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<SEC-DOCUMENT>0001145549-03-001187.txt : 20030915
<SEC-HEADER>0001145549-03-001187.hdr.sgml : 20030915
<ACCEPTANCE-DATETIME>20030915170545
ACCESSION NUMBER:		0001145549-03-001187
CONFORMED SUBMISSION TYPE:	20FR12B
PUBLIC DOCUMENT COUNT:		16
FILED AS OF DATE:		20030915

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SHINHAN FINANCIAL GROUP CO LTD
		CENTRAL INDEX KEY:			0001263043
		IRS NUMBER:				000000000

	FILING VALUES:
		FORM TYPE:		20FR12B
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-31798
		FILM NUMBER:		03896232

	BUSINESS ADDRESS:	
		STREET 1:		120 2-GA TAEPYUNG RO JUNG GU
		CITY:			SEOUL100-102
		STATE:			F4
		ZIP:			00000
		BUSINESS PHONE:		82263603000
</SEC-HEADER>
<DOCUMENT>
<TYPE>20FR12B
<SEQUENCE>1
<FILENAME>u98617e20fr12b.txt
<DESCRIPTION>SHINHAN FINANCIAL GROUP CO.,LTD FORM 20FR12B
<TEXT>
<PAGE>

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 20-F

<Table>
<C>        <S>
(Mark One)
   [X]     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
           THE SECURITIES EXCHANGE ACT OF 1934

                                  OR

   [ ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

           FOR THE FISCAL YEAR ENDED

                                  OR


   [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

           FOR THE TRANSITION PERIOD FROM           TO
</Table>

                         COMMISSION FILE NUMBER:
                             ---------------------
                       SHINHAN FINANCIAL GROUP CO., LTD.
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                                    <C>
                         N/A                                           THE REPUBLIC OF KOREA
             (Translation of registrant's                          (Jurisdiction of incorporation
                  name into English)                                      or organization)
</Table>

                             ---------------------
                        120, 2-GA, TAEPYUNG-RO, JUNG-GU
                              SEOUL 100-102, KOREA
                    (Address of principal executive offices)
                             ---------------------
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<Table>
<Caption>
                 TITLE OF EACH CLASS:                        NAME OF EACH EXCHANGE ON WHICH REGISTERED:
                 --------------------                        ------------------------------------------
<S>                                                    <C>
     Common stock, par value Won 5,000 per share*                     New York Stock Exchange
              American depositary shares                              New York Stock Exchange
</Table>

- ---------------

* Not for trading, but only in connection with the listing of American
  depositary shares on the New York Stock Exchange, pursuant to the requirements
  of the Securities and Exchange Commission.
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

 SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
                                  OF THE ACT:
                                      NONE

     INDICATE THE NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES
OF CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE LAST FULL FISCAL YEAR COVERED
BY THIS ANNUAL REPORT:

                AS OF DECEMBER 31, 2002, THERE WERE OUTSTANDING:
      292,361,125 SHARES OF COMMON STOCK, PAR VALUE OF WON 5,000 PER SHARE

     INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS:

                          Yes  [ ]               No  [X]

INDICATE BY CHECK MARK WHICH FINANCIAL STATEMENT ITEM THE REGISTRANT HAS ELECTED
                                   TO FOLLOW:

                       Item 17  [ ]          Item 18  [X]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                         PAGE
                                                                         ----
<S>        <C>                                                           <C>
EXPLANATORY NOTE.......................................................    3
CERTAIN DEFINED TERMS, CONVENTIONS AND CURRENCY OF PRESENTATION........    3
FORWARD LOOKING STATEMENTS.............................................    3
Item 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.......    5
             Directors and Senior Management...........................    5
             Advisers..................................................    6
             Auditors..................................................    6
Item 2.    OFFER STATISTICS AND EXPECTED TIMETABLE.....................    6
Item 3.    KEY INFORMATION.............................................    7
             Selected Financial Data of Shinhan Financial Group........    7
             Selected Financial Data of Chohung Bank...................   12
             Exchange Rates............................................   15
             Listing on the New York Stock Exchange....................   16
             Risk Factors..............................................   17
Item 4.    INFORMATION ON THE COMPANY..................................   39
             History and Development of Shinhan Financial Group........   39
             Our Acquisition of Chohung Bank...........................   43
             Unaudited Pro Forma Combined Financial Data...............   51
             Business Overview of Shinhan Financial Group..............   59
             Business Overview of Chohung Bank.........................   82
             Description of Assets and Liabilities.....................  102
             Supervision and Regulation................................  195
             Properties................................................  215
Item 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS................  216
             Overview..................................................  216
             Shinhan Financial Group...................................  218
             Chohung Bank..............................................  266
Item 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..................  308
             Directors and Senior Management...........................  308
             Compensation..............................................  311
             Board Practices...........................................  311
             Employees.................................................  312
             Share Ownership...........................................  312
Item 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS...........  314
             Major Shareholders........................................  314
             Related Party Transactions................................  315
Item 8.    FINANCIAL INFORMATION.......................................  315
             Consolidated Financial Statements and Other Financial
             Information...............................................  315
Item 9.    THE OFFER AND LISTING.......................................  317
             Market Price Information and Trading Market...............  317
             Markets...................................................  318
Item 10.   ADDITIONAL INFORMATION......................................  324
             Articles of Incorporation.................................  324
</Table>

                                        1
<PAGE>

<Table>
<Caption>
                                                                         PAGE
                                                                         ----
<S>        <C>                                                           <C>
             Exchange Controls.........................................  332
             Taxation..................................................  335
             Statement by Experts......................................  341
             Documents on Display......................................  341
Item 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
           RISK........................................................  341
Item 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES......  341
               Description of American Depositary Receipts.............  341
               Description of Bonds with Warrants......................  349
Item 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.............  350
Item 14.   MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS AND
           USE OF PROCEEDS.............................................  350
Item 15.   CONTROLS AND PROCEDURES.....................................  350
Item 16A.  AUDIT COMMITTEE FINANCIAL EXPERT............................  350
Item 16B.  CODE OF ETHICS..............................................  350
Item 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES......................  350
Item 17.   FINANCIAL STATEMENTS........................................  350
Item 18.   FINANCIAL STATEMENTS........................................  350
Item 19.   EXHIBITS....................................................  351
</Table>

                                        2
<PAGE>

                                EXPLANATORY NOTE

     On August 19, 2003, we acquired 80.04% of the outstanding common shares of
Chohung Bank. We will not combine or merge the operations of Chohung Bank with
those of our other bank subsidiary, Shinhan Bank, for a period of three years
following the acquisition. While we will prepare consolidated financial
statements including Chohung Bank as of and for the year ended December 31,
2003, there are currently no consolidated financial statements available
reflecting our operations and those of Chohung Bank. Accordingly, except where
the text expressly states or the context otherwise requires, we have presented
information about Chohung Bank separately from information about the rest of our
group.

        CERTAIN DEFINED TERMS, CONVENTIONS AND CURRENCY OF PRESENTATION

     All references to "Korea" or the "Republic" contained in this document mean
The Republic of Korea. All references to the "government" mean the government of
The Republic of Korea. The "Financial Supervisory Service" is the executive body
of the "Financial Supervisory Commission". References to "MOFE" are to the
Ministry of Finance and Economy. The terms "we," "us" and "our" mean Shinhan
Financial Group Co., Ltd. ("Shinhan Financial Group") and/or its consolidated
subsidiaries as the context requires or unless the context otherwise requires.
The terms "Shinhan", "SFG" or the "Group" mean Shinhan Financial Group and/or
its consolidated subsidiaries but excludes Chohung Bank as the context requires
or unless the context otherwise requires. The terms "Shinhan Bank" and "SHB"
refer to Shinhan Bank on a nonconsolidated basis, unless otherwise specified or
the context otherwise requires. The terms "Chohung Bank","Chohung" and "CHB"
refer to Chohung Bank on a consolidated basis, unless otherwise specified or the
context otherwise requires.

     Our fiscal year ends on December 31 of each year. All references to a
particular year are to the year ended December 31 of that year.

     In this document, unless otherwise indicated, all references to "Won" or
"W" are to the currency of the Republic, and all references to "U.S. Dollars",
"Dollars", "$" or "US$" are to the currency of the United States of America.
Unless otherwise indicated, all translations from Won to Dollars were made at
W1,186.30 to US$1.00, which was the noon buying rate in The City of New York for
cable transfers in Won per US$1.00 as certified for customs purposes by the
Federal Reserve Bank of New York (the "Noon Buying Rate") on December 31, 2002.
On September 12, 2003, the Noon Buying Rate was W1,174.00 = US$1.00. No
representation is made that the Won or U.S. Dollar amounts referred to in this
report could have been or could be converted into Dollars or Won, as the case
may be, at any particular rate or at all.

     Unless otherwise indicated, the financial information presented in this
document has been prepared in accordance with accounting principles generally
accepted in the United States ("U.S. GAAP").

     Any discrepancies in any table between totals and the sums of the amounts
listed are due to rounding.

                           FORWARD LOOKING STATEMENTS

     This document includes "forward-looking statements", as defined in Section
27A of the U.S. Securities Act, as amended, and Section 21E of the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
statements regarding the Group's expectations and projections for future
operating performance and business prospects. The words "believe", "expect",
"anticipate", "estimate", "project" and similar words used in connection with
any discussion of future operating or financial performance of the Group,
Chohung Bank or the Group and Chohung Bank combined or our acquisition of
Chohung Bank identify forward-looking statements. In addition, all statements
other than statements of historical facts included in this document 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 to be correct. All forward-looking statements are management's present
expectations of future events and are subject to a number of factors and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements.
                                        3
<PAGE>

This document discloses, under the caption "Item 3. Key Information -- Risk
Factors" and elsewhere, important factors that could cause actual results to
differ materially from our expectations ("Cautionary Statements"). Included
among the factors discussed under the caption "Item 3. Key Information -- Risk
Factors" are the followings risks related to the businesses of the Group,
Chohung Bank or both combined, which could cause actual results to differ
materially from those described in the forward-looking statements: the risk of
adverse impacts from an economic downturn; increased competition; market
volatility in securities and derivatives markets, interest or foreign exchange
rates or indices; other factors impacting our operational plans; or legislative
or regulatory developments.

     We caution you not to place undue reliance on the forward-looking
statements, which speak only as of the date of this document.

     All subsequent written and oral forward-looking statements attributable the
Group or persons acting on behalf the Group are expressly qualified in their
entirety by the Cautionary Statements.

                                        4
<PAGE>

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

                        DIRECTORS AND SENIOR MANAGEMENT

     The names and positions of our directors and executive officers are set
forth below. The business address of all of the directors and executive officers
is our registered office at 120, 2-Ga Taepyung-Ro, Jung-Gu, Seoul 100-102,
Korea.

EXECUTIVE DIRECTORS

<Table>
<Caption>
NAME                             POSITION
- ----                             --------
<S>                              <C>
Eung Chan Ra...................  Chairman of the Board of Directors
Young Hwi Choi.................  President and Chief Executive Officer
</Table>

NON-EXECUTIVE DIRECTORS

<Table>
<Caption>
NAME                             POSITION
- ----                             --------
<S>                              <C>
In Ho Lee......................  Non-Executive Director
Young Seok Choi................  Non-Executive Director; Executive Committee member;
                                 Audit Committee member
Jae Kun Yoo....................  Non-Executive Director
Young Soo Lee..................  Non-Executive Director
Myung Ho Kim...................  Outside Director; Executive Committee member
Pyung Joo Kim..................  Outside Director; Executive Committee member;
                                 Head of Risk Management Committee
Il Sup Kim.....................  Outside Director; Head of Audit Committee
Byung Hun Park.................  Outside Director; Executive Committee member
Moon Pil Oh....................  Outside Director; Executive Committee member;
                                 Risk Management Committee member
Kun Chi Kim....................  Outside Director
Pyung Jo Park..................  Outside Director; Audit Committee member
Young Chul Kwon................  Outside Director
Alain Penicaut.................  Outside Director; Risk Management Committee member
</Table>

     Non-executive directors include outside directors, who are independent of
major shareholders, affiliates and the management and who satisfies the
requirements set forth under the Korea Securities and Exchange Act.

EXECUTIVE OFFICERS

     In addition to the executive directors who are also our executive officers,
we currently have the following executive officers.

<Table>
<Caption>
NAME                             POSITION
- ----                             --------
<S>                              <C>
Bhang Gil Choi.................  Senior Executive Vice President of Management Support Team
                                 and Treasury & Risk Management Team
Min Ky Han.....................  Senior Executive Vice President of General Services Team,
                                 Investor Relations Team and Public Relations Team
Youn Soo Song..................  Senior Executive Vice President of Strategy & Planning Team,
                                 Information & Technology Planning Team and Audit &
                                 Compliance Team
Chil Sun Hong..................  Senior Executive Vice President
Byung Jae Cho..................  Senior Executive Vice President
</Table>

                                        5
<PAGE>

                                    ADVISERS

     Certain legal matters in connection with the American depositary shares
will be passed upon for us by Simpson Thacher & Bartlett LLP, at 425 Lexington
Avenue, New York, New York, our United States counsel, and by Kim & Chang, at
Seyang Building, 223 Naeja-dong, Chongro-gu, Seoul, Korea, our Korean counsel.

                                    AUDITORS

     Our independent auditor for the consolidated financial statements prepared
under accounting principles generally accepted in the United States of America
(U.S. GAAP) for the years ended December 31, 2001 and 2002 was as follows.

<Table>
<Caption>
NAME                                         ADDRESS               MEMBERSHIP IN PROFESSIONAL BODIES
- ----                             --------------------------------  ---------------------------------
<S>                              <C>                               <C>
PricewaterhouseCoopers.........  Kukje Center Building 15th Floor  Korean Institute of Certified
                                 191 Hangangro 2ga, Yongsan-gu,    Public Accountants
                                 Seoul, Korea
</Table>

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

                                        6
<PAGE>

ITEM 3.  KEY INFORMATION

               SELECTED FINANCIAL DATA OF SHINHAN FINANCIAL GROUP

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA UNDER U.S. GAAP

     The selected consolidated financial data set forth below for the years
ended December 31, 2001 and 2002 and as of December 31, 2001 and 2002 have been
derived from the Group's consolidated financial statements which have been
prepared in accordance with U.S. GAAP and audited by our independent auditors.

     You should read the following data with the more detailed information
contained in "Item 5. Operating and Financial Review and Prospects -- Shinhan
Financial Group" and our consolidated financial statements included herein.
Historical results do not necessarily predict the future.

  CONSOLIDATED INCOME STATEMENT DATA

<Table>
<Caption>
                                                                       YEAR ENDED DECEMBER 31,
                                                              -----------------------------------------
                                                                  2001           2002         2002(1)
                                                              ------------   ------------   -----------
                                                              (IN BILLIONS OF WON AND MILLIONS OF US$,
                                                                    EXCEPT PER COMMON SHARE DATA)
<S>                                                           <C>            <C>            <C>
Interest and dividend income................................    W  3,694       W  3,735       $ 3,149
Interest expense............................................       2,439          2,305         1,943
                                                                --------       --------       -------
  Net interest income.......................................       1,255          1,430         1,206
Provision for loan losses...................................         411            236           199
Provision for guarantees and acceptances....................          (6)            10             8
Noninterest income..........................................         632          1,037           874
Noninterest expense.........................................         828          1,302         1,097
Income tax expense..........................................         223            320           270
Minority interest...........................................          (1)            10             9
Extraordinary gain and cumulative effect of
  changes in accounting principle, net of tax(2)............          64             --            --
                                                                --------       --------       -------
  Net income................................................    W    496       W    589       $   497
                                                                ========       ========       =======
Net income per common shares (in currency unit):
  Net income -- basic(3)....................................    W  1,948       W  2,246       $  1.89
  Net income -- diluted(4)..................................       1,663          2,243          1.89
Weighted average common shares outstanding-basic (in
  thousands of common shares)...............................     254,680        262,480
Weighted average common shares outstanding-diluted (in
  thousands of common shares)...............................     299,215        262,812
</Table>

- ---------------

Notes:
(1) Won amounts are expressed in U.S. dollars at the rate of W1,186.30 to
    US$1.00, the noon buying rate in effect on December 31, 2002 as quoted by
    the Federal Reserve Bank of New York in the United States.

(2) Includes W(196) million of cumulative effect of accounting change, net of
    tax in 2001.

(3) Basic earnings per share is calculated by dividing the net income available
    to common stockholders by the weighted average number of common shares
    issued and outstanding for the period.

(4) Diluted earnings per share is computed in a manner consistent with that of
    basic earnings per share, while giving effect to the potential dilution that
    could occur if convertible securities, options or other contracts to issue
    common stock were converted into or exercised for common stock. We have
    three categories of potentially dilutive common shares: (i) shares issuable
    on exercise of stock option, (ii) shares issuable on bond with warrants and
    (iii) shares issuable on conversion of preferred shares.

                                        7
<PAGE>

  CONSOLIDATED BALANCE SHEET DATA

<Table>
<Caption>
                                                                         AS OF DECEMBER 31,
                                                              -----------------------------------------
                                                                 2001           2002          2002(1)
                                                              -----------    -----------    -----------
                                                              (IN BILLIONS OF WON AND MILLIONS OF US$)
<S>                                                           <C>            <C>            <C>
ASSETS
Cash and cash equivalents...................................    W   580        W   282        $   238
Restricted cash.............................................        678          1,365          1,151
Interest-bearing deposits in banks..........................        255            125            105
Call loans and securities purchased under resale
  agreements................................................      1,816            576            485
Trading assets:
  Trading securities........................................        858            926            780
  Derivatives assets........................................         98            139            118
Securities:
  Available-for-sale securities.............................      7,087          8,737          7,365
  Held-to-maturity securities...............................      6,038          4,408          3,715
Loans (net of allowance for loan losses of W720 billion in
  2001 and W996 billion in 2002)............................     32,997         44,139         37,208
Customers' liability on acceptances.........................      1,566            928            782
Premises and equipment, net.................................        530            828            698
Goodwill and intangible assets..............................          4            219            185
Security deposits...........................................        390            466            393
Other assets................................................      2,205          1,648          1,389
                                                                -------        -------        -------
     Total assets...........................................    W55,102        W64,786        $54,612
                                                                =======        =======        =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
  Interest-bearing..........................................    W31,036        W35,886        $30,250
  Non-interest-bearing......................................      1,184          1,163            980
Trading liabilities.........................................        119            131            111
Acceptances outstanding.....................................      1,566            928            782
Short-term borrowings.......................................      5,759          6,994          5,896
Secured borrowings..........................................      4,088          4,706          3,967
Long-term debt..............................................      4,876          8,235          6,941
Accrued expenses and other liabilities......................      3,562          3,193          2,692
                                                                -------        -------        -------
     Total liabilities......................................     52,190         61,236         51,619
                                                                -------        -------        -------
Minority interest...........................................          2            288            243
STOCKHOLDERS' EQUITY:
Common stock................................................      1,462          1,462          1,232
Additional paid-in capital..................................      1,041          1,048            884
Retained earnings...........................................        638          1,077            908
Accumulated other comprehensive income, net of taxes........        164             70             59
Less: treasury stock, at cost...............................       (395)          (395)          (333)
                                                                -------        -------        -------
     Total stockholders' equity.............................      2,910          3,262          2,750
                                                                -------        -------        -------
     Total liabilities, minority interest and stockholders'
       equity...............................................    W55,102        W64,786        $54,612
                                                                =======        =======        =======
</Table>

                                        8
<PAGE>

- ---------------

Note:
(1) Won amounts are expressed in U.S. dollars at the rate of W1,186.30 to
    US$1.00, the noon buying rate in effect on December 31, 2002 as quoted by
    the Federal Reserve Bank of New York in the United States.

  DIVIDENDS

<Table>
<Caption>
                                                         YEAR ENDED DECEMBER 31,
                                             -----------------------------------------------
                                             1998(1)   1999(1)   2000(1)   2001(2)   2002(3)
                                             -------   -------   -------   -------   -------
                                                     (IN WON AND US$, EXCEPT RATIOS)
<S>                                          <C>       <C>       <C>       <C>       <C>
U.S. GAAP:
Cash dividends per common share:(4)(5)
  In Korean Won............................     N/A       N/A       N/A      W750      W600
  In U.S. dollars(6).......................     N/A       N/A       N/A     $0.63     $0.51
Stock dividends per common share(4)(5).....      --        --        --        --        --
KOREAN GAAP:
Cash dividends per common share:(7)
  In Korean Won............................    W150      W400      W750      W600      W600
  In U.S. dollars(6).......................   $0.13     $0.34     $0.63     $0.51     $0.51
  Dividend ratio(8)........................    3.00%     8.00%    15.00%    12.00%    12.00%
Stock dividends per common share(7)........      --        --        --        --        --
</Table>

N/A = not available.
- ---------------

Notes:

(1) Represents dividends declared on common stock of Shinhan Bank for the
    periods indicated.
(2) Under U.S. GAAP, represents dividends declared on common stock of Shinhan
    Financial Group for the year ended December 31, 2000. Under Korean GAAP,
    represents dividends declared on common stock of Shinhan Bank for the year
    ended December 31, 2001.
(3) Represents dividends declared on common stock of Shinhan Financial Group for
    the year ended December 31, 2002.
(4) Represents dividends declared on common stock of Shinhan Financial Group in
    2001 and 2002.
(5) U.S. GAAP requires that dividends be recorded in the period in which they
    are declared and paid rather than the period to which they relate as is the
    case under Korean GAAP unless these are the same.
(6) Won amounts are expressed in U.S. dollars at the rate of W1,186.30 per
    US$1.00. The Noon Buying Rate in effect on December 31, 2002 as quoted by
    the Federal Reserve Bank of New York in the United States.
(7) Represents dividends declared on common stock of Shinhan Bank for 1998, 1999
    and 2000 and represents dividends declared on common stock of Shinhan
    Financial Group in 2001 and 2002. In connection with our holding company
    restructuring in 2001, common stock of Shinhan Bank was exchanged for common
    stock of Shinhan Financial Group on a 1:1 ratio.
(8) Dividends declared and paid as a percentage of par value of W5,000 per
    share.

                                        9
<PAGE>

SELECTED STATISTICAL INFORMATION

  PROFITABILITY RATIOS

<Table>
<Caption>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                              -------------
                                                              2001    2002
                                                              -----   -----
                                                              (PERCENTAGES)
<S>                                                           <C>     <C>
Net income as a percentage of:
  Average total assets(1)...................................   0.94%   0.94%
  Average stockholders' equity(1)...........................  16.14   15.99
Dividend payout ratio(2)....................................  38.91   25.59
Net interest spread(3)......................................   2.28    2.39
Net interest margin(4)......................................   2.66    2.58
Efficiency ratio(5).........................................  43.88   52.78
Cost-to-average assets ratio(6).............................   1.57    2.08
Average stockholders' equity as a percentage of average
  total assets..............................................   5.84    5.89
</Table>

- ---------------

Notes:

(1) Average balances are based on (a) daily balances for Shinhan Bank and Jeju
    Bank and (b) quarterly balances for other subsidiaries.
(2) Represents the ratio of total dividends declared on common stock as a
    percentage of net income.
(3) Represents the difference between the yield on average interest-earning
    assets and cost of average interest-bearing liabilities.
(4) Represents the ratio of net interest income to average interest-earning
    assets.
(5) Represents the ratio of noninterest expense to the sum of net interest
    income and noninterest income.
(6) Represents the ratio of noninterest expense to average total assets.

  ASSET QUALITY RATIOS

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Total loans.................................................   W33,665     W45,052
Total allowance for loan losses.............................       720         996
Allowance for loan losses as a percentage of total loans....      2.14%       2.21%
Total non-performing loans(1)...............................   W   530     W   518
Non-performing loans as a percentage of total loans.........      1.57%       1.15%
Non-performing loans as a percentage of total assets........      0.96%       0.80%
Impaired loans(2)...........................................   W 1,492     W 1,263
Allowance for impaired loans(3).............................       385         480
Impaired loans as a percentage of total loans...............      4.43%       2.80%
Allowance for impaired loans as a percentage of impaired
  loans.....................................................     25.80%      38.00%
</Table>

- ---------------

Notes:

(1) Non-performing loans are defined as those loans, both corporate and
    consumer, which are past due more than 90 days.
(2) Impaired loans include non-performing loans and other impaired loans, such
    as potential problem loans.
(3) Allowance for loan losses established in respect of impaired loans only.

                                        10
<PAGE>

  CAPITAL RATIOS

<Table>
<Caption>
                                                              AS OF DECEMBER 31,
                                                              -------------------
                                                                2001       2002
                                                              --------   --------
                                                                 (PERCENTAGES)
<S>                                                           <C>        <C>
Requisite capital ratio(1)..................................   134.43%    130.93%
Total capital adequacy ratio for Shinhan Bank(2)............    11.99      10.92
  Tier I capital adequacy ratio(2)..........................     8.24       6.81
  Tier II capital adequacy ratio(2).........................     3.75       4.11
Adjusted equity capital ratio of Shinhan Card(3)............      N/A      10.86
</Table>

- ---------------

N/A = not applicable.

Notes:

(1) We were restructured as a financial holding company on September 1, 2001 and
    became subject to minimum capital requirements as reflected in the requisite
    capital ratio. Under the guidelines issued by the Financial Supervisory
    Commission applicable to financial holding companies, we, at the holding
    company level, are required to maintain a minimum requisite capital ratio of
    100%. Requisite capital ratio represents the ratio of net aggregate amount
    of our equity capital to aggregate amounts of requisite capital (all of
    which are described in "Item 4. Information on the Company -- Supervision
    and Regulation -- Regulations Applicable to Financial Holding
    Companies -- Capital Adequacy"). This computation is based on our
    consolidated financial statements in accordance with Korean GAAP.

(2) Shinhan Bank comprises 89.7% of our total assets as of December 31, 2002.
    Shinhan Bank's capital adequacy ratios are computed in accordance with the
    guidelines issued by the Financial Supervisory Commission, which was revised
    as of December 31, 2002 to take into account market risk as well as credit
    risk. The capital ratios as of December 31, 2001 were recalculated using
    these revised guidelines. Under these guidelines, Shinhan Bank is required
    to maintain a minimum capital adequacy ratio of 8%. Applying the previous
    calculation, which only takes into account credit risks, Shinhan Bank's
    total capital adequacy ratio as of December 31, 2001 and 2002 were 12.02%
    and 10.91%, respectively. This computation is based on the bank's
    consolidated financial statements prepared in accordance with Korean GAAP.
    See "Item 4. Information on the Company -- Supervision and
    Regulation -- Regulations Applicable to Banks -- Capital Adequacy."

(3) Represents the ratio of total adjusted shareholders' equity to total
    adjusted assets and is computed in accordance with the guidelines issued by
    the Financial Supervisory Commission for credit card companies. Under these
    guidelines, Shinhan Card, which was established on June 4, 2002, is required
    to maintain a minimum adjusted equity capital ratio of 8%. This computation
    is based on Shinhan Card's nonconsolidated financial statements prepared in
    accordance with Korean GAAP.

                                        11
<PAGE>

                    SELECTED FINANCIAL DATA OF CHOHUNG BANK

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA UNDER U.S. GAAP

     The selected consolidated financial data set forth below for the years
ended December 31, 2001 and 2002 and as of December 31, 2001 and 2002 have been
derived from Chohung Bank's consolidated financial statements which have been
prepared in accordance with U.S. GAAP and audited by Chohung Bank's independent
auditors.

     You should read the following data with the more detailed information
contained in "Item 5. Operating and Financial Review and Prospects -- Chohung
Bank" and Chohung Bank's consolidated financial statements included herein.
Historical results do not necessarily predict the future.

  CONSOLIDATED INCOME STATEMENT DATA

<Table>
<Caption>
                                                                      YEAR ENDED DECEMBER 31,
                                                             ------------------------------------------
                                                                 2001           2002         2002(1)
                                                             ------------   ------------   ------------
                                                              (IN BILLIONS OF WON AND MILLIONS OF US$,
                                                                   EXCEPT PER COMMON SHARE DATA)
<S>                                                          <C>            <C>            <C>
Interest and dividend income...............................    W  4,007       W  4,151       $  3,499
Interest expense...........................................       2,344          2,105          1,774
                                                               --------       --------       --------
  Net interest income......................................       1,663          2,046          1,725
Provision for loan losses..................................         553          1,384          1,167
Provision for guarantees and acceptances...................        (134)           (55)           (47)
Noninterest income.........................................         843            772            651
Noninterest expense........................................         986          1,256          1,060
Income tax expense.........................................         362             75             63
Minority interest..........................................           3              5              4
Cumulative effect of changes in accounting principle, net
  of taxes(2)..............................................          (1)            --             --
                                                               --------       --------       --------
  Net income...............................................    W    735       W    153       $    129
                                                               ========       ========       ========
Net income per common share (in currency unit):
  Net income -- basic(3)...................................    W  1,125       W    228       $   0.19
  Net income -- diluted(4).................................       1,125            228           0.19
Weighted average common shares outstanding-basic (in
  thousands of common shares)..............................     653,833        673,609
Weighted average common shares outstanding-diluted (in
  thousands of common shares)..............................     653,833        673,615
</Table>

- ---------------

Notes:
(1) Won amounts are expressed in U.S. Dollars at the rate of W1,186.30 to
    US$1.00, the noon buying rate in effect on December 31, 2002 as quoted by
    the Federal Reserve Bank of New York in the United States.

(2) Includes a negative amount of W655 million of cumulative effect of
    accounting change, net of tax in 2001.

(3) Basic earnings per share is calculated by dividing the net income available
    to common stockholders by the weighted average number of common shares
    issued and outstanding for the period.

(4) Diluted earnings per share is computed in a manner consistent with that of
    basic earnings per share, while giving effect to the potential dilution that
    could occur if convertible securities, options or other contracts to issue
    common stock were converted into or exercised for common stock. Chohung Bank
    has two categories of potentially dilutive common shares: (i) shares
    issuable on exercise of stock option and (ii) shares issuable on bonds with
    warrants.

                                        12
<PAGE>

  CONSOLIDATED BALANCE SHEET DATA

<Table>
<Caption>
                                                                         AS OF DECEMBER 31,
                                                              -----------------------------------------
                                                                 2001           2002          2002(1)
                                                              -----------    -----------    -----------
                                                              (IN BILLIONS OF WON AND MILLIONS OF US$)
<S>                                                           <C>            <C>            <C>
ASSETS
Cash and cash equivalents...................................    W 1,678        W 1,863        $ 1,570
Restricted cash.............................................        176          1,245          1,049
Interest-bearing deposits in banks..........................        196            177            149
Call loans and securities purchased under resale
  agreements................................................         96            466            393
Trading assets:
  Trading securities........................................      1,413          1,054            888
  Derivatives...............................................         69            140            118
Securities:
  Available-for-sale securities.............................     12,347          9,624          8,112
Loans (net of allowance for loan losses of W2,032 billion in
  2001 and W2,678 billion in 2002)..........................     33,474         43,437         36,615
Customers' liability on acceptances.........................      1,380          1,384          1,166
Premises and equipment, net.................................        722            693            584
Security deposits...........................................        426            460            388
Other assets................................................      2,922          3,459          2,919
                                                                -------        -------        -------
     Total assets...........................................    W54,899        W64,002        $53,951
                                                                =======        =======        =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
  Interest-bearing..........................................    W36,274        W42,371        $35,717
  Noninterest-bearing.......................................      1,648          1,903          1,604
Trading liabilities.........................................         26             83             70
Acceptances outstanding.....................................      1,380          1,384          1,166
Short-term borrowings.......................................      5,539          5,525          4,657
Secured borrowings..........................................      2,268          1,351          1,139
Long-term debt..............................................      3,281          6,461          5,446
Accrued expenses and other liabilities......................      3,315          3,534          2,982
                                                                -------        -------        -------
     Total liabilities......................................     53,731         62,612         52,781
                                                                -------        -------        -------
Minority interest...........................................         17             16             14
STOCKHOLDERS' EQUITY:
Common stock................................................      3,395          3,396          2,862
Additional paid-in capital..................................      1,729          1,722          1,451
Accumulated deficit.........................................     (4,069)        (3,925)        (3,309)
Accumulated other comprehensive income, net of taxes........        223            181            152
Treasury stock, at cost.....................................       (127)            --             --
                                                                -------        -------        -------
     Total stockholders' equity.............................      1,151          1,374          1,156
                                                                -------        -------        -------
     Total liabilities, minority interest and stockholders'
       equity...............................................    W54,899        W64,002        $53,951
                                                                =======        =======        =======
</Table>

- ---------------

Note:
(1) Won amounts are expressed in U.S. Dollars at the rate of W1,186.30 to
    US$1.00, the noon buying rate in effect on December 31, 2002 as quoted by
    the Federal Reserve Bank of New York in the United States.

                                        13
<PAGE>

SELECTED STATISTICAL INFORMATION

  PROFITABILITY RATIOS

<Table>
<Caption>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                              -------------
                                                              2001    2002
                                                              -----   -----
                                                              (PERCENTAGES)
<S>                                                           <C>     <C>
Net income as a percentage of:
  Average total assets(1)...................................   1.39%   0.25%
  Average stockholders' equity(2)...........................  96.25   10.72
Dividend payout ratio(3)....................................   0.00    0.00
Net interest spread(4)......................................   3.44    3.57
Net interest margin(5)......................................   3.55    3.72
Efficiency ratio(6).........................................  40.84   50.46
Cost-to-average assets ratio(7).............................   1.88    2.27
Average stockholders' equity as a percentage of average
  total assets..............................................   1.44    2.33
</Table>

- ---------------

Notes:
(1) Average balances are based upon (a) daily balances for Chohung Bank and its
    overseas subsidiaries and (b) quarterly balances for domestic subsidiaries
    including Chohung Investment Trust Management and special purpose entities
    for Chohung Bank's asset securitization.

(2) Average balances are based upon quarterly balances.

(3) Represents the ratio of total dividends declared on common stock as a
    percentage of net income.

(4) Represents the difference between the yield on average interest-earning
    assets and cost of average interest-bearing liabilities.

(5) Represents the ratio of net interest income to average interest-earning
    assets.

(6) Represents the ratio of noninterest expense to the sum of net interest
    income and noninterest income.

(7) Represents the ratio of noninterest expense to average total assets.

  ASSET QUALITY RATIOS

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              --------------------
                                                                2001        2002
                                                              --------    --------
                                                              (IN BILLIONS OF WON,
                                                              EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Total loans.................................................  W35,462     W46,030
Total allowance for loan losses.............................    2,032       2,678
Allowance for loan losses as a percentage of total loans....     5.73%       5.82%
Total non-performing loans(1)...............................  W 1,047     W 1,109
Non-performing loans as a percentage of total loans.........     2.95%       2.41%
Non-performing loans as a percentage of total assets........     1.91%       1.73%
Impaired loans(2)...........................................  W 3,216     W 2,403
Allowance for impaired loans(3).............................    1,303       1,199
Impaired loans as a percentage of total corporate loans.....    14.93%       9.67%
Allowance for impaired loans as a percentage of impaired
  loans.....................................................    40.52%      49.90%
</Table>

- ---------------

Notes:
(1) Non-performing loans are defined as those loans, both corporate and
    consumer, which are past due more than 90 days.
(2) Impaired loans include non-performing loans and other impaired loans, such
    as potential problem loans.
(3) Allowance for loan losses established in respect of impaired loans only.

                                        14
<PAGE>

  CAPITAL RATIOS(1)

<Table>
<Caption>
                                                              AS OF DECEMBER 31,
                                                              -------------------
                                                               2001         2002
                                                              -------      ------
                                                                 (PERCENTAGES)
<S>                                                           <C>          <C>
Total capital adequacy ratio for Chohung Bank...............   10.43%       8.66%
  Tier I capital adequacy ratio.............................    5.91        4.61
  Tier II capital adequacy ratio............................    4.52        4.05
</Table>

- ---------------

Note:

(1) Chohung Bank's capital adequacy ratios are computed in accordance with the
    guidelines issued by the Financial Supervisory Commission, which was revised
    in 2002 to take into account market risk as well as credit risk. The capital
    ratios as of December 31, 2002 were calculated using these revised
    guidelines. Under these guidelines, Chohung Bank is required to maintain a
    minimum capital adequacy ratio of 8%. Applying the previous calculation,
    which only takes into account credit risks, Chohung Bank's total capital
    adequacy ratio as of December 31, 2002 was 8.64%. This computation is based
    on the bank's consolidated financial statements prepared in accordance with
    Korean GAAP. See "Item 4. Information on the Company -- Supervision and
    Regulation -- Regulations Applicable to Banks -- Capital Adequacy."

                                 EXCHANGE RATES

     The following table sets forth, for the periods and dates indicated,
certain information concerning the Noon Buying Rate in Won per US$1.00.

<Table>
<Caption>
YEAR ENDED DECEMBER 31,                          AT END OF PERIOD   AVERAGE(1)     HIGH       LOW
- -----------------------                          ----------------   ----------   --------   --------
                                                                  (WON PER US$1.00)
<S>                                              <C>                <C>          <C>        <C>
1998...........................................      1,206.00        1,401.00    1,812.00   1,196.00
1999...........................................      1,136.00        1,189.80    1,243.00   1,125.00
2000...........................................      1,267.00        1,130.90    1,267.00   1,105.50
2001...........................................      1,313.50        1,292.00    1,369.00   1,234.00
2002...........................................      1,186.30        1,250.40    1,332.00   1,160.60
2003 (through September 11)....................      1,174.00        1,195.98    1,262.00   1,164.00
  January......................................      1,165.00        1,176.45    1,197.30   1,164.60
  February.....................................      1,193.70        1,190.37    1,206.00   1,173.00
  March........................................      1,252.00        1,237.20    1,260.00   1,184.60
  April........................................      1,215.50        1,231.10    1,262.00   1,204.00
  May..........................................      1,210.00        1,201.23    1,217.00   1,192.00
  June.........................................      1,196.00        1,194.14    1,203.00   1,185.00
  July.........................................      1,181.00        1,181.16    1,192.00   1,176.30
  August.......................................      1,175.00        1,178.60    1,187.90   1,168.00
  September (through September 12).............      1,174.00        1,173.54    1,178.00   1,170.00
</Table>

- ---------------

Note:

(1) The average of the Noon Buying Rates over the relevant period.

     We have translated certain amounts in Korean Won, which appear in this
document, into dollars for convenience. This does not mean that the Won amounts
referred to could have been, or could be, converted into dollars at any
particular rate, the rates stated above, or at all. All translations from Won to
dollars are based on the noon buying rate in effect on December 31, 2002, which
was W1,186.30 to US$1.00. The exchange rates used for convenience translations
differ from the actual rates used in the preparation of our consolidated
financial statements.

                                        15
<PAGE>

                     LISTING ON THE NEW YORK STOCK EXCHANGE

     We are currently seeking the listing of our American depositary shares on
the New York Stock Exchange and thereby become subject to, and comply with, U.S.
securities laws and the rules of the New York Stock Exchange to establish and
confirm that our corporate governance and management transparency are on par
with international "best practice" standards. We believe the listing on the New
York Stock Exchange will greatly enhance our corporate image as a leading
financial institution in Northeast Asia.

     We are not raising any equity capital through our current listing on the
New York Stock Exchange. Instead, this will create a parallel market for which
our investors can buy and sell our equity securities. While our management
currently does not have any concrete plans to raise funds through an offering of
securities that will be listed on the New York Stock Exchange, we believe that
listing on the New York Stock Exchange will also provide us with a broader
investor base for us to obtain funding for our business growth in the future by
enhancing our corporate profile in the international investor community.

     Pursuant to Korean laws and regulations, Shinhan Bank (which owns 10.22% of
the Group's common shares as of June 30, 2003) is required to dispose of shares
of our common stock, which it currently holds, by the end of August 2004.
Following our listing on the New York Stock Exchange, we may, among other
options, consider selling these shares by way of a registered offering of
securities to be listed on the New York Stock Exchange.

                                        16
<PAGE>

                                  RISK FACTORS

     An investment in the American depositary shares representing our common
shares involves a number of risks. You should carefully consider the following
information about the risks we face, together with the other information
contained in this document, in evaluating us and our business.

RISKS RELATING TO OUR BANKING BUSINESS

 WE MAY NOT BE ABLE TO SUSTAIN THE RATE OF GROWTH IN OUR MORTGAGE AND HOME
 EQUITY LENDING.

     Over the past two years mortgage and home equity lending was the largest
contributor to the growth of our lending business. The Group's mortgage and home
equity lending grew from W2,376 billion at December 31, 2000 to W11,539 billion
at December 31, 2002, while Chohung Bank's mortgage and home equity lending grew
from W1,785 billion at December 31, 2000 to W7,167 billion at December 31, 2002.
Such increase represents 53.3% of the overall increase in the Group's loan
portfolio over that period and 35.7% of the overall increase in Chohung Bank's
loan portfolio over that period. Of the Group's total consumer loan portfolio,
32.7%, 56.4% and 59.9%, respectively, was attributable to mortgage and home
equity lending as of December 31, 2000, 2001 and 2002, and of Chohung Bank's
total consumer loan portfolio, 21.5%, 28.7% and 33.8%, respectively, was
attributable to mortgage and home equity lending as of December 31, 2000, 2001
and 2002. The volume of such lending is significantly dependent on competitive
conditions, real estate prices, interest rate levels and government policies
affecting these markets. There can be no assurance that these factors will
support continued significant growth of our mortgage and home equity lending
business.

 A DECLINE IN THE VALUE OF THE COLLATERAL SECURING OUR LOANS AND OUR INABILITY
 TO REALIZE FULL COLLATERAL VALUE MAY ADVERSELY AFFECT OUR CREDIT PORTFOLIO.

     Borrowers' houses, other real estate or securities secure substantial
portions of our loans. As of December 31, 2002, the secured portion of
Won-denominated loans of Shinhan Bank amounted to W19,709 billion, or 62.1% of
such loans, and the secured portion of Won-denominated loans of Chohung Bank
amounted to W14,462 billion, or 44.1% of such loans. No assurance can be given
that the collateral value may not materially decline in the future. Until
recently, it was the Group's general policy to lend up to 50%-70% of the
appraised value of collateral, which appraisal value we believe was in general
lower than the market value. Chohung Bank's policy is to lend up to the
estimated recovery value of the collateral, which Chohung Bank calculates based
on the value of collateral published by the courts as recovered through court-
approved auctions and further adjusted to take into account the existence of any
lien or other security interest that is prior to Chohung Bank's security
interest. Chohung Bank believes such estimated recovery value of the collateral
is in general lower than the market value. However, downturns in the real estate
market as well as decreases in the value of securities collateral in the past
have resulted at times in the principal amount of a number of loans exceeding
the value of the underlying collateral. Declines in the value of securities
and/or real estate prices in Korea that result in shortfalls in collateral
values to loan amounts would require us to increase loan loss provisions and may
have a material adverse effect on us. For a description of our collateral
valuation policy, see "Item 4. Information on the Company -- Description of
Assets and Liabilities -- Risk Management of Shinhan Financial Group -- Credit
Evaluation and Approval -- Consumer Loans" and "Item 4. Information on the
Company -- Business Overview of Chohung Bank -- Chohung Bank's Principal
Activities -- Retail Banking Services -- Consumer Lending Activities".

     Foreclosure on collateral generally requires a written petition to a Korean
court. Such application, when made, may be subject to delays and administrative
requirements that may result in a decrease in the recovery value of such
collateral. Foreclosure proceedings under laws and regulations in Korea
typically take from seven months to one year from initiation to collection
depending on the nature of the collateral. In addition, there can be no
assurance that we will be able to realize the full value on such collateral as a
result of, among other factors, delays in foreclosure proceedings, defects in
the perfection of collateral, fraudulent transfers by borrowers and general
declines in collateral value as large numbers of properties are placed in the
market.

                                        17
<PAGE>

 WE HAVE SIGNIFICANT EXPOSURE TO SK GLOBAL, WHICH IS EXPERIENCING FINANCIAL
 DIFFICULTIES THAT IT CONCEALED THROUGH ACCOUNTING IRREGULARITIES AND WHICH IS
 IN A WORKOUT PROGRAM. IF THIS PROGRAM IS NOT SATISFACTORILY RESOLVED, IT MAY
 HAVE A MATERIAL ADVERSE EFFECT ON US.

     As of December 31, 2002, our total exposure (both the Group and Chohung
Bank combined) outstanding to SK Global alone was W1,020 billion, or 0.8% of our
total exposure, consisting of W738 billion in loans, W24 billion in debt
securities and W258 billion in guarantees and acceptances. Of our total loans
outstanding to SK Global, W71 billion was secured for which we made no allowance
for loan losses. For the remaining unsecured loans of W667 billion, we made
allowance for loan losses of W338 billion. With respect to the guarantees and
acceptances outstanding, we made allowances of W111 billion. The value of our
debt securities exposure of W24 billion in securities to SK Global reflects the
impairment loss of W23 billion we recognized during the year ended December 31,
2002, which we believe is other than temporary.

     In the first quarter of 2003, accounting irregularities were discovered at
SK Global to which most commercial banks in Korea, including ourselves, have
substantial exposure. These irregularities had concealed the weak financial
condition of SK Global over a period of several years. In March 2003, the
principal creditor banks of SK Global acknowledged that SK Global is a troubled
company subject to formal workout procedures under the Corporate Restructuring
Promotion Act of Korea and agreed to postpone the maturity of all domestic
credits of SK Global until June 18, 2003.

     In June 2003, the domestic creditors of SK Global agreed to a workout
program under which the creditors participating in this program will buy out the
outstanding credits of the dissenting creditors by providing cash in the amount
of approximately 30% of the outstanding loans, which we did not participate in.
In addition, in July 2003, the domestic creditors' committee and the steering
committee of the overseas creditors of SK Global agreed to a workout program
under which the domestic creditors will buy out the outstanding credits of the
dissenting foreign creditors by providing cash in the amount of 43% of the
outstanding loans as well as incentives which will be in the form of bonds with
warrants. The cash payment shall be repaid in four installments of 40% on
December 31, 2003, 30% on March 31, 2004, 20% on June 30, 2004 and 10% on
September 30, 2004. Depending on whether the approval rate of all the foreign
creditors is 95% or more, between 90 to 95% or between 80 to 90%, the amount of
the incentives will be 5%, 4% or 3% of the total outstanding credit as of March
11, 2003. The bonds with warrants, which warrants can be exercised in 2005, will
be due in 2007, without any interest, and will be repaid in a one-time payment.

     The agreement, which has been endorsed by the steering committee of
overseas creditors, remains subject to each overseas creditors' approval. The
steering committee of overseas creditors was originally required to obtain the
approval from each overseas creditor and present a written statement of consent
to the domestic creditors by mid-August 2003. The domestic creditors have since
extended this deadline to September 17, 2003.

     Once finally approved by the overseas creditors, domestic creditors are
expected to finalize the detailed terms of the workout program, which will,
among other things, require SK Corporation, the major shareholder of SK Global
and the creditors of SK Global participating in the workout program to convert
approximately W2.4 trillion in principal amount of total debt into equity
securities, consisting of common shares, redeemable preferred shares and
convertible bonds, of SK Global, after writing off substantially all of
pre-existing equity securities. While the workout program may also call for
additional restructuring of surviving debt, including extension of maturity and
reduction of interest rates, the detailed terms are expected to be finalized by
the end of 2003.

     Both the Group and Chohung Bank have decided to participate in the workout
program. We believe that participation in the workout program will eventually
yield more than the 30% cash buyout proposed for dissenting domestic creditors.
At this time, it is difficult to predict how much of our loans to SK Global will
be converted into what percentage of equity securities of SK Global or whether
our loans to SK Global will be subject to additional restructuring including
extension of maturities and reduction of interest rates.

                                        18
<PAGE>

     In reaching our conclusion with respect to the appropriate level of our
allowance for loan losses for SK Global, we took into account the results of
discounted cash flow analyses and also considered discussions as to the future
prospects of SK Global that took place at the domestic creditors' meetings and
our discussion with SK Global in connection with the determination of specific
loan loss allowances for unsecured loan balance and exposures. These discounted
cash flow analyses took into account certain assumptions including, among other
things, those related to SK Global's future business revenues, the level of
conversion of debt to equity (including the conversion of debt owing to SK
Corporation, SK Global's largest shareholder) and the extent of a foreign
creditor cash buyout. With respect to secured debt, we did not make any
allowance for loan losses as they are fully secured by real estate property and
the externally appraised value of the collateral significantly exceeds the
balance of these loans. Based on the foregoing analyses, we believe that the
level of provision raised with respect to our exposure to SK Global is
appropriate. However, the financial condition of SK global is complex and the
ultimate resolution of the workout program is subject to decisions of other
creditors and external factors affecting the business of SK Global, the
resolution of which is not certain and is beyond our control. Accordingly, while
we believe we have taken these uncertainties into account in establishing the
level of reserves with respect to our SK Global exposure, there is a risk that
the losses could be greater than anticipated and such increased losses could
have a material adverse effect on our results of operations.

     We also have exposures to other companies belonging to the SK Group. As of
December 31, 2002, our total exposure outstanding to Segae Trading Co. was W4
billion, consisting of W3 billion in loans and W1 billion in equity securities.
For the loans, we have made an allowance for loan losses of W1 billion. In
addition, as of December 31, 2002, our total exposure outstanding to SK
Corporation, the controlling company of the SK Group, was W152 billion, or 0.1%
of our total exposure, consisting of W24 billion in loans, W1 billion in equity
securities, W19 billion in debt securities and W108 billion in guarantees and
acceptances. We classify loans and guarantees and acceptances to other SK Group
companies, including SK Corporation, as performing in accordance with our
internal credit rating methodology and therefore no specific allowance is made
against these loans or guarantees and acceptances. Our management believes the
general allowance of W484 billion against the performing element of the
corporate loan portfolio in total is sufficient to cover any incurred losses
within this portfolio, including those loans to companies within the SK Group,
including SK Corporation and excluding SK Global and Segae Trading Co.

     For a more detailed discussion of our exposure to the SK Group as of
December 31, 2002, see "Item 4. Information on the Company -- Description of
Assets and Liabilities -- Loans -- Loan Concentrations -- Exposures to SK Group
Companies".

 WE MAY EXPERIENCE A FURTHER DETERIORATION OF THE CREDIT QUALITY OF OUR CREDIT
 CARD AND OTHER CONSUMER LENDING PORTFOLIOS.

     In recent years credit card and other consumer lending, including lending
to small unincorporated businesses, in Korea have experienced significant growth
as a result of government policies and a greater focus on these sectors by
commercial banks and credit card companies. This growth, however, has led to
industry-wide declines in overall credit quality, with increased delinquencies,
provisions and charge-offs, as a result of, among other things, weak economic
conditions as well as an increase in unemployment. The unemployment rate in
Korea has increased from 2.8% as of June 30, 2002 to 3.3% as of June 30, 2003.

     Our total consumer portfolio is comprised of three principal product types,
namely mortgages and home equity loans, credit cards and other consumer loans
(which include principally unsecured consumer loans). Over the past two years,
the amount of the Group's total consumer loans accounted for on a nonaccrual
basis increased from W228 billion to W469 billion, including, most
significantly, W169 billion in 2000 and W358 billion in 2002 relating to the
increase in nonaccrual loans specific to the credit card portfolio. The amount
of credit card loans has increased from W1,570 billion as of December 31, 2000
to W2,763 billion as of December 31, 2002, resulting in the Group's ratio of
nonaccrual loans to the total credit card loans to have also increased from
10.8%to 13.0%. In addition, the Group's other consumer loans have increased from
W3,330 billion as of December 31, 2000 to W4,962 billion as of December 31,
2002. This increase in lending has brought increasing delinquencies in this
portion of our portfolio. Over the past two years, the
                                        19
<PAGE>

amount of Chohung Bank's total consumer loans accounted for on a nonaccrual
basis increased from W766 billion as of December 31, 2000 to W3,269 billion as
of December 31, 2002, including, most significantly, an increase from W664
billion as of December 31, 2000 and W2,860 billion as of December 31, 2002
relating to the increase in nonaccrual loans specific to the credit card and
other consumer lending portfolios. The amount of loans in the credit card and
other consumer lending portfolios has increased from W6,532 billion as of
December 31, 2000 to W14,009 billion as of December 31, 2002, resulting in
Chohung Bank's ratio of nonaccrual loans in these specific portfolios to the
total credit card and other consumer lending portfolios to have also increased
from 10.2% to 20.4%. Loans are placed on nonaccrual status when payments of
interest and/or principal become past due by one day. The credit card and other
consumer loan sectors continue to experience credit quality problems and there
can be no assurance that a continuation of these problems will not have a
material adverse effect on our results of operations.

 GOVERNMENT REGULATION OF OUR CONSUMER AND CREDIT CARD OPERATIONS HAS INCREASED
 SIGNIFICANTLY WHICH MAY MATERIALLY AND ADVERSELY AFFECT OUR CREDIT CARD AND
 CONSUMER OPERATIONS.

     Due to the rapid increase in consumer debt in Korea in recent years, the
Korean government has adopted a series of regulations designed to restrain the
rate of growth in, and delinquencies of, cash advances, credit card loans and
credit card usage generally and to strengthen the reporting of, and compliance
with, credit quality indexes. In March 2002, the Financial Supervisory
Commission of Korea imposed sanctions, ranging from warnings and administrative
fines to partial business suspensions, on substantially all Korean credit card
issuers as a result of alleged unlawful or unfair practices discovered during
its industry-wide inspection. In March 2002, Chohung Bank was given a warning by
the Financial Supervisory Commission for issuing credit cards to underaged
customers. In late 2002, the Korean government enacted a number of changes to
the laws governing the reporting by credit card issuers. In particular, the
Financial Supervisory Commission and the Financial Supervisory Service began to
apply, and then subsequently increased, the minimum allowance required, stated
as a certain percentage of outstanding balance, under the rules and guidelines
issued by the Financial Supervisory Commission and the Financial Supervisory
Service. This calculation is performed on a Korean GAAP basis and does not
affect our U.S. GAAP provisioning policy. See "Item 5. Operating and Financial
Review and Prospects -- Shinhan Financial Group -- Reconciliation with Korean
Generally Accepted Accounting Principles". In addition, the Financial
Supervisory Commission and the Financial Supervisory Service have announced a
number of changes to the rules governing the reporting of credit card balances
(determined on a Korean GAAP basis), as well as the procedures governing which
persons may receive credit cards. In addition, the Korean government has also
revised the calculation formula for capital adequacy ratios and delinquency
ratios applicable to credit card companies, imposing sanctions against credit
card companies with capital adequacy ratios of 8% or below and/or delinquency
ratios of 10% or above. As of December 31, 2002, Shinhan Card's adjusted equity
capital ratio was 10.86% and its delinquency ratio (as reported to the Financial
Supervisory Service) was 5.2%.

     In the consumer loan sector, the Korean government enacted a number of
changes to laws governing retail lending volumes, including the lowering of
maximum loan-to-value ratio of mortgage and home equity loans to 60%, and in
certain cases to 50%. We believe that the Korean government will continue to
announce regulatory changes restricting the growth of consumer loans, in
particular, mortgage and home equity lending.

     These regulations may significantly reduce the level of credit card
accounts and mortgage and home equity loans that may be made in the future. The
growth and profitability of our consumer lending and credit card operations may
suffer materially as a result of these enforcement activities and regulations
and proposed regulations.

 WE INTEND TO EXPAND OUR EXPOSURE TO SMALL- AND MEDIUM-SIZED ENTERPRISES TO
 INCLUDE SMALLER ENTERPRISES, AND THIS EXPANSION MAY RESULT IN A DETERIORATION
 OF OUR ASSET QUALITY TO THIS SEGMENT AND HAVE AN ADVERSE IMPACT ON US.

     The Group's loans to small- and medium-sized enterprises meeting the
definition of such enterprises under the Basic Act on Small- and Medium-sized
Enterprises and its Presidential Decree increased from W10,898 billion as of
December 31, 2000 to W11,690 billion as of December 31, 2001 and to W
                                        20
<PAGE>

14,649 billion as of December 31, 2002. These balances represent 39.1%, 34.7%
and 32.5%, respectively, of the Group's total loan portfolio as of December 31,
2000, 2001 and 2002. For a definition of small- and medium-sized enterprises,
see "Item 4. Information on the Company -- Business Overview of Shinhan
Financial Group -- Our Principal Activities -- Corporate Banking
Services -- Small- and medium-sized Enterprises Division". Non-performing loans
to small- and medium-enterprises as described above were W222 billion as of both
December 31, 2000 and 2001 and W159 billion as of December 31, 2002,
representing 2.04%, 1.90% and 1.09% of the Group's total loans to small- and
medium-sized enterprises as of December 31, 2000, 2001 and 2002. Chohung Bank's
loans to small- and medium-sized enterprises meeting the definition of such
enterprises under the Basic Act of Small- and Medium-Sized Enterprises and its
Presidential Decree increased from W10,070 billion as of December 31, 2000 to
W10,592 billion as of December 31, 2001 and to W15,084 billion as of December
31, 2002. These balances represent 44.5%, 49.2% and 60.7%, respectively, of
Chohung Bank's total corporate loan portfolio as of December 31, 2000, 2001 and
2002. Non-performing loans to small- and medium-enterprises as described above
were W442 billion as of December 31, 2000, W219 billion as of December 31, 2001
and W249 billion as of December 31, 2002, representing 4.4%, 2.1% and 1.7% of
Chohung Bank's total corporate loans to small-and medium-sized enterprises as of
December 31, 2000, 2001 and 2002.

     The small- and medium-sized enterprise business is currently the focus of
intense competition among large commercial banks and the opportunities for us to
expand our business with more established small- and medium-sized enterprises
have been reduced. As a result, an integral part of our small- and medium-sized
enterprise lending business focus is to maintain the growth and profitability of
our loans to small- and medium-sized enterprises by selectively increasing our
customer base to include relatively smaller enterprises. We believe that lending
to these customers presents a significant opportunity for growth but will also
increase our credit risk exposure relative to our existing customers in this
segment. Financial difficulties experienced by our small- and medium-sized
enterprises, and our less established customers in particular, may have an
adverse impact on us.

 FUTURE FINANCIAL DIFFICULTIES OF CHAEBOLS MAY ADVERSELY AFFECT THE CREDIT
 QUALITY OF OUR SMALL- AND MEDIUM-SIZED ENTERPRISE CUSTOMERS WHO SERVE CHAEBOLS.

     Many of the more established small- and medium-sized enterprises, which
have been a key focus of our corporate banking activities, have close business
relationships with chaebols, primarily as suppliers. Financial difficulties
encountered by such chaebols would be likely to adversely impact the financial
condition of such small- and medium-sized enterprises and the quality of our
credit exposure to these customers.

 WE HAVE EXPOSURE TO THE LARGEST KOREAN COMMERCIAL CONGLOMERATES, KNOWN AS
 "CHAEBOLS", AND, AS A RESULT, RECENT AND ANY FUTURE FINANCIAL DIFFICULTIES OF
 CHAEBOLS MAY HAVE AN ADVERSE IMPACT ON US.

     As a result of the unfavorable financial and economic conditions in Korea,
a number of chaebols have experienced and continue to experience financial
difficulties. We have significant exposure to chaebols and large corporate
borrowers. Of the Group's twenty largest corporate exposures as of December 31,
2002, eight are companies that are members of the thirty largest chaebols in
Korea. Of Chohung Bank's twenty largest corporate exposures as of December 31,
2002, six are companies that are members of the thirty largest chaebols in
Korea. If the quality of the exposures extended by us to chaebols declines, we
would require additional loan loss provisions in respect of loans and would
record impairment losses in respect of securities, which would adversely affect
our financial condition, results of operations and capital adequacy.

     In particular, we have significant exposures to a number of former Hyundai
Group companies, Daewoo Group companies and Ssangyong Group companies, a number
of which have been experiencing financial difficulties.

     In 2001, creditor financial institutions of several former Hyundai Group
companies, including Hynix Semiconductor, Hyundai Engineering & Construction,
Hyundai Petrochemical, Inchon Oil Refinery and Hyundai Merchant Marine, agreed
to provide financial assistance to these companies by way of additional loans,
extensions of maturities of various outstanding payment obligations,
debt-to-equity swap transactions,

                                        21
<PAGE>

guarantees of overseas borrowings and injections of additional capital. In
addition, restructuring procedures under the new Corporate Restructuring
Promotion Act were commenced in respect of Hynix Semiconductor and Hyundai
Petrochemical. As of December 31, 2002, the Group had total exposure outstanding
to Hyundai Merchant Marine, Hyundai Petrochemical, Hynix Semiconductor, Inchon
Oil Refinery and Hyundai Engineering & Construction of W108 billion, W97
billion, W28 billion, W54 billion and W35 billion, respectively, including W9
billion and W26 billion of securities of Hyundai Petrochemical and Hyundai
Engineering & Construction, respectively. As of December 31, 2002, the Group
raised allowance for loan losses of W45 billion, W13 billion, W14 billion and
W34 billion in respect of Hyundai Merchant Marine, Hyundai Petrochemical, Hynix
Semiconductor and Inchon Oil Refinery, respectively. Substantially no allowance
for loan losses were raised with respect to our loans and guarantees and
acceptances outstanding to Hyundai Engineering & Construction. As of December
31, 2002, Chohung Bank had total exposure outstanding to Hyundai Merchant
Marine, Hyundai Petrochemical, Hynix Semiconductor, Inchon Oil Refinery and
Hyundai Engineering & Construction of W370 billion, W17 billion, W518 billion,
W78 billion and W86 billion, respectively, including W7 billion, W78 billion and
W129 billion of securities of Hyundai Petrochemical, Hyundai Engineering &
Construction and Hynix Semiconductor, respectively. As of December 31, 2002,
Chohung Bank made allowance for loan losses of W103 billion, W1 billion, W42
billion and W323 billion in respect of Hyundai Merchant Marine, Hyundai
Petrochemical, Inchon Oil Refinery and Hynix Semiconductor, respectively.

     In May 1997, in connection with the financing of US$850 million for the
construction of a fabrication plant in Eugene, Oregon of Hyundai Semiconductor
America, Hyundai Heavy Industries, Hyundai Merchant Marine and Hyundai
Corporation entered into a group support agreement to unconditionally,
irrevocably and jointly and severally guarantee the obligations of Hynix
Semiconductor. This transaction resulted in a creation of joint and several
obligations of these three companies in favor of the creditors of Hynix
Semiconductor in the amount of US$850 million, of which US$842 million is
currently outstanding, subject to scheduled repayment. Hynix Semiconductor's
failure to perform its obligations under this transaction will trigger this
obligation and will give rise to significant liquidity problems and capital
requirements for these three companies, further resulting in asset quality
deterioration of our total exposure outstanding to these three companies.

     In 1998, Daewoo Motors acquired Ssangyong Motors from the former Ssangyong
Group, on condition that certain of the then existing liabilities of Ssangyong
Motors be retained by the former Ssangyong Group. In connection with this
transaction, ten member companies of the Ssangyong Group assumed in the
aggregate W1.8 trillion, which subsequently resulted in significant increases in
interest expense for such companies, further aggravated by a sharp increase in
interest rates during the financial crisis of the late 1990's. Several of the
Ssangyong Group companies, including Ssangyong Corporation, Ssangyong Cement
Industrial and Ssangyong Engineering & Construction, have experienced
significant financial and liquidity difficulties as a result and were
subsequently placed under workout programs by their respective creditors. In
particular, Chohung Bank is the largest creditor to Ssangyong Corporation and,
as such, is the lead creditor bank under the workout program applicable to
Ssangyong Group companies. As of December 31, 2002, our total exposure to
Ssangyong Corporation (including its overseas offices in the United States,
Japan and Singapore) and Ssangyong Cement Industrial amounted to W408 billion
and W245 billion, respectively. Of our total loans and guarantees and
acceptances to the Ssangyong Group, W523 billion was classified as impaired. As
of December 31, 2002, allowances with respect to our loans and guarantees and
acceptances to Ssangyong Corporation and Ssangyong Cement Industrial were W104
billion and W43 billion, respectively.

     The financial condition of the former Daewoo Group, which was one of the
largest chaebols in Korea, has deteriorated over the past several years. In
August 1999, the principal creditor banks of the former Daewoo Group commenced
formal workout procedures with respect to 12 member companies of the Daewoo
Group, including Daewoo Corporation, Daewoo Electronics, Daewoo Heavy
Industries, Daewoo Telecom and Ssangyong Motors (acquired by Daewoo Motor in
1998). Currently, many of these companies either are subject to liquidation
proceedings or have been liquidated, are under workouts or corporate
reorganization proceedings, have been split up into more than one company or are
looking for purchasers. As of December 31, 2002, our total exposure to the
former members of the Daewoo Group was W517 billion,

                                        22
<PAGE>

including exposures to Ssangyong Motors, Daewoo Electronics Corp., Daewoo
Shipbuilding & Marine Engineering and Daewoo Electronics Service of W117
billion, W79 billion, W57 billion and W56 billion, respectively. Of our total
loans and guarantees and acceptances to the Daewoo Group companies, including
Ssangyong Motors, Daewoo Electronics Service, Daewoo Motor, Daewoo Telecom and
Daewoo Capital, W210 billion were classified as impaired, for which we made an
aggregate allowance for loan losses and guarantees and acceptances of W124
billion.

     No assurance can be given that our allowance for loan losses with respect
to our exposures to these companies will be sufficient to adequately cover any
losses arising from this arrangement. In addition, there can be no assurance
that other companies of the former Hyundai Group, to which we have outstanding
exposures, do not have additional contingent or other obligations outstanding in
favor of Hynix Semiconductor, which may have a material adverse effect on such
companies and us. The foregoing may result in a material adverse effect on our
financial condition and results of operations. We cannot assure you that the
allowances we have established against our exposures to the former Hyundai
Group, Daewoo Group and Ssangyong Group companies will be sufficient to cover
all future losses arising from these exposures. In addition, with respect to
those companies that are in or in the future enter into workout or liquidation
proceedings, we may not be able to make any recoveries against such companies.
We may, therefore, experience future losses with respect to those loans, which
may have a material adverse impact on us.

 DEVELOPMENTS ADVERSELY AFFECTING THE BUSINESS AND LIQUIDITY OF CREDIT CARD
 COMPANIES IN KOREA MAY RESULT IN LOSSES IN RESPECT OF OUR EXPOSURE TO SUCH
 COMPANIES.

     Recent adverse developments in the credit card industry such as
industry-wide increases in delinquencies and resulting increases in provisioning
for loan losses have had a negative impact on investors' perception of credit
card companies in the Korean corporate debt market, thereby significantly
limiting the ability of credit card companies to raise financing through
issuances of debt securities. For example, according to a press release issued
by the Financial Supervisory Commission, the average industry-wide delinquency
ratio (defined as ratio of credit card balances that are delinquent for more
than 30 days over total outstanding balances) of credit card companies in Korea
was approximately 9.5% as of June 30, 2003, showing a 290 basis points increase
compared to 6.6% as of December 31, 2002. As a result, Korean credit card
companies have been experiencing significant financial and liquidity
difficulties. As of December 31, 2002, the total corporate debt securities
(including commercial paper and asset-backed securities) issued and outstanding
by Korean credit card companies were reported to be approximately W89 trillion.
As of the same date, the Group held debt securities issued by credit card
companies (including through asset-backed securitization) in the aggregate
principal amount of W1,106 billion in our investment portfolio. As of the same
date, Chohung Bank held debt securities issued by credit card companies
(including through asset-backed securitization) with a book value of W322
billion in Chohung Bank's investment portfolio.

     In light of the financial market instability in Korea resulting from the
liquidity problems faced by credit card companies during the first quarter of
2003, the Korean government announced temporary measures in April 2003 intended
to provide liquidity support to credit card companies. These measures included,
among other things:

     - a request by the government for credit card companies to effect capital
       increase in the aggregate amount of W4.6 trillion, as part of their
       self-rescue efforts;

     - banks and other financial institutions agreeing with each other to extend
       the maturity of all debt securities of credit card companies that they
       hold;

     - investment trust companies agreeing with each other to extend the
       maturity of 50% of the aggregate amount of the debt securities of credit
       card companies that they hold which are scheduled to mature by June 2003;
       and

     - with respect to the remaining 50% of such credit card company debt
       securities, banks and other financial institutions agreeing with each
       other to contribute an aggregate amount of W5.6 trillion to purchase such
       debt securities from investment trust companies.

                                        23
<PAGE>

     Pursuant to the above measures, the Group, at the holding company level,
injected new capital of W100 billion in the form of subordinated debt into
Shinhan Card in April 2003 and plans to inject an additional W100 billion in the
second half of 2003. In addition, the Group agreed to extend the maturities of
the W436 billion of credit card company debt securities that the Group held in
April 2003 or that have become due in June 2003 (including W426 billion of such
debt securities we transferred from the Group's trust accounts to the Group's
bank accounts). Of the W5.6 trillion aggregate contribution made by Korean
financial institutions to purchase credit card company debt securities held by
investment trust companies, the portion allocated for the Group to purchase was
approximately W263 billion, all of which were repaid as of July 31, 2003.
Chohung Bank also agreed to extend the maturities of the W177 billion of loans
and debt securities of credit card companies that it held in April 2003 or that
have become due in June 2003. Of the W5.6 trillion aggregate contribution made
by Korean financial institutions to purchase credit card company debt securities
held by investment trust companies, the portion allocated for Chohung Bank to
purchase was approximately W183 billion, all of which were repaid as of July 31,
2003. See also "-- The Korean government may encourage lending to and investment
in certain types of borrowers in furtherance of government initiatives, and we
may take this factor into account".

     As of December 31, 2002, the Group had outstanding loans outstanding to
credit card companies in the aggregate principal amount of W490 billion
(including W450 billion to Kookmin Card). As of December 31, 2002, Chohung Bank
had outstanding loans to credit card companies in the aggregate principal amount
of W416 billion (including W311 billion to Kookmin Card). These are considered
performing in accordance with our internal credit rating methodology and
therefore we have not recognized a specific loan loss allowance against these.
See "Item 4. Information on the Company -- Description of Assets and
Liabilities -- Loans -- Loan Concentrations -- Exposures to the Credit Card
Industry". To the extent that financial and liquidity difficulties experienced
by credit card companies are not resolved on a timely basis, the asset quality
of our exposure to credit card companies may become significantly impaired,
resulting in losses that are materially adverse to our financial condition and
results of operations.

 WE HAVE EXPOSURE TO COMPANIES THAT ARE CURRENTLY OR MAY IN THE FUTURE BE PUT IN
 RESTRUCTURING, AND WE MAY SUFFER LOSSES AS A RESULT OF ADDITIONAL LOAN LOSS
 PROVISIONS REQUIRED AND/OR THE ADOPTION OF RESTRUCTURING PLANS WITH WHICH WE DO
 NOT AGREE.

     As of December 31, 2002, the Group's total loans and guarantees and
acceptances to companies that were under troubled debt restructurings amounted
to W410 billion or 0.83% of the Group's total loans and guarantees and
acceptances. As of the same date, the Group's allowances for losses on these
loans and guarantees and acceptances amounted to W145 billion, or 35.37% of
these loans. As of December 31, 2002, Chohung Bank's total loans and guarantees
and acceptances to companies that were in restructuring amounted to W1,657
billion or 3.3% of Chohung Bank's total loans and guarantees and acceptances. As
of the same date, Chohung Bank's allowances for losses on these loans and
guarantees and acceptances amounted to W802 billion, or 48.4% of these loans and
guarantees and acceptances. These allowances may not be sufficient to cover all
future losses arising from our exposure to these companies. Furthermore, in the
event that any of our borrowers become subject to corporate restructuring
procedures, we may be forced to restructure our credits pursuant to
restructuring plans approved by other creditor financial institutions holding
75% or more of the total outstanding debt (and 75% or more of the total
outstanding secured debt, if the restructuring plan includes the restructuring
of existing secured debt) of the borrower, or to dispose of our credits to other
creditors on unfavorable terms.

 ANY DETERIORATION IN THE ASSET QUALITY OF OUR GUARANTEES AND ACCEPTANCES WILL
 LIKELY HAVE A MATERIAL ADVERSE AFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF
 OPERATIONS.

     In the normal course of our banking activities, we make various commitments
and incur certain contingent liabilities in the form of guarantees and
acceptances. Guarantees are recorded as off-balance sheet items in the footnotes
to our financial statements and those guarantees that we have confirmed to make
payments on become acceptances, which are recorded on the balance sheet. The
Group had aggregate guarantees of W3,148 billion, and acceptances of W928
billion as of December 31, 2002. The Group

                                        24
<PAGE>

provides an allowance for losses with respect to guarantees and acceptances as
of each balance sheet date using the same criteria used for corporate loans
except that no allowance is provided for those guarantees and acceptances that
are not impaired. The Group provided allowances for losses of W40 billion in
respect of the guarantees and W41 billion in respect of acceptances as of
December 31, 2002. Chohung Bank had aggregate guarantees of W1,492 billion, and
acceptances of W1,384 billion as of December 31, 2002. Chohung Bank provides an
allowance for losses with respect to guarantees and acceptances as of each
balance sheet date using the same criteria used for corporate loans. With
respect to guarantees and acceptances that are not impaired, Chohung Bank
provided allowance for loan losses of W15 billion as of December 31, 2002. In
total, Chohung Bank provided allowances for losses of W66 billion in respect of
the guarantees and W77 billion in respect of acceptances as of December 31,
2002. If we experience significant asset quality deterioration in our guarantees
and acceptances exposure, no assurance can be given that such allowances will be
sufficient to cover any actual losses resulting in respect of these liabilities
or that the losses we incur on guarantees and acceptances will not be larger
than those experienced on loans.

  IF CHOHUNG BANK IS REQUIRED TO REPURCHASE THE SUBSTANDARD OR BELOW LOANS THAT
  IT SOLD TO THE KOREA ASSET MANAGEMENT CORPORATION, CHOHUNG BANK MAY NEED TO
  RECOGNIZE LOSSES.

     In December 1997, in response to the financial difficulties faced by Korean
financial institutions as a result of the severe economic deterioration in
Korea, the Korean government required Korea Asset Management Corporation to
purchase certain assets which were classified as substandard or below from
Korean financial institutions at discounted prices. Chohung Bank has sold an
aggregate of W1,883 billion substandard or below loans to Korea Asset Management
Corporation in 1997, 1998 and 1999. Pursuant to the purchase agreement with
Korea Asset Management Corporation, the purchase price of the substandard or
below loans can be adjusted by Korea Asset Management Corporation following the
sale based on a valuation of any underlying collateral or, for substandard or
below loans relating to borrowers in restructuring proceedings, based on the
value of their payments on the loans under the final restructuring plan. In
addition, Korea Asset Management Corporation can require Chohung Bank to
repurchase any substandard or below loan that Chohung Bank has sold to them in
the event that certain criteria of the loan are not met. Chohung Bank may be
required to repurchase any loan relating to a borrower that has applied to a
court for restructuring or that is the subject of restructuring proceedings at
the time of the sale to Korea Asset Management Corporation if a court rejects
the application for restructuring, disapproves the restructuring plan or fails
to approve the restructuring plan within two years of the sale. Chohung Bank may
also be required to repurchase a loan if it is determined by a court that the
borrower cannot meet the terms of the repayment schedule developed in the
restructuring proceeding. The ability of Korea Asset Management Corporation to
exercise its right to require Chohung Bank to repurchase loans sold is without
expiration.

     Since Chohung Bank may be liable for the failure of debtors to pay when
due, and where Chohung Bank may be required to repurchase loans in the event
that they do not meet the purchase criteria specified in the agreements, Chohung
Bank estimates a recourse liability as of each balance sheet date. As of
December 31, 2002, the remaining loans for which Korea Asset Management
Corporation has recourse amounted to W160 billion against which Chohung Bank had
estimated a recourse liability of W66 billion.

     Chohung Bank is unable to predict when, if at all, it will be required to
repurchase assets from the Korea Asset Management Corporation. If Chohung Bank
is required to repurchase loans from the Korea Asset Management Corporation and
recovers less on the loans than was estimated in determining the recourse
liability, Chohung Bank will incur a loss. Any such loss could have a material
adverse effect on Chohung Bank's results of operations and financial condition.

  CHOHUNG BANK'S FINANCIAL CONDITION MAY DETERIORATE AND MAY IMPACT ITS ABILITY
  TO MAINTAIN THE REQUIRED MINIMUM CAPITAL ADEQUACY RATIO.

     Pursuant to the capital adequacy guidelines issued by the Financial
Supervisory Commission, which are derived from standards established by the Bank
for International Settlements, commercial banks in Korea are required to
maintain a minimum Tier I and Tier II capital adequacy ratio of 8% on a
consolidated basis where Tier II capital may not be recognized over 100% of Tier
I capital. Chohung Bank's Tier I and Tier II
                                        25
<PAGE>

capital adequacy ratio as of December 31, 2002 was 8.66% and Chohung Bank's Tier
I and Tier II capital adequacy ratio as of December 31, 2001 and 2000 was 10.43%
and 9.78%, respectively.

     Subordinated debentures that qualify for Tier II capital treatment are
subject to amortization (20% per annum) of such capital treatment commencing
five years prior to the applicable maturity date of such debentures. See "Item
4. Information on the Company -- Supervision and Regulation -- Regulations
Applicable to Banks -- Capital Adequacy." As of December 31, 2002, out of W1,607
billion outstanding balance of the subordinated debentures that qualify for Tier
II (both upper and lower) capital treatment, W1,326 billion qualified for such
capital treatment after amortization. All else being equal, including the
exchange rate, the amount of such subordinated debentures currently existing
that would qualify for Tier II capital treatment will be reduced to W1,100
billion and W873 billion by the end of 2003 and 2004, respectively, after
amortization. Chohung Bank estimates that for every W100 billion decrease in
subordinated debt as a result of such amortization, assuming that such amortized
portion is not replaced, its capital adequacy ratio will decrease by
approximately 0.24%. Chohung Bank intends to issue additional subordinated
debentures that qualify for Tier II capital treatment. However, there can be no
assurance that if Chohung Bank requires additional capital and issue additional
subordinated debentures, it will be able to obtain such capital on favorable
terms or at all.

     Beginning in 2002, the Financial Supervisory Commission adopted for Korean
banks (including Chohung Bank) the changes adopted by the Bank for International
Settlement in calculating capital adequacy ratios to take into account market
risks relating to trading securities, foreign exchange and interest rate. In
November 2002, the Financial Supervisory Commission revised the capital adequacy
ratio calculation guidelines to increase the risk-weights for newly extended
consumer loans secured by housing from 50% to (i) 60% if the credit of the
borrower of such loans qualify under one of the two following categories and
(ii) 70% if the credit of the borrower of such loans qualify under both of the
two following categories: (x) such loan is delinquent for 30 days or more or the
cumulative number of days delinquent for the past one year amounts to 30 days or
more; or (y) the debt-to-equity ratio (total credits over annual income) of a
borrower of such a loan exceeds 250%. The revised guidelines apply to newly
extended loans secured by housing starting from November 13, 2002. See "Item 4.
Information on the Company  -- Supervision and Regulation -- Regulations
Applicable to Banks -- Capital Adequacy."

     The economic crisis in Korea beginning late 1997 has caused deteriorations
of the capital levels and capital adequacy position of Chohung Bank. Increased
non-performing loans have led to increases in the provisioning for loan losses
and declines in the financial condition and the results of operations of Chohung
Bank and, as a result have reduced the capital adequacy ratio of Chohung Bank.
Any deterioration of the Korean economy as well as any further financial
difficulties of Korean corporations or consumers is likely to erode the capital
adequacy of Chohung Bank. In addition, deterioration in property and other
collateral values may require Chohung Bank to add provisions which would further
erode the capital adequacy of Chohung Bank.

     If a bank fails to maintain the required minimum capital adequacy ratios,
the Financial Supervisory Commission may impose penalties ranging from a warning
to a suspension or revocation of Chohung Bank's license. No assurance can be
given that Chohung Bank's financial condition and other sources of capital will
be sufficient to keep Chohung Bank's capital adequacy ratios above the minimum
required amounts. Also, there can be no assurance that if Chohung Bank requires
additional capital, it will be able to obtain such capital on favorable terms or
at all. In addition, Chohung Bank's ability to obtain additional capital may be
further restricted to the extent Korean banks and banks from other Asian
countries are seeking to raise capital at the same time.

  THE LOSS OF DEPOSIT ACCOUNTS MAINTAINED BY KOREAN COURTS WITH CHOHUNG BANK MAY
  HAVE A MATERIAL ADVERSE EFFECT ON CHOHUNG BANK'S FINANCIAL POSITION AND
  RESULTS OF OPERATIONS.

     Chohung Bank believes that it holds the largest amount of deposits made by
litigants and applicants in connection with legal proceedings in Korean courts
or by persons involved in disputes. Although Chohung Bank has been involved in
this business for more than forty years and has acquired certain competitive

                                        26
<PAGE>

advantages and entry barriers in connection therewith, no assurance can be given
that Chohung Bank will be able to maintain its competitiveness in this area. The
Korean Supreme Court in 1994 opened to other banks the opportunity to establish
new sub-branches or branches in newly opened court houses. The Supreme Court may
open up competitive bidding to the entire network of sub-branches and branches
taking court deposits. If the Supreme Court decides to select a bank for court
deposits at all courts through competitive bidding, there can be no assurance
that Chohung Bank will be selected. Because court deposits are a low-cost source
of funding and Chohung Bank had total court deposits of W3,887 billion and
W3,872 billion as of December 31, 2001 and December 31, 2002, respectively,
which accounted for 10.7% and 9.2% of total Won deposits of Chohung Bank as of
the same periods, the loss of such business would have a material adverse effect
on Chohung Bank's financial condition and results of operations.

  ANY REQUIRED TRANSFERS FROM CHOHUNG BANK'S BANK ACCOUNTS TO COVER SHORTFALLS
  IN ITS GUARANTEED TRUST ACCOUNTS COULD HAVE A MATERIAL ADVERSE EFFECT ON
  CHOHUNG BANK'S RESULTS OF OPERATIONS.

     Under Korean law, assets held in a bank's trust accounts are segregated
from other assets of such bank and are not available to satisfy the claims of
the depositors or other creditors of such bank. In respect of certain trust
account products, Chohung Bank guarantees the principal of the trust account
and, in certain cases, a fixed rate of return. As of December 31, 2002 and June
30, 2003, Chohung Bank guaranteed principal of trust accounts in the aggregate
amount of W1,146 billion and W1,112 billion, respectively. If income from such
trust accounts is insufficient to pay the guaranteed amount, such deficiency is
satisfied first from special reserves maintained in such trust accounts, then
from the trust fees, and finally from funds transferred from Chohung Bank's bank
accounts. Chohung Bank's obligation to be paid from the bank accounts to
guaranteed trusts at their maturities were W21 billion and W58 billion in 2001
and 2002, respectively. There can be no assurance that Chohung Bank will not be
required to make transfers from its bank accounts to such trust accounts in the
future or that the amounts of such transfers will not be significantly greater
in the future.

RISKS RELATING TO OUR STRATEGY

 IF WE ARE UNABLE TO ADEQUATELY UTILIZE OUR HOLDING COMPANY STRUCTURE TO REAP
 THE EXPECTED BENEFITS, OUR FUTURE EARNINGS AND THE PRICES OF OUR COMMON SHARES
 AND OUR AMERICAN DEPOSITARY SHARES MAY BE MATERIALLY ADVERSELY AFFECTED.

     We realigned our business structure as a financial holding company in
September 2001. We have no prior experience operating in a holding company
structure. The success of the holding company structure, which entailed the
reorganization and integration of various activities and/or operations of our
subsidiaries, depends in part on our ability to realize the anticipated
synergies, growth opportunities and cost savings from coordinating and, in
certain cases, combining the businesses of our subsidiaries. Our future
earnings, as well as the future value of our common shares and our American
depositary shares and our ability to compete effectively, may be materially and
adversely affected should we fail to achieve the anticipated benefits from the
holding company structure or should costs to achieve these benefits be higher
than we expect.

     In particular, since each of our subsidiaries have operated independently
within the financial holding company structure, the integration of the
activities and/or operations of our subsidiaries is likely to require a
significant amount of time, financial resources and management attention. To
realize the anticipated benefits of the holding company structure, our
management must implement a business plan that will effectively coordinate
and/or combine activities and/or operations that are diverse in terms of
management, compensation and business culture, as well as in terms of some of
the products and services they offer and the regions and the customers they
serve. If our management is not able to do so, we may not realize the
anticipated benefits of the holding company structure on a timely basis, at
levels we had expected or at all.

     For risks relating to our acquisition of Chohung Bank, see "-- Risks
Relating to our Acquisition of Chohung Bank" below.

                                        27
<PAGE>

 AS A HOLDING COMPANY, WE ARE DEPENDANT ON RECEIVING DIVIDENDS FROM OUR
 SUBSIDIARIES IN ORDER TO PAY DIVIDENDS ON OUR COMMON SHARES.

     We are a financial holding company with no operating assets other than the
shares of our subsidiaries. Our source of funding and cash flow is dividends
from, or disposition of its interests in, our subsidiaries or our cash
resources, most of which are currently the result of borrowings. Since our
principal asset is the outstanding capital stock of Shinhan Bank and Chohung
Bank, our ability to pay dividends on our common shares will mainly depend on
dividend payments from Shinhan Bank and Chohung Bank.

     Dividend payments from Shinhan Bank and Chohung Bank to the holding company
are subject to the Commercial Code of Korea, the Bank Act and to regulatory
limitations, generally based on capital levels and retained earnings, imposed by
the various regulatory agencies with authority over Shinhan Bank and Chohung
Bank. As of December 31, 2002, Shinhan Bank could declare and pay W427 billion
of dividends to us without the approval of regulatory authorities. The ability
of Shinhan Bank to pay dividends, however, is always subject to regulatory
restrictions if paying dividends would impair its nonconsolidated profitability,
financial condition or other cash flow requirements, including:

     - Under the Commercial Code of Korea, dividends may only be paid out of
       distributable income, an amount which is calculated by subtracting the
       aggregate amount of a company's paid-in capital and certain mandatory
       legal reserves from its net assets, in each case as of the end of the
       prior fiscal year;

     - Under the Bank Act, a bank also is required to credit at least 10% of its
       net profit to a legal reserve each time it pays dividends on
       distributable income until such time when this reserve equals the amount
       of its total paid-in capital; and

     - Under the Bank Act and the requirements promulgated by the Financial
       Supervisory Commission, if a bank fails to meet its required capital
       adequacy ratio or otherwise subject to the management improvement
       measures imposed by the Financial Supervisory Commission, then the
       Financial Supervisory Commission may restrict the declaration and payment
       of dividend by such a bank.

     Although Shinhan Bank is considered "well-capitalized" under the Bank Act
and the Financial Supervisory Commission requirements, we cannot assure you that
Shinhan Bank will continue to meet the criteria under the regulatory guidelines,
in which case it may stop paying or reduce the amount of dividends paid to us.

 WE MAY NEED TO RAISE ADDITIONAL CAPITAL, AND ADEQUATE FINANCING MAY NOT BE
 AVAILABLE TO US ON ACCEPTABLE TERMS, OR AT ALL.

     We may seek additional capital in the near future to fund the growth of our
operations, including through mergers and acquisitions, to provide financial
support for our subsidiaries, including funds needed to address liquidity
difficulties experienced by our credit card subsidiary, to meet minimum
regulatory capital adequacy ratios and to enhance our capital levels. We may not
be able to obtain additional debt or equity financing, or if available, it may
not be in amounts or on terms commercially acceptable to us, it may impose
conditions on our ability to pay dividends or grow our business or it may impose
restrictive financial covenants on us. If we are unable to obtain the funding we
need, we may be unable to continue to implement our business strategy, enhance
our financial products and services, take advantage of future opportunities or
respond to competitive pressures, all of which could have a material adverse
effect on our financial condition and results of operations.

 WE MAY NOT SUCCEED IN IMPROVING CUSTOMER SERVICE THROUGH THE INTRODUCTION OF
 PERFORMANCE-BASED COMPENSATION.

     Our ability to increase our market share in the retail, small- and
medium-sized enterprise and credit card segments will depend in part upon our
ability to attract and maintain customers through high-quality services. We
intend to enhance the quality of our customer service by increasing employee
performance measured against the level of customer satisfaction and customer
response to our products and services and the quality of the assets and revenues
generated. To do so, it may involve the introduction of performance-based
                                        28
<PAGE>

compensation. Virtually all employees interfacing with the Group's customers are
members of the Group's labor union subject to contracts that do not currently
provide for performance-based compensation. To the extent we attempt to
implement performance-based compensation, we may face strong resistance from our
labor union. Failure of the union to accept or cooperate fully with our new
programs may materially adversely affect the implementation of this aspect of
our strategy.

RISKS RELATING TO OUR OTHER BUSINESSES

 WE MAY INCUR SIGNIFICANT LOSSES FROM OUR INVESTMENT AND, TO A LESSER EXTENT,
 TRADING ACTIVITIES DUE TO MARKET FLUCTUATIONS.

     We enter into and maintain large investment positions in the fixed income
markets, primarily through our treasury and investment business. We describe
these activities in "Item 4. Information on the Company -- Business Overview of
Shinhan Financial Group -- Our Principal Activities -- Treasury and Securities
Investment" and "Item 4. Information on the Company -- Business Overview of
Chohung Bank -- Chohung Bank's Principal Activities -- Treasury and
International Business"." We also maintain smaller trading positions, including
securities and derivative financial instruments as part of our banking
operations. In each of the product and business lines in which we enter into
these kinds of positions, part of our business entails making assessments about
financial market conditions and trends. The revenues and profits we derive from
many of our positions and related transactions are dependent on market prices.
When we own assets such as debt securities, market price declines, including as
a result of fluctuating market interest rates, can expose us to losses. If
prices move in a way we have not anticipated, we may experience losses. Also,
when markets are volatile, characterized by rapid changes in price direction,
the assessments we have made may prove to lead to lower revenues or profits, or
losses, on the related transactions and positions.

 PROTRACTED MARKET DECLINES CAN REDUCE LIQUIDITY IN THE MARKETS, MAKING IT
 HARDER TO SELL ASSETS AND LEADING TO MATERIAL LOSSES.

     In some of our businesses, protracted market movements, particularly price
declines in assets, can reduce the level of activity in the market or reduce
market liquidity. These developments can lead to material losses if we cannot
close out deteriorating positions in a timely way. This may especially be the
case for assets that are not traded on stock exchanges or other public trading
markets, such as corporate debt securities issued by Korean companies, including
credit card companies, and derivatives contracts, which may have values that we
calculate using models other than publicly-quoted prices. For instance, the
market value of debt securities in our portfolio as reflected on our balance
sheet is determined by references to suggested prices posted by Korean rating
agencies. These valuations, however, may differ significantly from the actual
value that we may realize in the event we elect to sell these securities. As a
result, we may not be able to realize the full "marked-to-market" value at the
time of any such sale of these securities and thus may incur additional losses.
Monitoring the deterioration of prices of assets like these is difficult and
could lead to losses we did not anticipate.

 WE MAY GENERATE LOWER REVENUE FROM BROKERAGE AND OTHER COMMISSION- AND
 FEE-BASED BUSINESS.

     Market downturns are likely to lead to decline in the volume of
transactions that we execute for our customers and, therefore, to decline in our
non-interest revenues. In addition, because the fees that we charge for managing
our clients' portfolios are in many cases based on the value of performance of
those portfolios, a market downturn that reduces the value of our clients'
portfolios or increases the amount of withdrawals would reduce the revenues we
receive from our securities brokerage, trust account management and other asset
management services. Even in the absence of a market downturn, below-market
performance by our securities, trust account or asset managers may result in
increased withdrawals and reduced inflows, which would reduce the revenue we
receive from these businesses.

                                        29
<PAGE>

 OUR INTERNET BANKING SERVICES ARE SUBJECT TO SECURITY CONCERNS RELATING TO THE
 COMMERCIAL USE OF THE INTERNET.

     We provide Internet banking services to our retail and corporate customers,
which require sensitive customer information, including passwords and account
information, to be transferred over a secure connection on the Internet.
However, connections on the Internet, although secure, are not free from
security breach. No assurance can be given that security breach in connection
with our Internet banking service will not occur in the future, which may result
in significant liability to our customers and third parties and materially and
adversely affect our business.

RISKS RELATING TO OUR ACQUISITION OF CHOHUNG BANK

  WE MAY FAIL TO FULLY REALIZE THE ANTICIPATED BENEFITS OF THE ACQUISITION.

     We aim to capitalize over time on the combined strengths of Shinhan Bank
and Chohung Bank in terms of market share, product and service mix, customer
base and cost efficiencies. Our ability to achieve these benefits during the
three-year transition period and after a merger of the two banks is subject to
risks and uncertainties, some of which are beyond our control, including:

     - unforeseen or latent risks in the operations or the loan portfolio of
       Chohung Bank;

     - difficulties in managing the gradual integration of the two businesses
       during the transition period, including the harmonization of compensation
       levels and the implementation of a coordinated business plan;

     - difficulties in operating the integrated information technology system,
       risk management and other systems;

     - difficulties in integrating the managements of the two banks after the
       anticipated merger;

     - difficulties in putting in place effective cost-cutting measures such as
       procurement systems and electronic banking systems;

     - difficulties in harmonizing the two corporate cultures; and

     - difficulties in securing and retaining the key personnel of Chohung Bank
       during the transition period and retaining key personnel after the
       anticipated merger.

  LABOR OPPOSITION AND UNREST COULD DELAY OR DISRUPT SUCCESSFUL INTEGRATION OF
  SHINHAN BANK AND CHOHUNG BANK OR HINDER OUR ABILITY TO REALIZE THE ANTICIPATED
  BENEFITS OF OUR ACQUISITION OF CHOHUNG BANK.

     Prior to entering into a cooperation understanding with our management, the
labor union of Chohung Bank opposed the acquisition, engaging in a strike in
mid-June 2003 interrupting Chohung Bank's operations for five days and causing
temporary liquidity problems. Following execution of the acquisition agreements,
the labor union of Chohung Bank opposed the selection of Chohung Bank's new CEO,
who was a former executive of Chohung Bank, and attempted to prevent the
recommendation committee for the CEO of Chohung Bank from meeting to approve the
appointment. Subsequently, the labor union withdrew their objection.
Disagreements by the labor union of Chohung Bank regarding integration steps or
the full integration or by the labor union of Shinhan Bank regarding the
understanding or other aspects of the integration and actions taken to delay or
disrupt the process could have a material adverse effect on our ability to
realize the anticipated benefits of our acquisition of Chohung Bank and have an
adverse effect on our combined results of operations and the price of our common
shares or American depositary shares.

                                        30
<PAGE>

RISKS RELATING TO COMPETITION

 COMPETITION IN THE KOREAN BANKING INDUSTRY, IN PARTICULAR IN THE SMALL- AND
 MEDIUM-SIZED ENTERPRISES BANKING, RETAIL BANKING AND CREDIT CARD OPERATIONS, IS
 INTENSE, AND WE MAY EXPERIENCE DECLINING MARGINS AS A RESULT.

     We compete principally with other nationwide commercial banks in Korea but
also face competition from a number of additional sources including regional
banks, development banks, specialized banks and branches of foreign banks
operating in Korea, as well as various other types of financial institutions,
including credit card companies, securities companies and investment trust
companies. Over the past few years, regulatory reforms and liberalization of the
Korean financial markets have led to increased competition among financial
institutions in Korea. As the reform of the financial sector continues, foreign
financial institutions, many with greater resources than we have, have entered
the Korean market. There can be no assurance that we will be able to compete
successfully with other domestic and foreign financial institutions or that
increased competition will not have a material adverse effect on our financial
condition or operating results including Chohung Bank.

     The Korean commercial banking industry has undergone dramatic changes
recently as a number of significant mergers and acquisitions in the industry
have taken place. There may be additional consolidation in the Korean commercial
banking industry, including Korea's regional banks in particular. In November
2001, Kookmin Bank and Housing & Commercial Bank, two of the strongest banks in
Korea, merged to form Kookmin Bank. The newly merged bank is significantly
larger and has more financial resources than us. Also in 2001, Woori Bank
restructured itself as a financial holding company and significantly realigned
its businesses and products to compete with other larger banks in Korea. In
2002, there was a merger between Hana Bank and Seoulbank. At present, these and
other banks resulting from mergers or acquisitions may have more financial
resources than us. There can be no assurance that we will be able to compete
successfully with such banks.

     Over the past several years, virtually all Korean banks have adopted a
strategy of reducing large corporate exposure and increasing small- and
medium-sized enterprises, retail and credit card exposure. As a result,
substantially all commercial banks and financial institutions in Korea have
focused their business on, and engaged in aggressive marketing campaigns and
made significant investments in, these sectors. The growth and profitability of
our small- and medium-sized enterprises and retail banking activities and credit
card operations may decline as a result of growing market saturation in these
sectors, increased interest rate competition, pressure to lower the fee rates
applicable to these sectors and higher marketing expenses. In particular, it
will be more difficult for us including Chohung Bank to secure new small- and
medium-sized enterprise customers, retail and credit card customers with the
credit quality and on credit terms necessary to achieve our business objectives.

     An important focus of our business is to increase our fee income in order
to diversify our revenue base, in anticipation of greater competition and
declining lending margins. To date, except for credit card fees, securities
brokerage fees and trust account management fees, we have not generated
significant fee revenues. We recognize, however, that other banks and financial
institutions in Korea have recently recognized the same trends and are beginning
to focus on increasing their fee income. Intense competition in the fee-based
business will require us to create and market new and innovative products and
services in a highly competitive environment. Our failure to do so could
adversely affect our future results of operations.

 WE ARE HIGHLY DEPENDENT ON SHORT-TERM FUNDING SOURCES THAT ARE SUSCEPTIBLE TO
 PRICE COMPETITION, WHICH DEPENDENCE MAY ADVERSELY AFFECT OUR OPERATIONS.

     Most of our funding requirements, principally those of Shinhan Bank and
Chohung Bank, are met through short-term funding sources, primarily in the form
of customer deposits, which are subject to significant price competition. As of
December 31, 2002, approximately 94.2% of the Group's total deposits had current
maturities of one year or less or were payable on demand. As of December 31,
2002, approximately 51.3% of Chohung Bank's deposits in Korean Won and
approximately 68.9% of Chohung Bank's deposits in foreign currencies had current
maturities of one year or less or were payable on demand.
                                        31
<PAGE>

In the past, a substantial portion of such customer deposits has been rolled
over upon maturity or otherwise maintained with us, and such short-term deposits
have been a stable source of funding over time. For example, of the Group's
total deposits outstanding as of December 31, 2002 with remaining maturities of
six months or less, approximately 73% were rolled over or otherwise maintained
with us. Of Chohung Bank's total deposits maturing during the six months ended
June 30, 2003, approximately 49% were rolled over or otherwise maintained with
Chohung Bank. No assurance can be given, however, that such stable source of
funding will continue, including as a result of intense price competition. If a
substantial number of depositors fail to roll over deposited funds upon maturity
or withdraw such funds from us, our liquidity position could be materially
adversely affected, and we may be required to seek more expensive sources of
short-term and long-term funds to finance our operations.

RISKS RELATING TO GOVERNMENT REGULATION AND POLICY

 WE OPERATE IN A LEGAL AND REGULATORY ENVIRONMENT THAT IS SUBJECT TO CHANGE,
 WHICH MAY HAVE AN ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS.

     The legal and regulatory framework for the Korean banking industry has
continued to undergo significant reforms recently. Historically, regulations of
the Korean government included, among other things, establishing lending rates
and deposit rates for banks. Regulations also dictated the extent of competition
through restrictions on new entrants and on the growth of existing banks,
including the opening of new branches. Regulatory reform of the Korean banking
industry to date has removed controls on all lending rates and all deposit rates
and provided for increased prudential supervision of the financial sector by the
Korean government. We believe that the Korean government intends to continue to
deregulate the financial sector, by allowing market forces to have a larger role
in guiding the development of the industry. However, with respect to
provisioning, liquidity and capital adequacy standards, the Government has
revised its regulations to implement stricter standards for commercial banks and
credit card companies. We expect the regulatory environment in which we operate
to continue to be subject to change. There can be no assurance that any future
changes will not have an adverse effect on our business, financial condition or
results of operations.

 STRUCTURAL REFORMS OCCURRING IN THE KOREAN ECONOMY AND FINANCIAL SECTOR MAY
 HAVE A SUBSTANTIAL IMPACT ON OUR BUSINESS.

     In response to the financial and economic downturn in Korea in 1997 and
1998, the Korean government announced and implemented a series of comprehensive
policy packages to address structural weaknesses in the Korean economy and the
financial sector, which included the mergers and restructurings of a number of
banks. We expect that these comprehensive policy packages will continue to have
a substantial impact on our business. The government has indicated that it may
advocate further mergers or restructurings involving other commercial banks and
financial institutions in the Korean financial sector. Such mergers or
restructurings may create larger banks and financial institutions that may pose
a competitive threat and in turn have an adverse impact on our business,
financial condition and results of operations, including the business, financial
condition and results of operations of Chohung Bank.

 THE FINANCIAL SUPERVISORY COMMISSION MAY IMPOSE BURDENSOME MEASURES IF IT DEEMS
 US OR OUR OPERATING SUBSIDIARIES TO BE FINANCIALLY UNSOUND.

     If the Financial Supervisory Commission deems our financial condition,
including the financial conditions of our operating subsidiaries including
Chohung Bank, to be unsound or if our operating subsidiaries or we fail to meet
the applicable requisite capital ratio or the capital adequacy ratio, as the
case may be, set forth under Korean law, the Financial Supervisory Commission
may order, among other things, at the level of the holding company or a
subsidiary, capital increases or reductions, stock cancellations or
consolidations, transfers of business, sales of assets, closures of branch
offices, mergers with other financial institutions, or suspensions of a part or
all of our business operations. If any of such measures are imposed on us or our
operating subsidiaries including Chohung Bank by the Financial Supervisory
Commission as a result of poor financial condition or failure to comply with
minimum capital adequacy requirements or

                                        32
<PAGE>

otherwise, such measures may materially harm our business and adversely affect
the price of our common shares or our American depositary shares.

 THE KOREAN GOVERNMENT MAY ENCOURAGE LENDING TO AND INVESTMENT IN CERTAIN TYPES
 OF BORROWERS IN FURTHERANCE OF GOVERNMENT INITIATIVES, AND WE MAY TAKE THIS
 FACTOR INTO ACCOUNT.

     The Korean government has encouraged and may in the future encourage
lending to or investment in the securities of certain types of borrowers and
other financial institutions in furtherance of government initiatives. The
Korean government, through its regulatory bodies such as the Financial
Supervisory Commission, has in the past announced lending policies to encourage
Korean banks and financial institutions to lend or make investments in
particular industries or customer sectors, and, in certain cases, has provided
lower cost funding through loans made by the Bank of Korea for further lending
to specific customer sectors, such as the small- and medium-sized enterprises.
The Korean government has in this manner encouraged commercial banks to step in
to provide credit card companies with additional liquidity. While all loans or
securities investments will be reviewed in accordance with our credit review
policies or internal investment guidelines and regulations or those of Chohung
Bank, as the case may be, we, on a voluntary basis, may factor the existence of
such policies and encouragements into consideration in making loans or
securities investments. However, the ultimate decision whether to make loans or
securities investments always remains with us based on our credit approval
procedures and our risk management system, independently of government policies.

RISKS RELATING TO KOREA AND THE GLOBAL ECONOMY

 UNFAVORABLE FINANCIAL AND ECONOMIC CONDITIONS IN KOREA AND WORLDWIDE HAVE HAD
 AND WILL IN THE FUTURE CONTINUE TO HAVE A MATERIAL ADVERSE IMPACT ON OUR ASSET
 QUALITY, LIQUIDITY AND FINANCIAL PERFORMANCE.

     Economic conditions in Korea, elsewhere in Asia, in the United States and
elsewhere in the world materially affect our business. Financial turmoil in Asia
in the late 1990's adversely affected the Korean economy and in turn Korean
financial institutions. In addition, investors' reactions to developments in one
country can have adverse effects on the securities of companies in other
countries, including Korea. In addition, as recently acknowledged by the Korean
government, the Korean economy has been experiencing a recession which had and
is expected to continue to have a material impact on our operations.

     Developments that could hurt Korea's economy in the future include, among
other things:

     - failure of restructuring of chaebols, including financial difficulties
       experienced by SK Global and other SK Group companies, and accounting
       irregularities of and regulatory proceedings against chaebols, together
       with its negative effect on the Korean financial markets and on the
       small- and medium-sized enterprises market;

     - volatility in commodity prices (including oil prices), exchange rates,
       interest rates, stock markets or foreign currency reserves;

     - increased reliance on exports to service foreign currency debts, which
       could cause friction with Korea's trading partners;

     - continued adverse developments in the economies of countries to which
       Korea exports goods and services (such as the United States and Japan),
       or in emerging market economies in Asia or elsewhere;

     - social and labor unrest resulting from lay-offs, increasing unemployment
       and lower levels of income;

     - a decrease in tax revenues and a substantial increase in the Korean
       government's expenditures for unemployment compensation and other social
       programs that together could lead to an increased government budget
       deficit; and

     - a deterioration in economic or diplomatic relations between Korea and its
       trading partners or allies, including such deterioration resulting from
       trade disputes or disagreements in foreign policy.

                                        33
<PAGE>

     Deterioration in the Korean economy can also occur as a result of
deterioration in the global economic conditions. The worldwide economy has been
in a slump since the beginning of 2001, as the United States and other G8
countries have experienced recessionary conditions which have been exacerbated
by the terrorist attacks in the United States on September 11, 2001 and the
impact of Severe Acute Respiratory Syndrome, or SARS, on global exports or GDP
growth rates. Any prolonged stagnation or future deterioration in global
economic conditions would continue to have an adverse impact on the Korean
economy. A significant adverse change in the Korean economy or a loss of
investor confidence in the financial systems of emerging and other markets could
have an adverse effect on us and the market price of our common shares or the
American depositary shares.

 TENSIONS WITH NORTH KOREA COULD HAVE AN ADVERSE EFFECT ON US AND THE PRICE OF
 THE AMERICAN DEPOSITARY SHARES.

     In recent months, the level of tension between the Republic of Korea and
Democratic People's Republic of Korea ("North Korea"), as well as among North
Korea, the United States and Japan, has increased. In response to North Korea's
admission to maintaining of a nuclear weapons program in breach of the peace
accord executed in October 1994, the United States, Japan, the Republic of Korea
and the European Union (which became party to the 1994 accord in November 2002)
decided to suspend shipments of oil to North Korea called for by the 1994 accord
and reiterated their demands for the dismantling of North Korea's nuclear
weapons program. Following the suspension of oil shipments, North Korea removed
seals and surveillance equipment from its Yongbyon nuclear power plant and
evicted nuclear inspectors from the United Nations International Atomic Energy
Agency (the "IAEA") in December 2002. In January 2003, North Korea announced its
intention to withdraw from the Nuclear Non-Proliferation Treaty, refusing to
abandon its nuclear power and arms program unless the United States were to
execute a non-aggression pact. Media reports have stated that North Korea has
reactivated a reactor at its main nuclear complex, the Yongbyon nuclear power
plant. In February 2003, the IAEA referred the nuclear issue to the United
Nations Security Council. In an effort to secure a peaceful negotiated
resolution to these events, the two Koreas continue to hold ministerial talks.
In addition, in April 2003, the United States, North Korea and China held
tripartite discussions in an effort to resolve issues relating to North Korea's
nuclear weapons program, during which North Korea reportedly admitted that it
had already successfully developed nuclear weapons. In August 2003, the
representatives from South and North Korea, the United States, Japan, Russian
Federation and China gathered in Beijing, China in a further effort to resolve
these issues. Although both President Roh of Korea and President Bush of the
United States have pledged their support in principle to a peaceful resolution
of the situation, there is no assurance that the level of tension will not
escalate and that such escalation will not have a serious adverse effect on our
operations and the market price of the common shares or the American depositary
shares.

 LABOR UNREST MAY ADVERSELY AFFECT THE KOREAN ECONOMY AND OUR OPERATIONS.

     During 1998 and 1999, there were large-scale protests and labor strikes in
Korea. In July 2000, the Korean Financial Industry Union, which represents the
employees of over 30 financial institutions, urged its members to participate in
a strike to express their opposition to mergers of the banks and the possibility
of further layoffs, when the Korean government announced its plan to implement
the second phase of restructuring the Republic's banks, including the
promulgation of a law which allows the formation of financial holding companies.
The strike subsequently was cancelled after the Korean government and the union
leaders reached an agreement whereby the Korean government would not require
mandatory bank mergers. In December 2000, members of the Kookmin Bank and H&CB
labor union participated in a strike that lasted seven days, opposing the
contemplated merger between the two banks. Although we believe that our
relationship with our labor unions is good, 72.5% of our full-time employees are
members of the labor unions of our subsidiaries. No assurance can be given that
further acquisitions or restructuring of our holding company structure will not
meet labor union resistance and possible labor disputes.

     In May 2003, truck drivers of the Korean Cargo Workers Federation of the
Korean Confederation of Trade Unions went on strike and blockaded the land
routes to major steel mills in Korea, a fundamental

                                        34
<PAGE>

driver of the Korean economy, and also blockaded two major ports in Kwangyang
and Busan resulting in significant disruptions to physical distribution and
import and export activities in Korea. This strike was peacefully resolved soon
thereafter. In late August 2003, the Korean Confederation of Trade Unions again
called for a nationwide strike which is currently continuing. This strike and
similar events in the future could have a material adverse effect on the Korean
economy and our operations.

     Continuing labor unrest could adversely affect our operations, as well as
the operations of many of our customers and their ability to repay their loans,
and could affect the financial conditions of Korean companies in general,
depressing the prices of securities on the Korea Stock Exchange, the value of
unlisted securities and the value of the Won relative to other currencies. Such
developments would likely have an adverse effect on our financial condition,
results of operations and requisite capital ratio.

RISKS RELATING TO OUR AMERICAN DEPOSITARY SHARES

 THERE ARE RESTRICTIONS ON WITHDRAWAL AND DEPOSIT OF COMMON SHARES UNDER THE
 DEPOSITARY FACILITY.

     Under the deposit agreement, holders of shares of our common stock may
deposit those shares with the depositary bank's custodian in Korea and obtain
American depositary shares, and holders of American depositary shares may
surrender American depositary shares to the depositary bank and receive shares
of our common stock. However, under current Korean laws and regulations, the
depositary bank is required to obtain our prior consent for the number of shares
to be deposited in any given proposed deposit which exceeds the difference
between (1) the aggregate number of shares deposited by us for the issuance of
American depositary shares (including deposits in connection with the initial
and all subsequent offerings of American depositary shares and stock dividends
or other distributions related to these American depositary shares) and (2) the
number of shares on deposit with the depositary bank at the time of such
proposed deposit. We have consented to the deposit of outstanding shares of
common stock as long as the number of American depositary shares outstanding at
any time does not exceed 20,216,314. As a result, if you surrender American
depositary shares and withdraw shares of common stock, you may not be able to
deposit the shares again to obtain American depositary shares.

 THE VALUE OF YOUR INVESTMENT MAY BE REDUCED BY FUTURE SALES OF OUR COMMON STOCK
 OR OUR AMERICAN DEPOSITARY SHARES BY THE KOREA DEPOSIT INSURANCE CORPORATION OR
 BNP PARIBAS, BY OTHER STOCKHOLDERS OR HOLDERS OF AMERICAN DEPOSITARY SHARES OR
 BY US.

     Korea Deposit Insurance Corporation owns redeemable convertible preferred
shares convertible into shares of our common stock representing approximately
13.27% of our shares. BNP Paribas owns approximately 4.0% of our outstanding
shares. Currently, we do not know when, how, or what percentage of, our
redeemable convertible preferred shares will be converted by Korea Deposit
Insurance Corporation and when, how or what percentage of our shares Korea
Deposit Insurance Corporation will dispose of upon conversion or BNP Paribas
will dispose of our shares, or to whom such shares will be sold. As a result, we
cannot currently predict the impact of such sales on us. In addition, Shinhan
Bank holds 29,873,674 shares, or 10.22%, of the Group's common stock which it
obtained in connection with its restructuring into a holding company. Pursuant
to Korean laws and regulations, Shinhan Bank is required to dispose of these
shares by the end of August 2004, which may include a sale of these shares in
the public market in the form of common stock or American depositary shares.
Sales of substantial numbers of our shares or our American depositary shares in
the public market or otherwise by Korea Deposit Insurance Corporation, other
stockholders such as BNP Paribas or holders of American depositary shares or by
us, or the perception that such sales may occur, could depress the prevailing
market prices of our common stock and our American depositary shares.

                                        35
<PAGE>

  IN CERTAIN CASES, WE MUST OBTAIN THE CONSENT OF THE KOREA DEPOSIT INSURANCE
  CORPORATION TO DECLARE AND PAY DIVIDENDS ON OUR SHARES OR OUR AMERICAN
  DEPOSITARY SHARES. IF KOREA DEPOSIT INSURANCE CORPORATION DECLINES TO GIVE
  SUCH CONSENT, HOLDERS OF AMERICAN DEPOSITARY SHARES MAY BE ADVERSELY AFFECTED.

     Pursuant to the terms of the Investment Agreement, we are required to
obtain the consent of the Korea Deposit Insurance Corporation, to the extent
permitted under applicable law, in order to declare and pay dividends on our
common shares in excess of W750, representing 15% of par value (W5,000), if our
net income under Korean GAAP is below W800 billion in a given fiscal year and
any of the Redeemable Preferred Shares and Redeemable Convertible Preferred
Shares are outstanding. Failure to obtain the consent of the Korea Deposit
Insurance Corporation in such instances may lead to payment of dividends at a
level that is lower than expected and may adversely affect the price of our
common shares and our American depositary shares and further adversely affect
the interest of our shareholders, including the holders of our American
depositary shares.

 OWNERSHIP OF OUR SHARES IS RESTRICTED UNDER KOREAN LAW.

     Under the Financial Holding Company Act of Korea, any single shareholder
(together with certain persons in a special relationship with such shareholder)
may acquire beneficial ownership of only up to 10% of the total issued and
outstanding shares with voting rights of a bank holding company controlling
nationwide banks such as us. The Korean government and the Korea Deposit
Insurance Corporation are exempt from this limit. Furthermore, certain
non-financial business group companies (i.e., (i) any same shareholder group
with aggregate net assets of all non-financial business companies belonging to
such group of not less than 25% of the aggregate net assets of all members of
such group; (ii) any same shareholder group with aggregate assets of all
non-financial business companies belonging to such group of not less than W2
trillion; or (iii) any mutual fund in which a same shareholder group identified
in (i) or (ii) above owns more than 4% of the total shares issued and
outstanding of such mutual fund) may not acquire beneficial ownership in us in
excess of 4% of our outstanding voting shares, provided that such non-financial
business group companies may acquire beneficial ownership of up to 10% of our
outstanding voting shares with the approval of the Financial Supervisory
Commission under the condition that such non-financial business group companies
will not exercise voting rights in respect of such shares in excess of the 4%
limit. See "Item 4. Information on the Company -- Supervision and Regulation --
Regulations Applicable to Financial Holding Companies -- Restriction on
Financial Holding Company Ownership". To the extent that the total number of
shares of our common stock that you and your affiliates own together exceeds
such limit, you will not be entitled to exercise the voting rights for the
excess shares, and the Financial Supervisory Commission may order you to dispose
of the excess shares within a period of up to six months. Failure to comply with
such an order would result in a fine of up to W50 million.

 HOLDERS OF AMERICAN DEPOSITARY SHARES WILL NOT HAVE PREEMPTIVE RIGHTS IN
 CERTAIN CIRCUMSTANCES.

     The Commercial Code of Korea and our articles of incorporation require us,
with some exceptions, to offer shareholders the right to subscribe for new
shares in proportion to their existing ownership percentage whenever new shares
are issued. If we offer any rights to subscribe for additional shares of our
common stock or any rights of any other nature, the depositary bank, after
consultation with us, may make the rights available to you or use reasonable
efforts to dispose of the rights on your behalf and make the net proceeds
available to you. The depositary bank, however, is not required to make
available to you any rights to purchase any additional shares unless it deems
that doing so is lawful and feasible and:

     - a registration statement filed by us under the US Securities Act of 1933,
       as amended, is in effect with respect to those shares; or

     - the offering and sale of those shares is exempt from or is not subject to
       the registration requirements of the US Securities Act.

     We are under no obligation to file any registration statement with the U.S.
Securities and Exchange Commission. If a registration statement is required for
you to exercise preemptive rights but is not filed by

                                        36
<PAGE>

us, you will not be able to exercise your preemptive rights for additional
shares and you will suffer dilution of your equity interest in us.

 YOUR DIVIDEND PAYMENTS AND THE AMOUNT YOU MAY REALIZE UPON A SALE OF YOUR
 AMERICAN DEPOSITARY SHARES WILL BE AFFECTED BY FLUCTUATIONS IN THE EXCHANGE
 RATE BETWEEN THE DOLLAR AND THE WON.

     Investors who purchase the American depositary shares will be required to
pay for them in US dollars. Our outstanding shares are listed on the Korea Stock
Exchange and are quoted and traded in Won. Cash dividends, if any, in respect of
the shares represented by the American depositary shares will be paid to the
depositary bank in Won and then converted by the depositary bank into Dollars,
subject to certain conditions. Accordingly, fluctuations in the exchange rate
between the Won and the Dollar will affect, among other things, the amounts a
registered holder or beneficial owner of the American depositary shares will
receive from the depositary bank in respect of dividends, the Dollar value of
the proceeds which a holder or owner would receive upon sale in Korea of the
shares obtained upon surrender of American depositary shares and the secondary
market price of the American depositary shares. The average of the Won to dollar
exchange rates, based on the Noon Buying Rates, were W1,130.90, W1,292.00,
W1,250.40 per US$1.00 in 2000, 2001 and 2002.

 IF THE GOVERNMENT DEEMS THAT CERTAIN EMERGENCY CIRCUMSTANCES ARE LIKELY TO
 OCCUR, IT MAY RESTRICT THE DEPOSITARY BANK FROM CONVERTING AND REMITTING
 DIVIDENDS IN DOLLARS.

     If the government deems that certain emergency circumstances are likely to
occur, it may impose restrictions such as requiring foreign investors to obtain
prior government approval for the acquisition of Korean securities or for the
repatriation of interest or dividends arising from Korean securities or sales
proceeds from disposition of such securities. These emergency circumstances
include any or all of the following:

     - sudden fluctuations in interest rates or exchange rates;

     - extreme difficulty in stabilizing the balance of payments; and

     - a substantial disturbance in the Korean financial and capital markets.

     The depositary bank may not be able to secure such prior approval from the
government for the payment of dividends to foreign investors when the government
deems that there are emergency circumstances in the Korean financial markets.

 SUBSEQUENT HOLDERS OF AMERICAN DEPOSITARY SHARES MAY BE REQUIRED TO PAY A
 KOREAN SECURITIES TRANSACTION TAX UPON WITHDRAWAL OF UNDERLYING COMMON SHARES.

     Under Korean tax law, a securities transaction tax (including an
agricultural and fisheries special surtax) is imposed on transfers of shares
listed on the Korea Stock Exchange, including our common shares, at the rate of
0.3% of the sales price if traded on the Korea Stock Exchange. According to a
tax ruling issued by the Korean tax authorities, foreign shareholders are not
subject to a securities transaction tax upon the deposit of underlying shares
and receipt of depositary shares or upon the surrender of depositary shares and
withdrawal of originally deposited underlying shares. However, questions have
been raised as to whether this ruling also governs the surrender of depositary
shares and withdrawal of underlying shares by holders other than the initial
holders of depositary shares. It is still unclear as to whether, when, on whom,
and in what amount the securities transaction tax will be imposed in the case of
such withdrawals by holders other than initial holders. Accordingly, there can
be no assurance that holders of American depositary shares will not be subject
to the securities transaction tax when they withdraw our common shares upon
surrendering the American depositary shares. See "Item 10. Additional
Information -- Taxation -- Korean Taxation".

                                        37
<PAGE>

OTHER RISKS

 WE DO NOT PREPARE INTERIM FINANCIAL INFORMATION ON A U.S. GAAP BASIS. IN
 ADDITION, HOLDERS OF OUR AMERICAN DEPOSITARY SHARES WILL NOT HAVE A COMPLETE
 ANALYSIS UNDER U.S. GAAP OF OUR COMBINED BUSINESS OPERATIONS AND FINANCIAL
 CONDITION AND RESULTS OF OPERATIONS UNTIL JUNE 30, 2004.

     We, including our subsidiaries such as Chohung Bank, are not required to
and do not prepare interim financial information on a U.S. GAAP basis. U.S. GAAP
differs in significant respects from Korean GAAP, particularly with respect to
the establishment of provisions and loan loss allowance. See "Item 5. Operating
and Financial Review and Prospects -- Shinhan Financial Group -- Selected
Financial Information under Korean GAAP" and "-- Reconciliation with Korean
Generally Accepted Accounting Principles". As a result, provision and allowance
levels reflected under Korean GAAP in the Group's results or Chohung Bank's
results for the three months ended March 31, 2002 and 2003 or for the six months
ended June 30, 2002 and 2003 or for the nine months ended September 30, 2002 and
2003 may differ significantly from comparable figures under U.S. GAAP for these
and future periods.

     In addition, we are not required to prepare and file with the U.S.
Securities and Exchange Commission our audited financial statements for 2003
prepared under U.S. GAAP that include Chohung Bank as a consolidated subsidiary,
until June 30, 2004. Accordingly, until June 30, 2004, holders of our American
depositary shares will not have a complete analysis under U.S. GAAP of our
combined business operations and management's discussion and analysis of our
financial condition and results of operations and our audited financial
statements for 2003 prepared under U.S. GAAP.

 YOU MAY NOT BE ABLE TO ENFORCE A JUDGMENT OF A FOREIGN COURT AGAINST US.

     We are corporations with limited liability organized under the laws of
Korea. Substantially all of our directors and officers and other persons named
in this document reside in Korea, and all or a significant portion of the assets
of our directors and officers and other persons named in this document and
substantially all of our assets are located in Korea. As a result, it may not be
possible for holders of the American depository shares to effect service of
process within the United States, or to enforce against them or us in the United
States judgments obtained in United States courts based on the civil liability
provisions of the federal securities laws of the United States. There is doubt
as to the enforceability in Korea, either in original actions or in actions for
enforcement of judgments of United States courts, of civil liabilities
predicated on the United States federal securities laws.

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<PAGE>

ITEM 4.  INFORMATION ON THE COMPANY

               HISTORY AND DEVELOPMENT OF SHINHAN FINANCIAL GROUP

INTRODUCTION

     We are the largest financial holding company in Korea on the basis of total
assets, total deposits and stockholders' equity. We were formed in 2001 as the
holding company for Shinhan Bank and related financial services companies. On
August 19, 2003, we acquired 80.04% of Chohung Bank and plan to merge its
operations with those of Shinhan Bank after a three-year transition period. As
of December 31, 2002, based on asset size published by the Financial Supervisory
Commission, Shinhan Bank was the fifth largest bank in Korea, with total assets
of W58,083 billion (US$48,961 million) and Chohung Bank was the fourth largest
bank in Korea, with total assets of W64,002 billion (US$53,951 million). From
this expanded platform, we serve all major components of the corporate and
retail banking and financial services markets. In the corporate sector, we serve
the large corporate community, established and developing small- and medium-
sized enterprises as well as small unincorporated businesses. In the retail
sector, we provide mortgages and home equity finance as well as general
unsecured consumer lending to retail customers ranging from high net worth
customers to the mass retail market. Both Shinhan and Chohung Bank have credit
card operations with approximately 2,548,000 and approximately 4,266,000
cardholders as of December 31, 2002. Through our banking and non-banking
subsidiaries, we engage in a comprehensive range of related financial services
including securities brokerage, investment banking, investment trust management
and bancassurance. We have also entered into joint ventures with BNP Paribas,
our 4.0% shareholder, in the areas of investment trust management and
bancassurance to bring an international perspective to these operations.

     Through Shinhan Bank and Chohung Bank, we operate the second largest
nationwide branch network in Korea with 414 branches in the Seoul and its
metropolitan area, 299 branches in Kyunggi Province and six major cities in
Korea and 164 branches throughout the rest of the country. On a combined basis
as of December 31, 2002, we have 230,000 corporate deposit customers and
15,293,000 retail deposit customers with an aggregate average deposit of W73,578
billion. This customer base provides us with a large stable and cost effective
core funding base and access to an established corporate and retail customer
base to whom we can market the full range of our financial products and
services.

HISTORY AND ORGANIZATION

     On September 1, 2001, we were formed as a financial holding company under
the Financial Holding Company Act of Korea, by acquiring all of the issued
shares of the following companies from the former shareholders in exchange for
shares of our common stock:

     - Shinhan Bank, a nationwide commercial bank;

     - Shinhan Securities, a securities brokerage company;

     - Shinhan Capital, a leasing company; and

     - Shinhan Investment Trust Management, an investment trust management
       company.

     Shinhan Bank and Shinhan Securities were previously listed on the Korea
Stock Exchange and Shinhan Capital was previously registered with Korea
Securities Dealers Association Automated Quotation, or KOSDAQ, whereas Shinhan
Investment Trust Management was privately held. On September 10, 2001, we listed
the common stock of our holding company on the Korea Stock Exchange.

     In December 2001, we concluded an agreement with our strategic partner and
our largest shareholder, the BNP Paribas Group, pursuant to which BNP Paribas
purchased a 4.0% equity interest in us.

     In April 2002, we acquired a 51% equity stake in Jeju Bank, a regional bank
incorporated in 1969 to engage in commercial banking and trust business.

     During 2002, through a series of transactions, we acquired 31.7% of common
stock (or 30.7% of voting equity securities) of Good Morning Securities.
Subsequently, we merged Shinhan Securities into Good
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<PAGE>

Morning Securities and renamed it Good Morning Shinhan Securities. As of
December 31, 2002, following the foregoing transactions, we effectively owned
60.5% of Good Morning Shinhan Securities.

     On June 4, 2002, the credit card division of Shinhan Bank was spun off and
established as our wholly-owned subsidiary, Shinhan Card. Shinhan Credit
Information was established on July 8, 2002 as our wholly-owned subsidiary,
which engages in the business of debt collection and credit reporting. On June
9, 2003, we sold a 49% interest in Shinhan Credit Information to LSH Holdings
L.L.C., a wholly-owned subsidiary of Lone Star Fund, and converted Shinhan
Credit Information into a joint venture with Lone Star Fund.

     On August 9, 2002, we signed a joint venture agreement with BNP Paribas
Asset Management, the asset management arm of BNP Paribas, in respect of Shinhan
Investment Trust Management. On October 24, 2002, we sold to BNP Paribas Asset
Management 3,999,999 shares of Shinhan Investment Trust Management, which was
subsequently renamed Shinhan BNP Paribas Investment Trust Management Co., Ltd.

     On October 1, 2002, SH&C Life Insurance, a bancassurance joint venture, was
established under a related joint venture agreement with Cardif S.A., the
bancassurance subsidiary of BNP Paribas.

     On August 19, 2003, we acquired 80.04% of common shares of Chohung Bank, a
nationwide commercial bank in Korea. See "-- Our Acquisition of Chohung Bank."

     As of the date hereof, we had eleven direct and eight indirect
subsidiaries. The following diagram shows our organization structure as of the
date hereof:

                              (ORGANIZATION CHART)

     With the exception of Shinhan Finance Limited and Chohung Finance Ltd.,
Hong Kong, which are incorporated in Hong Kong, CHB America Bank and Good
Morning Shinhan Securities USA Inc., which are incorporated in the United
States, Good Morning Shinhan Securities Europe Ltd., which is incorporated in
London, United Kingdom, and Chohung Bank (Deutschland) GmbH, which is
incorporated in Germany, all of our other subsidiaries are incorporated in
Korea.

     Our legal name is Shinhan Financial Group Co., Ltd. and commercial name is
Shinhan Financial Group. Our registered office and principal executive offices
are located at 120, 2-Ga, Taepyung-Ro, Jung-gu, Seoul 100-102, Korea. Our
telephone number is 82-2-6360-3000. Our agent in the United States, Shinhan
Bank, New York branch, is located at 800 Third Avenue, 32nd Floor, New York, NY
10022, U.S.A.

OUR STRATEGY

     Our vision is to enhance shareholder value by securing a position as the
leading provider of total financial solutions in Korea and further establishing
our position as a leading financial institution in Northeast
                                        40
<PAGE>

Asia. Total financial solutions means the full range of financial products and
services meeting the needs of both corporate and retail customers. To achieve
this vision, we are implementing and will continue to implement the following
strategies:

     Reconfiguring our Corporate Structure.  In order to better address the
requirements of our customers, we restructured ourselves as a financial holding
company in 2001, bringing together a broad range of financial services,
including commercial banking, including credit cards, securities brokerage
service, leasing and investment trust management services. At the same time we
are leveraging off of our relationships with foreign financial institutions to
gain access to new financial products and services, including investment
advisory and internet banking services and bancassurance. We are also currently
contemplating the feasibility of establishing a systems integration subsidiary
to provide financial solutions.

     Enhancing the core competency of our operating subsidiaries.  In order to
provide the highest quality products and services from each of our banking and
financial businesses, we intend to focus on enhancing the core competency of
each of our operating subsidiaries by taking the following initiatives:

     - In commercial banking, we have sought to achieve economies of scale by
       acquiring Chohung Bank, enabling us to, among other things, capitalize on
       greater mass market penetration and large corporate portfolio as a
       complement to Shinhan Bank's greater emphasis on small- and medium-sized
       enterprises and high net worth individuals.

     - In securities brokerage services, we have sought to achieve economies of
       scale and enhance brand image through our acquisition of Good Morning
       Securities.

     - In credit cards, we have focused on and will continue to focus on
       improved credit initiation through higher credit scoring requirements,
       risk management through continued credit scoring reviews and improved
       collection results through coordinated call centers and increased
       collection staff, as well as enhanced marketing. We have spun-off of our
       credit card business into Shinhan Card and we are currently contemplating
       the merger of Chohung Bank's credit card operations into Shinhan Card to
       provide specialized focus on our credit card business and to achieve
       economies of scale.

     - In areas where we lack core competency as compared to the leading global
       financial institutions, we will continue to expand our relationships
       through affiliations and business cooperation with world class financial
       institutions such as BNP Paribas and Macquarie.

     Establishing and Consolidating the One Portal Network.  In order to provide
total financial solutions to our customers on a real-time basis, we are
continuing to develop our one portal network. The one portal network refers to
the ability of a corporate or retail customer to have access to our total
financial solutions through any single point of contact with our group. In
furtherance of this strategy, we have been implementing and will continue to
implement the following initiatives:

     - Integrating our physical and online distribution channels to offer
       products and services developed by all of our operating subsidiaries and
       businesses, including as follows:

          - making banking, securities brokerage, insurance and other services
            available at each branch;

          - enabling online cross access between commercial banking and our
            online securities brokerage service; and

          - integrating the customer service call centers for our commercial
            banking, credit card and securities brokerages services.

     - Focusing on retail and corporate customers with total financial solutions
       designed to meet their respective needs and utilizing specialized
       branches to provide convenient access and trained employees to offer and
       provide relevant products and services, including as follows:

          - in retail banking, utilizing private banking centers to provide high
            net worth customers convenient access to total financial solutions
            that link banking to brokerage services, asset management and
            insurance; as well as penetrating the mass market penetration by
            enhancing brand and customer

                                        41
<PAGE>

            loyalty through focus on cross selling of products and strengthened
            customer relationship management;

          - in corporate banking, expanding and enhancing the capabilities of
            our large corporate and small-and medium-sized enterprises
            specialist branch network and leveraging our increased large
            corporate customer base to provide total financial solutions that
            combine banking and non-banking financial products, such as asset
            backed securities, structured finance, M&A advice; syndication and
            equity derivatives, acting more as a financial advisor for larger,
            well established small-and-medium-sized enterprises by providing
            underwriting, rights offerings and offering related investment
            banking services in addition to lending, deposit and foreign
            exchange products and services and focusing on investment in
            corporate debt securities and initial public offerings for smaller
            businesses;

     - Developing and promoting integrated financial products customized to meet
       the needs and demands of our customer segments, such as Financial Network
       Accounts that combine banking services and securities brokerage services
       or that combine credit card services and securities brokerage services
       and Safe Loans that combine banking services and insurance services.

     - Enhancing customer loyalty by offering an "All Plus Points System" that
       combines customers' banking, securities and credit card activities in a
       single report on the basis of which specific customer benefits are
       awarded.

     - Developing joint products and services and joint sales support and
       enhancing cross-selling by sharing customer information through
       integrated data-warehousing and customer relationship management systems,
       which are expected in the second half of 2003.

     Achieving Cost Efficiency from our Holding Company Structure.  We intend to
achieve cost efficiency and to achieve maximum benefit from our holding company
structure by:

     - preventing overlapping investments in solution development, information
       technology related investments, new investments in operating channels,
       hiring and training of employees; and

     - identifying and realizing synergies such as combined information
       technology, call centers and shared customer services, distribution
       channels and new products and services;

     Introducing a Performance-based Culture.  In order to promote a customer
oriented group culture, we intend to measure and reward employee performance in
relation to the level of customer satisfaction reflected in customer response to
our products and services, including products and services offered as part of
our cross-selling efforts, and the quality of the assets and revenues generated.

                                        42
<PAGE>

                        OUR ACQUISITION OF CHOHUNG BANK

PURPOSE OF THE ACQUISITION

     Through the acquisition, our Board of Directors expects primarily to
achieve greater scale and market share and secure stronger distribution channels
to fulfill the advantages of our holding company model. Prior to the
acquisition, Shinhan Bank was the fifth largest bank in Korea in terms of assets
as of December 31, 2002. The acquisition of Chohung Bank placed us second in
terms of assets. With these substantially enhanced resources, we constitute a
broad-based nationwide financial services platform that enjoys a leadership
position in the retail, corporate and small- and medium-sized enterprise banking
sectors as well as enhances our position in related financial services,
including credit card, securities brokerage and investment trust management
services. The acquisition has also enhanced our ability to optimize funding
costs with a larger core deposit base and greater leverage in product sourcing.
Through the acquisition, our Board of Directors is also hoping over time to
benefit from synergies associated with combining and integrating the resources
of Shinhan Bank and Chohung Bank, including combined information technology
platforms, branch specialization, banking product and service development and
the expansion and development of related financial services such as
bancassurance and investment banking.

     In reaching these judgments, our Board of Directors took into account, on a
Korean GAAP basis, increases as of and for the year ended December 31, 2002 in
the following items resulting from the acquisition of Chohung Bank:

     - total assets (from W60 trillion to W128 trillion; second largest in
       Korea), total loans (from W41 trillion to W89 trillion; second largest in
       Korea), deposits (from W37 trillion to W83 trillion; second largest in
       Korea), branches (from 334 to 780; second largest in Korea) and assets
       under management (from W5 trillion to W12 trillion; sixth largest in
       Korea);

     - based on our estimates (and defining the market as the sum of eight
       largest financial institutions in Korea), market share in the retail
       banking sector (from 9% to 17%; second largest in Korea), small-and
       medium-sized enterprises sector (from 10% to 21%; second largest in
       Korea), large corporate sector (from 10% to 20%; second largest in
       Korea), and credit card sector (from 2% to 10%; fourth largest in Korea);
       and

     - net interest margin (2.83% to 3.55%).

     Our Board of Directors was also advised by our management that the
acquisition is expected to be accretive in 2005 from an earnings per share
standpoint, and that it is expected that there would be sufficient internally
generated cash flow to enable payment of dividends on and scheduled redemptions
of our preferred shares and to pay dividends on our common shares.

     The conclusion in respect of the earnings per share was based upon the
following material factors and assumptions by our management:

     - We would retain our 80.04% ownership interest in Chohung Bank shares;

     - There are no material adverse developments affecting Shinhan Bank's or
       Chohung Bank's loan portfolio post acquisition;

     - The Group's net earnings would increase by approximately 10% per annum
       from 2004 and going forward, based on a projected asset growth of
       9% - 10% per annum and assuming a stable net interest margin and a return
       on assets of 1% - 1.1%;

     - Chohung Bank's net earnings would increase by approximately 5% - 6% from
       2004 and going forward, based on a projected asset growth of 7% - 8% per
       annum during the period from 2003 and 2006 assuming that strengthened
       risk management will moderate asset growth;

     - No synergies, cost savings and restructuring costs are taken into
       account;

                                        43
<PAGE>


     - Goodwill amortization of approximately W800 billion over a ten year
       period using the straight line method;

     - Income tax rate of 29.7%;

     - All 44,720,603 shares of our redeemable convertible preferred stock owned
       by Korea Deposit Insurance Corporation are converted into our common
       shares bringing our total outstanding shares of common stock to
       337,081,728 shares; and

     - Our redeemable preferred shares issued to Korea Deposit Insurance
       Corporation would pay a 4.04% dividend and our redeemable preferred
       shares issued to the market would pay a 6.5% dividend (the actual
       dividend payable on average is 7.2%).

     The conclusion in respect of our internal cash flow to service preferred
shares was based upon the following material factors and assumptions by our
management:

     - Our cash inflow consists of dividends paid only by Shinhan Bank and
       Chohung Bank;

     - For Chohung Bank, we assumed that the dividends at a dividend payout
       ratio of 40% would be paid from 2005 and for Shinhan Bank, we assumed
       that the dividends at a dividend payout ratio of 45% would be paid from
       2003;

     - For Shinhan and Chohung Bank, we assumed that amounts available to pay
       dividends (other than amounts required to be reserved to maintain a Tier
       I capital adequacy ratio of 6.5%) would be paid as dividends;

     - Dividends would be paid on our common shares at 15% of par value (or W750
       per share) from 2003 through 2008 and at 20% of par value (or W1,000 per
       share) from 2009 through 2010; and

     - Our redeemable preferred shares issued to Korea Deposit Insurance
       Corporation would be redeemed in equal installments from the third
       anniversary date of the issuance date until the seventh anniversary date
       and our redeemable preferred shares issued to the market would be
       redeemed in the following amounts: W250 billion on the third anniversary
       date, W350 billion on the fifth anniversary date and W300 billion on the
       seventh anniversary date.

     Certain of these assumptions and analyses involve a high degree of
uncertainty and should not be viewed as indicative of future results. Factors
which could cause the results to differ materially include, without limitation,
difficulties affecting our ability to effect the integration of two large banks,
unknown or unforeseen risks and contingencies in the loan portfolios, changes in
interest rates on assets or liabilities, further deterioration of economic
conditions in Korea or globally, labor unrest, as well as other risks detailed
under "Item 3 -- Key Information -- Risk Factors".

THE ACQUISITION

     On August 19, 2003, we acquired 543,570,144 shares of common stock of
Chohung Bank from Korea Deposit Insurance Corporation, which shares represent
80.04% of the outstanding shares of Chohung Bank. Korea Deposit Insurance
Corporation had acquired the Chohung Bank shares in connection with a capital
injection in 1999 during the Korean financial crisis. Our acquisition of these
shares of Chohung Bank was the culmination of a lengthy process pursuant to
which we were awarded preferred bidder status in January 2003 following which we
entered into negotiations with Korea Deposit Insurance Corporation over a
six-month period with respect to the price and terms of the acquisition. During
this period, the proposed transaction encountered opposition from both the labor
union and the senior management of Chohung Bank. Beginning in mid-June 2003, the
labor union of Chohung Bank undertook actions, including a strike, opposing our
acquisition of Chohung Bank. See "Item 5. Operating and Financial Review and
Prospects -- Chohung Bank -- Liquidity and Capital Resources".

     In connection with the finalization of the Stock Purchase Agreement, our
management, together with the managements of Korea Deposit Insurance Corporation
and Chohung Bank, reached a written understanding with the labor union of
Chohung Bank. Labor related issues relating to Chohung Bank will be resolved
                                        44
<PAGE>

through consultation. The understanding contemplates that a merger between
Shinhan Bank and Chohung Bank may take place three years after the closing and
that during the transition period (i) the chief executive officer of Chohung
Bank will be drawn from a pool of candidates with backgrounds at Chohung Bank
and will, as such, manage Chohung Bank within the holding company structure,
(ii) Chohung Bank and Shinhan Bank will have equal representation on the
integration committee to be established two years after the acquisition and
equal representation as senior executive officers of Shinhan Financial Group,
and (iii) forceable lay-offs will not take place, employee compensation will be
harmonized based on operating results and seniority will be discussed. Upon
completion of the merger, employee redundancy policy will be retained and, where
feasible, branch redundancies will be avoided. The understanding is broadly
consistent with our strategy and timetable for combining the resources of the
two banks and is designed to enhance the support and cooperation of Chohung
Bank's employees in the process.

     The definitive terms of the acquisition were reflected in a Stock Purchase
Agreement and an Investment Agreement, each dated July 9, 2003. The purchase
price for the Chohung Bank shares consisted of (i) a maximum cash amount of
W1,718,800,548,296, of which W900,000,000,000 was paid at the closing, with the
W652,284,172,800 being due two years from the closing, subject to reduction if
certain loan portfolio quality conditions existing as of December 31, 2002 under
Korean GAAP are not maintained, and W166,516,375,496 being due two years from
the closing, subject to reductions relating to the accuracy of representations
and warranties contained in the Stock Purchase Agreement, (ii) 46,583,961 shares
of our Redeemable Preferred Stock and (iii) 44,720,603 shares of our Redeemable
Convertible Preferred Stock convertible into 13.27% of our common shares as of
December 31, 2002. See "Item 10. Additional Information -- Articles of
Incorporation -- Description of Capital Stock -- Description of Redeemable
Preferred Stock". In addition, we have agreed to make an earn out payment equal
to 20% of Chohung Bank's net income for 2004, 2005 and 2006 in excess of
W1,800,000,000,000 in the aggregate as reflected under Korean GAAP. We have also
agreed to make up the difference between the price at which outstanding
exchangeable debt securities of Korea Deposit Insurance Corporation exchangeable
for our shares through conversion of the Redeemable Convertible Preferred Stock
are exchanged for our common shares and a price of W18,086 per share with
respect to up to a maximum of 44,720,603 common shares. The loan portfolio
quality adjustment to the cash portion of the acquisition price referred to
above will be based on the Korean GAAP performance of Chohung Bank's portfolios
of certain large corporate loans, including corporate loans sold with recourse
to the Korea Asset Management Corporation, and credit card loans. Any loan loss
provisions, net charge-offs or other losses or costs associated with such
adjustments and with adjustments associated with accuracy of representations and
warranties referred to above will be reflected in the ordinary course on our
consolidated income statement. Any resultant cash amount when paid to Korea
Deposit Insurance Corporation will be reflected on our consolidated balance
sheet as additional goodwill from the acquisition.

     The Stock Purchase Agreement also provided for the resignation of the board
of directors and officers of Chohung Bank and the election of persons specified
by us, all of which has taken place and a new management and board of directors
of Chohung Bank are in place. Pursuant to the terms of the Investment Agreement,
so long as Korea Deposit Insurance Corporation holds 4.0% or more of our
outstanding shares of common stock resulting from conversion of the redeemable
convertible preferred stock, Korea Deposit Insurance Corporation will have the
right to nominate one outside director. In addition, we have the right to
exercise all voting rights that Korea Deposit Insurance Corporation may have
with respect to the enfranchised Redeemable Preferred Shares and the Redeemable
Convertible Preferred Shares as well as our common shares issuable to Korea
Deposit Insurance Corporation upon conversion of the Redeemable Convertible
Preferred Shares except, so long as Korea Deposit Insurance Corporation owns
more than 4.0% of our outstanding shares of common stock resulting from
conversion of the redeemable convertible preferred stock, we are required to
obtain the consent of Korea Deposit Insurance Corporation prior to voting on the
following matters: (i) any matters which require a special resolution or
unanimous resolution of the shareholders under the Korean Commercial Code; (ii)
approval of any dividend payment on our common shares; and (iii) appointment or
dismissal of any outside director nominated by Korea Deposit Insurance
Corporation.

                                        45
<PAGE>

     Pursuant to the terms of the Investment Agreement, we are required to
obtain the consent of the Korea Deposit Insurance Corporation, to the extent
permitted under applicable law, in order to declare dividends on our common
shares in excess of W750, if our net income under Korean GAAP is below W800
billion in a given fiscal year and any of the Redeemable Preferred Shares and
Redeemable Convertible Preferred Shares are outstanding.

STRATEGY, ORGANIZATION AND TIMETABLE FOR INTEGRATING CHOHUNG BANK AND SHINHAN
BANK AND EFFECTING A MERGER

  STRATEGY

     We intend to implement the integration of Shinhan Bank and Chohung Bank
over a three-year transition period by executing the following strategy:

     - integrating the two information technology systems of Shinhan Bank and
       Chohung Bank by taking advantage of the fact that both banks utilize the
       same operating systems;

     - introducing Shinhan Bank's risk management and provisioning systems into
       Chohung Bank to improve the asset quality of Chohung Bank's portfolio;

     - unifying marketing strategy and branding to enhance overall market
       impact;

     - unifying distribution and expanding our overall customer base by taking
       advantage of a greatly expanded nationwide branch network;

     - unifying product and service development;

     - capitalizing on Chohung Bank's greater retail mass market penetration and
       large corporate portfolio as a complement to Shinhan Bank's greater
       emphasis on small- and medium-sized enterprises and high net worth
       individuals;

     - enhancing financial services activities, including by coordinating or
       combining credit card and investment management activities; and

     - harmonizing employee compensation benchmarked to common productivity
       targets and enhancing operational efficiency primarily through normal and
       voluntary early retirement programs.

  ORGANIZATION AND TIMETABLE

     We intend to complete the integration of Shinhan Bank and Chohung Bank over
a three-year period culminating in a merger of the two banks. We intend to
accomplish this process in three phases. The integration process will be managed
by a joint management committee which will be established with equal members
from the managements of both Shinhan Bank and Chohung Bank, which will provide
integration leadership during the first two phases and which will, along with
additional outside members, form an integration committee near the end of the
second phase to make decisions on legal and organizational integration options.

  Phase I:  Business portfolio, policy and strategy alignment

     Phase I of the integration process will be as follows:

     - Credit policy (including risk management) and pricing alignment;

     - Joint business strategy development; and

     - Consider credit card and asset management business consolidation.

                                        46
<PAGE>

  Phase II:  Back-office and headquarters consolidation

     Phase II of the integration process will be as follows:

     - Consider call center and loan collection consolidation;

     - Joint purchasing and development of information technology;

     - Full scale preparation for integration of information technology; and

     - Full scale preparation for integration of headquarters function.

  Phase III:  Branch and organizational integration

     Phase III of the integration process will be as follows:

     - Branch network reconfiguration;

     - Full scale IT mainframe integration; and

     - Organizational integration of headquarters operations.

LIQUIDITY AND CAPITAL RESOURCES

     As consideration for our purchase of Chohung Bank shares, at closing, we
(i) paid to Korea Deposit Insurance Corporation cash of W900 billion, (ii)
issued to Korea Deposit Insurance Corporation 46,583,961 shares of our
Redeemable Preferred Stock, with a redemption price of W842,517,518,646 and
(iii) issued to Korea Deposit Insurance Corporation 44,720 603 shares of our
Redeemable Convertible Preferred Stock convertible into 13.27% of our shares of
common stock as of December 31, 2002, with a redemption price of
W808,816,825,858. In August 2003, we raised W900 billion in cash through the
issuance of 6,000,000 shares of redeemable preferred stock, all of which were
sold in the domestic fixed-income market. These redeemable preferred shares have
terms that are different from the preferred shares issued to Korea Deposit
Insurance Corporation. We are required to redeem these preferred shares in three
installments in 2006, 2008 and 2010.

     Pursuant to the terms of the Redeemable Preferred Stock issued to Korea
Deposit Insurance Corporation, we are required to redeem such shares in five
equal annual installments commencing three years from the date of issuance and,
pursuant to the terms of the Redeemable Convertible Preferred Stock, we are
required to redeem the full amount of such shares outstanding five years from
the date of issuance to the extent not converted into our common shares. Each
share of Redeemable Convertible Preferred Stock is convertible into one share of
our common stock. The dividend ratios on the Redeemable Preferred Stock and the
Redeemable Convertible Preferred Stock are 4.04% and 2.02%, respectively. See
"Item 10. Additional Information -- Articles of Incorporation -- Description of
Capital Stock -- Description of Redeemable Preferred Stock".

     The following table sets forth the contractual scheduled maturities by type
of preferred stock issued by us in connection with our acquisition of Chohung
Bank.

<Table>
<Caption>
                                                             DUE AUGUST
                                --------------------------------------------------------------------
                                2004   2005     2006       2007        2008        2009       2010       TOTAL
                                ----   ----   --------   --------   ----------   --------   --------   ----------
                                 (IN MILLIONS OF WON)
<S>                             <C>    <C>    <C>        <C>        <C>          <C>        <C>        <C>
Redeemable Preferred Stock
  issued to KDIC..............   W--    W--   W168,504   W168,504   W  168,504   W168,504   W168,504   W  842,518
Redeemable Preferred Stock
  issued in the market........   --     --     525,000         --      365,000         --     10,000      900,000
Redeemable Convertible
  Preferred Stock(1)..........   --     --          --         --      808,817         --         --      808,817
                                 --     --    --------   --------   ----------   --------   --------   ----------
  Total.......................   W--    W--   W693,504   W168,504   W1,342,321   W168,504   W178,504   W2,551,335
                                 ==     ==    ========   ========   ==========   ========   ========   ==========
</Table>

                                        47
<PAGE>

- ---------------

Note:

(1) Assumes no conversion of the Redeemable Convertible Preferred Stock into our
    common stock.

     Pursuant to laws and regulations in Korea, we may redeem our preferred
stock to the extent of our retained earnings of the previous financial year, net
of certain reserves. At this time, we expect that our future profitability
should be adequate to provide us with sufficient capital resources to enable us
to redeem our preferred stock pursuant to the scheduled maturities as described
in the table above. In the event there is a short-term shortage of liquidity to
make the required cash payments for redemption as a result of, among other
things, failure to receive dividend payments from our operating subsidiaries on
time, we plan to raise cash liquidity through the issuance of long-term debt in
the Korean fixed-income market in advance of the scheduled maturity on our
preferred stock. In addition, the Stock Purchase Agreement requires us to make
cash payments of W652,284,172,800 two years from the closing subject to
reduction if certain loan portfolio quality conditions existing as of December
31, 2002 under Korean GAAP are not maintained, and W166,516,375,496 two years
from the closing, subject to reductions relating to the accuracy of
representations and warranties contained in the Stock Purchase Agreement. As a
result of uncertainties relating to loan quality conditions and possible breach
of representations and warranties, it is impossible to predict at this time the
actual amount of cash payments that will be due. To the extent we need to obtain
additional liquidity, we plan to do so through the issuance of long-term debt
and the use of our other secondary funding sources. See "Item 5. Operating and
Financial Review and Prospects -- Shinhan Financial Group -- Liquidity and
Capital Resources".

CAPITAL ADEQUACY

     Chohung Bank's capital adequacy ratios as of December 31, 2002 and June 30,
2003, calculated based on guidelines issued by the Financial Supervisory
Commission, were 8.66% and 9.18%, respectively. Pursuant to the capital adequacy
guidelines issued by the Financial Supervisory Commission, financial holding
companies in Korea, including us, are required to maintain a minimum requisite
capital ratio of at least 100%. Requisite capital ratio represents the ratio of
net aggregate amount of our equity capital to aggregate amounts of requisite
capital (all of which are described in "-- Supervision and
Regulation -- Regulations Applicable to Financial Holding Companies -- Capital
Adequacy"). Although our estimated requisite capital ratio as of September 30,
2003 is expected to decline as a result of our acquisition of Chohung Bank, we
expect to continue to satisfy the minimum capital adequacy requirement. Our
acquisition of Chohung Bank did not affect the capital adequacy ratios of our
operating subsidiaries, including Shinhan Bank and Shinhan Card.

NEW MANAGEMENT OF CHOHUNG BANK

     At a shareholders' meeting held on August 26, 2003, the shareholders of
Chohung Bank, including the Group, approved the nomination of a new management
of Chohung Bank consisting of standing and non-standing directors.

  STANDING DIRECTORS

     Chohung Bank's standing directors are as follows.

<Table>
<Caption>
NAME                   AGE   POSITION                              DIRECTOR SINCE    DATE TERM ENDS
- ----                   ---   --------                              --------------    ---------------
<S>                    <C>   <C>                                   <C>               <C>
Dong Soo Choi........  57    Chairman of the Board,                August 26, 2003   August 25, 2006
                             President and Chief Executive
                             Officer
Sang Woo Kim.........  56    Standing Auditor                      March 9, 2001     March 8, 2004
</Table>

     Dong Soo Choi is the Chairman of the Board, President and Chief Executive
Officer of Chohung Bank. Prior to being elected to his current position in
August 2003, he served as a Deputy President and Head of

                                        48
<PAGE>

Chohung Bank from 1998 to 1999. Mr. Choi also served as a senior vice president
of LG Merchant Bank from 1996 to 1998. Mr. Choi received a B.A. in business
administration from Seoul National University.

     Sang Woo Kim is the Standing Auditor of Chohung Bank. Prior to being
elected to his current position in August 2003, he served as an Assistant Deputy
Governor of the Financial Supervisory Service. Mr. Kim also served as the head
of planning and coordination at the Office of Bank Supervision, the predecessor
of the Financial Supervisory Service in 1998 and 1999. Mr. Kim received a law
degree from Seoul National University.

NON-STANDING DIRECTORS

     Chohung Bank's non-standing directors are selected based on the candidates'
talents and skills in diverse areas, such as law, finance, economy, management
and accounting. Currently, seven non-standing directors are in office.

     Chohung Bank's non-standing directors are as follows.

<Table>
<Caption>
NAME                                                AGE   DIRECTOR SINCE      DATE TERM ENDS(1)
- ----                                                ---   --------------      -----------------
<S>                                                 <C>   <C>                 <C>
Jong Hyuk Kim.....................................  61    March 9, 2001       March 28, 2004
Wan Young Yu......................................  59    March 9, 2001       March 28, 2004
Chang Seong Jang..................................  46    March 9, 2001       March 28, 2004
Jeong Myung Lee...................................  60    March 29, 2002      March 28, 2004
Jin Soon Lee......................................  53    March 29, 2002      March 28, 2004
Woo Jin Kim.......................................  38    March 29, 2002      March 28, 2004
Young Hwi Choi....................................  57    September 5, 2003   September 4, 2004
</Table>

- ---------------

Note:

(1) The date on which each term will end will be the date of the general
    stockholders' meeting in the relevant year.

     Jong Hyuk Kim is a non-standing director of Chohung Bank. Mr. Kim is
currently an adjunct professor of monetary finance at Sungkyunkwan University.
Mr. Kim began his banking career by joining the Bank of Korea in 1964 and served
in various positions until 1999 when he joined Kangwon Bank as its Standing
Auditor. Mr. Kim received a B.A. in public administration from Seoul National
University. Mr. Kim also received a M.A. and Ph.D. in economics from La Trobe
University in Australia.

     Wan Young Yu is a non-standing director of Chohung Bank. Mr. Yu is
currently the President of Orion Electric Co., Ltd., prior to which Mr. Yu
served as the President of Eastel Systems from 1999. Mr. Yu served as a senior
executive vice president of LG Group and LG telecommunications in 1996 and 1998,
respectively. Mr. Yu received a B.S. in electric engineering from Seoul National
University. Mr. Yu also received a M.A. and Ph.D. from Case Western Reserve
University.

     Chang Seong Jang is a non-standing director of Chohung Bank. Mr. Jang is
currently the general manager of the resolution planning department of the Korea
Deposit Insurance Corporation. Mr. Jang served in various positions, including
the general manager of risk management department in 1999 and the general
manager of planning and coordination department in 2000. Mr. Jang received a
B.A. in mathematics from Seoul National University. Mr. Jang also received a
M.S. in statistics from Seoul National University and a M.S. in science
management from Korea University.

     Jeong Myung Lee is a non-standing director of Chohung Bank. Mr. Lee is
currently the General Secretary of the Korean Commission of the International
Press Institute. Previously, Mr. Lee has served as an advisor to Yonhap News
since 1998. Mr. Lee received a B.A. in economics from Sogang University.

     Jin Soon Lee is a non-standing director of Chohung Bank. Mr. Lee is
currently a professor at the College of Business Administration of Soongsil
University. Mr. Lee previously served as an Appointed

                                        49
<PAGE>

Member of the Presidential Commission on Education & Human Resource Policy. Mr.
Lee received a B.A. in International Trade & Business from Seoul National
University. Mr. Lee also received a M.A. and Ph.D. in economics from University
of Wisconsin.

     Woo Jin Kim is a non-standing director of Chohung Bank. Mr. Kim is
currently a researcher of Korea Institute of Finance. Mr. Kim began his banking
career by joining the Korea Institute of Finance in 1997. Mr. Kim received a
B.A. in economics from Seoul National University. Mr. Kim also received a MBA
and Ph.D in business administration from New York University.

     Young Hwi Choi is a non-standing director of Chohung Bank. Mr. Choi is
currently the President and Chief Executive Officer of the Group. Prior to being
elected to his current position in 2003, Mr. Choi served as Director and Deputy
President of Shinhan Financial Group and Deputy President of Shinhan Bank. Mr.
Choi also serves as an outside director of Shinhan Bank. Mr. Choi began his
banking career by joining the Bank of Korea in 1969. He served as a deputy
director of the Ministry of Finance and Economy from 1978 to 1982, when he first
joined Shinhan Bank as one of its incorporators. Mr. Choi received a B.A. in
economics from Sungkyunkwan University.

                                        50
<PAGE>

                  UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

     The following unaudited pro forma combined balance sheet data is derived
from the audited consolidated balance sheets of the Group and Chohung Bank both
appearing elsewhere in this registration statement. The unaudited pro forma
combined balance sheet data has been prepared to reflect the combined financial
position as if the acquisition occurred on December 31, 2002. The unaudited pro
forma combined statement of income data is derived from the audited consolidated
statements of income of the Group and Chohung Bank both appearing elsewhere in
this registration statement. The unaudited pro forma combined statement of
income data has been prepared as if the acquisition occurred on January 1, 2002.

     The following unaudited pro forma combined financial data give effect to
the acquisition by the Group of Chohung Bank using the purchase method of
accounting for business combinations, with the Group being the acquiring entity
and Chohung Bank being the acquired entity. The operating results of Chohung
Bank will be reflected in the Group's consolidated financial statements
prospectively from August 19, 2003, the acquisition date. The acquisition
transaction is more fully described in "-- Our Acquisition of Chohung Bank".

     You should read the unaudited pro forma combined financial data in
conjunction with the historical audited financial statements and the related
notes of the Group and Chohung Bank included elsewhere in this registration
statement.

     The unaudited pro forma combined financial data appearing below is based on
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America ("US GAAP"). These principles require
the use of estimates that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from those estimates. The
unaudited pro forma combined financial data has been prepared based on the
assumptions described in the notes thereto. The objective of the unaudited pro
forma information is to provide information about the continuing impact of the
acquisition by indicating how the transaction might have affected historical
financial statements had it occurred as of December 31, 2002, with respect to
the unaudited pro forma combined balance sheet, and as of January 1, 2002, with
respect to the unaudited pro forma combined statement of income. The unaudited
pro forma combined balance sheet and statement of income comprise historical
financial data which has been retroactively combined to reflect the effect of
the merger as described in the notes thereto and they do not reflect any
adjustments to reflect significant trends or other factors that may be of
relevance in considering future performance. Such trends and factors are
discussed in "Item 5. Operating and Financial Review and Prospects -- Shinhan
Financial Group -- Recent Developments -- Recent Events" and "-- Chohung Bank --
Recent Developments -- Recent Events".

     The unaudited pro forma combined financial data have been prepared for
comparative purposes only and do not purport to be indicative of what the
operating results and financial position would have been, had the acquisition
between the Group and Chohung Bank actually taken place as of and for the
periods indicated.

                                        51
<PAGE>

                   UNAUDITED PRO FORMA COMBINED BALANCE SHEET

                            AS OF DECEMBER 31, 2002

<Table>
<Caption>
                                                                                 PRO FORMA
                                 HISTORICAL           ----------------------------------------------------------------
                          -------------------------                                         PURCHASE
                                          CHOHUNG      INTERCOMPANY       FAIR VALUE       ACCOUNTING
                              SFG          BANK       ELIMINATIONS(1)   ADJUSTMENTS(2)   ADJUSTMENTS(3)     COMBINED
                          -----------   -----------   ---------------   --------------   --------------   ------------
                                                              (IN MILLIONS OF WON)
<S>                       <C>           <C>           <C>               <C>              <C>              <C>
ASSETS
Cash and cash
  equivalents...........  W   282,324   W 1,862,750      W      --         W     --       W   (14,833)    W  2,130,241
Restricted cash.........    1,365,358     1,244,519             --               --                --        2,609,877
Interest-bearing
  deposits in banks.....      124,764       177,109        (54,792)              --                --          247,081
Call loans and
  securities purchased
  under resale
  agreements............      575,533       466,496            (15)              --                --        1,042,014
Trading assets..........    1,064,931     1,193,897        (13,847)              --                --        2,244,981
Securities:
  Available-for-sale
    securities..........    8,736,708     9,623,847        (53,379)              --                --       18,307,176
  Held-to-maturity
    securities..........    4,407,677            --         (8,921)              --                --        4,398,756
Loans, net..............   44,139,270    43,436,502        (39,904)         194,049                --       87,729,917
Customers' liability on
  acceptances...........      927,933     1,383,595             --               --                --        2,311,528
Premises and equipment,
  net...................      828,438       692,842             --          572,444                --        2,093,724
Goodwill and intangible
  assets................      219,471            --             --               --           179,374          398,845
Security deposits.......      466,129       460,192             --               --                --          926,321
Other assets............    1,647,594     3,460,054             --           83,391                --        5,191,039
Core deposit intangible
  acquired..............           --            --             --               --           998,099          998,099
Credit card relationship
  intangible acquired...           --            --             --               --           165,279          165,279
                          -----------   -----------      ---------         --------       -----------     ------------
  Total assets..........  W64,786,130   W64,001,803      W(170,858)        W849,884       W 1,327,919     W130,794,878
                          ===========   ===========      =========         ========       ===========     ============
LIABILITIES AND
  STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
  Interest-bearing......  W35,886,059   W42,371,268      W (54,792)        W217,529       W        --     W 78,420,064
  Noninterest-bearing...    1,162,528     1,903,033             --               --                --        3,065,561
Trading liabilities.....      131,012        82,563         (6,833)              --                --          206,742
Acceptances
  outstanding...........      927,933     1,383,595             --               --                --        2,311,528
Short-term borrowings...    6,994,596     5,524,743        (47,512)              --                --       12,471,827
Secured borrowings......    4,705,899     1,351,032             --            5,143                --        6,062,074
Long-term debt..........    8,234,652     6,461,151        (61,721)          48,561                --       14,682,643
Accrued expenses and
  other liabilities.....    3,192,965     3,535,478             --          228,491           370,330(4)     7,327,264
Mandatorily redeemable
  preferred stock.......           --            --             --               --         1,662,355(5)     1,662,355
                          -----------   -----------      ---------         --------       -----------     ------------
  Total liabilities.....  W61,235,644   W62,612,863      W(170,858)        W499,724       W 2,032,685     W126,210,058
                          -----------   -----------      ---------         --------       -----------     ------------
Minority interest.......      287,879        16,190             --               --           274,001(6)       578,070
Redeemable convertible
  preferred stock.......           --            --             --               --           744,143(7)       744,143
STOCKHOLDERS' EQUITY
Common stock............    1,461,806     3,395,592             --               --        (3,395,592)(8)    1,461,806
Additional paid-in
  capital...............    1,048,085     1,721,536             --               --        (1,721,536)(8)    1,048,085
Retained earnings.......    1,076,906    (3,924,904)            --               --         3,924,904(8)     1,076,906
Accumulated other
  comprehensive income,
  net of taxes..........       70,361       180,526             --               --          (180,526)(8)       70,361
Less: treasury stock, at
  cost..................     (394,551)           --             --               --                --         (394,551)
                          -----------   -----------      ---------         --------       -----------     ------------
    Total stockholders'
      equity............    3,262,607     1,372,750             --               --        (1,372,750)       3,262,607
                          -----------   -----------      ---------         --------       -----------     ------------
    Total liabilities,
      minority interest
      and stockholders'
      equity............  W64,786,130   W64,001,803      W(170,858)        W499,724       W 1,678,079     W130,794,878
                          ===========   ===========      =========         ========       ===========     ============
</Table>

                                        52
<PAGE>

                UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

                      FOR THE YEAR ENDED DECEMBER 31, 2002

<Table>
<Caption>
                                                                                        PRO FORMA
                                                                       --------------------------------------------
                                                  HISTORICAL                              PURCHASE
                                           -------------------------    INTERCOMPANY     ACCOUNTING
                                              SFG       CHOHUNG BANK   ELIMINATIONS(9)   ADJUSTMENTS      COMBINED
                                           ----------   ------------   ---------------   -----------     ----------
                                                         (IN MILLIONS OF WON, EXCEPT PER SHARE DATA)
<S>                                        <C>          <C>            <C>               <C>             <C>
INTEREST AND DIVIDEND INCOME
  Interest and fees on loans.............  W2,832,910    W3,343,140       W    (864)      W (24,114)(10) W6,151,072
  Interest and dividends on securities...     749,111       682,554        (272,021)             --       1,159,644
  Trading assets.........................      52,376        86,733         (33,126)             --         105,983
  Other interest income..................     100,903        38,464          (2,613)             --         136,754
                                           ----------    ----------       ---------       ---------      ----------
    Total interest income................   3,735,300     4,150,891        (308,624)        (24,114)      7,553,453
INTEREST EXPENSE
  Interest on deposits...................   1,401,348     1,438,849          (2,606)       (118,164)(10)  2,719,427
  Interest on short-term borrowing.......     252,912       222,719         (57,306)             --         418,325
  Interest on secured borrowings.........     242,663        98,458               0          (2,708)(10)    338,413
  Interest on long-term debt.............     390,760       344,574        (248,614)        (13,811)(10)    472,909
  Other interest expense.................      17,445            --                         120,891(11)     138,336
                                           ----------    ----------       ---------       ---------      ----------
    Total interest expense...............   2,305,128     2,104,600        (308,526)        (13,792)      4,087,410
NET INTEREST INCOME......................   1,430,172     2,046,291             (98)        (10,322)      3,466,043
  Provision for loan losses..............     236,219     1,384,749              --              --       1,620,968
  Provision for guarantees and
    acceptances..........................       9,841       (55,296)             --              --         (45,455)
  Net interest income after provision for
    loan losses, guarantees and
    acceptances..........................   1,184,112       716,838             (98)        (10,322)      1,890,530
NONINTEREST INCOME.......................                                        --              --
  Commissions and fees...................     473,895       485,129              --              --         959,024
  Net trust management fees..............     128,918        (8,663)             --              --         120,255
  Net trading profits....................      88,027        90,115              --              --         178,142
  Net gains on investment securities.....     143,347            --              98              --         143,445
  Other..................................     203,118       205,694              --              --         408,812
                                           ----------    ----------       ---------       ---------      ----------
    Total noninterest income.............   1,037,305       772,275              98              --       1,809,678
NONINTEREST EXPENSES
  Employee compensation and severance
    benefits.............................     357,149       332,622              --              --         689,771
  Depreciation and amortization..........     104,238        75,178              --         183,988(12)     363,404
  General and administrative expenses....     409,531       304,108              --              --         713,639
  Net losses on investment securities....          --        51,118              --              --          51,118
  Impairment loss on goodwill............     137,002            --              --              --         137,002
  Write-down of other investments........      31,133        69,774              --              --         100,907
  Credit card fees.......................      44,635       104,395              --              --         149,030
  Other..................................     217,836       318,686              --              --         536,522
                                           ----------    ----------       ---------       ---------      ----------
    Total noninterest expenses...........   1,301,524     1,255,881              --         183,988       2,741,393
  Income before income tax expense and
    minority interest....................     919,893       233,232              --        (194,310)        958,815
  Income tax expense.....................     320,316        74,771              --         (22,965)        372,122
  Minority interest......................      10,155         4,889              --              --          15,044
                                           ----------    ----------       ---------       ---------      ----------
  Net income.............................  W  589,422    W  153,572       W      --       W(171,345)     W  571,649
                                           ==========    ==========       =========       =========      ==========
NET INCOME PER COMMON SHARE(13)(14)
  Basic net income (in Won)..............       2,246           228                                           2,007
  Basic weighted average shares
    outstanding (in thousands)...........     262,480           674                                         262,480
  Diluted net income per share (in
    Won).................................       2,243           228                                           1,859
  Diluted weighted average shares
    outstanding (in thousands)...........     262,812           674                                         307,533
</Table>

                                        53
<PAGE>

ACQUISITION OF CHOHUNG BANK

     On January 23, 2003, the Public Fund Oversight Committee (the "PFOC"), a
unit within Korea's Ministry of Finance and Economy, which determined the
preferred bidder in connection with KDIC's contemplated disposition of its
80.04% equity interest in Chohung Bank, chose the Group as the preferred bidder
to become the purchaser of KDIC's equity interest in Chohung Bank.

     On July 9, 2003, as a result of the bid negotiations with the PFOC, the
Group entered into a Stock Purchase Agreement ("Agreement") with KDIC to
purchase from KDIC 543,570,144 shares of Chohung Bank's common stock, which
constitutes 80.04% of the issued and outstanding common stock of Chohung Bank,
Korea's oldest bank, providing both retail and commercial banking services. The
closing date of the acquisition was August 19, 2003 ("Closing Date"). The
purchase price is approximately W2,446,138 million.

     The acquisition will be accounted for under the purchase method of
accounting for business combinations. The Group's proportionate share of Chohung
Bank's asset and liabilities will be recorded at fair value, with the excess of
purchase price over the Group's proportionate share of fair value of net assets
representing goodwill.

     The numbered paragraphs below refer to corresponding item numbers set forth
in the pro forma combined balance sheet and income statement.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

     (1) As of December 31, 2002, intercompany balances consisted principally of
unsettled deposits, loans, securities, and borrowings.

     (2) The fair value adjustments applied to the Group's proportionate share
of the assets and liabilities to be acquired of Chohung Bank are estimates of
fair value, determined as follows:

  ASSETS

     - Loans, net: Fair value is determined using discounted cash flows based on
       current rates at which similar loans would be made to borrowers for the
       same maturities;

     - Premises and equipment, net: Fair value adjustment to premises and
       equipment solely relate to Chohung Bank's land and buildings, as the net
       book values of other fixed assets approximate respective fair values as
       of December 31, 2002. The fair value adjustment for land and buildings as
       of December 31, 2002 was 485,248 million Won and 87,196 million Won,
       respectively. The fair value of Chohung Bank's land and buildings were
       determined as of December 31, 1998 by independent valuation specialists
       in connection with a revaluation under Korean GAAP. For purposes of
       estimating the fair value of Chohung Bank's land and buildings as of
       December 31, 2002, the change in the price index of real properties
       between January 1, 1999 and December 31, 2002 was applied to the fair
       value of individual properties as of December 31, 1998, based on
       geographical location and category type. The price index of real
       properties is published annually by the Korean tax authority, based on
       annual appraisals conducted by independent appraisers hired by the Korean
       Ministry of Construction and Transportation and local governmental
       agencies; and

     - Other assets: Fair value adjustments consist primarily of deferred tax
       assets related to the fair value adjustments of Chohung Bank liabilities.

  LIABILITIES

     - Interest-bearing deposits: Fair value is determined using discounted cash
       flows based on rates offered for deposits with similar maturities;

     - Secured borrowings and long-term debt: Fair value is determined based on
       discounted cash flows based on current rates for issues of similar
       maturities; and

                                        54
<PAGE>

     - Other liabilities: Fair value adjustment consists of deferred tax
       liabilities related to the fair value adjustments of Chohung Bank's
       assets.

     (3) Purchase price allocation and goodwill (in millions of Won):

     ESTIMATED FAIR VALUES OF CONSIDERATION

<Table>
<S>                                                            <C>
Cash........................................................   W  900,000(a)
Redeemable preferred stock..................................      777,188(b)
Redeemable convertible preferred stock......................      744,143(c)
Direct acquisition costs....................................       24,807(d)
                                                               ----------
     Total purchase price...................................   W2,446,138
                                                               ==========
</Table>

          (a) The Group issued new shares of redeemable preferred stock through
     a public offering in Korea for cash on the Closing Date to fund the cash
     portion of the consideration paid to KDIC (Note 5).

          (b) The Group issued 46,583,961 new shares of redeemable preferred
     stock to KDIC ("RPS"). The estimated fair value of the RPS is determined
     based on the present value of the cash dividend and principal payment
     streams. The RPS was issued in five series on August 18, 2003, redeemable
     over seven years after the issue date. If there is any RPS outstanding on
     the last day of the redemption period ("RPS Final Redemption Date"), the
     Group will be obligated to redeem all outstanding RPS to the extent that
     distributable profits are available for such purchase. In the event that
     the Group does not have sufficient distributable profits to redeem all
     outstanding RPS on the RPS Final Redemption Date, the RPS will remain
     outstanding until sufficient distributable profits are available. The Group
     may, at its option, elect to redeem all or part of the outstanding RPS at
     any time during the redemption period. The holder of RPS will not have any
     voting rights, unless dividends on the RPS are not distributed in any given
     year, in which case each RPS will be given one voting right.

          (c) The Group issued 44,720,603 new shares of redeemable convertible
     preferred stock to KDIC ("RCPS"). The estimated fair value of the RCPS is
     determined based on the present value of the cash dividend and principal
     payment streams as well as the conversion feature valued using a binomial
     option model. The RCPS was issued in three series on August 18, 2003,
     redeemable at any time after the fourth anniversary date of the issue date
     and from time to time until the fifth anniversary date of the issue date
     ("RCPS Final Redemption Date"). If there is any RCPS outstanding on the
     last day of the redemption period, the Group is obligated to redeem the
     outstanding RCPS to the extent that distributable profits are available for
     the purchase. In the event that the Group does not have sufficient
     distributable profits to redeem all outstanding RCPS on the RCPS Final
     Redemption Date, the RCPS will remain outstanding until sufficient
     distributable profits are available. The Group may, at its option, elect to
     redeem all or part of the outstanding RCPS at any time during the
     redemption period. KDIC may convert the RCPS into newly issued common stock
     of the Group at a conversion ratio of 1:1, based on a scheduled conversion
     after the first anniversary date of the issue date until the fourth
     anniversary of the issue date. The holder of RCPS will not have any voting
     rights, unless dividends on the RCPS are not distributed in any given year,
     in which case each RCPS will be given one voting right.

          (d) Represents estimated direct acquisition costs.

     In addition, the Agreement stipulates that the Group will pay KDIC certain
contingent consideration, the amount of which cannot be determined. The first
element of contingent consideration, referred to as the Asset Indemnity, relates
to reimbursement of 80.04% of future credit losses related to certain acquired
assets. The second element of contingent consideration, referred to as the
General Indemnity, relates to reimbursement of losses from certain
preacquisition contingencies and breach of representations and warranties of the
Agreement. The third element of contingent consideration relates to a profit
earn-out.

     - A payment of 652,284 million Won will be made to KDIC on the second
       anniversary of the Closing Date. This amount will, be reduced by an
       amount equal to 80.04% of certain future credit losses

                                        55
<PAGE>

       related to acquired corporate and credit card loans, including loans sold
       with recourse to the Korea Asset Management Corporation, plus accrued
       interest, occurring between December 31, 2002 and the end of the last
       quarter before the second anniversary of the Closing Date. The amount of
       this payment is dependent upon future events and is not reasonably
       estimable.

     - A payment of 166,516 million Won will be paid to the KDIC on the second
       anniversary of the Closing Date. This amount will be reduced by losses
       incurred by the Group related to certain contingencies occurring within
       the period commencing on the Closing Date and ending on the second
       anniversary of the Closing Date, plus accrued interest. These losses
       include any settlement of contingencies that existed but were unknown
       prior to the Closing Date, losses from any breach of representations and
       warranties of the Agreement, and losses incurred on certain loans sold
       with recourse prior to the Closing Date, which are not covered under the
       Asset Indemnity. The amount of this payment is dependent upon future
       events and is not reasonably estimable.

     - A profit earn-out amount equal to 20% of Chohung Bank's consolidated net
       income for the years ended December 31, 2004, 2005 and 2006, in the
       aggregate and determined under Korean GAAP, in excess of 1,800,000
       million Won. In the event that Chohung Bank's operation is merged into
       that of Shinhan Bank's, the net income used for the calculation for the
       year in which the two entities are merged would be equal to the combined
       net income of Shinhan Bank and Chohung Bank for the two years prior to
       the merger.

     In accordance with the Agreement, KDIC also has the right to override the
conversion schedule and convert all its RCPS in the event of a qualifying public
offering of the Group's common stock ("QPO") provided that in no event can KDIC
convert its RCPS within one year of the Closing Date. A QPO is defined as a
public offering of the Group's common stock that (i) is made to the public prior
to December 11, 2004 exclusively for cash, (ii) has an aggregate offer price in
excess of US$200 million, (iii) provides the Group with a public float in excess
of US$1 billion immediately after the public offering, and (iv) has more than
100 institutional investors or qualified institutional buyers. In the event of a
QPO, KDIC may convert all its RCPS into the Group's common stock at a conversion
ratio of 1:1. The Group agreed to pay KDIC the difference between 18,086 Won per
share and 118% of the market price of its common stock at the date of a QPO
conversion. Since it is uncertain when, if at all, a QPO event will ever occur,
this guarantee represents a contingent liability for the Group that cannot be
determined and accrued for at the Closing Date.

  ALLOCATION OF PURCHASE PRICE

<Table>
<Caption>
                                                               (IN MILLIONS OF WON)
                                                               --------------------
<S>                                                            <C>
Total purchase price........................................        W2,446,138
Less (Add):
  Group's proportionate share of fair value of Chohung
     Bank's net tangible assets.............................         1,448,909(e)
  Core deposit intangible asset acquired....................           998,099(f)
  Credit card relationship intangible asset acquired........           165,279(f)
  Deferred tax liability related to intangible assets
     acquired...............................................          (345,523)(g)
                                                                    ----------
     Total fair value of net assets acquired................         2,266,764
                                                                    ----------
Goodwill....................................................        W  179,374
                                                                    ==========
</Table>

          (e) The Group's proportionate share of the fair value of net tangible
     assets include a deferred tax asset and deferred tax liability of W80,556
     million and W228,491 million, respectively, related to the fair value
     adjustments.

          (f) Estimated fair value of core deposit intangible asset and credit
     card relationship intangible asset acquired as of December 31, 2002, based
     on an independent valuation report.

                                        56
<PAGE>

          (g) Deferred tax liability created as a result of core deposit
     intangible asset and credit card relationship intangible asset acquired,
     assuming a statutory tax rate of 29.7%

     (4) Purchase accounting adjustments to Accrued expenses and other
liabilities include the following (in millions of Won):

<Table>
<S>                                                            <C>
Direct acquisition costs....................................   W 24,807
Deferred tax liability related to intangible assets
  acquired..................................................    345,523
                                                               --------
     Total..................................................   W370,330
                                                               ========
</Table>

     We do not anticipate any restructuring or reorganization activities in
connection with the acquisition of Chohung Bank that would require the
recognition of any restructuring or merger-related charges since we will operate
Chohung Bank separately and not combine or merge its operations with those of
Shinhan Bank, historically our principal banking subsidiary, for a period of
three years following our acquisition of Chohung Bank. See "-- Our Acquisition
of Chohung Bank -- Strategy, Organization and Timetable for Integrating Chohung
Bank and Shinhan Bank and Effecting a Merger".

     (5) Mandatorily redeemable preferred stock includes the following (in
millions of Won):

<Table>
<S>                                                            <C>
SFG redeemable preferred stock to be issued to the public,
  net of estimated issuance costs of 14,833 million Won
  (Note 3a).................................................   W  885,167
SFG redeemable preferred stock to be issued to KDIC (Note
  3b).......................................................      777,188
                                                               ----------
     Total..................................................   W1,662,355
                                                               ==========
</Table>

     In accordance with Statement of Financial Accounting Standards No. 150
("SFAS No. 150"), Accounting for Financial Instruments with Characteristics of
both Liabilities and Equity, preferred stock issued after May 31, 2003 that
represents an unconditional obligation and must be redeemed on a specified date
shall be classified as a liability.

     (6) To record the minority interest of 19.96% in Chohung Bank based on book
value of Chohung Bank's net assets.

     (7) In accordance with SFAS No. 150, redeemable preferred stock that is
also convertible into common stock is not mandatorily redeemable as defined
under SFAS No. 150, as it will be redeemed only if not converted. As such, the
redeemable convertible preferred stock to be issued to KDIC (Note 3c) is
classified between the liabilities and equity sections of the balance sheet
rather than as a liability.

     (8) To eliminate share capital of Chohung Bank.

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

     (9) Intercompany eliminations consist principally of interest income or
expense related to various lending and financing transactions entered into
during the normal course of business.

     (10) Includes the amortization/accretion of the premium/discount arising
from the difference between the carrying values and fair values of Chohung
Bank's loans, deposits, and debentures acquired, calculated based on the
weighted average maturity of each financial instrument.

     (11) Adjustment to other interest expense consists of the following (in
millions of Won):

<Table>
<S>                                                            <C>
Amortization of estimated issuance costs related to SFG's
  redeemable preferred stock to be issued to the public.....   W  3,903
Accretion of discount and accrual of 2002 dividends on
  mandatorily redeemable preferred stock to be issued to the
  public....................................................     63,000
Accretion of discount and accrual of 2002 dividends on RPS
  to be issued to KDIC......................................     53,988
                                                               --------
     Total..................................................   W120,891
                                                               ========
</Table>

                                        57
<PAGE>

     (12) Adjustment to depreciation and amortization includes (i) additional
depreciation expense of W1,959 million from the increase in fair value of
Chohung Bank's premises and equipment and (ii) amortization expense of W154,619
million and W27,410 million related to the acquired core deposit intangible
asset and the credit card relationship intangible asset, respectively. The core
deposit intangible asset has an estimated useful life of 13 years and the credit
card relationship intangible asset has an estimated useful life of 11 years.
They are amortized on an accelerated basis.

     (13) To derive the combined pro forma net income available to common
stockholders, combined pro forma net income has been reduced by (i) the
accretion of the discount arising from the difference between the redemption
amounts and the fair values of SFG redeemable convertible preferred stock to be
issued and (ii) the accrual for 2002 dividends on the redeemable convertible
preferred stock to be issued (in millions of Won):

<Table>
<S>                                                            <C>
Combined pro forma net income...............................   W571,649
Less accretion of discount and accrual of 2002 dividends on
  SFG RCPS to be issued to KDIC.............................    (44,747)
                                                               --------
Combined pro forma net income available to common
  stockholders -- Basic.....................................    526,902
Add back accretion of discount and accrual of 2002 dividends
  on SFG RCPS to be issued to KDIC, as if converted.........     44,747
                                                               --------
Combined pro forma net income available to common
  stockholders -- Diluted...................................   W571,649
                                                               ========
</Table>

     (14) Shares used for the computation of diluted earnings per share of the
combined entity reflects the following (in thousands):

<Table>
<S>                                                            <C>
Basic weighted average shares outstanding...................   262,480
Add:
  RCPS of SFG...............................................    44,721
  Dilutive warrants on SFG bonds............................       288
  SFG share options.........................................        44
                                                               -------
Diluted weighted average shares outstanding.................   307,533
                                                               =======
</Table>

                                        58
<PAGE>

                  BUSINESS OVERVIEW OF SHINHAN FINANCIAL GROUP

     Unless otherwise specifically mentioned, the following business overview is
presented on a consolidated basis under U.S. GAAP and does not include
information regarding Chohung Bank, which information is contained under
"-- Business Overview of Chohung Bank".

     In the overview of the Group's business that follows, we provide you with
information regarding the Group's branch network and other distribution channels
and a detailed look at our principal group activities.

OUR BRANCH NETWORK AND DISTRIBUTION CHANNELS

     Through branches maintained at various levels of our subsidiaries, the
Group offers a variety of financial services to retail and corporate customers.
The following table presents the geographical distribution of the Group's
domestic branch network, according to the Group's principal subsidiaries with
branch networks, as of December 31, 2002.

<Table>
<Caption>
                                       SHINHAN BANK
                                    ------------------                  GOOD MORNING      SHINHAN
                                    RETAIL   CORPORATE   JEJU BANK   SHINHAN SECURITIES   CARD(1)   TOTAL
                                    ------   ---------   ---------   ------------------   -------   -----
<S>                                 <C>      <C>         <C>         <C>                  <C>       <C>
Seoul and metropolitan............   143(2)      45           1              40               8      237
Kyunggi Province..................    53         10          --              14               1       78
Six major cities:
  Inchon..........................    15          4          --               2               1       22
  Busan...........................    11          4           1               7               1       24
  Kwangju.........................     5          1          --               3               1       10
  Taegu...........................     6          3          --               5               1       15
  Ulsan...........................     4          1          --               2              --        7
  Taejon..........................     4          1          --               4               1       10
                                     ---        ---         ---             ---             ---      ---
     Sub-total....................    45         14           1              23               5       88
                                     ---        ---         ---             ---             ---      ---
Others............................    23          8          30              18              --       79
                                     ---        ---         ---             ---             ---      ---
       Total......................   264         77          32              95              14      482
                                     ===        ===         ===             ===             ===      ===
</Table>

- ---------------

Notes:

(1) Represents sales offices focusing on attracting new customers.

(2) Includes two private banking centers.

  BANKING BRANCH NETWORK

     As of December 31, 2002, Shinhan Bank had 341 branches in Korea. Shinhan
Bank's branch network is designed to focus on providing one-stop banking
services tailored to one of the three customer categories: retail customers,
small- and medium-sized enterprises customers and large corporate customers.
Under the customer oriented branch network, branch officers operate under the
sole and independent supervision of their respective division profit centers,
providing one-stop banking services tailored to their respective customer
groups. Of the 341 total domestic branches, three branches specialize in serving
large corporations, 74 branches concentrate on small- and medium-sized
enterprises and 264 branches focus on retail customers. The Group believes that
by targeting specific service areas and offering differentiated services to each
group of customers will improve its profitability and productivity.

  Retail Banking Branches

     In Korea, retail transactions are generally conducted in cash, although
credit card use is increasing, and conventional checking accounts are not
offered or used as widely as in other countries. Shinhan Bank's 264

                                        59
<PAGE>

retail branches are principally located near Seoul and its metropolitan area to
target and service high net worth individuals.

     The Group's private banking relationship managers are the representatives
of the private banking corporate division to our clients. Working within target
customer groups, they assist clients in developing individual investment
strategies. The Group believes that its relationship managers help the Group
foster enduring relationships with its clients. Private banking customers also
have access to the Group's retail branch network and other general banking
products the Group offers through its retail banking operations.

  Corporate Banking Branches

     In order to service corporate customers and attract high-quality borrowers,
in particular from the small-and medium-sized enterprises sector, the Group has
developed a relationship management system within its domestic branch network
and strengthened its marketing capability. The Group believes that its
relationship managers help the Group foster enduring relationships with its
corporate customers, the small- and medium-sized enterprises in particular.
Recently, as part of an effort to centralize our resources and institutional
knowledge with respect to the Group's corporate customer base, the Group has
reduced the number of its banking branch offices that offer services to large
corporate customers. The Group expects its headquarters to be much better
positioned to effect policies and business strategies throughout its branch
network. This should lead to greater efficiency and better services being
provided to these customers. In addition, the Group has three corporate branches
solely dedicated to large corporate customers, all of which are located in
Seoul.

  Self-Service Terminals

     In order to complement the Group's branch network, the Group has
established an extensive network of automated banking machines, which are
located in branches and in unmanned outlets. These automated banking machines
consist of ATMs, cash dispensers and passbook printers. As of December 31, 2002,
Shinhan Bank had 1,037 cash dispensers and 1,175 ATMs, which are part of a
larger national and international network of ATMs. The Group has actively
promoted the use of these distribution outlets in order to provide convenient
service to customers, as well as to maximize the marketing and sales functions
at the branch level, reduce employee costs and improve profitability. The Group
believes that the use of its automated banking machines has increased in recent
years. The Group estimates that, in 2002, automated banking machine transactions
accounted for approximately 38% of its total deposit and withdrawal
transactions.

     The following table sets forth information, for the periods indicated,
regarding the number of transactions and the fee revenue of the Group's ATMs and
cash dispensers.

<Table>
<Caption>
                                                              FOR THE YEAR ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
ATMs and cash dispensers....................................    2,064      2,212
Number of transactions (millions)...........................      103        117
Fee revenue (billions of Won)...............................   W   14     W   19
</Table>

  Electronic Banking

     Since launching Korea's first internet banking service in July 1999, the
Group has been widely acknowledged in the print and electronic media as the
internet banking leader among Korea commercial banks. The Group's internet
banking services are more comprehensive than those available at the counter,
including such services as 24 hour account balance posting, real-time account
transfer, overseas remittance and loan requests. Consistent with the fact that
Korea has the highest internet supply rate in the world and an active e-business
market, internet banking has continued to grow at a rapid pace. In 2002,
internet banking made up 19.8% of total banking transactions, an increase from
14.3% in 2001 and 7.5% in 2000. In the case of loans, in particular, an average
of approximately 15,000 requests are made per month, twice as many as

                                        60
<PAGE>

the number made through the branch channels. Among the electronic banking
service customers in 2002, 1,033,000 were retail customers and 55,000 were
corporate customers.

     The following table sets forth information, for the periods indicated, on
the number of users and transactions and the fee revenue of the above services
provided to the Group's retail and corporate customers.

<Table>
<Caption>
                                                              FOR THE YEAR ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
TELEPHONE BANKING(1):
  Number of users...........................................   382,305    792,317
  Number of transactions (in thousands).....................    25,362     27,792
INTERNET BANKING(1):
  Number of users...........................................   349,872    741,552
  Number of transactions (in thousands).....................    24,055     45,125
Total fee revenue (millions of Won).........................  W  9,133   W 13,244
</Table>

- ---------------

Note:

(1) Includes 445,100 users who were simultaneously using both telephone banking
    and internet banking.

     In line with the Group's strategy to provide high quality and comprehensive
customer service, the Group is in the process of establishing a group-wide
integrated call center designed to provide comprehensive customer service and
marketing.

 Overseas Branch Network

     The table below sets forth Shinhan Bank's overseas banking subsidiary and
branches.

<Table>
<Caption>
BUSINESS UNIT                                         LOCATION         YEAR ESTABLISHED OR ACQUIRED
- -------------                                   --------------------   ----------------------------
<S>                                             <C>                    <C>
Subsidiary
  Shinhan Finance Limited.....................  Hong Kong SAR, China               1990
Branches
  Tokyo.......................................                 Japan               1988
  Osaka.......................................                 Japan               1986
  Fukuoka.....................................                 Japan               1997
  New York....................................         United States               1989
  London......................................        United Kingdom               1991
  Ho Chi Minh City............................               Vietnam               1995
  Tianjin.....................................                 China               1996
</Table>

     In addition, Shinhan Bank also plans to open a new branch in Shanghai,
China in September 2003. The principal activities of Shinhan Bank's overseas
branches and subsidiaries are providing trade financing and local currency
funding for Korean companies and Korean nationals in the overseas market and
providing foreign exchange services in conjunction with our headquarters. On a
limited basis, Shinhan Bank's overseas branches and subsidiaries also engage in
the investment and trading of securities of foreign issuers.

 CREDIT CARD DISTRIBUTION CHANNELS

     As of December 31, 2002, Shinhan Card had 14 sales offices nationwide,
which primarily focus on attracting new credit card customers. As part of the
Group's strategy to focus on cross-selling of credit card products and services
to our banking customers, the Group generally markets its credit card products
and services to its credit card customers through its established retail
distribution channels, primarily through Shinhan Bank's retail and corporate
banking branch network, including automated transaction machines.

                                        61
<PAGE>

 SECURITIES BROKERAGE DISTRIBUTION CHANNELS

     The Group's Securities Brokerage Services is conducted principally through
Good Morning Shinhan Securities. As of December 31, 2002, Good Morning Shinhan
Securities had 95 branches nationwide and two overseas subsidiaries based in New
York and London to service the Group's customers in this business. As of March
31, 2003, we reduced the number of these branches to 83.

     Approximately 42% of the Group's brokerage branches are located in the
Seoul metropolitan area with a focus to attract high net worth individual
customers and also to achieve synergy with the Group's retail and corporate
banking branch network. In the corporate sector in particular, the Group
continues to explore new opportunities through cooperation between Good Morning
Shinhan Securities and the Investment Banking Division at Shinhan Bank.

OUR PRINCIPAL ACTIVITIES

     The Group's principal group activities consist of deposit-taking activities
from its retail and corporate customers, which provide the Group with funding
necessary to offer a variety of commercial banking, securities brokerage,
investment banking and other financial services.

     The comprehensive financial services that the Group provides are:

     - Retail banking services

     - Credit cards services

     - Corporate banking services, comprised of two divisions:

      - Small- and medium-sized enterprises banking

      - Large corporate banking

     - Treasury and securities investment

     - Other banking services

     - Securities brokerage services

     - Other services, including leasing and equipment financing, investment
       trust management, regional banking, investment banking advisory,
       bancassurance and loan collection and credit reporting

     In addition to the above business activities, the Group has a corporate
center at the group level to house those functions that support the
cross-divisional management in our organization.

 DEPOSIT-TAKING ACTIVITIES

     The Group offers many deposit products that target different customer
segments with features tailored to each segment's financial profile and other
characteristics. The Group's deposit products principally include the following:

     - Demand deposits, which either do not accrue interest or accrue interest
       at a lower rate than time or savings deposits. Demand deposits allow the
       customer to deposit and withdraw funds at any time and, if they are
       interest bearing, accrue interest at a fixed or variable rate depending
       on the period and the amount of deposit. Retail and corporate demand
       deposits constituted approximately 4.9% of the Group's total deposits as
       of December 31, 2002 and paid average interest of 1.39% in 2002.

     - Time deposits, which generally require the customer to maintain a deposit
       for a fixed term during which the deposit accrues interest at a fixed
       rate or variable rate based on the Korean Composite Stock Price Index
       (KOSPI). If the amount of the deposit is withdrawn prior to the end of
       the fixed term, the customer will be paid a lower interest rate than that
       originally offered. The term for time deposits typically ranges from one
       month to seven years. Retail and corporate time deposits

                                        62
<PAGE>

       constituted approximately 54.3% of the Group's total deposits as of
       December 31, 2002 and paid average interest of 4.91% in 2002.

     - Mutual installment deposits, which generally require the customer to make
       periodic deposits of a fixed amount over a fixed term during which the
       deposit accrues interest at a fixed rate. If the amount of the deposit is
       withdrawn prior to the end of the fixed term, the customer will be paid a
       lower interest rate than that originally offered. The term for
       installment deposits typically ranges from six months to five years.
       Retail and corporate installment deposits constituted approximately 4.8%
       of the Group's total deposits as December 31, 2002 and paid average
       interest of 6.07% in 2002.

     - Savings deposits, which allow the customer to deposit and withdraw funds
       at any time and accrue interest at an adjustable interest rate, which is
       lower than time or installment deposits. Currently, interest on savings
       deposits ranges from 0.0% to 3.8%. Retail and corporate savings deposits
       constituted approximately 28.5% of the Group's total deposits as of
       December 31, 2002 and paid average interest of 1.85% in 2002.

     - Marketable deposits, consisting of certificates of deposit, cover bills
       and bonds sold under repurchase agreements that have maturities ranging
       from 30 days to 365 days. Interest rates on marketable deposits are
       determined based on the length of the deposit and prevailing market
       interest rates. The Group sells certificates of deposit on a discount to
       their face value, reflecting the interest payable on the certificates of
       deposit. Under U.S. GAAP, cover bills sold are reflected as short-term
       borrowings and bonds sold under repurchase agreements are reflected under
       secured borrowings.

     - Foreign currency deposits, which accrue interest at an adjustable rate
       and are available to Korean residents, nonresidents and overseas
       immigrants. The Group offers foreign currency demand and time deposits
       and checking and passbook accounts in nine currencies.

     The Group also offers deposits which provide the holder with preferential
rights to housing subscriptions under the Housing Construction Promotion Law,
and eligibility for mortgage loans. These products include:

     - Housing subscription time deposits, which are special purpose time
       deposit accounts providing the holder with a preferential right to
       subscribe for new private apartment units under the Housing Construction
       Promotion Law. This law is the basic law setting forth various measures
       supporting the purchase of houses and the supply of such houses by
       construction companies. Such preferential rights are neither transferable
       nor marketable in the open market. These products accrue interest at a
       fixed rate for one year and at an adjustable rate after one year, which
       are consistent with other time deposits. Deposit amounts per account
       range from W2 million to W15 million depending on the size and location
       of the dwelling unit. These deposit products target high and middle
       income households.

     - Housing subscription installment savings deposits, which are monthly
       installment savings programs providing the holder with a preferential
       subscription right for new private apartment units under the Housing
       Construction Promotion Law. Such preferential rights are neither
       transferable nor marketable in the open market. These deposits require
       monthly installments of W50,000 to W500,000, have maturities between
       three and five years and accrue interest at fixed rates depending on the
       term, which are consistent with other installment savings deposits. These
       deposit products target low- and middle-income households.

     For information on the Group's deposits in Korean Won based on the
principal types of deposits offered by Shinhan Bank, see "Item 4. Information on
the Company -- Description of Assets and Liabilities -- Funding -- Deposits".

                                        63
<PAGE>

     The following table sets forth the number of the deposit customers of
Shinhan Bank by category as well as the number of domestic branches as of the
dates indicated.

<Table>
<Caption>
                                                                   AS OF
                                                                DECEMBER 31,
                                                              ----------------
                                                               2001     2002
                                                              ------   -------
                                                               (IN THOUSANDS,
                                                              EXCEPT BRANCHES)
<S>                                                           <C>      <C>
Retail deposit customers(1).................................  5,073     5,361
  Active retail deposit customers(2)........................  2,034     2,295
Corporate deposit customers.................................     83        93
Domestic branches...........................................    328       341
</Table>

- ---------------

Notes:

(1) Based on the classification for the purpose of customer management, retail
    deposit customers include individual deposit customers, foreigners, sole
    proprietorships and certain small- and medium-sized enterprises deposit
    customers classified as retail customers depending on a number of factors,
    including those small- and medium-sized enterprises to whom a credit of less
    than W1 billion has been extended.
(2) Represents customers (i) whose average account balance is greater than
    W300,000, (ii) whose account balance is greater than W10,000 with more than
    five transactions during the last one month and (iii) who used their credit
    cards more than once during the last three months.

     The Group offers varying interest rates on its deposit products depending
on the rate of return on its interest earning assets, average funding costs and
interest rates offered by other nationwide commercial banks.

     The Monetary Policy Committee of the Bank of Korea imposes a reserve
requirement on Won currency deposits of commercial banks which currently ranges
from 1% to 5%, based generally on the term to maturity and the type of deposit
instrument. See "Item 4. Information on the Company -- Supervision and
Regulation -- Principal Regulations Applicable to Banks -- Liquidity". The
Monetary Policy Committee also regulates maximum interest rates that can be paid
on certain deposits. Under the Korean government's finance reform plan issued in
May 1993, controls on deposit interest rates have been gradually reduced.
Currently, only maximum interest rates payable on demand deposits are subject to
regulation by the Bank of Korea.

     The Depositor Protection Act provides for a deposit insurance system where
the Korea Deposit Insurance Corporation guarantees to depositors the repayment
of their eligible bank deposits. The deposit insurance system insures up to a
total of W50 million per depositor per bank. See "Item 4. Information on the
Company -- Supervision and Regulation -- Regulations Applicable to
Banks -- Deposit Insurance System".

 RETAIL BANKING SERVICES

 Overview

     The Group provides retail banking services primarily through Shinhan Bank
which is the Group's largest and wholly-owned subsidiary, and, to a much lesser
extent, through Jeju Bank, a regional commercial bank the Group acquired in
April 2002. See "-- Other Banking Services" below. The consumer loans of Shinhan
Bank amounted to W15,976 billion (not including credit cards) as of December 31,
2002, which represented approximately 96.8% of the Group's total consumer loans
(not including credit cards) as of the same date.

     Retail banking services include mortgage, small business and consumer
lending as well as demand, savings and fixed deposit-taking, checking account
services, electronic banking and ATM services, bill paying services, payroll and
check-cashing services, currency exchange and wire fund transfer. We believe
that the provision of modern and efficient retail banking services is important
both in maintaining our public profile and as a source of fee-based income. The
Group believes that its retail banking services and products will become
increasingly important in the coming years as the domestic and regional banking
sectors further develop and become more diverse. Retail banking has been and
will continue to remain one of our core businesses. The Group's strategy in
retail banking is to provide fast and comprehensive service to retail

                                        64
<PAGE>

customers through increased automation and improved customer service, as well as
a streamlined branch network focused on sales. The retail segment places an
emphasis on targeting high net-worth individuals. As of December 31, 2002, the
Group had approximately 400,000 high net-worth customers with over W70 million
in deposits.

 Consumer Lending Activities

     The Group offers various consumer loan products, consisting principally of
household loans, that target different segments of the population with features
tailored to each segment's financial profile and other characteristics,
including each customer's profession, age group, loan purpose, collateral
requirements and the length of time a borrower has been a customer of the Group.
Household loans consist principally of the following:

     - Mortgage and home equity loans, mostly comprised of mortgage loans which
       are loans to finance home purchases which are generally secured by the
       home being purchased (more than 92.4% of which have a maturity of five
       years or less that can be rolled over); and

     - Other consumer loans, which are loans made to customers for any purpose
       (other than mortgage and home equity loans) and the terms of which vary
       based primarily upon the characteristics of the borrower and which are
       either unsecured or secured or guaranteed by deposits or a third party.

     For secured loans, including mortgage and home equity loans, the Group's
policy is to lend up to 50%-70% of the appraisal value of the collateral, also
by taking into account the value of any lien or other security interest that is
prior to our security interest (other than petty claims). Due to the rapid
increase in mortgage and home equity loans in Korea, the Financial Supervisory
Commission recently has implemented certain regulations and guidelines that are
designed to suppress the increase of loans secured by housing. These regulations
include restrictions on banks' maximum loan-to-value ratios, guidelines with
respect to appraisal of collateral, internal control and credit approval policy
requirements with regard to housing loans as well as provisions designed to
discourage commercial banks from instituting incentive-based marketing and
promotion of housing loans.

     The Group plans to continue to increase the volume of such loans because
the Group believes that these loans: (i) offer greater opportunities for growth,
(ii) have less risks and lower delinquency rates since risks are diversified
with many retail borrowers with relatively smaller borrowed amounts and (iii)
provide an opportunity for the Group to market its deposit products and credit
cards.

     The following table sets forth the portfolio of the Group's consumer loans.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              --------------------
                                                                2001       2002
                                                              --------   ---------
                                                              (IN BILLIONS OF WON,
                                                              EXCEPT PERCENTAGES)
<S>                                                           <C>        <C>
Consumer loans(1)
  Mortgage and home-equity loans(2).........................   W7,253     W11,539
  Other consumer............................................    3,537       4,962
Percentage of consumer loans to total gross loans...........    32.05%      36.63%
</Table>

- ---------------

Notes:

(1) Before allowance for loans losses and excludes credit card accounts.

(2) Consumer loans related to housing including, among others, home equity loans
    and home mortgage loans.

     As of December 31, 2002, mortgage and home-equity loans and other consumer
loans accounted for 69.93% and 30.07%, respectively, of the Group's consumer
loans (excluding credit cards).

                                        65
<PAGE>

 Pricing

     The interest rates on the Group's consumer loans are either a periodic
floating rate (which is based on a base rate determined for three-month,
six-month or twelve-month periods derived using the Group's internal transfer
price system, which reflects the Group's cost of funding in the market, further
adjusted to account for the Group's expenses related to lending) or a fixed rate
that reflects the Group's cost of funding, as well as our expenses related to
lending. Fixed rate loans are currently limited to maturities of three years and
offered only on a limited basis. For unsecured loans, both types of rates also
incorporate a margin based on, among other things, the borrower's credit score
as determined during our loan approval process. For secured loans, credit limit
is based on the type of collateral, priority with respect to the collateral and
loan to value. The Group can adjust the price to reflect the borrower's current
and/or expected future contribution to the Group's profitability. The applicable
interest rate is determined at the time a loan is extended. If a loan is
terminated prior to its maturity, the borrower is obligated to pay the Group an
early termination fee of approximately 0.5% to 1.0% of the loan amount in
addition to the accrued interest.

     As of December 31, 2002, the Group's three-month, six-month and
twelve-month base rates were approximately 4.90%, 5.10% and 5.20%, respectively.
As of December 31, 2002, the Group's fixed-rates for loans with a maturity of
one year, two years and three years were 7.80%, 8.10% and 8.40%, respectively.

     As of December 31, 2002, approximately 68.7% of the Group's consumer loans
were priced based on a floating rate and approximately 31.3% were priced based
on a fixed rate. As of the same date, approximately 94.0% of the Group's
consumer loans with maturity of over one year were priced based on a floating
rate and approximately 6.0% were priced based on a fixed rate.

 Private Banking

     Historically, the Group has focused on customers with higher net-worth. The
Group's retail banking services provide a private banking service to its wealthy
clients who seek personal advice in complex financial matters. The Group's aim
is to help enhance the private wealth and increase the financial sophistication
of its clients by offering them advisory services on tax matters and legal
affairs, portfolio/fund management services and tailored financial services.

     The Group believes that it was one of the first banks to initiate private
banking in Korea. The Group opened its first Private Banking Center in Seoul in
2002 to serve the needs of high net worth customers, and the Group currently has
two private banking centers both of which are located in Seoul metropolitan
area. While the Group believes that the market for private banking services in
Korea is still at an early stage of development, in connection with the Group's
strategy to target high net worth retail customers, the Group's banking
operation recently established a separate private banking team to further
develop and improve our services in this area.

 CREDIT CARD SERVICES

 Overview
     As of December 31, 2002, the Group's total credit card balance outstanding
was W2,763 billion, or 6.12% of the Group's total loans outstanding as of the
same date.

     The use of credit cards in Korea has increased dramatically in recent years
as the Korean economy and consumer spending recovered from the financial and
economic difficulties of late 1990's and also as a result of government
initiatives designed to promote the use of credit cards, such as providing tax
benefits to businesses that accept credit cards and tax deductions for consumers
up to certain amounts charged to credit cards. However, as credit card
delinquencies in Korea have begun to increase since mid-2002, concerns have been
raised regarding the rapid growth in credit card usage and significant
deterioration in asset quality of the Korean credit card industry. Throughout
2002 and during the first half of 2003, the Financial Supervisory Commission
strengthened regulations designed to address these concerns relating to the
credit card industry. See "Item 3. Key Information -- Risk Factors -- Risks
relating to our banking business -- Government

                                        66
<PAGE>

regulation of our consumer and credit card operations has increased
significantly which may materially and adversely affect our credit card and
consumer operations," and "-- Supervision and Regulation".

     On June 4, 2002, Shinhan Bank spun-off its credit card business into
Shinhan Card Co., Ltd., a "monoline" credit card subsidiary. Despite the
spin-off, Shinhan Bank continues to manage a substantial portion of our credit
card operations, including the collection of payments and receiving and
processing of applications, pursuant to an agency agreement between the two
subsidiaries.

 Products and Services

     The Group offers a variety of credit card products and services that target
select customer profiles and focus on:

     - offering cards that provide additional benefits such as frequent flyer
       miles and reward program points that can be redeemed by the customer for
       complementary services, prizes and cash;

     - offering gold cards, platinum cards and other preferential members' cards
       which have a higher credit limit and provide additional services in
       return for a higher annual membership fee;

     - acquiring new customers through strategic alliances and cross-marketing
       with wholesalers and retailers;

     - encouraging increased use of credit cards by existing customers through
       special offers for dormant customers;

     - introducing new features to preferred customers, such as revolving credit
       cards, travel services and insurance;

     - developing fraud detection and security systems to prevent the misuse of
       credit cards and to encourage the use of credit cards over the Internet;
       and

     - issuing smart cards and preparing for a cardless business environment in
       which customers can use credit cards to make purchases by phone or over
       the Internet.

     Income from the credit card business consists of annual fees paid by
cardholders, installment purchase fees, cash advance fees, interest on late and
deferred payments and fees paid by merchants, with fees from merchants and cash
advance fees constituting the largest source. Merchant discount fees, which are
processing charges on the merchants, can be up to 4.5% of the purchased amount
depending on the merchant used, with the average charge being 2.3%.

     In contrast to the United States and many other countries, where most
credit cards are revolving cards that allow outstanding amounts to be rolled
over from month to month so long as a required minimum percentage is repaid,
credit card holders in Korea are required to pay for their purchases within
approximately 20 to 50 days of purchase depending on their payment cycle and,
except in the case of installment purchases where the charged amounts are repaid
in installments, typically during the following three to six months. Credit card
accounts that remain unpaid after this period are deemed to be delinquent
accounts. Delinquent accounts are charged a penalty interest rate and monitored.

     In certain cases, credit card companies in Korea, including Shinhan Card,
have been allowed to rewrite delinquent credit card balances for purchase and
cash advance as credit card loans. Shinhan Card rewrites a small number of card
balances as a means of maximizing collection related to a relatively small
number of borrowers who are suffering from temporary financial difficulties
where Shinhan Card believes it is probable that all or substantially all
principal and interest will ultimately be recovered. Credit card customers may
apply for entry into the rewritten loan program (i) when the loan balance is
past due three months and the borrower applying for entry into this program
secures one or more guarantors meeting certain asset and credit quality criteria
based on Shinhan Card's credit scoring system or (ii) when the loan balance is
less than three months past due and the borrower pays off 10%, or 20% if the
amount exceeds a certain threshold, of the balance due. If approved, Shinhan
Card rewrites card balances including past due interest into card loans and
amend the maturity and the repayment terms accordingly. Shinhan Card provides
the borrower with the
                                        67
<PAGE>

option of either repaying the rewritten balance either on a monthly installment
basis over five years or as a term loan due at the end of one year. The
rewritten credit card program is comprised of approximately 3,000 smaller
homogenous loans. The Group segregates this portfolio for performance
measurement and monitoring purposes due to the higher credit risk. The balance
of rewritten loans was W8 billion and W37 billion as of December 31, 2001 and
2002, respectively, against which the Group recognized an allowance of W1
billion and W13 billion, respectively. See "-- Financial and Statistical
Information" below.

     For purchases made by installments, the Group charges interest on unpaid
installments at rates that vary according to the term of repayment.

 Customers and Merchants

     As the Group believes that internal growth through cross-selling can only
be limited, the Group also seeks to enhance its market position by selectively
targeting new customers with high net worth and good creditworthiness through
the use of a sophisticated and market-oriented risk management system. Credit
card applicants are screened and appropriate credit limits are assessed
according to internal guidelines based on the Group's credit scoring system.

     The following table sets forth the number of customers and merchants of
Shinhan Card as of the dates indicated.

<Table>
<Caption>
                                                                     AS OF
                                                                  DECEMBER 31,
                                                              --------------------
                                                                2001        2002
                                                              --------    --------
                                                                 (IN THOUSANDS,
                                                              EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Number of credit card holders...............................   2,181       2,548
Personal accounts...........................................   2,105       2,463
Corporate accounts..........................................      76          85
Active ratio(1).............................................    47.0%       49.1%
Number of merchants.........................................     590       1,545
</Table>

- ---------------

Note:

(1) Represents the ratio of accounts used at least once within the last six
    months to total accounts as of year end.

     As of December 31, 2002, the Group had a total of approximately 2,548,000
credit card customers, which represents an increase of approximately 868,000
customers from approximately 1,680,000 as of December 31, 2000. Of the total
customers outstanding as of December 31, 2002, the number of platinum and gold
card members, whose higher credit worthiness entitles them to certain benefits,
was approximately 500,000 as of December 31, 2002.

     The number of the Group's merchants also increased from approximately
338,000 merchants as of December 31, 2000 to approximately 1,545,000 merchants
as of December 31, 2002, primarily as a result of the Group's decision to
develop its own credit card merchant network starting in July 2002.

                                        68
<PAGE>

 Financial and Statistical Information

     The following table sets forth certain financial and statistical
information relating to the Group's credit card operations as of the dates or
for the period indicated.

<Table>
<Caption>
                                                              AS OF OR FOR THE YEAR
                                                               ENDED DECEMBER 31,
                                                              ---------------------
                                                               2001(1)     2002(1)
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Interest income:
  Installments..............................................   W    23     W    30
  Cash advances.............................................       120         185
  Card Loans(2).............................................        60          51
  Annual membership.........................................         5           8
  Revolving(3)..............................................         6           6
  Late payments.............................................        16          21
                                                               -------     -------
     Total..................................................   W   230     W   301
                                                               =======     =======
Credit card fees:
  Merchant fees(4)..........................................   W    82     W   110
  Other fees................................................        12          12
                                                               -------     -------
     Total..................................................   W    94     W   122
                                                               =======     =======
Charge volume:(5)
  General purchases.........................................   W 4,648     W 6,969
  Installment purchases.....................................       537         772
  Cash advances.............................................     5,007       8,119
                                                               -------     -------
     Total..................................................   W10,192     W15,860
                                                               =======     =======
Outstanding balance (at year end):(6)
  General purchases.........................................   W   635     W   970
  Installment purchases.....................................       179         305
  Cash advances.............................................       737         965
  Revolving purchases.......................................        41          42
  Card loans................................................       473         476
  Others....................................................         5           5
                                                               -------     -------
     Total..................................................   W 2,070     W 2,763
                                                               =======     =======
Average balance.............................................   W 1,807     W 2,371
Delinquent balances:
  From 1 day to 1 month.....................................   W   189     W   231
  Over 1 month:
     From 1 month to 3 months...............................   W    29     W    79
     From 3 months to 6 months..............................        16          48
     Over 6 months..........................................        --          --
                                                               -------     -------
       Sub-total............................................        45         127
                                                               -------     -------
          Total.............................................   W   234     W   358
                                                               =======     =======
</Table>

                                        69
<PAGE>

<Table>
<Caption>
                                                              AS OF OR FOR THE YEAR
                                                               ENDED DECEMBER 31,
                                                              ---------------------
                                                               2001(1)     2002(1)
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Delinquency ratios:(7)
  From 1 day to 1 month.....................................      9.13%       8.36%
  Over 1 month:
     From 1 month to 3 months...............................      1.40%       2.86%
     From 3 months to 6 months..............................      0.77        1.74
     Over 6 months(8).......................................        --          --
                                                               -------     -------
       Sub-total............................................      2.17        4.60
                                                               -------     -------
          Total.............................................     11.30%      12.96%
                                                               =======     =======
Rewritten loans(9)..........................................   W     8     W    37
Gross charge-offs...........................................   W    39     W    60
Recoveries..................................................        (7)        (17)
                                                               -------     -------
  Net charge-offs...........................................   W    32     W    43
                                                               =======     =======
Gross charge-off ratio(10)..................................      2.16%       2.53%
Net charge-off ratio(11)....................................      1.77        1.81
</Table>

- ---------------

Notes:

(1)   Prior to June 2002 when the credit card division of Shinhan Bank was spun
      off to create Shinhan Card, a separate credit card subsidiary, the Group's
      credit card operation was conducted by Shinhan Bank. As a result, the 2001
      data represents the results of operation of Shinhan Bank's credit card
      division. The 2002 data presents collective results of credit card
      operations of Shinhan Bank's credit card division, Shinhan Card and Jeju
      Bank's credit card division.

(2)   Card loans consist of loans that are provided on either a secured or
      unsecured basis to cardholders upon prior agreement. Payment of principal,
      fees and interest on such a loan can be due either in one payment or in
      installments after a fixed period. Card loans are provided by Shinhan
      Card's Visa cards.

(3)   Revolving purchases were introduced in October 1998 for certain
      creditworthy credit card customers (e.g., customers who have not been
      delinquent for more than three times in the past one year).

(4)   Merchant discount fees consist of merchant membership and maintenance
      fees, charges associated with prepayment by Shinhan Card (on behalf of
      customers) of sales proceeds to merchants, processing fees relating to
      sales and membership applications.

(5)   Represents the aggregate cumulative amount charged during the year.

(6)   Represents amounts before allowance for loan losses.

(7)   Represents the ratio of delinquent balances to outstanding balances for
      the year.

(8)   The Group's charge-off policy is to charge off all credit card balances
      which are 180 days past due.

(9)   Represents delinquent credit card balances for purchase and cash advance
      which have been rewritten as credit card loans, thereby reducing the
      balance of delinquent accounts.

(10)  Represents the ratio of gross charge-offs for the year to average balance
      for the year. The Group's charge-off policy is to write off all credit
      card balances which are 180 days past due.

(11)  Represents the ratio of net charge-offs for the year to average balances
      for the year.

 Supervisory Statistical Information under Korean GAAP

     Due to the rapid increase in consumer debt in Korea in recent years, the
Korean government has adopted a series of regulations designed to restrain the
rate of growth in, and delinquencies of, cash advances, credit

                                        70
<PAGE>

card loans and credit card usage generally and to strengthen the reporting of,
and compliance with, credit quality indexes. The Financial Supervisory
Commission and the Financial Supervisory Service have announced a number of
changes to the rules governing the reporting of credit card balances, as well as
the procedures governing which persons may receive credit cards. In addition,
the Korean government has also revised the calculation formula for capital
adequacy ratios and delinquency ratios applicable to credit card companies,
imposing sanctions against credit card companies with capital adequacy ratios of
8% or below and/or delinquency ratios of 10% or above. These computations are
all based on financial information prepared in accordance with Korean GAAP, as
required by regulatory guidelines, which differs significantly from U.S. GAAP.
As of December 31, 2001 and 2002, under Korean GAAP, Shinhan Card's delinquent
balances (defined as credit card accounts delinquent for over 30 days) were W68
billion and W150 billion, respectively, representing delinquency ratios (defined
as the ratio of delinquent balances to outstanding balances) of 3.25% and 5.92%.
In certain cases, credit card companies in Korea have been allowed to rewrite
delinquent credit card balances for purchase and cash advance as credit card
loans, thereby reducing the balance of delinquent accounts. Delinquent credit
card balances that were rewritten as loans as of December 31, 2001 and 2002,
under Korean GAAP, were W9 billion and W38 billion, respectively. Net
charge-offs, under Korean GAAP, during 2001 and 2002 were W19 billion and W49
billion, respectively, representing net charge-off ratios (defined as the ratio
of net charge-offs for the year to average balances for the year) of 1.05% and
2.12%. As of December 31, 2002, Shinhan Card's adjusted equity capital ratio was
10.86%.

 CORPORATE BANKING SERVICES

 Overview

     The Group conducts its corporate banking services primarily through Shinhan
Bank. The following table sets forth the balances and percentage of our total
lending attributable to the Group's corporate lending business as of the dates
indicated.

<Table>
<Caption>
                                                                         AS OF DECEMBER 31,
                                                             -------------------------------------------
                                                                     2001                   2002
                                                             --------------------   --------------------
                                                              (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                          <C>          <C>       <C>          <C>
Small- and medium-sized enterprises loans(1)...............   W11,690      34.7%     W14,649      32.5%
Large corporate loans......................................     9,115      27.1       11,139      24.7
                                                              -------      ----      -------      ----
  Total corporate loans....................................   W20,805      61.8%     W25,788      57.2%
                                                              =======      ====      =======      ====
</Table>

- ---------------

Note:

(1) Represents the principal amount of loans extended to corporations meeting
    the definition of small- and medium-sized enterprises under the Basic Act on
    Small- and Medium-sized Enterprises and its Presidential Decree.

     The Group's corporate banking services consist of two divisions:

     - small- and medium-sized enterprise banking; and

     - large corporate banking.

 Small- and medium-sized Enterprises Division
     The small- and medium-sized enterprise loans of Shinhan Bank amounted to
W13,204 billion as of December 31, 2002, which represented approximately 90.1%
of our total small- and medium-sized enterprise loans as of the same date. Under
the Basic Act on Small and Medium-sized Enterprises and its Presidential Decree,
small- and medium-sized enterprises are defined as companies which (i) do not
have employees and assets exceeding the number or the amount, as the case may
be, specified in accordance with their types of businesses in the Presidential
Decree and (ii) do not belong to a conglomerate as defined in the Monopoly
Regulations and Fair Trade Act. We presently have approximately 57,000 small-
and medium-sized

                                        71
<PAGE>

enterprises customers. The Group's small- and medium-sized enterprises business
has historically focused on larger and well-established small- and medium-sized
enterprises in Korea that prepared financial statements audited by independent
auditors. This focus is based on our belief and historical observation that the
larger and, in many cases, more sound businesses tend to engage independent
auditors and strengthen investor confidence. As of December 31, 2002, the
Group's small- and medium-sized enterprise banking operation was the largest
among Korean banks in terms of the total amount of Won-denominated loans to
small- and medium-sized enterprises that are audited by certified public
accountants, with 3,708 customers and an estimated market share of 9.9%. As a
result, the Group believes that its banking operation had the largest market
share of small- and medium-sized enterprises customers subject to independent
audit.

     The Group's small- and medium-sized enterprises banking business has
traditionally been and will remain one of the Group's core businesses. However,
the small- and medium-sized enterprise business is currently the focus of
intense competition among large commercial banks and the opportunities for the
Group to expand its business with more established small- and medium-sized
enterprises have been reduced. During recent years, most of the nationwide banks
have shifted their focus to or increased their emphasis on this type of lending,
as opportunities in the large corporate and retail sectors diminish. While the
Group expects the competition in this sector to intensify, the Group's
established customer base, quality brand image and experienced lending staff
will provide an opportunity to maintain steady growth in this environment.

     The Group believes that it possesses the necessary elements to succeed in
the small- and medium-sized enterprises market, including the Group's marketing
capabilities (which the Group believes have provided the Group with significant
brand loyalty) and the Group's credit rating system for credit approval. To
increase and maintain the Group's market share of small- and medium-sized
enterprises lending, the Group has:

     - positioned itself based on its accumulated expertise. Based on the
       Group's experience, the Group believes it has a better understanding of
       the credit risks embedded in this market segment and to develop loan and
       other products specifically tailored to the needs of this market segment;

     - begun operating a relationship management system to provide targeted and
       tailored customer service to small- and medium-sized enterprises. The
       Group has 78 corporate banking branches with relationship management
       teams. These relationship management teams market the Group's products
       and review and approve smaller loans that pose less credit risks; and

     - begun to focus on cross-selling the Group's loan products with other
       products. For example, when the Group lends to small- and medium-sized
       enterprises, it also explores opportunities to cross-sell consumer loans
       or deposit products to the employees of those companies or to provide
       financial advisory services and other capital markets and investment
       banking services.

     An integral part of the Group's small- and medium-sized enterprise lending
business focus is to maintain the growth and profitability of the Group's loans
to small- and medium-sized enterprises by selectively increasing its customer
base to include relatively smaller enterprises. The Group believes that lending
to these customers presents a significant opportunity for growth but will also
increase the Group's credit risk exposure relative to its existing customers in
this segment.

 Large Corporate Division

     Large corporate loans of Shinhan Bank amounted to W10,787 billion as of
December 31, 2002, which represented approximately 96.8% of the Group's total
large corporate loans as of the same date. Large corporate customers include all
corporate customers, other than small- and medium-sized enterprise customers,
and all government corporations. As a late entrant into the Korean commercial
banking industry, large corporate banking has not been a core business and the
Group's focus of business in this customer sector has been on investments in
corporate debt securities and fee-based businesses rather than conventional
lending activities.

     In recent years, the Group's large corporate banking division has begun
providing investment banking services. The Group provides services as an
arranger, trustee and liquidity provider for asset-backed securities. The Group
also participates in and administer syndicated loans and project financings. The
Group
                                        72
<PAGE>

provides advisory services in the area of social overhead capital projects such
as highway, port, power and water and sewage projects, as well as equity and
venture financing, real estate financing and mergers and acquisitions brokerage.

 Corporate Lending Activities

     The Group's principal loan products for corporate customers are working
capital loans and facilities loans. Working capital loans include discounted
notes and trade financing. Facilities loans are provided to finance the purchase
of equipment and the establishment of manufacturing plants. As of December 31,
2002, working capital loans and facilities loans accounted for 89.8% and 10.2%,
respectively, of the Group's total corporate loans. Working capital loans
generally have a maturity of one year, but may be extended on an annual basis
for an aggregate term of three years in the case of unsecured loans and five
years in the case of secured loans. Facilities loans, which are generally
secured, have a maximum maturity of ten years.

     Loans to corporations may be unsecured or secured by real estate, deposits
or guaranty certificates. As of December 31, 2002, under Korean GAAP, secured
loans and guaranteed loans (including loans secured by guaranty certificates
issued by credit guarantee insurance funds) accounted for 48.9% and 15.1%,
respectively, of Shinhan Bank's Won-denominated loans to small- and medium-sized
enterprises. Among the secured loans, approximately 88.5% were secured by real
estate. As of December 31, 2002, under Korean GAAP, secured loans and guaranteed
loans accounted for 6.8% and 2.7%, respectively, of Shinhan Bank's
Won-denominated loans to large corporate customers. Among the secured loans,
approximately 39.9% were secured by real estate.

     As of December 31, 2002, in terms of outstanding loan balance, 47.2% of the
Group's corporate loans were extended to borrowers in the manufacturing
industry, 15.3% were to borrowers in the retail and wholesale industry, 9.7%
were to the borrowers in the real estate, leasing and service industry, 3.4%
were to borrowers in the construction industry, and 6.2% were extended to
borrowers in the finance and insurance industry.

     When evaluating the extension of loans to corporate customers, the Group
reviews the corporate customer's creditworthiness, credit scoring, value of any
collateral or third party guarantee. The value of any collateral is defined
using a formula that takes into account the appraised value of the property, any
prior liens or other claims against the property and an adjustment factor based
on a number of considerations including, with respect to property, the value of
any nearby property sold in a court-supervised auction during the previous three
years. The Group revalues any collateral when a secured loan is renewed or if a
trigger event occurs with respect to the loan in question.

 Pricing

     The Group establishes the price for the Group's corporate loan products
based principally on the Group's cost of funding and the expected loss rate
based on a borrower's credit risk. The Group generally determines pricing of the
Group's loans as follows:

     Interest rate = (The Group's periodic market floating rate or reference
                     rate) plus transaction cost plus a credit spread plus risk
                     premium plus or minus a discretionary adjustment rate.

     Depending on the situation and the Group's agreement with the borrower, the
Group may use either the Group's periodic market floating rate or the reference
rate as the base rate in calculating the Group's pricing. As of December 31,
2002, the Group's periodic market floating rates (which is based on a base rate
determined for three-month, six-month, one-year, two-year, three-year or
five-year periods derived using the Group's market rate system) were 4.90% for
three months, 5.03% for six months, 5.20% for one year, 5.39% for two years,
5.61% for three years and 6.00% for five years. As of the same date, the Group's
reference rate was 8.75%.

     Transaction cost is added to reflect the standardized transaction cost
assigned to each loan product and other miscellaneous costs, including
contributions to the Credit Guarantee Fund and education taxes.

                                        73
<PAGE>

     The credit spread is added to the periodic floating rate to reflect the
expected loss from a borrower's credit rating and the value of any collateral or
payment guarantee. In addition, we add a risk premium that is measured by the
unexpected loss that exceeds the expected loss from the credit rating assigned
to a particular borrower.

     A discretionary adjustment rate is added or subtracted to reflect the
borrower's current and/or future contribution to the Group's profitability. In
the event of additional credit provided by way of a guarantee of another, the
adjustment rate is subtracted to reflect such. In addition, depending on the
price and other terms set by competing banks for similar borrowers, the Group
may reduce the interest rate the Group charges to compete more effectively with
other banks.

     As of December 31, 2002, 54.5% of the Group's corporate loans with
outstanding maturities of one year or more had interest rates that were not
fixed but were variable in reference to the Group's periodic market rate.

 Electronic Corporate Banking

     The Group launched its electronic corporate banking services connecting the
Group's corporate customers through dedicated subscriber lines in 1991. The
Group has since developed its electronic corporate banking services to offer to
the Group's corporate customers a web-based total cash management service
through "Shinhan Bizbank". Shinhan Bizbank supports all types of banking
transactions from basic transaction history inquiries and fund transfers to
opening letters of credit and trade finance. The Group's products and services
related to cash management include payment management, collection management,
sales settlement service, acquisition settlement service, B2B settlement
service, sweeping and pooling. By offering such information technology-related
products services such as purchase cards, loans for purchasing goods, e-biz
loans, and a B2B settlement service, the Group is able to continue to develop
its image as one of the leaders in electronic corporate banking. Through the
enhancement of Shinhan Bizbank and its cash management service, the Group
intends to improve the support service system related to customer cash
management. Shinhan Bizbank's services were being used by 49,261 corporations as
of April 31, 2003 and its number of transactions and the aggregate transaction
amount were 775,776 and W20,700 billion, respectively.

 TREASURY AND SECURITIES INVESTMENT

     The Group's treasury and securities investment business engages primarily
in the following activities:

     - treasury;

     - securities investment and trading; and

     - derivatives trading.

 Treasury

     Treasury Department provides funds to all business operations and ensures
the liquidity of the Group's banking operation. To secure long-term stable
funds, we use reverse floating rate notes, structured financing, and other
advanced funding methods. As for overseas funding, the department constantly
explores the feasibility of raising funds in currencies other than the U.S.
dollar, such as Japanese Yen and the Euro. In addition, the Group makes call
loans and borrow call money in the short-term money market. Call loans are
short-term lending among banks and financial institutions in either Korean Won
or foreign currencies, in amounts exceeding 100 million, with maturities of 30
days or less. Typically, call loans have maturities of one day.

                                        74
<PAGE>

 Securities Investment and Trading

     The Group invests in and trades securities for its own account in order to
maintain adequate sources of liquidity and generate interest and dividend income
and capital gains. The Group's trading and investment portfolios consist
primarily of Korean treasury securities and debt securities issued by Korean
government agencies, local governments or certain government-invested
enterprises and debt securities issued by financial institutions. The Group's
equity securities consist of equities listed on the Korea Stock Exchange and
KOSDAQ. For a detailed description of the Group's securities investment
portfolio, see "-- Description of Assets and Liabilities -- Investment
Portfolio".

 Derivatives Trading

     The Group provides and trades a range of derivatives products. The
derivatives products that the Group offers include:

     - Interest rate swaps and options, relating to Korean Won interest rate
       risks;

     - Cross currency swaps largely for Korean Won against U.S. dollars,
       Japanese Yen and Euros; and

     - Foreign currency forwards, swaps and options.
     Shinhan Bank's trading volume in terms of notional amount was W33,862
billion and W53,705 billion in 2001 and 2002, respectively. The Group's
derivative operations focus on addressing the needs of the Group's corporate
clients to hedge their risk exposure and back-to-back derivatives entered into
to hedge the Group's risk exposure that results from such client contracts.

     The Group also engages in derivative trading activities to hedge the
interest rate and foreign currency risk exposure that arise from its own assets
and liabilities. Many of these nontrading derivative contracts, however, do not
qualify for hedge accounting under U.S. GAAP and are accordingly accounted for
as trading derivatives in the financial statements. In addition, on a limited
basis, the Group engages in proprietary trading of derivatives within its
regulated open position limits. See "-- Description of Assets and
Liabilities -- Derivatives".

 OTHER BANKING SERVICES

     The revenue-generating activities in the Group's other banking services
consist primarily of the Group's trust account management services and any gains
and losses from the Group's overseas branches. As a result, the Group's
discussion in this subsection will focus on the Group's trust account management
services.

 Trust Account Management Services

 -- Overview

     The Group's trust account management services offer trust funds managed by
the Group's banking operation consisting primarily of money trusts. In Korea, a
money trust is a discretionary trust over which (except in the case of a
specified money trust) the Group has investment discretion (subject to
applicable law) and is commingled and managed jointly for each type of trust
account. The specified money trusts are established on behalf of customers which
give the Group specific directions as to the investment of trust assets. Trust
account customers are typically individuals seeking higher rates of return than
those offered by bank account deposits. Because there are fewer regulatory
restrictions on trust accounts than on bank account deposits, including no
deposit reserve requirements, the Group has historically been able to offer
higher rates of return on trust account products than on bank account deposits.
Trust account products, however, generally require higher minimum deposit
amounts and longer deposit periods compared with comparable bank account deposit
products. Assets of the trust accounts are invested primarily in securities and
loans, except that a greater percentage of the assets of the trust accounts are
invested in securities compared to the bank accounts because trust accounts
generally require more liquid assets due to their limited funding source
compared to bank accounts. As a result of the recent low interest environment,
the Group has not been able to offer attractive rates of return on its trust
account products.
                                        75
<PAGE>

     Under Korean law, assets accepted in trust accounts are segregated from
other assets of the trustee bank and are not available to satisfy the claims of
the depositors or other creditors of such bank. Accordingly, trust accounts are
accounted for and reported separately from the bank accounts. See
"-- Supervision and Regulation". Trust accounts are regulated by the Trust Act
and Trust Business Act of Korea and most nationwide commercial banks offer
similar trust account products. The Group earns income from trust account
management services, which is reflected in the Group's accounts as trust
management fees. See "Item 5. Operating and Financial Review and Prospects".

     Under U.S. GAAP, the Group has not consolidated trust accounts in the
Group's financial statements or recognized the acquisition of such accounts in
accordance with the purchase method of accounting due to the fact that these are
not our assets but customer assets. As of December 31, 2001 and 2002, under
Korean GAAP the Group had total trust assets of W9,423 billion and W11,090
billion, respectively, comprised principally of securities investments of W5,549
billion and W5,610 billion, respectively, and loans in the principal amount of
W529 billion and W271 billion, respectively. Securities investments consisted of
corporate bonds, government-related bonds and other securities, primarily
commercial paper. As of December 31, 2001 and 2002, under Korean GAAP equity
securities constituted 7.2% and 7.4%, respectively, of the Group's total trust
assets. Loans made by trust accounts are similar in type to those made by the
Group's bank accounts, except that they are made only in Korean Won. As of
December 31, 2001 and 2002, under Korean GAAP approximately 55.0% and 78.0%,
respectively, of the amount of loans from the trust accounts were collateralized
or guaranteed. In making investment from funds received for each trust account,
each trust product maintains investment guidelines applicable to each such
product which sets forth, among other things, company, industry and security
type limitations.
     The balance of the money trusts managed by the Group's trust account
business was W6,269 billion as of December 31, 2002 under Korean GAAP, showing a
decrease of 3.9% compared to W6,524 billion as of December 31, 2001.

 -- Trust Products

     The Group's trust account management services offers to individuals
primarily two basic types of money trust accounts: guaranteed fixed rate trusts
and variable rate trusts.

     - Guaranteed Fixed Rate Trust Accounts.  Guaranteed fixed rate trust
       accounts offer customers a fixed-rate of return and guaranteed principal.
       The Group receives any amounts remaining after taking into account the
       guaranteed return and all expenses of the trust accounts, including
       provisions for valuation losses on equity securities, loan losses and
       special reserves. The Group maintains two types of guaranteed fixed rate
       trust accounts: general unspecified money trusts and development money
       trusts. Korean banks, including the Group, are restricted from
       establishing new general unspecified money trusts since January 1, 1996,
       and development money trusts effective January 1, 1999. As a result, the
       size of general unspecified money trusts and development money trusts has
       decreased substantially and most of development money trusts matured by
       the end of 2001 and most of general unspecified money trusts matured by
       the end of 2002. As of December 31, 2001 and December 31, 2002, under
       Korean GAAP development money trusts amounted to W3.6 billion and W0.9
       billion, respectively and general unspecified money trusts amounted to an
       aggregate of W0.4 billion and W0.3 billion, respectively. See note 35 of
       the Group's consolidated financial statements as of and for the years
       ended December 31, 2001 and 2002 included in "Item 8. Financial
       Information".

     - Variable Rate Trust Accounts.  Variable rate trust accounts are trust
       accounts for which the Group does not guarantee the return on the trust
       account but, in certain instances described below, the principal of the
       trust account is guaranteed. In respect of variable rate trust accounts,
       the Group is entitled to receive fixed fees. The Group also receives
       commissions upon the termination of trust accounts prior to their stated
       maturities. However, the recent trend has been to offer products with
       stated maturities that are significantly shorter than those offered in
       the past, resulting in lower commissions from early termination.

                                        76
<PAGE>

     The Group is required to set aside allowances for trust assets which are
not marked to market and provide special reserves under Korean GAAP for
principal guaranteed variable rate trust accounts in addition to guaranteed
fixed rate trust accounts. Provisions for variable rate trust assets that are
not marked to market are reflected in the rate of return to customers, and thus,
have no impact on the Group's income while provisions for guaranteed fixed rate
trust accounts could reduce the Group's income in case of a deficiency in the
payment of the guaranteed amount. The Group provides special reserves with
respect to guaranteed fixed rate and principal-guaranteed variable rate trust
account credits by deducting the required amounts from trust fees for such trust
accounts in accordance with the Trust Act and Trust Business Act of Korea.

     Korean banks are currently allowed to guarantee the principal of the
following types of variable rate trust account products: (i) new pension trusts,
(ii) new personal pension trusts and (iii) retirement trusts.

     Payments from Bank Accounts to Guaranteed Fixed Rate Trust Accounts.  If
income from a guaranteed fixed rate trust account is insufficient to pay the
guaranteed amount, such deficiency must be satisfied from (i) first, special
reserves maintained in such trust accounts, (ii) secondly, trust fees and (iii)
lastly, funds transferred from the Group's bank accounts. The Group made no such
payments from the Group's bank accounts to cover such deficiencies during 2002
and 2001, primarily due to a decrease in the balance of the Group's guaranteed
fixed rate trust accounts, as a result of the legal prohibition against
providing such accounts beginning in 1996 with respect to general unspecified
money trusts and beginning in 1999 for development money trusts, as well as the
improving economic condition in Korea. The decrease in the balance of the
Group's guaranteed fixed rate trust accounts, in turn, has generally translated
into a decrease in non-performing credits. There can be no assurance, however,
that such transfers will not be required in the future.

 -- Distribution Channels and Marketing

     The Group distributes its trust products primarily through the branch
network of the Group's retail banking services. See "-- Our Branch Network and
Distribution Channels" above.

 SECURITIES BROKERAGE SERVICES

 Overview

     The Group's securities brokerage services provide a full range of brokerage
services, including investment advice and financial planning, to the Group's
retail customers as well as international and institutional brokerage services
to the Group's corporate customers.

     Approximately 77% of the Group's revenues from the Group's securities
brokerage services is generated from fees and commissions earned as a broker for
the Group's clients in the purchase and sale of securities including fees earned
by managing client assets. As of December 31, 2002, total amount of beneficiary
certificates issued in respect of assets under fee-based management were W4,912
billion. As of the same date, the Group's market share was approximately 6.7% in
the Korean equity brokerage market and are ranked sixth in the industry in terms
of brokerage volume.

 Products and Services

     The Group offers a variety of financial and advisory services through three
main business groups of Good Morning Shinhan Securities, consisting of the
Retail Business Division, the Institutional & International Client and Research
Division and Capital Markets Division.

     - Retail Business Division provides equity and bond brokerage, investment
       advisory and financial planning services to retail customers, with a
       focus on high net worth individuals. In 2002, revenues generated by the
       Retail Business Division represented approximately 77% of total revenues
       of the Group's Securities Brokerage Services in 2002. The Retail Business
       Division earns fees by managing client assets as well as commissions as a
       broker for the Group's clients in the purchase and sale of securities. In
       addition, the Group generates net interest revenue by financing
       customers' securities

                                        77
<PAGE>

       transactions and other borrowing needs through security-based lending and
       also receive commissions and other sales and service revenues through the
       sale of proprietary and third-party mutual funds.

     - Institutional & International Client and Research Division offers a
       variety of brokerage services, including brokerage of corporate bonds,
       futures and options, to the Group's institutional and international
       customers. In addition, through the Group's research center with more
       than 60 research analysts, the Group produces equity, bonds and
       derivatives research to serve both institutional and international
       investor clients.

     - Capital Markets Division offers a wide array of investment banking
       services, including selling institutional financial products and trading
       equity and derivatives and, to a lesser extent, M&A advisory and
       underwriting, to the Group's corporate customers.

 OTHERS SERVICES

     Through the Group's other operating subsidiaries, the Group also provides
leasing and equipment, investment trust management, regional banking and
investment banking and advisory services. In addition, the Group has also
established a bancassurance joint venture to offer life insurance and other
insurance-related products and services following deregulation of this industry
in September 2003. See "-- Life Insurance" below.

 Leasing and Equipment Financing

     The Group provides leasing and equipment financing services to the Group's
corporate customers through Shinhan Capital, the Group's leasing subsidiary.
Established as a leasing company in 1991, Shinhan Capital provides customers
with leasing, installment financing and new technology financing.

     As of December 31, 2002, Shinhan Capital's total assets were W971 billion,
showing a W127 billion increase from the previous year. In particular, new lease
executions increased from W169 billion in 2000 to W275 billion in 2001 and to
W345 billion in 2002, representing an estimated 14.0%, the largest market share,
of the Korean leasing market in 2002. The Group believes that its strength is in
leasing of ships, printing machines, automobiles and other specialty items. The
Group continues to diversify its revenue base from this business by expanding
the Group's services, as demonstrated by the Group's acting as corporate
restructuring company for financially troubled companies beginning in 2002.

 Investment Trust Management Services

     In addition to personalized asset management services provided by the
Group's private banking and securities brokerage services, the Group also
provide our customers with investment trust services through Shinhan BNP Paribas
Investment Trust Management, our 50:50 joint venture with BNP Paribas. This
business offers institutional, high net worth and retail clients a broad range
of investment alternatives based on an integrated asset management system.
Products and services offered include beneficiary certificates, mutual funds,
closed-end funds and separately managed accounts.

     The investment trust industry in Korea showed a sluggish trend in 2002 due
primarily to falling interest rates and poor stock market performance. As of
December 31, 2002, total assets under fee-based management by Shinhan BNP
Paribas Investment Trust Management were W46.6 billion.

     Since the financial crisis of the late 1990's, the Group has been
rebuilding its business base by writing off assets with poor quality,
principally those related to large corporations. As a result of these efforts,
the Group believes that the Group's investment trust business is well positioned
to develop and market sophisticated products and services.

 Regional Banking Services

     In April 2002, pursuant to a stock purchase agreement with Korea Deposit
Insurance Corporation, the Group acquired a majority interest in Jeju Bank,
which is engaged in providing commercial banking services

                                        78
<PAGE>

on a regional basis, primarily on Jeju Island of Korea, through its network of
32 branches. As of December 31, 2002, Jeju Bank had total assets, total
liabilities and total stockholders' equity of W1,727 billion, W1,652 billion and
W75 billion, respectively.

 Investment Banking and Advisory Services

     In addition to the investment banking services provided by the Investment
Banking Division of Shinhan Bank and the Capital Markets Division of Good
Morning Shinhan Securities, the Group also provides a variety of investment
banking and advisory services through Shinhan Macquarie Financial Advisory, our
51:49 joint venture with Macquarie Bank of Australia. The products and services
offered by Shinhan Macquarie Financial Advisory include project and
infrastructure finance, capital & debt raisings, corporate finance advisory,
structured finance, mergers and acquisitions, cross-border leasing and
infrastructure and specialized fund management advisory services. During the
year ended December 31, 2002, the Group concluded infrastructure deals with a
value in excess of US$800 million, from which the Group derived total revenue of
W6 billion.

 Life Insurance

     In anticipation of deregulation in the Korean bancassurance market, which
is expected to occur in mid-2003, the Group established SH&C Life Insurance Co.
Ltd., our 50:50 joint venture with Cardif S.A., an insurance arm of the BNP
Paribas Group. The Group plans to develop and market a variety of insurance
products as the "first mover" and establish the Group's position in the
bancassurance market.

 Loan Collection and Credit Reporting

     In order to centralize loan collection of our group, on July 8, 2002, the
Group established Shinhan Credit Information Co. Ltd., the Group's wholly-owned
subsidiary engaged in credit collection and credit reporting. Shinhan Credit
Information is capable of managing and collecting bad loans generated by the
Group's subsidiaries to improve the Group's overall asset quality. In addition,
Shinhan Credit Information plans to expand its services to such areas as credit
reporting, credit inquiry, credit card rating, civil application/petition
services, lease and rental research and advisory and consulting services related
to non-performing loan management. For the year ended December 31, 2002, the
Group's total revenues from this operation were W3 billion.

 Internet Portal Financial Services

     In 2001, the Group established e-Shinhan Inc., a joint venture with The
Boston Consulting Group to offer high-quality internet financial services.
Through its portal site, www.emoden.com, e-Shinhan offers an integrated account
aggregation service that enables the user to see all of his or her accounts at a
glance, an electronic accounting service that keeps track of all the user's
financial transactions, an investment clinic service and a financial supermarket
service that helps users to choose the financial products that best meet their
needs. To offer high quality financial portal service, the Group concluded
business ties with "Yoddle" of the U.S., the world's leading account aggregation
provider. As of December 31, 2002 and 19 months since its opening, the number of
members of this portal site exceeded 1.4 million.

INFORMATION TECHNOLOGY

     The Group believes that a sophisticated information technology system is
crucial in supporting our operations management and providing high quality
customer service. The Group employs approximately 730 total employees in
connection with the Group's information technology operations.

     To ensure maximum results from our strategic initiatives, in particular,
the Group's objective is to establish a flexible one-portal platform from which
the Group may launch new products and services to

                                        79
<PAGE>

satisfy its customers' needs. The Group is in the process of implementing, on a
step-by-step basis, its IT master plan designed to integrate fully the different
information technology systems of our various subsidiaries by 2005. As the first
step, the Group has upgraded its network infrastructure with fiber optic cable
to handle the anticipated increase in volume and speed of information and
communication. In 2002, to further facilitate the sharing of information and
communication among the headquarters, the Group's branch networks and each of
the Group's subsidiaries, the Group established an integrated enterprise
information portal, where the Group's management and employees can readily gain
access to the Group's intra-group communication and communities.

     The Group plans to continue our efforts to integrate its information
technology systems by taking the following initiatives:

     - completing the introduction of a group-wide integrated enterprise data
       warehousing system and a group-wide integrated customer relationship
       management system, which are designed to provide the Group with
       comprehensive customer information, including transaction history, and
       thereby allow the Group to identify potential marketing and
       cross-marketing opportunities;

     - creating the infrastructure necessary to establish a group-wide
       integrated call center designed to provide comprehensive customer service
       and marketing by utilizing the Group's customer relations management
       system;

     - introducing a group-wide strategic enterprise management system and
       developing the next generation banking system, each an advanced
       information technology system designed to enhance the processing speed of
       the Group's systems and make them more user-friendly by adopting
       component-based development technology; and

     - introducing an IT personnel pool designed to encourage cooperation and to
       facilitate the sharing of know-how and technology among our information
       technology specialists and personnel on a group-wide basis.

     The Group expects that the implementation of the master plan for
information technology integration will cost approximately W830 billion over the
next three years.

     The Group's information technology system for each of the Group's
subsidiaries, except for Good Morning Shinhan Securities and Jeju Bank, which
were recently acquired in 2002, is currently backed up on a real time basis at
the Group's information technology center located in the suburbs of Seoul. The
Group expects to have a comprehensive group-wide contingency plan by the end of
the third quarter of 2003 when the Group completes the back-up and disaster
recovery centers for Good Morning Shinhan Securities and Jeju Bank.

COMPETITION

     The Group competes principally with other nationwide commercial banks in
Korea, but also faces competition from a number of additional sources including
regional banks, Korea's specialized banks and branches of foreign banks
operating in Korea, as well as various other types of financial service
institutions, including savings institutions (such as mutual savings and finance
companies and credit unions and credit cooperatives), investment institutions
(such as securities brokerage firms, merchant banking corporations and
investment trust companies) and life insurance companies. Regulatory reforms in
the Korean banking industry have increased competition among banks for deposits,
generally leading to lower margins from lending activities. Prior to the
beginning of the economic crisis in Korea in late 1997, there were 26 commercial
banks, three development banks and four specialized banks. Due in part to the
economic crisis, as of December 31, 1999, there were 17 commercial banks, two
development banks and four specialized banks. Of these, two commercial banks
were recapitalized by the Government. During 1999, four mergers were consummated
and, in the first half of 2000, Korea First Bank sold its controlling interest
to a foreign investor. In 2001, H&CB and Kookmin Bank merged to create the
largest Korean bank in terms of assets. Also in

                                        80
<PAGE>

2001, Woori Bank restructured itself as a financial holding company and
significantly realigned its businesses and products to compete with other larger
banks in Korea. In December 2002, Hana Bank merged with Seoulbank. The Group
believes that the banking industry in Korea will continue to experience
consolidation among institutions leading to increased competition in all areas
in which the Group operates. As of December 31, 2002, Chohung Bank and Shinhan
Bank ranked fourth and fifth largest, respectively, in terms of total assets
among Korean commercial banks based on information published by the Financial
Supervisory Commission. See "Item 3. Key Information -- Risk Factors -- Risks
Relating to Competition -- Competition in the Korean banking industry, in
particular in the small- and medium-sized enterprises banking, retail banking
and credit card operations, is intense, and we may experience declining margins
as a result".

                                        81
<PAGE>

                       BUSINESS OVERVIEW OF CHOHUNG BANK

     Unless otherwise specifically mentioned, the following business overview is
presented on a consolidated basis under U.S. GAAP.

     In the overview of Chohung Bank's business that follows, the following
information is provided:

     - an introduction to Chohung Bank and its activities;

     - Chohung Bank's history and development;

     - Chohung Bank's branch network and other distribution channels; and

     - a detailed look at Chohung Bank's principal activities.

INTRODUCTION

     Chohung Bank, established in 1897, is the oldest financial institution in
Korea. It is a leading participant in each of the three principal sectors of the
Korean commercial banking industry: large corporations, SMEs, as defined in the
Basic Act on Small- and Medium-sized Enterprises and its Presidential Decree
under Korean law, and retail. As of December 31, 2001 and December 31, 2002,
Chohung Bank had total assets of W54,899 billion and W64,002 billion (US$53,951
million), respectively, total deposits of W37,922 billion and W44,274 billion
(US$37,321 million), respectively, and shareholders' equity of W1,151 billion
and W1,374 billion (US$1,156 million), respectively. As of December 31, 2002,
based on statistics published by the Financial Supervisory Commission, Chohung
Bank was the fourth largest commercial bank in Korea in terms of total assets.
As of December 31, 2002, Chohung Bank had a market capitalization of W2,784
billion.

     Chohung Bank believes that its large and extensive depositor base has
contributed to its achieving the lowest costs for Won-based funding and the
second highest net interest margins among Korean commercial banks as of December
31, 2002 based on information reported to the Financial Supervisory Service. To
streamline operations and to increase profitability, Chohung Bank has reduced
the number of its full-time employees by 41.1% to 6,637 as of December 31, 2002
from 11,263 as of December 31, 1997. Chohung Bank also reduced the number of its
domestic and overseas branches by 15.3% to 542 as of December 31, 2002 from 640
as of December 31, 1997, and reduced its domestic subsidiaries from seven to
one. As a result, Chohung Bank has improved its operating efficiency to obtain
one of the lowest cost ratios among Korean banks based upon shared information
among Korean banks.

     Chohung Bank's legal name is Chohung Bank and commercial name is Chohung
Bank. Chohung Bank's registered office and principal executive offices are
located at 14, 1-ka, Namdaemun-ro, Chung-ku, Seoul, Korea. Chohung Bank's
telephone number is 82-2-2010-2114.

HISTORY AND DEVELOPMENT OF CHOHUNG BANK

     Chohung Bank, formerly known as Han Sung Bank, was founded as the nation's
first financial institution in 1897. In April 1963, Chohung Bank commenced its
international banking business, which was followed by the opening of overseas
branches in different countries, including Japan and the United States. In
December 1996, Chohung Bank listed its Global Depositary Receipts on the London
Stock Exchange. In 1999, Chohung Bank merged with Chungbuk Bank and Kangwon
Bank, both of which were regional commercial banks in Korea undergoing
significant financial and liquidity difficulties since the Korean financial
crisis of late 1997.

     Since late 1997, most Korean banks and companies have been materially and
adversely impacted by a financial and economic crisis that has affected all
aspects of the Korean economy. Chohung Bank experienced serious deterioration in
asset quality levels and substantial liquidity problems and as a result received
financial assistance from Korea Deposit Insurance Corporation on several
occasions. As a result of a 4.5:1 reverse stock split, the capital stock
outstanding of Chohung Bank was reduced from W930 billion to W207 billion in
February 1999, and Korea Deposit Insurance Corporation made an aggregate capital
contribution of W2,718 billion to Chohung Bank in February, May and September
1999 and as a result became the largest

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<PAGE>

and controlling shareholder of Chohung Bank, owning approximately 80.04% of its
total issued and outstanding shares as of June 30, 2003. In addition to the
capital contributions, the Government provided other financial assistance to
Chohung Bank by purchasing certain of its non-performing assets from 1997 to
2001 through the Korea Asset Management Corporation. On August 19, 2003, Shinhan
Financial Group acquired the 80.04% shareholder interest of Korea Deposit
Insurance Corporation in Chohung Bank. Accordingly, Chohung Bank became a member
of the Shinhan Financial Group. See "-- Our Acquisition of Chohung Bank".

  CAPITAL INJECTION BY KOREA DEPOSIT INSURANCE CORPORATION AND THE MEMORANDA OF
  UNDERSTANDING

     As a condition to the financial assistance by Korea Deposit Insurance
Corporation as described above, Chohung Bank, the Financial Supervisory
Commission and Korea Deposit Insurance Corporation entered into several
memoranda of understanding and management improvement plans from 1999 through
2000, whereby Chohung Bank agreed to meet certain financial and operating
targets as well as be subject to quarterly audits by Korea Deposit Insurance
Corporation and the Financial Supervisory Commission. The latest memorandum of
understanding between Chohung Bank and Korea Deposit Insurance Corporation was
dated January 31, 2002 and supercedes the previous memoranda of understanding
and management improvement plans.

     This memorandum of understanding sets forth, among other requirements, six
financial targets determined on a Korean GAAP basis (minimum capital adequacy
ratio, minimum return on assets, maximum expenses to income ratio, minimum
operating income per employee, maximum non-performing loan ratio and maximum net
non-performing loan ratio) for each quarter in 2002 and 2003 consisting of the
following:
<Table>
<Caption>
                                                               REQUIREMENTS
                                  -----------------------------------------------------------------------
                                                           2002(1)                              2003(1)
                                  ---------------------------------------------------------   -----------
FINANCIAL TARGETS                  MARCH 31,    JUNE 30,     SEPTEMBER 30,    DECEMBER 31,     MARCH 31,
- -----------------                 -----------   ---------   ---------------   -------------   -----------
                                                 (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                               <C>           <C>         <C>               <C>             <C>
Capital adequacy ratio(2).......         10.0        10.0              10.0            10.0          10.3
Return on assets ("ROA")(3).....          0.5         0.5               0.8             1.0           1.0
Expenses to income ratio(4).....         45.0        45.0              45.0            45.0          45.0
Per employee operating
 income(5)......................         0.23        0.23              0.23            0.23          0.23
Non-performing loan ratio(6)....          5.0         5.0               4.5             4.0           3.9
Net non-performing loan
 ratio(7).......................          4.0         4.0               3.5             3.0           2.7

<Caption>
                                                 REQUIREMENTS
                                  -------------------------------------------
                                                    2003(1)
                                  -------------------------------------------
FINANCIAL TARGETS                 JUNE 30,     SEPTEMBER 30,    DECEMBER 31,
- -----------------                 ---------   ---------------   -------------
                                   (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                               <C>         <C>               <C>
Capital adequacy ratio(2).......       10.5              10.7            11.0
Return on assets ("ROA")(3).....        1.0               1.0             1.0
Expenses to income ratio(4).....       45.0              45.0            45.0
Per employee operating
 income(5)......................       0.23              0.23            0.23
Non-performing loan ratio(6)....        3.8               3.7             3.5
Net non-performing loan
 ratio(7).......................        2.4               2.0             1.5
</Table>

- ---------------

Notes:

(1) These targets are based on figures that are annualized on a daily basis.

(2) Represents a risk-adjusted minimum capital adequacy ratio derived
    principally from the standards established by the Bank for International
    Settlement. For details see "Supervision and Regulation -- Regulations
    Applicable to Banks -- Capital Adequacy".

(3) Represents total net income divided by daily-average balance of assets at
    the end of each period.

(4) Represents the general and administrative expenses divided by the sum of
    operating income, general and administrative expenses and depreciation and
    amortization.

(5) Represents per employee operating income before provision for possible loan
    losses.

(6) Represents the ratio of loans and other loan-like credits (as defined by the
    Financial Supervisory Commission) classified as substandard or below before
    allowance for loan losses to total of such loans and credits before
    allowance for loan losses.

(7) Represents loans and other loan-like credits (as defined by the Financial
    Supervisory Commission) classified as substandard or below after allowance
    for loan losses divided by total of such loans and credits after allowance
    for loan losses.

     If Chohung Bank fails to satisfy any of its obligations (including
financial and non-financial requirements) under the memorandum of understanding,
subject to certain exceptions for unavoidable reasons, Chohung Bank may be
subject to penalties, including the replacement of its senior management, sale
of its assets, restructuring of its organization, restrictions on its business,
including a suspension or transfer of its

                                        83
<PAGE>

business, and elimination or reduction of existing equity. Chohung Bank met all
of the requirements for 2002 except for the capital adequacy ratio requirement
and the minimum ROA requirement. Chohung Bank was unable to satisfy these
requirements primarily as a result of increased provisioning levels for the non-
performing retail loans, including credit cards account, and increased
provisioning for Hynix.

     The memorandum of understanding calls for a termination when Korea Deposit
Insurance Corporation is no longer the largest shareholder of Chohung Bank. The
memorandum of understanding further provides that if and when Korea Deposit
Insurance Corporation owns less than one-third of the total outstanding common
shares of Chohung Bank, the parties shall discuss the possibility of terminating
the memorandum of understanding even if Korea Deposit Insurance Corporation
remains the largest shareholder. As a result of the recent acquisition of
Chohung Bank by Shinhan Financial Group, Korea Deposit Insurance Corporation, by
written notice dated August 22, 2003, terminated the memorandum of
understanding.

CHOHUNG BANK'S BRANCH NETWORK AND DISTRIBUTION CHANNELS

     Through branches maintained at various levels of its subsidiaries, Chohung
Bank offers a variety of financial services to retail and corporate customers.
The following table presents the geographical distribution of Chohung Bank's
domestic branch network as of December 31, 2002.

<Table>
<Caption>
                                                              RETAIL   CORPORATE   TOTAL
                                                              ------   ---------   -----
<S>                                                           <C>      <C>         <C>
Seoul and metropolitan......................................   182        42        224(1)
Kyunggi Province............................................    63        15         78
Six major cities:
  Inchon....................................................    15         3         18
  Busan.....................................................    25         4         29
  Kwangju...................................................     9         2         11
  Taegu.....................................................    16         3         19
  Ulsan.....................................................     8         1          9
  Taejon....................................................    11         2         13
                                                               ---        --        ---
     Sub-total..............................................    84        15         99
                                                               ---        --        ---
Others......................................................   118        15        133
                                                               ---        --        ---
       Total................................................   447        87        534(1)
                                                               ===        ==        ===
</Table>

- ---------------

Note:

(1) Excludes one merchant banking branch and one private banking branch.

  DOMESTIC BRANCH NETWORK

     As of December 31, 2002, Chohung Bank had an extensive nation-wide branch
network with a total of 536 branches in Korea. With key branches located in high
traffic locations such as airports, hospitals and other public facilities,
Chohung Bank believes that it provides its customers with convenience and
efficiency that enables Chohung Bank to secure a significant source of stable
funding at competitive rates. To create a customer oriented branch network,
Chohung Bank spun off the corporate sections from 81 of its existing branches
and created separate corporate banking branches in August 2002.

  Retail Banking Branches

     In Korea, many retail transactions are conducted in cash or with credit
cards, and conventional checking accounts are generally not offered or used as
widely as in other countries. As a result, an extensive retail branch network
plays an important role for Korean banks as customers generally handle most
transactions through bank branches. Chohung Bank has an extensive nationwide
network of 447 retail branches covering

                                        84
<PAGE>

all regions of Korea, which also offers credit card-related services in addition
to conventional consumer lending.

     Chohung Bank has focused on and continues to focus on retail banking as
opposed to large corporate borrowers. To focus more on profitability, it has
developed and has been implementing what it refers to as "deepening customer
relationship branches" or DCR branches, which have separate layouts from
conventional branches and provides easier access and differentiated services to
high net-worth customers. As of December 31, 2002, Chohung Bank had 67 DCR
branches located primarily in strategic locations in major Korean cities.

  Corporate Banking Branches

     In August 2002, in order to service quality corporate customers, in
particular from the small- and medium-sized enterprises sector, Chohung Bank
spun off the corporate sections from 81 of its existing branches and created
separate corporate banking branches. These corporate banking branches operate
independently from the retail banking branches and form a separate corporate
banking branch network. Each corporate banking branch has its own general
manager and is dedicated solely for large corporate customers.

  Self-Service Terminals

     In order to improve customer service and customer convenience and to reduce
expenditures on operations and administrative costs, Chohung Bank offers a
variety of services through its non-branch customer interface system, which
includes an extensive network of automated banking machines, which are located
in branches and in unmanned outlets. These automated banking machines consist of
ATMs, cash dispensers and passbook printers. Chohung Bank had 1,496 ATMs, 2,801
cash dispensers and 525 passbook printers as of December 31, 2001, and 2,513
ATMs, 2,036 cash dispensers and 462 passbook printers as of December 31, 2002.
We estimate that, in 2002, automated banking transactions accounted for
approximately 54.5% of Chohung Bank's total deposit and withdrawal transactions.

     The following table sets forth information, for the periods indicated,
regarding the number of transactions and the fee revenue of Chohung Bank's ATMs.

<Table>
<Caption>
                                                              FOR THE YEAR ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
ATMs, cash dispensers and passbook printers.................    4,822      5,011
Number of transactions (millions)...........................      285        338
Fee revenue (billions of Won)...............................   W   30     W   41
</Table>

  Electronic Banking

     Chohung Bank launched its electronic banking services in May 1993, allowing
customers to transfer funds, make account inquiries and receive account
statements by telephone and facsimile. Chohung Bank provides a 24-hour phone
banking service which facilitates money transfers and account inquiries as well
as Chohung Bank's efforts to market its products and services through the phone.
The internet banking system, launched in July 1999, enables customers to
transfer funds more conveniently than under the existing phone banking system.
Chohung Bank is in the process of further developing its internet banking
services and plans to add more services in the near future, including services
targeted to corporate customers.

     E-banking functions primarily as a cost-saving method, rather than a
profit-generating platform, for Chohung Bank. Accordingly, substantially all of
electronic banking transactions do not generate fee income for Chohung Bank as
many transactions, such as balance inquiries, consultations with customer
representatives or transfers of money within Chohung Bank, are not charged fees.
This is especially the case for phone banking services where a majority of the
transactions are balance inquiries or consultations with customer
representatives. Firm banking services, which are electronic banking services
offered to corporate customers, have also contributed to reducing expenditures
on operations and administrative costs.

                                        85
<PAGE>

     The following table sets forth information, for the periods indicated, on
the number of users and transactions and the fee revenue of the above services
provided to Chohung Bank's retail and corporate customers.

<Table>
<Caption>
                                                                FOR THE YEAR ENDED
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2001         2002
                                                              ----------   ----------
<S>                                                           <C>          <C>
TELEPHONE BANKING:
  Number of users...........................................   2,144,000    2,485,000
  Number of transactions (in thousands).....................       8,178       11,388
INTERNET BANKING:
  Number of users...........................................   1,526,000    1,974,000
  Number of transactions (in thousands).....................       7,919       12,084
HOST BANKING(1):
  Number of users...........................................       2,243        3,684
  Number of transactions (in thousands).....................      14,947       16,137
Total fee revenue (millions of Won).........................  W   27,224   W   32,119
</Table>

- ---------------

Note:

(1) Service provided to corporate customers through a separate host server.

  OVERSEAS BRANCH NETWORK

     The table below sets forth Chohung Bank's overseas banking subsidiaries and
branches.

<Table>
<Caption>
BUSINESS UNIT                                         LOCATION         YEAR ESTABLISHED OR ACQUIRED
- -------------                                   --------------------   ----------------------------
<S>                                             <C>                    <C>
Subsidiaries
  Chohung Finance Ltd., Hong Kong.............  Hong Kong SAR, China               1982
  Chohung Bank (Deutschland) GmbH.............               Germany               1994
  CHB America Bank(1).........................                U.S.A.               2003
  Chohung Vina Bank...........................               Vietnam               2000
Branches
  London Branch...............................          London, U.K.               1979
  Tokyo Branch................................          Tokyo, Japan               1981
  Singapore Branch............................             Singapore               1990
  Tianjin Branch..............................        Tianjin, China               1994
  Mumbai Branch...............................         Mumbai, India               1996
  New York Branch.............................      New York, U.S.A.               1978
</Table>

- ---------------

Note:

(1) Created as a result of a merger between Chohung Bank of New York and
    California Chohung Bank in March 2003. CHB America Bank has offices in New
    York City, New York and Los Angeles, California.

     The principal activities of Chohung Bank's overseas branches and
subsidiaries are providing trade financing and local currency funding for Korean
companies and Korean nationals in the overseas market and providing foreign
exchange services in conjunction with its headquarters. On a limited basis,
Chohung Bank's overseas branches and subsidiaries also engage in the investment
and trading of securities of foreign issuers.

                                        86
<PAGE>

CHOHUNG BANK'S PRINCIPAL ACTIVITIES

     Chohung Bank's activities consist of deposit-taking activities from its
retail and corporate customers, which provide it with funding necessary to offer
a variety of commercial banking, merchant banking, capital markets and other
financial services.

     The comprehensive financial services that Chohung Bank provides are:

     - Retail banking;

     - Credit card services;

     - Corporate banking;

     - Merchant banking;

     - Treasury and international business; and

     - Other services, including trust account management services of Chohung
       Bank and investment trust management services of Chohung Investment Trust
       Management Co., Ltd.

  DEPOSIT-TAKING ACTIVITIES

     Chohung Bank offers many deposit products that target different customer
segments with features tailored to each segment's financial profile and other
characteristics. Chohung Bank's deposit products principally include the
following:

     - Demand deposits, which either do not accrue interest or accrue interest
       at a lower rate than time or savings deposits. Demand deposits allow the
       customer to deposit and withdraw funds at any time and, if they are
       interest bearing, accrue interest at a fixed or variable rate depending
       on the period and the amount of deposit. Retail and corporate demand
       deposits constituted approximately 13.3% of Chohung Bank's total deposits
       as of December 31, 2002 and paid average interest of 1.47% in 2002.

     - Time deposits, which generally require the customer to maintain a deposit
       for a fixed term during which the deposit accrues interest at a fixed
       rate or variable rate based on KOSPI. If the amount of the deposit is
       withdrawn prior to the end of the fixed term, the customer will be paid a
       lower interest rate than that originally offered. The term for time
       deposits typically ranges from one month to five years. Retail and
       corporate time deposits constituted approximately 48.4% of Chohung Bank's
       total deposits as of December 31, 2002 and paid average interest of 5.11%
       in 2002.

     - Mutual installment deposits, which generally require the customer to make
       periodic deposits of a fixed amount over a fixed term during which the
       deposit accrues interest at a fixed rate. If the amount of the deposit is
       withdrawn prior to the end of the fixed term, the customer will be paid a
       lower interest rate than that originally offered. The term for
       installment deposits typically ranges from six months to five years.
       Retail and corporate installment deposits constituted approximately 1.5%
       of Chohung Bank's total deposits as of December 31, 2002 and paid average
       interest of 6.58% in 2002.

     - Savings deposits, which allow the customer to deposit and withdraw funds
       at any time and accrue interest at an adjustable interest rate, which is
       lower than time or installment deposits. Currently, interest on savings
       deposits ranges from 0.15% to 3.25%. Retail and corporate savings
       deposits constituted approximately 27.5% of Chohung Bank's total deposits
       as of December 31, 2002 and paid average interest of 1.61% in 2002.

     - Marketable deposits, consisting of certificates of deposits, cover bills
       and bonds sold under repurchase agreements that have maturities ranging
       from 30 days to 365 days. Interest rates on marketable deposits are
       determined based on the length of the deposit and prevailing market
       interest rates. Certificate of deposits are sold on a discount to their
       face value, reflecting the interest payable on the certificate of
       deposit. Under U.S. GAAP, cover bills sold are reflected as short-term
       borrowings and bonds sold under repurchase agreements are reflected under
       secured borrowings.

                                        87
<PAGE>

     - Foreign currency deposits, which accrue interest at an adjustable rate
       and are available to Korean residents, nonresidents and overseas
       immigrants. Chohung Bank offer foreign currency demand and time deposits
       and checking and passbook accounts in 19 currencies. Deposits in foreign
       currency constituted approximately 3.35% of Chohung Bank's total deposits
       as of December 31, 2002 and paid average interest of 1.78% in 2002.

     Chohung Bank also offers deposits which provide the holder with
preferential rights under the Housing Construction Promotion Act to housing
subscriptions and eligibility for mortgage loans. These products include:

     - Housing subscription time deposits, which are special purpose time
       deposit accounts providing the holder with a preferential right to
       subscribe for new private apartment units under the Housing Construction
       Promotion Law. This law is the basic law setting forth various measures
       supporting the purchase of houses and the supply of such houses by
       construction companies. If a potential home-buyer subscribes for these
       deposit products and holds them for a certain period of time as set forth
       in the Housing Construction Promotion Law, such deposit customers obtain
       the right to subscribe for a new private apartment units on a priority
       basis under this law. Such preferential rights are neither transferable
       nor marketable in the open market. These products accrue interest at a
       fixed rate for one year, and at an adjustable rate after one year, which
       are consistent with other time deposits. Deposit amounts per account
       range from 2 million to 15 million depending on the size and location of
       the dwelling unit. These deposit products target high and middle income
       households.

     - Housing subscription installment savings deposits, which are monthly
       installment savings programs providing the holder with a preferential
       subscription right for new private apartment units under the Housing
       Construction Promotion Law. Such preferential rights are neither
       transferable nor marketable in the open market. These deposits require
       monthly installments of W50,000 to W500,000, have maturities between
       three and five years and accrue interest at fixed rates depending on the
       term, which are consistent with other installment savings deposits. These
       deposit products target low- and middle-income households.

     For information on Chohung Bank's deposits in Korean Won based on the
principal types of deposits offered, see "Item 4. Information on the
Company -- Description of Assets and Liabilities -- Funding -- Deposits".

     The following table sets forth the number of the deposit customers of
Chohung Bank by category as well as the number of domestic branches as of the
dates indicated.

<Table>
<Caption>
                                                                    AS OF
                                                                DECEMBER 31,
                                                              -----------------
                                                               2001      2002
                                                              -------   -------
                                                               (IN THOUSANDS,
                                                              EXCEPT BRANCHES)
<S>                                                           <C>       <C>
Retail deposit customers(1).................................   9,402     9,932
  High net worth retail deposit customers(2)................   2,846     2,913
Corporate deposit customers.................................     126       137
Domestic branches(3)........................................     447       536
</Table>

- ---------------

Notes:

(1) Based on the classification for the purpose of customer management, retail
    deposit customers include individual deposit customers, foreigners, sole
    proprietorships and certain small- and medium-sized enterprises deposit
    customers classified as retail customers depending on a number of factors,
    including those small- and medium-sized enterprises to whom a credit of less
    than W1 billion has been extended and who are sole proprietors.

(2) Represents customers whose aggregate of outstanding balances of all accounts
    as of December 31 of each year was W100,000 or more.

                                        88
<PAGE>

(3) The significant increase in the number of branches in 2002 was primarily due
    to Chohung Bank's reconfiguration of branches into retail and corporate
    branches. As a result, 81 new corporate branches were spun off from the
    previous branch network.

     We offer varying interest rates on our deposit products depending on the
rate of return on our interest earning assets, average funding costs and
interest rates offered by other nationwide commercial banks.

     Chohung Bank believes that it holds the largest amount of deposits made by
litigants in connection with legal proceedings in Korean courts or by persons
involved in disputes as of December 31, 2002. For example, in Korea, a debtor
may discharge his obligation by depositing the subject of performance with the
court for the creditor if a creditor refuses to accept payment of debt or is
unable to receive it, or if the debtor cannot be ascertained without any
negligence who is entitled to the payment. Also, in instances in which there has
been a preliminary attachment of real property, the property owner may deposit
in cash the amount being claimed by such preliminary attachment holder in escrow
with the court, in which case the court will remove such lien or attachment.
Chohung Bank has been performing such court deposit services since 1958, and has
developed an infrastructure of equipment, software and personnel for such
business. Such deposits in the past have carried interest rates, which were
generally lower than market rates (on average approximately 2% per annum). Such
deposits totaled W3,887 billion or 10.7% and W3,872 billion or 9.2% of total
deposits in Korean Won as of December 31, 2001 and December 31, 2002,
respectively.

     The Monetary Policy Committee of the Bank of Korea imposes a reserve
requirement on Won currency deposits of commercial banks which currently ranges
from 1% to 5%, based generally on the term to maturity and the type of deposit
instrument. See "Item 4. Information on the Company -- Supervision and
Regulation -- Regulations Applicable to Banks -- Liquidity". The Monetary Policy
Committee also regulates maximum interest rates that can be paid on certain
deposits. Under the Korean government's finance reform plan issued in May 1993,
controls on deposit interest rates have been gradually reduced. Currently, only
maximum interest rates payable on demand deposits are subject to regulation by
the Bank of Korea.

     The Depositor Protection Act provides for a deposit insurance system where
the Korea Deposit Insurance Corporation guarantees to depositors the repayment
of their eligible bank deposits. The deposit insurance system insures up to a
total of W50 million per depositor per bank. See "Item 4. Information on the
Company -- Supervision and Regulation -- Regulations Applicable to
Banks -- Deposit Insurance System".

 RETAIL BANKING SERVICES

     Through the Retail Banking Group, Chohung Bank provides financial products
and services to retail customers comprised of individuals, households and small
businesses which are mostly sole proprietorships. Such products and services
generally include consumer loans up to W1 billion.

     Retail banking services include mortgage, small business and consumer
lending as well as demand, savings and fixed deposit-taking, checking account
services, electronic banking and ATM services, bill paying services, payroll and
check-cashing services, currency exchange and wire fund transfer. Chohung Bank
believes that retail banking services and products will become increasingly
important in the coming years as the domestic and regional banking sectors
further develop and become more diverse. Retail banking has been and will
continue to remain one of Chohung Bank's core businesses.

     Chohung Bank leverages its customer information database to actively market
and cross-sell to, as well as focus more resources on, its most profitable
customers. In addition, Chohung Bank, through its newly-formed Product
Development Division expects to offer a wider variety of products differentiated
and targeted towards differentiated customer segments with a greater focus on
the high-margin, high-net worth individuals. As of December 31, 2002, Chohung
Bank had approximately 202,000 high net-worth customers who are customers with
over W100 million in deposits.

  Consumer Lending Activities

     Chohung Bank also offers many consumer loan products to retail customers
that are differentiated according to a variety of factors, including each
customer's profession, age group, loan purpose, collateral
                                        89
<PAGE>

requirements and the length of time a borrower has been a customer of Chohung
Bank. Consumer loans (other than credit cards) consist principally of the
following:

     - Mortgage and home equity loans, mostly comprised of loans to finance home
       purchases which are generally secured by the home being purchased.

     - Other consumer loans, which are loans made to customers for any purpose
       (other than mortgage and home equity loans) and the terms of which vary
       based primarily upon the characteristics of borrower and which are either
       unsecured or secured or guaranteed by deposits or a third party.

     For secured loans, including mortgage and home equity loans, Chohung Bank's
policy is to lend up to the estimated recovery value of the collateral, which
Chohung Bank calculates based on the value of collateral published by courts as
recovered through court-approved auctions and further adjusted to take into
account the existence of any lien or other security interest that is prior to
Chohung Bank's security interest. Due to the rapid increase in mortgage and home
equity loans in Korea, the Financial Supervisory Commission recently has
implemented certain regulations and guidelines that are designed to suppress the
increase of loans secured by housing. These regulations include restrictions on
banks' maximum loan-to-value ratios, guidelines with respect to appraisal of
collateral, internal control and credit approval policy requirements with regard
to housing loans as well as provisions designed to discourage commercial banks
from instituting incentive-based marketing and promotion of housing loans. As
Chohung Bank is focusing on credit quality, this will moderate volume growth in
this sector.

     The following table sets forth the portfolio of Chohung Bank's consumer
loans, excluding credit cards.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              --------------------
                                                                2001       2002
                                                              --------   ---------
                                                              (IN BILLIONS OF WON,
                                                              EXCEPT PERCENTAGES)
<S>                                                           <C>        <C>
Consumer loans(1)...........................................   W9,058     W15,406
  Mortgage and home-equity loans(2).........................    3,993       7,167
  Other consumer............................................    5,065       8,239
Percentage of consumer loans to total gross loans...........    25.54%      33.47%
</Table>

- ---------------

Notes:

(1) Before allowance for loan losses and excludes credit card accounts.

(2) Consumer loans related to housing including, among others, home equity loans
    and home mortgage loans.

     As of December 31, 2002, mortgage and home equity loans and other consumer
loans accounted for 46.5% and 53.5%, respectively, of Chohung Bank's consumer
loans (excluding credit cards).

     The interest rates on consumer loans are either a periodic floating rate
(which is based on a base rate determined for three-month, six-month or
twelve-month periods derived using Chohung Bank's internal transfer price
system, which reflects cost of funding in the market, further adjusted to
account for expenses related to lending and profit margin) or a fixed rate that
reflects the cost of funding, as well as expenses related to lending and profit
margin. Fixed rate loans are currently limited to maturities of three years and
offered only on a limited basis. For unsecured loans, both types of rates also
incorporate a margin based on, among other things, the borrower's credit score
as determined during the loan approval process. For secured loans, credit limit
is based on the type of collateral, priority with respect to the collateral and
loan to value. We can adjust the price to reflect the borrower's current and/or
expected future contribution to Chohung Bank's profitability. The applicable
interest rate is determined at the time a loan is extended. If a loan is
terminated prior to its maturity, the borrower is obligated to pay Chohung Bank
an early termination fee of approximately 0.5% to 1.5% of the loan amount in
addition to the accrued interest, depending on the nature and liquidity of the
amount.

                                        90
<PAGE>

     The current three-month, six-month and twelve-month base rates of Chohung
Bank are approximately 6.75%, 7.00% and 7.00%, respectively. Chohung Bank's
current fixed-rates for loans with a maturity of one year, two years and three
years were 7.38%, 7.56% and 7.79%, respectively.

     As of December 31, 2002, approximately 90.5% of Chohung Bank's consumer
loans were priced based on a floating rate and approximately 9.5% were priced
based on a fixed rate. As of the same date, approximately 87.5% of Chohung
Bank's consumer loans with maturity of over one year were priced based on a
floating rate and approximately 12.5% were priced based on a fixed rate.

 CREDIT CARD SERVICES

     Chohung Bank currently has an active credit card business primarily through
the BC Card Co., Ltd. ("BC Card"). BC Card is owned by 11 consortium banks.
Chohung Bank currently holds 14.85% equity interest in BC Card. BC Card issues
credit cards under the names of the member banks, substantially all of which are
licensed to use MasterCard, Visa or JCB. This allows holders of BC Card to use
their cards at any establishment which accepts MasterCard, Visa or JCB, as the
case may be. On January 4, 2002, Chohung Bank released its own credit card,
"Forever," and the number of cardholders of "Forever" has reached approximately
315,000 members as of December 31, 2002.

     The use of credit cards in Korea has increased dramatically in recent years
as the Korean economy and consumer spending recovered from the financial and
economic difficulties of the late 1990's and also as a result of government
initiatives designed to promote the use of credit cards, such as providing tax
benefits to businesses that accept credit cards and tax deductions for consumers
up to certain amounts charged to credit cards. However, as credit card
delinquencies in Korea have begun to increase since mid-2002, concerns have been
raised regarding the rapid growth in credit card usage and significant
deterioration in asset quality of the Korean credit card industry. Throughout
2002 and during the first half of 2003, the Financial Supervisory Commission
strengthened regulations designed to address these concerns relating to the
credit card industry. See "Item. 3: Key Information -- Risk Factors -- Risks
relating to our banking business -- Government regulation of our consumer and
credit card operations has increased significantly which may materially and
adversely affect our credit card and consumer operations," and "-- Supervision
and Regulation".

  Products and Services

     Cardholders have several options for repayment of balances as follows:

     - general purchases of goods and services on credit, which are repayable on
       a lump-sum basis at the end of a monthly billing cycle;

     - installment purchases, which require payment approximately within 22 to
       54 days after purchase and are repayable on an even-payment installment
       basis over a period of time ranging from two months to three years and
       generally accrue interest at effective annual rates of 11.0% to 19.0%;

     - cash advances, which are repayable on a lump-sum basis at the end of a
       monthly billing cycle and generally accrue interest at effective annual
       rates of 20.9% to 27.0%; and

     - payments on a revolving payment basis, introduced in May 2000, which
       allow customers to roll over their balance into a revolving basis with
       fixed minimum percentage or amount of the total outstanding balance
       (including in respect of cash advances) at the end of a monthly billing
       cycle being made over a period of time depending on the balance and
       generally accrue fees at effective interest rates of 18.5% to 24.5%.

     Cardholders are also eligible to apply for credit card loans from Chohung
Bank, up to a maximum principal amount of W20 million. Credit card loans, which
are fully underwritten by Chohung Bank, are unsecured, have initial maturities
of one year and currently accrue interest at the effective annual rates of
approximately 12.5% to 15.0%.

     Income from Chohung Bank's credit card operations consists principally of
cash advance fees, merchant fees paid by retail and service establishments,
installment purchase fees, revolving credit fees, annual fees
                                        91
<PAGE>

paid by cardholders, interest on credit card loans and fees on late and deferred
payments. Transaction and other merchant fees are on average, approximately 2.6%
of the purchased amount as of December 31, 2002.

     Although the revolving credit system is more common in the United States
and many other countries, this payment system is still in its early stages of
development in Korea. The balance of credit card billings using the revolving
credit basis for payment was only 14.12% of the total outstanding balance as of
December 31, 2002 although Chohung Bank believes that this system will grow in
the future. Credit card holders in Korea are generally required to pay for their
purchases within approximately 20 to 50 days of purchase depending on their
payment cycle and, except in the case of installment purchases where the charged
amounts are repaid in installments, typically during the following three to six
months. Credit card accounts that remain unpaid after this period are deemed to
be delinquent accounts. Chohung Bank charges penalty interest on delinquent
accounts and closely monitors such accounts. For installment purchases, Chohung
Bank charges interest on unpaid installments at rates which vary according to
the terms of repayment.

     In certain cases, banks and credit card companies in Korea, including
Chohung Bank, have been allowed to rewrite delinquent credit card balances for
purchase and cash advance as credit card loans. Chohung Bank rewrites a small
number of card balances as a means of maximizing collection from a relatively
small number of borrowers who are suffering from temporary financial
difficulties where Chohung Bank believes it is probable that all or
substantially all principal and interest will ultimately be recovered. Credit
card customers may apply for entry into the rewritten loan program when the loan
balance is past due one month. Except in limited circumstances, borrowers
applying for entry into this program in general are required to secure one or
more guarantors meeting certain asset and credit quality criteria. If approved,
Chohung Bank rewrites card balances including past due interest into card loans
and amends the maturity and the repayment terms accordingly. In general,
rewritten credit card loans are due at the end of one year. Chohung Bank
segregates this portfolio for performance measurement and monitoring purposes
due to the higher credit risk. The balance of rewritten loans was W160 billion
and W529 billion as of December 31, 2001 and 2002, respectively, against which
Chohung Bank made an allowance of W5 billion and W107 billion, respectively.

  Customers and Merchants

     As internal growth through cross-selling can only be limited, Chohung Bank
also seeks to enhance its market position by selectively targeting new customers
with high net worth and good credit standing through the use of a sophisticated
and market-oriented risk management system. Credit card applicants are screened
and appropriate credit limits are assessed according to internal guidelines
based on Chohung Bank's credit scoring system.

     The following table sets forth the number of customers and merchants of
Chohung Bank's credit card business as of the dates indicated.

<Table>
<Caption>
                                                              AS OF DECEMBER 31,
                                                              -------------------
                                                               2001        2002
                                                              -------     -------
                                                                (IN THOUSANDS,
                                                              EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Number of credit card holders...............................   4,121       4,266
Personal accounts...........................................   4,072       4,196
Corporate accounts..........................................      49          70
Active ratio(1).............................................    60.2%       58.1%
Number of merchants(2)......................................     248         285
</Table>

- ---------------

Notes:

(1) Represents the ratio of accounts used at least once within the last six
    months to total accounts as of year end.

                                        92
<PAGE>

(2) Represents the number of merchants of BC Card's merchant network.

     As of December 31, 2002, Chohung Bank had a total of approximately
4,266,000 credit card customers, which represents an increase of approximately
1,256,000 customers from approximately 3,010,000 as of December 31, 2000. Of the
total customers outstanding as of December 31, 2002, the number of platinum and
gold card members, whose higher credit standing entitles them to certain
benefits, was approximately 692,000 as of December 31, 2002.

     Chohung Bank has developed an independent card processing system that will
allow Chohung Bank to process future billings for the existing BC Cards on its
own, demonstrating Chohung Bank's focus on cutting costs. Chohung Bank believes
that a potential merger of Chohung Bank's credit card business with Shinhan Card
may offer new opportunities for cost savings. Chohung Bank also participates in
a nationwide debit card program with 30 other banks. In connection with this
business, Chohung Bank currently charges service establishments commissions of
up to 1.5% on amounts purchased using the debit card.

  Financial and Statistical Information

     The following table sets forth certain financial and statistical
information relating to our credit card operations as of the dates or for the
period indicated.

<Table>
<Caption>
                                                              AS OF OR FOR THE YEAR
                                                               ENDED DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Interest income:
  Installments..............................................   W   103     W   166
  Cash advances.............................................       512         492
  Card loans(1).............................................        21          54
  Annual membership.........................................        12          11
  Revolving(2)..............................................        20         111
  Late payments.............................................         5           6
                                                               -------     -------
     Total..................................................   W   673     W   840
                                                               =======     =======
Credit card fees:
  Merchant fees(3)..........................................   W   206     W   250
  Other fees................................................         5           7
                                                               -------     -------
     Total..................................................   W   211     W   257
                                                               =======     =======
Charge volume:(4)
  General purchases.........................................   W 4,330     W 5,341
  Installment purchases.....................................     3,179       4,341
  Cash advances.............................................    19,404      20,224
                                                               -------     -------
     Total..................................................   W26,913     W29,906
                                                               =======     =======
Outstanding balance (at year-end):(5)
  General purchases.........................................   W   454     W   500
  Installment purchases.....................................     1,482       1,532
  Cash advances.............................................     2,300       2,124
  Revolving purchases.......................................       319         815
  Card loans................................................       272         660
  Others....................................................        42         139
                                                               -------     -------
     Total..................................................   W 4,869     W 5,770
                                                               =======     =======
</Table>

                                        93
<PAGE>

<Table>
<Caption>
                                                              AS OF OR FOR THE YEAR
                                                               ENDED DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Average balance.............................................   W 3,965     W 5,845
Delinquent balances:(6)
  From 1 day to 1 month.....................................       610         827
  Over 1 month:
     From 1 month to 3 months...............................       125         314
     From 3 months to 6 months..............................        77         273
     Over 6 months..........................................        --          --
                                                               -------     -------
       Sub-total............................................       202         587
                                                               -------     -------
          Total.............................................   W   812     W 1,414
                                                               =======     =======
Delinquency ratios:(7)
  From 1 day to 1 month.....................................     12.53%      14.33%
  Over 1 month:
     From 1 month to 3 months...............................      2.57        5.44
     From 3 months to 6 months..............................      1.58        4.73
     Over 6 months(8).......................................        --          --
                                                               -------     -------
       Sub-total............................................      4.15       10.17
                                                               -------     -------
          Total.............................................     16.68%      24.50%
                                                               =======     =======
Rewritten loans(9)..........................................   W   160     W   529
Gross charge-offs...........................................       179         493
Recoveries..................................................        42          28
                                                               -------     -------
  Net charge-offs...........................................   W   137     W   465
                                                               =======     =======
Gross charge-off ratio(10)..................................      4.51%       8.43%
Net charge-off ratio(11)....................................      3.46%       7.96%
</Table>

- ---------------

Notes:

(1) Card loans consist of loans that are provided on either a secured or
    unsecured basis to cardholders upon prior agreement. Payment of principal,
    fees and interest on such a loan can be due either in one payment or in
    installments after a fixed period.

(2) Revolving purchases were introduced in March 25, 2000 for certain
    creditworthy credit card customers (e.g., customers who have not been
    delinquent for more than three times in the past one year).

(3) Merchant discount fees consist of merchant membership and maintenance fees,
    charges associated with prepayment by Chohung Bank (on behalf of customers)
    of sales proceeds to merchants and processing fees relating to sales and
    membership applications.

(4) Represents the aggregate cumulative amount charged during the year.

(5) Represents amounts before allowance for loan losses.

(6) Includes the unbilled balances of installment purchases.

(7) Represents the ratio of delinquent balances to outstanding balances for the
    year.

(8) Chohung Bank's charge-off policy is to charge off all credit card balances
    which are 180 days past due.

(9) Represents delinquent credit card balances for purchase and cash advance
    which have been rewritten as credit card loans, thereby reducing the balance
    of delinquent accounts.

                                        94
<PAGE>

(10) Represents the ratio of gross charge-offs for the year to average balance
     for the year.

(11) Represents the ratio of net charge-offs for the year to average balance for
     the year.

  Supervisory Statistical Information prepared in accordance with Korean GAAP

     Due to the rapid increase in consumer debt in Korea in recent years, the
Korean government has adopted a series of regulations designed to restrain the
rate of growth in, and delinquencies of, cash advances, credit card loans and
credit card usage generally and to strengthen the reporting of, and compliance
with, credit quality indices. The Financial Supervisory Commission and the
Financial Supervisory Service have announced a number of changes to the rules
governing the reporting of credit card balances, as well as the procedures
governing which persons may receive credit cards. These computations are all
based on financial information prepared in accordance with Korean GAAP, which
differs significantly from U.S. GAAP. As of December 31, 2001 and 2002, under
Korean GAAP, as required by regulatory guidelines, Chohung Bank's delinquent
credit card balances (defined as credit card accounts delinquent for over 30
days) were W267 billion and W715 billion, respectively, representing delinquency
ratios (defined as the ratio of delinquent balances to outstanding balances) of
5.4% and 12.1%. In certain cases, credit card companies in Korea have been
allowed to rewrite delinquent credit card balances for purchase and cash advance
as credit card loans, thereby reducing the balance of delinquent accounts.
Delinquent credit card balances that were rewritten as loans as of December 31,
2001 and 2002, under Korean GAAP, were W161 billion and W539 billion,
respectively. Net charge-offs, under Korean GAAP, during 2001 and 2002 were W92
billion and W402 billion, respectively, representing net charge-off ratios
(defined as the ratio of net charge-offs for the year to average balance for the
year) of 2.3% and 6.8%.

 CORPORATE BANKING SERVICES

     Through the Corporate Banking Group, Chohung Bank provides financial
products and services to large corporations, including corporations that are
affiliated with chaebols, small- and medium-sized enterprises and local
governments and government-controlled companies. Such products and services
include deposit products, corporate loans, overdraft facilities, bill and
receivables discounting, trade related financing, payment remittances, foreign
exchange transactions and issuances of letters of credit and guarantees.

  Corporate lending Activities

     Products and services offered by the Corporate Banking Group include
corporate loans, overdraft facilities, bill and receivables discounting, trade
related financing, payment remittances, foreign exchange transactions and
issuances of letters of credit and guarantees.

     Corporate loans provided by Chohung Bank consist principally of working
capital loans which are, in general, loans used for general working capital
purposes with a maturity of one year or less, facilities loans which are, in
general, loans to finance the purchase of facilities and equipment with a
maturity of three years or more, and small business loans, classified as
business loans in Chohung Bank's financial statements, which are loans over W1
billion extended to sole-proprietorships which are generally secured or
guaranteed.

     Corporate loans may be unsecured or secured by real estate, deposits or
guaranty certificates. Among the secured loans, approximately 26.7% were secured
by real estate.

     As of December 31, 2002, in terms of outstanding loan balance, 44.6% of our
corporate loans were extended to borrowers in the manufacturing industry, 17.2%
were to borrowers in the retail and wholesale industry, 8.3% were to the
borrowers in the real estate, leasing and service industry, 6.8% were to
borrowers in the construction industry, 1.4% were extended to borrowers in the
finance and insurance industry, 2.8% were to borrowers in the hotel and leisure
industry and 10.5% to borrowers in the transportation, storage and communication
industry.

     When evaluating the extension of loans to corporate customers, Chohung Bank
reviews the corporate customer's creditworthiness, credit scoring, value of any
collateral or third party guarantee. The value of any collateral is defined
using a formula that takes into account the appraised value of the property, any
prior

                                        95
<PAGE>

liens or other claims against the property and an adjustment factor based on a
number of considerations including, with respect to property, the value of any
nearby property sold in a court-supervised auction during the previous three
years. Chohung Bank revalues any collateral when a secured loan is renewed or if
a triggering event occurs with respect to the loan in question.

  Pricing

     Chohung Bank establishes the price for its corporate loan products using
its credit management system based principally on the cost of funding and the
expected loss rate based on a borrower's credit risk. Chohung Bank generally
determines pricing of our loans as follows:

     Interest rate = Funds transfer pricing plus operating cost (or transaction
                     cost) plus or minus a discretionary adjustment rate plus a
                     credit spread plus a periodic spread plus risk premium plus
                     estimated margin.

     Fund transfer pricing represents inter-segment lending rates published by
the Treasury & International Business Group and varies depending on the type of
loans.

     Transaction cost is added to reflect the standardized transaction cost
assigned to each loan product and other miscellaneous indirect costs, including
contributions to the Credit Guarantee Fund and education taxes.

     A discretionary adjustment rate is added or subtracted to reflect the
borrower's current and/or future contribution to Chohung Bank's profitability.
In the event of additional credit provided by way of a guarantee of another, the
adjustment rate is subtracted to reflect such change in the credit spread. In
addition, depending on the price and other terms set by competing banks for
similar borrowers, Chohung Bank may reduce the interest rate we charge to
compete more effectively with other banks.

     The credit spread is added to reflect the expected loss from the value of
any collateral or payment guarantee.

     The periodic spread is added to reflect the expected loss from the length
of the maturity.

     The risk premium is added, which is measured by the unexpected loss that
exceeds the expected loss from the credit rating assigned to a particular
borrower.

     Estimated margin is added to reflect targeted profitability based on
expected losses.

     As of December 31, 2002, 11.0% of Chohung Bank's corporate loans with
outstanding maturities of one year or more had interest rates that were not
fixed but were variable in reference to Chohung Bank's market rate.

 MERCHANT BANKING

     Chohung Bank is one of only two banks in Korea, along with Korea Exchange
Bank, which currently provides merchant banking services. Chohung Bank
established its merchant banking business through its merger with Kangwon Bank
in 1999. Prior to merging with Chohung Bank, Kangwon Bank merged with Hyundai
Merchant Bank in February 1999 and acquired its merchant banking operations.

     Chohung Bank presently provides merchant banking services through the
Merchant Banking Group, which offers following services:

     - short-term financing for both deposit and lending sides, including cash
       management accounts, factoring financing and bill discounting;

     - investment banking and mergers and acquisitions advice services focused
       on niche markets where Chohung Bank has competitive strength such as
       asset-backed securities offerings and project financing; and

     - venture capital business to provide capital as well as necessary
       management support for high-tech start-up companies.

                                        96
<PAGE>

 TREASURY AND INTERNATIONAL BUSINESS

     Through the Treasury & International Business Group, Chohung Bank conducts
treasury and international business.

  Treasury

     Chohung Bank's Treasury & International Business Group provides funds to
all business operations and ensures the liquidity of its banking operation. To
secure long-term stable funds, Chohung Bank uses fixed and floating rate notes
payable and debentures and other advanced funding methods. As for overseas
funding, the department constantly explores the feasibility of raising funds in
currencies other than the U.S. Dollar, such as Japanese Yen and the Euro. In
addition, Chohung Bank makes call loans and borrows call money in the short-term
money market. Call loans are short-term lending among banks and financial
institutions in either Korean Won or foreign currencies, in amounts exceeding
W100 million, with maturities of 30 days or less. Typically, call loans have
maturities of one day.

  Securities Investment and Trading

     Chohung Bank's Treasury & International Business Group is also involved in
equity and fixed income securities investment and trading. Due to the recent
market volatility, Chohung Bank has been focusing on reducing risks in its
securities investment portfolio. Chohung Bank's debt securities portfolio
consists primarily of Government-related bonds, finance debentures consisting
primarily of those issued by the Bank of Korea and corporate bonds. Chohung Bank
has limited its investment in equity securities and discontinued its trading in
equity securities in 2000 to contain its exposure to market risk. As of December
31, 2002, Chohung Bank has approximately W294 billion remaining in equity
securities investments. See "-- Description of Assets and
Liabilities -- Investment Portfolio."

  International Business

     Chohung Bank's Treasury & International Business Group is also involved in
treasury and trading and securities investment in international capital markets,
principally engaged in foreign currency denominated securities trading, foreign
exchange trading and services, trade-related financial services, international
factoring services and foreign retail banking operations through Chohung Bank's
overseas branches and subsidiaries. Due to the volatility in recent years in
Asian capital markets, Chohung Bank has reduced its international capital
markets activities and its international securities investment portfolio.

  Derivatives Trading

     Chohung Bank provides and trades a range of derivatives products. The
derivatives products that we offer include:

     - Interest rate swaps and futures relating to Korean Won interest rate
       risks and LIBOR risks, respectively;

     - Cross currency swaps largely for Korean Won against U.S. Dollars,
       Japanese Yen and the Euro;

     - Foreign currency forwards and swaps;

     - Credit derivatives; and

     - KOSPI 200 indexed equity options.

     Chohung Bank's trading volume in terms of notional amount was W28,746
billion and W33,396 billion in 2001 and 2002, respectively. Chohung Bank's
derivative operations focuses on addressing the needs of its corporate clients
to hedge their risk exposure and back-to-back derivatives entered into to hedge
its risk exposure that results from such client contracts.

     Chohung Bank also engages in derivative trading activities to hedge the
interest rate and foreign currency risk exposure that arise from its own assets
and liabilities. Chohung Bank did not apply for hedge accounting
                                        97
<PAGE>

under U.S. GAAP and, accordingly, these derivatives are accounted for as trading
derivatives in the financial statements. In addition, within their own
established trading position limits, Chohung Bank engages in proprietary trading
of derivatives. See "-- Description of Assets and Liabilities -- Derivatives".

 OTHER SERVICES

     Other services include trust account management services offered by Chohung
Bank and investment trust management services offered by Chohung Investment
Trust Management Co., Ltd., Chohung Bank's majority-owned subsidiary. Both of
these services involve the management of customers' assets.

 Trust Account Management Services

  -- Overview

     Chohung Bank's trust account management services offer trust funds
consisting primarily of money trusts. In Korea, a money trust is a discretionary
trust over which (except in the case of a specified money trust) Chohung Bank
has investment discretion (subject to applicable law) and is commingled and
managed jointly for each type of trust account. The specified money trusts are
established on behalf of customers which give Chohung Bank specific directions
as to the investment of trust assets. Trust account customers are typically
individuals seeking higher rates of return than those offered by bank account
deposits. Because there are fewer regulatory restrictions on trust accounts than
on bank account deposits, including no deposit reserve requirements, Chohung
Bank has historically been able to offer higher rates of return on trust account
products than on bank account deposits. Trust account products, however,
generally require higher minimum deposit amounts and longer deposit periods
compared with comparable bank account deposit products. Assets of the trust
accounts are invested primarily in securities and loans, except that a greater
percentage of the assets of the trust accounts are invested in securities
compared to the bank accounts because trust accounts generally require more
liquid assets due to their limited funding source compared to bank accounts. As
a result of the recent low interest rate environment, Chohung Bank has been
offering less attractive rates of return on its trust account products.

     Under Korean law, assets accepted in trust accounts are segregated from
other assets of the trustee bank and are not available to satisfy the claims of
the depositors or other creditors of such bank. Accordingly, trust accounts are
accounted for and reported separately from the bank accounts of Chohung Bank.
See "-- Supervision and Regulation". Trust accounts are regulated by the Trust
Act and Trust Business Act of Korea and most nationwide commercial banks offer
similar trust account products. Chohung Bank earns income from trust account
management services, which is reflected in its accounts as net trust management
fees. See "Item 5. Operating and Financial Review and Prospects -- Chohung
Bank".

     Under U.S. GAAP, Chohung Bank has not consolidated trust accounts in its
financial statements or recognized the acquisition of such accounts in
accordance with the purchase method of accounting due to the fact that these are
not Chohung Bank's assets but customers' assets.

     As of December 31, 2001 and 2002, under Korean GAAP, Chohung Bank had total
trust assets of W5,667 billion and W5,533 billion, respectively, comprised
principally of securities investments of W4,700 billion and W4,724 billion,
respectively, and loans in the principal amount of W278 billion and W170
billion, respectively. Securities investments consisted of corporate bonds,
government-related bonds and other securities, primarily commercial papers. As
of December 31, 2001 and 2002, under Korean GAAP, equity securities constituted
6.4% and 9.1%, respectively, of our total trust assets. Loans made by trust
accounts are similar in type to those made by our bank accounts, except that
they are made only in Korean Won. As of December 31, 2001 and 2002, under Korean
GAAP, approximately 53.0% and 40.3%, respectively, of the amount of loans from
the trust accounts were collateralized or guaranteed. In making investment from
funds received for each trust account, each trust product maintains investment
guidelines applicable to each such product which sets forth, among other things,
issuer, industry and security type limitations.

                                        98
<PAGE>

     The balance of the money trusts managed by Chohung Bank was W5,155 billion
as of December 31, 2002 under Korean GAAP, showing a decrease of 4.3% compared
to W5,384 billion as of December 31, 2001.

  -- Trust Products

     Chohung Bank offers to individuals primarily two basic types of money trust
accounts: guaranteed fixed rate trusts and variable rate trusts.

     - Guaranteed Fixed Rate Trust Accounts.  Guaranteed fixed rate trust
       accounts offer customers a fixed-rate of return and guaranteed principal.
       Chohung Bank receives any amounts remaining after taking into account the
       guaranteed return and all expenses of the trust accounts, including
       provisions for valuation losses on equity securities, loan losses and
       special reserves calculated under Korean GAAP. Chohung Bank maintains two
       types of guaranteed fixed rate trust accounts: general unspecified money
       trusts and development trusts. Korean banks, including Chohung Bank, are
       restricted from establishing new general unspecified money trusts since
       January 1, 1996, and development trusts effective January 1, 1999. As a
       result, the size of general unspecified money trusts and development
       trusts have decreased substantially and most of development trusts
       matured by the end of 2001 and most of general unspecified money trusts
       will mature by the end of 2018. As of December 31, 2001 and December 31,
       2002, under Korean GAAP, development trusts had no outstanding balance
       and general unspecified money trusts amounted to an aggregate of W8
       billion and W9 billion, respectively. See Note 31 of Chohung Bank's
       consolidated financial statements as of and for the years ended December
       31, 2001 and 2002 included in "Item 8. Financial Information".

     - Variable Rate Trust Accounts.  Variable rate trust accounts are trust
       accounts for which Chohung Bank does not guarantee the return on the
       trust account but, in certain instances described below, the principal of
       the trust account is guaranteed. In respect of variable rate trust
       accounts, Chohung Bank is entitled to receive fixed fees. However, the
       recent trend has been to offer products with stated maturities that are
       significantly shorter than those offered in the past.

     Chohung Bank is required, under Korean GAAP, to set aside allowances for
trust assets which are not marked to market and provide special reserves for
principal guaranteed variable rate trust accounts in addition to guaranteed
fixed rate trust accounts. Provisions for variable rate trust assets that are
not marked to market are reflected in the rate of return to customers, and thus,
have no impact on Chohung Bank's income while provisions for guaranteed fixed
rate trust accounts could reduce Chohung Bank's income in case of a deficiency
in the payment of the guaranteed amount. Chohung Bank provides its special
reserves with respect to guaranteed fixed rate and principal-guaranteed variable
rate trust account credits by deducting the required amounts from trust fees for
such trust accounts in accordance with the Trust Act and Trust Business Act of
Korea.

     Korean banks are currently allowed to guarantee the principal of the
following types of variable rate trust account products: (i) pension trusts for
the elderly, (ii) individual pension trusts, and (iii) retirement trusts.

     Payments from Bank Accounts to Guaranteed Fixed Rate Trust Accounts.  If
income from a guaranteed fixed rate trust account is insufficient to pay the
guaranteed amount, such deficiency must be satisfied from (i) first, special
reserves maintained in such trust accounts, (ii) secondly, trust fees and (iii)
lastly, funds transferred from Chohung Bank's bank accounts. In connection with
Chohung Bank's obligations to the guaranteed fixed rate trust accounts, Chohung
Bank recorded an obligation of W21 billion and W58 billion as of December 31,
2001 and 2002, respectively, which will be paid out of Chohung Bank's bank
accounts at the trust accounts' maturities. Such increase in Chohung Bank's
obligation to the guaranteed fixed rate trust accounts in 2002 resulted from the
losses on sale by the trust accounts of loans extended to Hanbo Steel.

                                        99
<PAGE>

 -- Distribution Channels and Marketing

     Chohung Bank distributes its trust products primarily through its
nation-wide branch network.

 Investment Trust Management Services

     In addition to personalized asset management services provided by Chohung
Bank's private banking services, Chohung Bank also provides the customers with
investment trust services through Chohung Investment Trust Management Co., Ltd.
This business offers institutional, high net worth and retail clients a broad
range of investment alternatives based on an integrated asset management system.
Products and services offered include beneficiary certificates.

     The investment trust industry in Korea showed a sluggish trend in 2002 due
primarily to falling interest rates and poor stock performance. As of December
31, 2002, total assets under fee-based management by Chohung Investment Trust
Management Co., Ltd. were W68 billion.

     Since the financial crisis of the late 1990's, Chohung Bank has been
rebuilding its client base by writing off assets with poor credit quality,
principally those related to large corporations. As a result of these efforts,
Chohung Bank believes that its investment trust business is well positioned to
develop and market sophisticated products and services.

INFORMATION TECHNOLOGY

     Chohung Bank has made, and intends to continue to make, significant
investments in technology and information systems in order to improve its
operations management and customer service. Chohung Bank's information
technology department is divided into three groups, Information Technology
Planning Department, Information Technology Development Department and
Information Technology Operations Department, whose functions include systems
planning, equipment procurement, systems development, systems operation, systems
management, electric facility operations and communications operation. As of
December 31, 2001 and December 31, 2002, Chohung Bank's information technology
department had a total of 336 employees and 335 employees, respectively. Chohung
Bank's total expenses relating to information technology systems were W83
billion and W115 billion in 2001 and 2002, respectively, representing a 38.9%
increase in 2002. In addition, Chohung Bank spent approximately W27 billion and
W31 billion in 2001 and 2002, respectively on operational expenses related to
information technology. Chohung Bank expects to make continued investments in
information technology to support the increased volume of banking transactions
as well as new business initiatives such as private banking and Customer
Relationship Management System. Chohung Bank currently expects to spend
approximately W196 billion in capital expenditures related to information
technology in 2003.

     Chohung Bank has implemented a banking information system which consists of
a core banking system to provide support to customers and branches, an executive
information system and a new financial system for management information, and a
bank-wide marketing data warehouse. Chohung Bank also completed an internal
electronic communications and information system connecting its head office and
all of its overseas branches and subsidiaries.

     Since January 1998, Chohung Bank has operated three transaction processing
systems with a duplicative data storage to back-up system failure. In order to
provide seamless and uninterrupted services to its customers, Chohung Bank has
established a completely duplicative back-up IT system for its core banking
activities in Chungju, Korea to provide a back-up system in the event of any
system failure of the IT system located at Chohung Bank's headquarters in Seoul.
Chohung Bank believes that in the event of a complete disruption of the
information technology system in its headquarters, its entire information
technology systems will be fully operational within three hours.

SUBSIDIARIES

     As of June 30, 2003, Chohung Bank had one consolidated subsidiary in Korea
and three consolidated subsidiaries outside of Korea.
                                       100
<PAGE>

     Chohung Investment Trust Management Co., Ltd. was established in 1988 and
engages in investment management services. In 1997, the company changed its name
from Chohung Investment Management Co., Ltd. to Chohung Investment Trust
Management Co., Ltd. As of December 31, 2002, its capital stock amounted to W45
billion of which Chohung Bank owns 79.77%.

     Chohung Finance Ltd., Hong Kong is a subsidiary of Chohung Bank engaged in
various merchant banking activities in Hong Kong. As of December 31, 2002, its
capital stock amounted to W11.3 billion, of which Chohung Bank owns 99.99%.

     CHB America Bank is a wholly-owned subsidiary of Chohung Bank created
through a merger of Chohung Bank of New York and California Chohung Bank in
March 2003. It offers full banking services to Korean residents in New York and
in California. As of March 31, 2003, CHB America Bank's capital stock amounted
to W11 billion.

     Chohung Bank (Deutschland) GmbH was established in 1994 as a wholly-owned
subsidiary of Chohung Bank. As of December 31, 2002, its capital stock amounted
to W15.5 billion.

COMPETITION

     Chohung Bank competes principally with other nationwide commercial banks in
Korea, but also faces competition from a number of other financial institutions
including regional banks, Korea's specialized banks and branches of foreign
banks operating in Korea, as well as various other types of financial service
institutions, including savings institutions (such as mutual savings and finance
companies and credit unions and credit cooperatives), investment institutions
(such as securities brokerage firms, merchant banking corporations and
investment trust companies) and life insurance companies. Regulatory reforms in
the Korean banking industry have increased competition among banks for deposits,
generally leading to lower margins from lending activities. Prior to the
beginning of the economic crisis in Korea in late 1997, there were 26 commercial
banks, three development banks and four specialized banks. Due in part to the
economic crisis, as of December 31, 1999, there were 17 commercial banks, two
development banks and four specialized banks. Of these, three commercial banks,
including Chohung Bank, were recapitalized by the Government. During 1999, four
mergers were consummated and, in the first half of 2000, Korea First Bank sold
its controlling interest to a foreign investor. In 2001, Kookmin Bank and H&CB
merged to create the largest Korean bank in terms of assets. Also in 2001, Woori
Bank restructured itself as a financial holding company and significantly
realigned its businesses and products to compete with other larger banks in
Korea. In December 2002, Hana Bank merged with Seoulbank. As of December 31,
2002, Chohung Bank ranked fourth largest in terms of total assets among Korean
commercial banks based on information published by the Financial Supervisory
Commission. Chohung Bank believes that the banking industry in Korea will
continue to experience consolidation among institutions leading to increased
competition in all areas in which Chohung Bank operates. See "Item 3. Key
Information -- Risk Factors -- Risks Relating to Competition -- Competition in
the Korean banking industry, in particular in the small- and medium-sized
enterprises banking, retail banking and credit card operations, is intense, and
we may experience declining margins as a result".

                                       101
<PAGE>

                     DESCRIPTION OF ASSETS AND LIABILITIES

     Unless otherwise specifically mentioned or the context otherwise requires,
the following description of assets and liabilities is presented on a
consolidated basis under U.S. GAAP. In the following description, with the
exception of certain information relating to concentration of loans and
exposures, we have included separate tables for each of the Group and Chohung
Bank since we will operate Chohung Bank separately and not combine or merge its
operations with those of Shinhan Bank, historically our principal banking
subsidiary, for a period of three years following our acquisition of Chohung
Bank. See "-- Our Acquisition of Chohung Bank -- Strategy, Organization and
Timetable for Integrating Chohung Bank and Shinhan Bank and Effecting a Merger".
While we will prepare consolidated financial statements including Chohung Bank
as of and for the year ended December 31, 2003, there are currently no
consolidated financial statements available reflecting the operations of the
Group and Chohung Bank combined. Accordingly, we have retroactively combined the
assets and liabilities of Chohung Bank with those of the Group, where
appropriate, as if Chohung Bank were our subsidiary as of the dates indicated
below. The purpose of this combined presentation is to provide information about
the continuing impact of our acquisition of Chohung Bank by indicating how the
acquisition might have affected historical assets and liabilities information
and to enhance the reader's understanding of our combined business and
operations going forward. The combined figures are pro forma in nature and
represent the combined historical activities of both the Group and Chohung Bank
for periods when they operated as separate on-going entities and do not reflect
any adjustments to reflect significant trends or other factors that may be of
relevance in considering future performance. These combined figures have been
prepared for comparative and informational purposes only and do not purport to
be indicative of what our historical results and financial position would have
been, had our acquisition of Chohung Bank actually taken place prior to the
dates indicated below.

LOANS
     As of December 31, 2002, the Group's total gross loan portfolio was W45,052
billion, an increase of 33.8% from W33,665 billion at December 31, 2001. The
increase in the portfolio primarily reflects an increase in the mortgage and
home equity loans and other commercial loans. As of December 31, 2002, Chohung
Bank's total gross loan portfolio was W46,030 billion, an increase of 29.8% from
W35,462 billion at December 31, 2001.

                                       102
<PAGE>

 LOAN TYPES

 Shinhan

     The following table presents the Group's loans by type for the periods
indicated. Except where specified otherwise, all loan amounts stated below are
before deduction for loan loss allowances. Total loans reflect the Group's loan
portfolio, including past due amounts.

<Table>
<Caption>
                                                         AS OF DECEMBER 31,
                                           -----------------------------------------------
                                           1998(1)   1999(1)    2000      2001      2002
                                           -------   -------   -------   -------   -------
                                                        (IN BILLIONS OF WON)
<S>                                        <C>       <C>       <C>       <C>       <C>
Corporate
  Commercial and industrial(2)...........  W10,251   W12,570   W13,847   W13,459   W15,800
  Other commercial(3)....................    4,343     5,448     6,746     6,748     9,352
  Lease financing........................      634       558        --       598       636
                                           -------   -------   -------   -------   -------
Total -- Corporate.......................   15,228    18,576    20,593    20,805    25,788
                                           -------   -------   -------   -------   -------
Consumer
  Mortgages and home equity..............      430     1,216     2,376     7,253    11,539
  Credit cards...........................    1,009     1,143     1,570     2,070     2,763
  Other consumer(4)......................    1,869     2,478     3,330     3,537     4,962
                                           -------   -------   -------   -------   -------
Total -- Consumer........................    3,308     4,837     7,276    12,860    19,264
                                           -------   -------   -------   -------   -------
Total gross loans(5).....................  W18,536   W23,413   W27,869   W33,665   W45,052
                                           =======   =======   =======   =======   =======
</Table>

- ---------------

Note:

(1) Adjustments were necessary to reconcile the aggregate loan balance from
    Korean GAAP to a comparable U.S. GAAP basis. The following table sets out
    the adjustments necessary to reconcile the aggregate loan balance for 1998
    and 1999 from Korean GAAP to a basis comparable to the later years disclosed
    above.

(2) Consists primarily of working capital loans, general purpose loans, bills
    purchased, trade-related notes and inter-bank loans.

(3) Consists primarily of privately placed bonds, credit facility drawdowns and
    purchases of commercial paper or notes at a discount from its customers with
    recourse.

(4) Consists primarily of general unsecured loans to retail customers.

(5) As of December 31, 2002, approximately 79.8% of our total gross loans were
    Won-denominated.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                1998        1999
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>         <C>
TOTAL LOAN BALANCE UNDER KOREAN GAAP........................   W19,949     W24,490
Add/(less) adjustments to U.S. GAAP:
  De-consolidation of trust accounts........................    (1,669)       (818)
  Reclassification of items not classified as loans under
     U.S. GAAP..............................................      (223)       (272)
  Reclassification of items not classified as loans under
     Korean GAAP............................................       479          13
                                                               -------     -------
TOTAL LOAN BALANCE UNDER U.S. GAAP..........................   W18,536     W23,413
                                                               =======     =======
</Table>

                                       103
<PAGE>

  Chohung

     The following table presents Chohung Bank's loans by type for the periods
indicated. Except where specified otherwise, all loan amounts stated below are
before deduction for loan loss allowances. Total gross loans reflect Chohung
Bank's loan portfolio, including past due amounts.

<Table>
<Caption>
                                                         AS OF DECEMBER 31,
                                           -----------------------------------------------
                                           1998(1)   1999(1)    2000      2001      2002
                                           -------   -------   -------   -------   -------
                                                        (IN BILLIONS OF WON)
<S>                                        <C>       <C>       <C>       <C>       <C>
Corporate
  Commercial and industrial(2)...........  W14,334   W14,871   W14,862   W13,902   W16,814
  Other commercial(3)....................    3,805     6,353     6,995     7,080     7,611
  Lease financing........................      653       633       786       553       429
                                           -------   -------   -------   -------   -------
Total -- Corporate.......................   18,792    21,857    22,643    21,535    24,854
                                           -------   -------   -------   -------   -------
Consumer
  Mortgages and home equity..............       87       107     1,785     3,993     7,167
  Credit cards...........................      745     1,422     2,954     4,869     5,770
  Other consumer(4)......................    2,634     3,606     3,578     5,065     8,239
                                           -------   -------   -------   -------   -------
Total -- Consumer........................    3,466     5,135     8,317    13,927    21,176
                                           -------   -------   -------   -------   -------
Total gross loans(5).....................  W22,258   W26,992   W30,960   W35,462   W46,030
                                           =======   =======   =======   =======   =======
</Table>

- ---------------

Notes:

(1) Adjustments were necessary to reconcile the aggregate loan balance from
    Korean GAAP to a comparable U.S. GAAP basis. The following table sets out
    the adjustments necessary to reconcile the aggregate loan balance for 1998
    and 1999 from Korean GAAP to a basis comparable to the later years disclosed
    above.

(2) Consists primarily of working capital loans, general purpose loans, bills
    purchased, trade-related notes and inter-bank loans.

(3) Consists primarily of privately placed bonds, credit facility drawdowns and
    Chohung Bank's purchases of commercial paper or notes at a discount from its
    customers with recourse.

(4) Consists primarily of general unsecured loans to retail customers.

(5) As of December 31, 2002, approximately 89.7% of Chohung Bank's total gross
    loans were denominated in Korean Won.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                1998        1999
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>         <C>
TOTAL LOAN BALANCE UNDER KOREAN GAAP........................   W25,259     W28,614
Add/(less) adjustments to U.S. GAAP:
  De-consolidation of trust accounts........................    (2,471)     (1,382)
  Reclassification of items not classified as loans under
     U.S. GAAP..............................................      (566)       (240)
  Reclassification of items not classified as loans under
     Korean GAAP............................................        36          --
                                                               -------     -------
TOTAL LOAN BALANCE UNDER U.S. GAAP..........................   W22,258     W26,992
                                                               =======     =======
</Table>

                                       104
<PAGE>

  Shinhan and Chohung Combined

     The following table presents our loans (combining both the Group and
Chohung Bank) by type for the periods indicated. Except where specified
otherwise, all loan amounts stated below are before deduction for loan loss
allowances. Total gross loans reflect our loan portfolio, including past due
amounts.

<Table>
<Caption>
                                                         AS OF DECEMBER 31,
                                           -----------------------------------------------
                                           1998(1)   1999(1)    2000      2001      2002
                                           -------   -------   -------   -------   -------
                                                        (IN BILLIONS OF WON)
<S>                                        <C>       <C>       <C>       <C>       <C>
Corporate
  Commercial and industrial..............  W24,585   W27,441   W28,709   W27,361   W32,614
  Other commercial.......................    8,148    11,801    13,741    13,828    16,963
  Lease financing........................    1,287     1,191       786     1,151     1,065
                                           -------   -------   -------   -------   -------
Total -- Corporate.......................   34,020    40,433    43,236    42,340    50,642
                                           -------   -------   -------   -------   -------
Consumer
  Mortgages and home equity..............      517     1,323     4,161    11,246    18,706
  Credit cards...........................    1,754     2,565     4,524     6,939     8,533
  Other consumer.........................    4,503     6,084     6,908     8,602    13,201
                                           -------   -------   -------   -------   -------
Total -- Consumer........................    6,774     9,972    15,593    26,787    40,440
                                           -------   -------   -------   -------   -------
Total gross loans(2).....................  W40,794   W50,405   W58,829   W69,127   W91,082
                                           =======   =======   =======   =======   =======
</Table>

- ---------------

Notes:

(1) Adjustments were necessary to reconcile the aggregate loan balance from
    Korean GAAP to a comparable U.S. GAAP basis. The following table sets out
    the adjustments necessary to reconcile the aggregate loan balance for 1998
    and 1999 from Korean GAAP to a basis comparable to the later years disclosed
    above.

(2) As of December 31, 2002, approximately 84.8% of our total gross loans were
    Won-denominated.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                1998        1999
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>         <C>
TOTAL LOAN BALANCE UNDER KOREAN GAAP........................   W45,208     W53,104
Add/(less) adjustments to U.S. GAAP:
  De-consolidation of trust accounts........................    (4,140)     (2,200)
  Reclassification of items not classified as loans under
     U.S. GAAP..............................................      (789)       (512)
  Reclassification of items not classified as loans under
     Korean GAAP............................................       515          13
                                                               -------     -------
TOTAL LOAN BALANCE UNDER U.S. GAAP..........................   W40,794     W50,405
                                                               =======     =======
</Table>

                                       105
<PAGE>

 LOAN CONCENTRATIONS

     On a consolidated basis, our exposure to any single borrower and exposure
to any single group of companies belonging to the same conglomerate is limited
by law to 20% and 25%, respectively, of the Net Total Equity Capital Credit
under Korean GAAP (as defined in "-- Supervision and Regulation"). In addition,
each of Shinhan Bank's and Chohung Bank's exposure, on a non-consolidated basis,
to any single borrower and exposure, on a non-consolidated basis, to any single
group of companies belonging to the same conglomerate is limited by law to 20%
and 25%, respectively, of each bank's total Tier I and Tier II capital under
Korean GAAP.

 Twenty Largest Exposures by Borrower

     As of December 31, 2002, our twenty largest exposures (both the Group and
Chohung Bank combined), consisting of loans, securities and guarantees and
acceptances, totaled W22,971 billion and accounted for 18.6% of our total
exposures. The following table sets forth, as of December 31, 2002, our total
exposures to these top twenty borrowers.

<Table>
<Caption>
                                           LOANS                                                                AMOUNTS OF
                                    -------------------                             GUARANTEES                IMPAIRED LOANS
                                      WON      FOREIGN      EQUITY        DEBT          AND         TOTAL     AND GUARANTEES
COMPANY                             CURRENCY   CURRENCY   SECURITIES   SECURITIES   ACCEPTANCES   EXPOSURES   AND ACCEPTANCES
- -------                             --------   --------   ----------   ----------   -----------   ---------   ---------------
                                                                      (IN BILLIONS OF WON)
<S>                                 <C>        <C>        <C>          <C>          <C>           <C>         <C>
Korea Deposit Insurance             W    --    W    --      W  --       W  7,234      W    --     W  7,234        W    --
  Corporation.....................
Korean Government.................       --         17         --          2,918           --        2,935             --
The Bank of Korea.................       --         --         --          2,302           --        2,302             --
Korea Asset Management                   --         --          6          1,086           --        1,092             --
  Corporation.....................
Kookmin Card......................      761         --         --            319           --        1,080             --
SK Global(1)......................       43        695         --             24          258        1,020            996
LG International Corp.............        5        610         --             --          179          794             --
The Korea Development Bank........        1         --         --            783           --          784             --
Samsung Electronics Co., Ltd......       --        693         14             23            9          739             --
LG Electronics Inc................       10         71          5             61          458          605             --
Hynix Semiconductor(2)............      305        112        127              2           --          546            417
Korea Highway Corporation.........       --         --         --            508           --          508             --
Hyundai Motor Company.............        1        298          3             23          166          491             --
Hyundai Merchant Marine(3)........       98        377         --             --            3          478            478
Korea Land Corporation............       --         --         --            450           --          450             --
Kookmin Bank......................        3         --          3            403           --          409             --
Ssangyong Corporation(4)..........       34        153          3             40          178          408            365
Kia Motors Company................       10        267          5              1           92          375             --
Star Tower Corporation............      370         --         --             --           --          370             --
Korea Electric Power                     --         --          2            349           --          351             --
  Corporation.....................
                                    -------    -------      -----       --------      -------     --------        -------
Total.............................  W 1,641    W 3,293      W 168       W 16,526      W 1,343     W 22,971        W 2,256
                                    =======    =======      =====       ========      =======     ========        =======
</Table>

- ---------------

Notes:

(1) Includes its offshore subsidiaries, SK Global Hong Kong, SK Global ASIA-PAC,
    SK Group Japan, SK Global Europe and SK Global America.

(2) Includes its subsidiary, Hyundai Semiconductor America, Inc.

(3) Includes its subsidiaries, Sky-Con Leasing, Inc. and White-Cub Leasings,
    Inc.

(4) Includes its subsidiaries, Ssangyong Singapore, Ssangyong U.S.A. and
    Ssangyong Japan.

                                       106
<PAGE>

 Exposure to Chaebols

     As of December 31, 2002, 10.4% of our total exposure (both the Group and
Chohung Bank combined) was to the thirty largest chaebols. The following table
shows, as of December 31, 2002, our total exposures (both the Group and Chohung
Bank combined) to the ten chaebol groups to which we have the largest exposure.

<Table>
<Caption>
                                             LOANS                                                                AMOUNTS OF
                                      -------------------                             GUARANTEES                IMPAIRED LOANS
                                        WON      FOREIGN      EQUITY        DEBT          AND         TOTAL     AND GUARANTEES
CHAEBOL                               CURRENCY   CURRENCY   SECURITIES   SECURITIES   ACCEPTANCES   EXPOSURES   AND ACCEPTANCES
- -------                               --------   --------   ----------   ----------   -----------   ---------   ---------------
                                                                        (IN BILLIONS OF WON)
<S>                                   <C>        <C>        <C>          <C>          <C>           <C>         <C>
LG..................................  W   265    W   907      W  16        W 199        W 1,133     W  2,520        W    --
Samsung.............................      290        971         44          248            390        1,943             --
Hyundai Motors......................      400        762         36           89            409        1,696              3
SK..................................      184        811         16          116            541        1,668            999
Hanjin..............................      119        357          2           --             62          540             --
Hyundai.............................      104        414         --           --             17          535            529
KT..................................       99         --          7          270              1          377             --
Kumho...............................      179        132         --           --             56          367             --
Lotte...............................      247          5         --           10             79          341             --
Hyosung.............................      173         82         --            5             69          329             --
                                      -------    -------      -----        -----        -------     --------        -------
  Total.............................  W 2,060    W 4,441      W 121        W 937        W 2,757     W 10,316        W 1,531
                                      =======    =======      =====        =====        =======     ========        =======
</Table>

 Exposures to SK Group Companies

     In the first quarter of 2003, accounting irregularities were discovered at
SK Global to which most commercial banks in Korea, including ourselves, have
substantial exposure. These irregularities had concealed the weak financial
condition of SK Global over a period of several years. In March 2003, the
principal creditor banks of SK Global acknowledged that SK Global is a troubled
company subject to formal workout procedures under the Corporate Restructuring
Promotion Act of Korea and agreed to postpone the maturity of all domestic
credits of SK Global until June 18, 2003.

     In June 2003, the domestic creditors of SK Global agreed to a workout
program under which the creditors participating in this program will buy out the
outstanding credits of the dissenting creditors by providing cash in the amount
of approximately 30% of the outstanding loans, which we did not participate in.
In addition, in July 2003, the domestic creditors' committee and the steering
committee of the overseas creditors of SK Global agreed to a workout program
under which the domestic creditors will buy out the outstanding credits of the
dissenting foreign creditors by providing cash in the amount of 43% of the
outstanding loans as well as incentives which will be in the form of bonds with
warrants. The cash payment shall be repaid in four installments of 40% on
December 31, 2003, 30% on March 31, 2004, 20% on June 30, 2004 and 10% on
September 30, 2004. Depending on whether the approval rate of all the foreign
creditors is 95% or more, between 90 to 95% or between 80 to 90%, the amount of
the incentives will be 5%, 4% or 3% of the total outstanding credit as of March
11, 2003. The bonds with warrants, which warrants can be exercised in 2005, will
be due in 2007, without any interest, and will be repaid in a one-time payment.

     The agreement, which has been endorsed by the steering committee of
overseas creditors, remains subject to each overseas creditors' approval. The
steering committee of overseas creditors was originally required to obtain the
approval from each overseas creditor and present a written statement of consent
to the domestic creditors by mid-August 2003. The domestic creditors have since
extended this deadline to September 17, 2003.

     Once finally approved by the overseas creditors, domestic creditors are
expected to finalize the detailed terms of the workout program, which will,
among other things, require SK Corporation, the major

                                       107
<PAGE>

shareholder of SK Global and the creditors of SK Global participating in the
workout program to convert approximately W2.4 trillion in principal amount of
total debt into equity securities, consisting of common shares, redeemable
preferred shares and convertible bonds, of SK Global, after writing off
substantially all of pre-existing equity securities. While the workout program
may also call for additional restructuring of surviving debt, including
extension of maturity and reduction of interest rates, the detailed terms are
expected to be finalized by the end of 2003.

     Both the Group and Chohung Bank have decided to participate in the workout
program. We believe that participation in the workout program will eventually
yield more than the 30% cash buyout proposed for dissenting domestic creditors.
At this time, it is difficult to predict how much of our loans to SK Global will
be converted into what percentage of equity securities of SK Global or whether
our loans to SK Global will be subject to additional restructuring including
extension of maturities and reduction of interest rates. However, we do not
believe that our participation in the workout program will have any material
adverse impact on us or our financial condition. While we believe that the level
of our specific allowance for loan losses in respect of SK Global are adequate
to cover losses currently expected from our participation in, and implementation
of, the workout program of SK Global, no assurance can be given that our
allowance for loan losses with respect to SK Global will be sufficient to cover
actual future losses.

     As of December 31, 2002, 1.3% of our total exposure (both the Group and
Chohung Bank combined) was to the member companies of the SK Group. The
following table shows, as of December 31, 2002, the breakdown of our total
exposure by member companies of the SK Group.

<Table>
<Caption>
                                               LOANS                                                                AMOUNTS OF
                                        -------------------                             GUARANTEES                IMPAIRED LOANS
                                          WON      FOREIGN      EQUITY        DEBT          AND         TOTAL     AND GUARANTEES
                                        CURRENCY   CURRENCY   SECURITIES   SECURITIES   ACCEPTANCES   EXPOSURES   AND ACCEPTANCES
                                        --------   --------   ----------   ----------   -----------   ---------   ---------------
COMPANY                                                                   (IN BILLIONS OF WON)
<S>                                     <C>        <C>        <C>          <C>          <C>           <C>         <C>
  SK Global ..........................    W 43       W695        W--          W 24         W258        W1,020          W996
  SK Corporation......................      24         --          1            19          108           152            --
  SK Chemical.........................      61          4         --            10           15            90            --
  SK Telecom Co. .....................      10         --         14            60           --            84            --
  SK Teletech Co. ....................      --         --         --            --           82            82            --
  SK Gas .............................       4          7         --            --           69            80            --
  SK Shipping Co. ....................      --         84         --            --           --            84            --
  SKC Co. ............................      15         21         --            --           --            36            --
  Sheraton Grande Walkerhill Hotel....       6         --         --             3            6            15            --
  Daehan City Gas.....................      10         --         --            --           --            10            --
  Pusan City Gas......................       5         --         --            --           --             5            --
  Segae Trading Co. ..................       3         --          1            --           --             4             3
  SK Telesys..........................       1         --         --            --            3             4            --
  Kangwon Gas.........................       1         --         --            --           --             1            --
  Kumi City Gas.......................       1         --         --            --           --             1            --
                                          ----       ----        ---          ----         ----        ------          ----
    Total.............................    W184       W811        W16          W116         W541        W1,668          W999
                                          ====       ====        ===          ====         ====        ======          ====
</Table>

     As of December 31, 2002, our total exposure (both the Group and Chohung
Bank combined) outstanding to SK Global alone was W1,020 billion, or 0.8% of our
total exposure, consisting of W738 billion in loans, W24 billion in debt
securities and W258 billion in guarantees and acceptances. Of our total loans
outstanding to SK Global, W71 billion was secured for which we made no allowance
for loan losses. However, no assurance can be given that we will be able to
fully recover on these secured loans. For the remaining unsecured loans of W667
billion, we made allowance for loan losses of W338 billion. With respect to the
guarantees and acceptances outstanding, we made allowances of W111 billion.

     If the Group and Chohung Bank had participated in the domestic creditors'
buyout program, each would have recovered 30%, or W76 billion and W125 billion,
respectively, on their respective exposures of

                                       108
<PAGE>

unsecured loans of W252 billion and W415 billion. To date, approximately 13.6%
of the total outstanding domestic exposure has elected to participate in this
program. By electing not to participate in this program, the Group estimates
that it will recover 52% or W131 billion, and, therefore, has established an
allowance for the unsecured loans of W121 billion. Similarly, Chohung Bank
estimates that it will recover 48% or W198 billion and it has established an
allowance of W217 billion.

     Both the Group and Chohung Bank considered the results of discounted cash
flow analyses with respect to determining the appropriate levels of the
respective allowances for loan losses for SK Global as of December 31, 2002.
These discounted cash flow analyses took into account certain assumptions
including, among other things, those related to SK Global's future business
revenue, the level of conversion of debt to equity and the extent of a foreign
creditor cash buyout.

     With respect to the respective analyses performed by both the Group and
Chohung Bank, the assumptions related to SK Global's future business revenue
reflect the underlying premise of our analysis that SK Global has three viable
principal lines of business, consisting of energy distribution,
telecommunications infrastructure and export/import trading, that will generate
sufficient revenue to recover our remaining outstanding balance after the
allowance. In the case of the Group, our analysis started with a business plan
prepared by the management of SK Global prepared on March 19, 2003. The analysis
performed by Chohung Bank in this regard, also considered updates made by the
management of SK Global to this business plan in late May and early June 2003.
The estimates in these business plans were further refined, in the case of both
the Group and Chohung Bank, to reflect discussions with the management of SK
Global on the company's future prospects. While the accounting irregularities at
SK Global affected the historical financial statements, they did not have a
significant effect on these three lines of business. To the extent necessary,
our cash flow analysis considered the effect of these irregularities.

     In addition, both the Group and Chohung Bank are members of the domestic
creditors' committee of SK Global, or the "Committee", representing
approximately 4.6% and 5.0% respectively of the outstanding claims of all
members. Through membership in the Committee, the respective managements of the
Group and Chohung Bank considered matters discussed at meetings of the Committee
and among Committee members. Among other things, such matters included potential
alternatives to workout and restructuring. Whether formally proposed or not, the
management of each of the Group and Chohung Bank considered all alternatives
discussed as a means of assessing (i) the most likely workout and/or
restructuring plans to ultimately be agreed to by the Committee and SK Global
and (ii) the ability of SK Global to perform under terms of any agreed-upon
plan. The likely levels of debt to equity conversion, the intent of which is to
replenish the equity that was reduced by the accounting irregularities at SK
Global, are based upon statements of intent by SK Corporation and other parties
discussed at these meetings. It is currently anticipated that we will
participate, through the domestic creditor workout program, in a conversion of a
portion our debt into shares of SK Global's common stock. Recognizing the
potential dilutive effect of the domestic creditors' converting a significant
portion of their debt into shares of SK Global's common stock and the effect of
likely restrictions on the ability of both the Group and Chohung Bank to sell
any shares received, the respective discounted cashflow analyses performed by
the Group and Chohung reflect discounts to the market price of SK Global common
stock of 90% and 70%, respectively. The higher discount used by the Group in its
analysis reflects the higher common share price of SK Global during periods
considered earlier in 2003, when the Group's analysis was prepared.

     The information about foreign creditor cash buyout is based upon
information regarding participation discussed during meetings of the Committee.
It is our current understanding that the buyout of the foreign creditors will be
financed by SK Global through working capital. If necessary, we understand that
SK Global can raise additional funds through the sale of shares of SK Telecom
owned by SK Global.
     The amount of combined guarantees and acceptances of W258 billion as of
December 31, 2002 are largely trade related. Both the Group and Chohung Bank
used the same cash flow information described above, which reflected the lower
level of risk inherent in this exposure, which includes self-liquidating trade
finance transactions, and a reduction in the level of guarantees and acceptances
subsequent to December 31, 2002 to determine that the combined allowance of W111
billion was adequate.

                                       109
<PAGE>

     As of December 31, 2002, the value of our debt securities exposure of W24
billion in securities to SK Global reflects the impairment loss of W23 billion
we recognized during the year ended December 31, 2002, which we believe is other
than temporary. As of December 31, 2002, our total exposure outstanding to Segae
Trading Co. was W4 billion, consisting of W3 billion in loans and W1 billion in
equity securities. For the loans, we have made an allowance for loan losses of
W1 billion.

     In addition, as of December 31, 2002, our total exposure outstanding to SK
Corporation, the controlling company of the SK Group, was W152 billion, or 0.1%
of our total exposure, consisting of W24 billion in loans, W1 billion in equity
securities W19 billion in debt securities and W108 billion in guarantees and
acceptances. We classify loans and guarantees and acceptances to other SK Group
companies, including SK Corporation, as performing in accordance with our
internal credit rating methodology and therefore no specific allowance is made
against these loans or guarantees and acceptances. Our management believes the
general allowance of W484 billion against the performing element of the
corporate loan portfolio in total is sufficient to cover any incurred losses
within this portfolio, including those loans to companies within the SK Group,
including SK Corporation and excluding SK Global and Segae Trading Co. See "Item
3. Key Information -- Risk Factors -- Risks Relating to our banking
business -- We have significant exposure to SK Global which is experiencing
financial difficulties that it concealed through accounting irregularities and
which is in a workout program. If this program is not satisfactorily resolved,
it may have a material adverse effect on us".

 Exposures to Former Hyundai Group Companies

     A number of the former and current Hyundai Group companies, which used to
be one of the largest chaebols in Korea, have been experiencing financial
difficulties as a result of, among other things, their liquidity problems since
the Asian financial crisis in 1997. The most significant of such companies that
are experiencing financial difficulties are Hynix Semiconductor (formerly known
as Hyundai Electronics), Hyundai Merchant Marine, Hyundai Engineering &
Construction, Hyundai Petrochemicals and Inchon Oil Refinery. As of December 31,
2002, 2.6% of our total exposure was to the former Hyundai Group companies. The
former Hyundai Group companies have undergone corporate restructuring resulting
in a breakoff from the former Hyundai Group of (i) Hyundai Motor Company and its
affiliates, (ii) Hyundai Corporation and its affiliates, including Hyundai
Merchant Marine, (iii) Hyundai Oil and its affiliates, including Inchon Oil
Refinery, and (iv) Hyundai Heavy Industries and its affiliates. Each of Hyundai
Petrochemical, Hyundai Engineering & Construction and Hynix Semiconductor were
separately disaffiliated from the former Hyundai Group as a result of corporate
restructuring by creditor action, including capital reductions and
debt-to-equity swaps.

                                       110
<PAGE>

     The following table shows, as of December 31, 2002, the breakdown of our
total exposure (both the Group and Chohung Bank combined) by member companies of
the former Hyundai Group.

<Table>
<Caption>
                                               LOANS                                                                AMOUNTS OF
                                        -------------------                             GUARANTEES                IMPAIRED LOANS
                                          WON      FOREIGN      EQUITY        DEBT          AND         TOTAL     AND GUARANTEES
COMPANY                                 CURRENCY   CURRENCY   SECURITIES   SECURITIES   ACCEPTANCES   EXPOSURES   AND ACCEPTANCES
- -------                                 --------   --------   ----------   ----------   -----------   ---------   ---------------
                                                                          (IN BILLIONS OF WON)
<S>                                     <C>        <C>        <C>          <C>          <C>           <C>         <C>
HYUNDAI MOTOR GROUP:
Hyundai Motor Company.................    W  1      W  298       W  3         W 23         W166        W  491         W   --
Kia Motors Corporation................      10         267          5            1           92           375             --
Hyundai Hysco Co. ....................      47          92         --           --           31           170             --
Hyundai Capital Services Inc. ........     120          --         --           49           --           169             --
INI Steel Company.....................      --          23         25            1           45            94             --
Lotem Co. ............................       8          22         --           --           34            64             --
Hyundai Card Co. .....................      45          --         --           15           --            60             --
Hyundai Mobis Co. ....................      --          40          4           --           --            44             --
Globis Co. ...........................      14          --         --           --           --            14             --
Wia Corporation.......................      --          --         --           --            7             7             --
Dymos Co. ............................       6          --         --           --           --             6             --
Guandong Hyundai Mobis Co., Ltd.......      --           4         --           --           --             4             --
HYUNDAI CORPORATION GROUP:
Hyundai Merchant Marine Co. ..........      98         377         --           --            3           478            478
Hyundai Corporation...................      --          37         --           --           14            51             51
Hyundai Elevator Co. .................       5          --         --           --           --             5             --
HYUNDAI OIL GROUP:
Inchon Oil Refinery Co. ..............     132          --         --           --           --           132            132
Hyundai Oil Bank......................      15           1         --           --           51            67             --
HYUNDAI HEAVY GROUP:
Hyundai Heavy Industries Co. .........       3          15         --           10           91           119             --
Hyundai Motor Shipyard................      --          --         --           --           27            27             --
DISAFFILIATED:
Hynix Semiconductor...................     305         112        127            2           --           546            417
Hyundai Engineering & Construction
  Co. ................................      17          --         64           40           --           121             17
Hyundai Petrochemical Co. ............      71          19         13            3            8           114             98
Pentech & Curitel.....................      24          --         --           --            6            30             --
Koryo Development Corp. ..............       9          --         --           --            1            10             10
Hyundai ENG Plastic Co................       2          --         --           --           --             2             --
Hyundai Department Store Co., Ltd. ...      --           1         --           --            1             2             --
                                          ----      ------       ----         ----         ----        ------         ------
    Total.............................    W932      W1,308       W241         W144         W577        W3,202         W1,203
                                          ====      ======       ====         ====         ====        ======         ======
</Table>

     See "Item 3. Key Information -- Risk Factors -- Risks Relating to our
banking business -- We have exposure to the largest Korean commercial
conglomerates, known as "chaebols", and, as a result, recent and any future
financial difficulties of chaebols may have an adverse effect on us".

       -- Hynix Semiconductor

     As a result of, among other things, intense capital requirements and
falling memory prices, Hynix Semiconductor has experienced and is continuing to
experience significant financial difficulties. In May 2001, domestic commercial
banks, investment trust companies and certain other financial institution
creditors of Hynix Semiconductor agreed to provide financial assistance under
which the Group purchased W50 billion of convertible bonds for cash and extended
the maturities of certain credits in an aggregate amount of W351 billion
(certain types of credits being based on the credit limits) to June 2003
(except, in the case of

                                       111
<PAGE>

US$59.0 million, to September 2005) and Chohung Bank purchased W134 billion of
convertible bonds for cash and extended the maturities of certain credits in an
aggregate amount of W648 billion (certain types of credits being based on the
credit limits) to June 2003 (except, in the case of US$14.4 million, to April
2005). In June 2001, Hynix Semiconductor issued US$1.2 billion of global
depositary shares representing common shares.

     On October 31, 2001, the creditors' committee of Hynix Semiconductor
resolved to restructure the existing credits and provide additional credits in
accordance with the Corporate Restructuring Promotion Act. The following
summarizes the agreements applicable to commercial banks:

     - Equity conversion of W2.9 trillion of existing loans and other exposure
       (including the convertible bonds in the amount of W1 trillion issued in
       June 2001) to three-year mandatorily convertible bonds. Conversion price
       is capped at W3,100 per share but was adjusted downward on May 31, 2002
       to the minimum conversion price of W708 per share. Shares received upon
       conversion are subject to sales restriction until the end of 2006.

     - Conversion of trade related credit line of US$223 million to mid- to
       long-term loans maturing at the end of 2004 at 6.0%.

     - Extension of the maturities (to the end of 2004 for short-term loans and
       credit lines) and reduction of the interest rates (at 6.0% for loans in
       Korean Won, including syndicated loans and overdrafts).

     - Extension of additional credits in the amount of W658 billion, 50% of
       which will be provided for capital expenditures with a maturity of five
       years and 50% for working capital with a maturity of three years, both at
       an interest rate of 7.0% per annum. Such additional credits were all
       extended to Hynix Semiconductor by the end of March 2002.

     - Dissenters' rights: Korea First Bank and three other banks exercised
       their dissenters' right pursuant to the Corporate Restructuring Promotion
       Act and Hynix Semiconductor repaid the claims of such dissenting banks,
       except the claims of Korea First Bank in the amount of W63 billion, in
       May 2002. With respect to the claims of Korea First Bank, it was agreed
       that Hynix Semiconductor would repay the full amount by the end of 2003.
       In the case of Hynix Semiconductor's failure to repay this amount when
       due, pursuant to the Corporate Restructuring Promotion Act, the
       creditors' committee of Hynix Semiconductor shall be liable for the
       repayment of the claim by Korea First Bank. For description of
       dissenter's right under the Corporate Restructuring Promotion Act, see
       "-- Credit Exposures to Companies in Workout, Court Receivership and
       Composition" below.

     In connection with the equity conversion described above, the Group
acquired W125 billion of mandatorily convertible bonds in exchange for
convertible bonds acquired in June 2001, loans and other exposure in the
aggregate principal amount of W406 billion and Chohung Bank acquired W424
billion of mandatorily convertible bonds in exchange for convertible bonds
acquired in June 2001, loans and other exposure in the aggregate principal
amount of W424 billion. On June 1, 2002, the creditors of Hynix Semiconductor
converted the convertible bonds held by the various creditor banks. On the same
date, Chohung Bank converted the W424 billion of convertible bonds into equity
shares of Hynix Semiconductor at the conversion price of W708 per share. Chohung
Bank recorded a 70% aggregate loss in the aggregate amount of W297 billion and
reflected W127 billion as book value (W212 per share) of equity shares of Hynix
Semiconductor. Following approval at the creditors' committee, in April 2003,
Hynix Semiconductor conducted a 21 to 1 capital reduction of its equity shares
and Chohung Bank converted an additional W161 billion of convertible bonds into
equity shares of Hynix Semiconductor at the conversion price of W9,513 per
share. As a result of such capital reduction, Chohung Bank currently owns
45,418,897 shares of Hynix Semiconductor, representing 10.24% of its outstanding
shares.

     Following the breakdown in talks with Micron Technology about its
investment or acquisition of Hynix Semiconductor or its assets, the creditors'
committee of Hynix Semiconductor has agreed to further restructuring of Hynix
Semiconductor, including additional debt restructuring, in consultation with
Deutsche Bank, outside advisor to the creditors' committee of Hynix
Semiconductor.

                                       112
<PAGE>

     In May 1997, in connection with the financing of US$850 million for the
construction of a fabrication plant in Eugene, Oregon of Hyundai Semiconductor
America, Hyundai Heavy Industries, Hyundai Merchant Marine and Hyundai
Corporation entered into a group support agreement to unconditionally,
irrevocably and jointly and severally guarantee the obligations of Hynix
Semiconductor. This transaction resulted in a creation of joint and several
obligations of these three companies in favor of the creditors of Hynix
Semiconductor in the amount of US$850 million, subject to scheduled repayment.
Hynix Semiconductor's failure to perform its obligations under this transaction
will trigger this obligation and will give rise to significant liquidity
problems and capital requirements for these three companies, resulting in asset
quality deterioration of our total exposure outstanding to these three
companies.

     As of December 31, 2002, our total exposure outstanding to Hynix
Semiconductor was W546 billion, or 0.4% of our total exposure, consisting of
W417 billion in unsecured loans, W2 billion in debt securities and W127 billion
in equity securities. For its total loans of W417 billion, we made an allowance
for loan losses of W337 billion. The value of our debt securities exposure of W2
billion and equity securities exposure of W127 billion to Hynix Semiconductor
reflect the accumulated loss of W3 billion and W297 billion, respectively,
recognized during the year ended December 31, 2001 and 2002. While we currently
do not intend to provide additional financial assistance, including extension of
new credit, to normalize Hynix Semiconductor and its operations, the final
outcome of the matters relating to Hynix Semiconductor is highly uncertain and
subject to significant variation over time.

  -- Hyundai Merchant Marine

     Primarily due to large capital expenditures from borrowings, a decline in
the shipping industry since 2001 as well as losses from its Mt. Kumgang
operations in North Korea since 1999, Hyundai Merchant Marine has been
experiencing financial difficulties and has recorded significant decreases in
sales and profitability. In October 2002, a meeting of the creditor financial
institutions of Hyundai Merchant Marine was held to provide a bridge financing
of W50 billion, in which we, including Chohung Bank, did not participate. In
addition, the creditor financial institutions agreed to extend the maturities of
their respective short-term loans to Hyundai Merchant Marine to the end of 2002.
In December 2002, as part of its restructuring efforts, Hyundai Merchant Marine
entered into a definitive agreement to sell its automobile shipping division to
Eurkor Car Carriers Inc., a consortium led by Wallenius of Sweden, Wilhelmsen of
Norway and Hyundai Motor Company of Korea, for a sale price of US$1.3 billion
plus assumption of liabilities of US$200 million in related ship financing.
Hyundai Merchant Marine used the proceeds from the sale of its automobile
shipping division to repay outstanding loans extended by its creditor financial
institutions. In addition, Hyundai Heavy Industries and Hyundai Motor Company
have outstanding guarantees in favor of Hyundai Merchant Marine in the amount of
approximately US$2.5 billion and approximately US$400 million, respectively. As
of December 31, 2002, our total loans to Hyundai Merchant Marine of W475 billion
were classified as impaired, of which W200 billion was in connection with ship
financing, substantially all of which were secured by ship mortgages and
guarantees by Hyundai Heavy Industries, W172 billion was in connection with
leasing and W103 billion was in connection with general purpose loans. We made
an aggregate allowance for loan losses of W148 billion in respect of our total
loans to Hyundai Merchant Marine as of December 31, 2002.

  -- Inchon Oil Refinery

     As of December 31, 2002, our total exposure outstanding to Inchon Oil
Refinery was W132 billion in loans, or 0.1% of our total exposure. We made an
allowance for loan losses of W76 billion in connection with these loans, of
which W105 billion are secured and W27 billion are unsecured. No assurance can
be given that we will be able to fully recover on these secured loans. Since
January 2002, we have not provided any additional credits to Inchon Oil
Refinery. Inchon Oil Refinery is currently under court receivership.

                                       113
<PAGE>

  -- Hyundai Engineering & Construction

     At a creditors' meeting in June 2001, 44 domestic financial institutions,
including the Group, Chohung Bank and 13 other commercial banks, which have
extended credits to Hyundai Engineering & Construction agreed to and approved
the following:

     - convert credits in an aggregate amount of W1,400 billion into equity
       through a debt-to-equity swap after a 5.99:1 capital reduction, according
       to which the Group converted W33 billion of credits into common shares
       representing approximately 1.5% of Hyundai Engineering & Construction's
       outstanding common shares as of December 31, 2001 and Chohung Bank
       converted W96 billion of credits into common shares representing
       approximately 4.4% of Hyundai Engineering & Construction's outstanding
       common shares as of December 31, 2001;

     - participated in (i) a rights offering of W750 billion, of which the Group
       subscribed for W20 billion of common shares at W5,000 per share,
       representing approximately 0.9%, and Chohung Bank subscribed for W57
       billion of common shares at W5,000 per share, representing approximately
       2.7%, and (ii) an offering of convertible bonds due April 2004 of W750
       billion, of which the Group purchased W30 billion, convertible into
       approximately 1.4% of Hyundai Engineering & Construction's common shares
       as of December 31, 2001 (assuming full conversion), and Chohung Bank
       purchased W88 billion, convertible into approximately 4.0% of Hyundai
       Engineering & Construction's common shares as of December 31, 2001
       (assuming full conversion); and

     - investment trust companies, instead of participating in the
       debt-to-equity swap, agreed to extend the maturities of Hyundai
       Engineering & Construction's debentures in an aggregate amount of W515
       billion for three years from their respective maturities.

     As of December 31, 2002, our total exposure outstanding to Hyundai
Engineering & Construction was W121 billion, or 0.1% of our total exposure,
consisting of W17 billion in loans, W40 billion in debt securities and W64
billion in equity securities. For the loans of W17 billion, we made an allowance
for loan losses of W1 billion. We have also recognized an impairment loss of W59
billion and W64 billion against debt and equity securities, respectively, which
we believes is other than temporary.

     Since January 2003, we have not provided additional credits to Hyundai
Engineering & Construction.

  Exposures to Ssangyong Group Companies

     In 1998, Daewoo Motors acquired Ssangyong Motors from the former Ssangyong
Group, on condition that certain of the then existing liabilities of Ssangyong
Motors be retained by the former Ssangyong Group. In connection with this
transaction, ten member companies of the Ssangyong Group assumed in the
aggregate liabilities of W1.8 trillion, which subsequently resulted in
significant increases in interest expense for such companies, further aggravated
by a sharp increase in interest rates during the financial crisis of the late
1990's. Several of the Ssangyong Group companies, including Ssanyong
Corporation, Ssangyong Cement Industrial and Ssangyong Engineering &
Construction, have experienced significant financial and liquidity difficulties
as a result and were subsequently placed under workout programs by their
respective creditors.

     As of December 31, 2002, 0.5% of our total exposure was to the member
companies of the Ssangyong Group. In particular, Chohung Bank is the largest
creditor of Ssangyong Corporation and, as such, is the lead creditor bank under
the workout program applicable to Ssangyong Group companies. The following table

                                       114
<PAGE>

shows, as of December 31, 2002, the breakdown of our total exposure (both the
Group and Chohung Bank combined) by member companies of the Ssangyong Group.

<Table>
<Caption>
                                      LOANS                                                                 AMOUNT OF
                               -------------------                             GUARANTEES                IMPAIRED LOANS
                                 WON      FOREIGN      EQUITY        DEBT          AND         TOTAL     AND GUARANTEES
COMPANY(1)                     CURRENCY   CURRENCY   SECURITIES   SECURITIES   ACCEPTANCES   EXPOSURES   AND ACCEPTANCES
- ----------                     --------   --------   ----------   ----------   -----------   ---------   ---------------
                                                                 (IN BILLIONS OF WON)
<S>                            <C>        <C>        <C>          <C>          <C>           <C>         <C>
Ssangyong Corporation........     W34       W153         W3             W40       W178         W408           W365
Ssangyong Cement
  Industrial.................     158         --         --              87         --          245            158
Ssangyong Shipping...........       1          7         --              --         --            8             --
Ssangyong Resource
  Development................       5         --         --              --         --            5             --
Ssangyong Engineering &
  Construction...............      --         --          3               1         --            4             --
                                 ----       ----         --        --------       ----         ----           ----
  Total......................    W198       W160         W6            W128       W178         W670           W523
                                 ====       ====         ==        ========       ====         ====           ====
</Table>

- ---------------

Note:

(1) Includes domestic and overseas subsidiaries of each company.

     As of December 31, 2002, our total exposure (both the Group and Chohung
Bank combined) to Ssangyong Corporation (including its overseas offices in the
United States, Japan and Singapore) and Ssangyong Cement Industrial amounted to
W408 billion and W245 billion, respectively. Of our total loans and guarantees
and acceptances to Ssangyong Group, W523 billion was classified as impaired. As
of December 31, 2002, allowance for loan losses and guarantees and acceptances
with respect to our loans and guarantees and acceptances to Ssangyong
Corporation and Ssangyong Cement Industrial were W104 billion and W43 billion,
respectively. See "Item 3. Key Information -- Risk Factors -- Risks Relating to
our banking business -- We have significant exposure to the largest Korean
commercial conglomerates, known as "chaebols", and, as a result, recent and any
future financial difficulties of chaebols may have an adverse effect on us".

     In July 2003, a committee of its creditors participating in the workout
program of Ssangyong Cement Industrial approved a plan to (i) extend new credits
of W150 billion to provide additional liquidity, of which Chohung Bank's portion
is W50 billion, all of which are entitled to priority in repayment as agreed by
the creditors committee, (ii) debt-to-equity swap of W573 billion, in which we,
including Chohung Bank, did not participate, and (iii) extend the maturity for
repayment of principal from December 2003 to December 2005.

     As of June 30, 2003, Ssangyong Engineering & Construction's backlog of
construction orders is reported to amount to approximately W2.5 trillion. Due to
improved operations, the creditors' committee is seeking to terminate the
workout program and sell equity securities of Ssangyong Engineering &
Construction obtained through previous debt-to-equity swaps.

     Except as described above, no material changes have occurred with respect
to our exposures to the former Ssangyong Group companies since December 31,
2002. See "Item 3. Key Information -- Risk Factors -- Risks Relating to our
banking business -- We have significant exposure to the largest Korean
commercial conglomerates, known as "chaebols", and, as a result, recent and any
future financial difficulties of chaebols may have an adverse effect on us".

  Exposures to Former Daewoo Group Companies

     The financial condition of the former Daewoo Group, which was one of the
largest chaebols in Korea, has deteriorated over the past several years. In
August 1999, the principal creditor banks of the former Daewoo Group commenced
formal workout procedures with respect to 12 member companies of the Daewoo
Group, including Daewoo Corporation, Daewoo Motor, Daewoo Electronics, Daewoo
Heavy Industries, Daewoo Telecom and Ssangyong Motors. Currently, many of these
companies either are subject to liquidation proceedings or have been liquidated,
are under workouts or court receivership proceedings, have been split up

                                       115
<PAGE>

into more than one company or are looking for purchasers. In 2002, General
Motors, the world's largest automaker, purchased key assets of Daewoo Motor and
acquired a 67.0% stake in agreement with Daewoo creditors to revive the company.
As a condition to the successful sale of Daewoo Motors to General Motors, four
creditor financial institutions of Daewoo Motors, including us, entered into a
commitment to extend new credits to the newly restructured Daewoo Motors after
the acquisition by General Motors. Pursuant to this arrangement, Chohung Bank
made commitments to Daewoo Motors to extend credits in the aggregate principal
amount of US$100 million none of which has been drawn by Daewoo Motors to date.
The Group made no such commitments.

     As of December 31, 2002, 0.4% of our total exposure was to the member
companies of the former Daewoo Group. The following table shows, as of December
31, 2002, the breakdown of our total exposure (both the Group and Chohung Bank
combined) by member companies of the former Daewoo Group.

<Table>
<Caption>
                                       LOANS                                                                 AMOUNT OF
                                -------------------                             GUARANTEES                IMPAIRED LOANS
                                  WON      FOREIGN      EQUITY        DEBT          AND         TOTAL     AND GUARANTEES
COMPANY                         CURRENCY   CURRENCY   SECURITIES   SECURITIES   ACCEPTANCES   EXPOSURES   AND ACCEPTANCES
- -------                         --------   --------   ----------   ----------   -----------   ---------   ---------------
                                                                  (IN BILLIONS OF WON)
<S>                             <C>        <C>        <C>          <C>          <C>           <C>         <C>
Ssangyong Motors(1)...........      W6        W--         W63          W--          W48         W117            W54
Daewoo Electronics Corp.......      41         --          38           --           --           79             --
Daewoo Shipbuilding & Marine
  Engineering.................      --          1           3           --           53           57             --
Daewoo Electronics Service....      40         13          --            3           --           56             53
Daewoo Motors.................      30         23          --           --           --           53             53
Daewoo Telecom................      45         --          --           --           --           45             45
Daewoo Heavy Industries &
  Machinery...................       3          1           2            1           33           40             --
Daewoo Construction...........      23         --          16           --           --           39             --
Daewoo Securities.............      --         --          14           --           --           14             --
Daewoo International..........      --         --           3            3           --            6             --
Daewoo Capital................       5         --          --           --           --            5              5
Vitzrocell....................       1         --          --           --            1            2             --
Daewoo Precision..............      --         --           1           --           --            1             --
Daewoo Securities Co.,
  Ltd. .......................       3         --          --           --           --            3             --
                                  ----       ----        ----         ----         ----         ----           ----
    Total.....................    W197        W38        W140           W7         W135         W517           W210
                                  ====       ====        ====         ====         ====         ====           ====
</Table>

- ---------------

Note:

(1) Ssangyong Motors was acquired by the Daewoo Group in 1998 and was a member
    company of the Daewoo Group until April 2000, when it was disaffiliated from
    the former Daewoo Group upon satisfying certain regulatory requirements of
    the Korea Fair Trade Commission.

     As of December 31, 2002, our total exposure (both the Group and Chohung
Bank combined) to the former Daewoo Group companies was W517 billion, including
exposures to Ssangyong Motors, Daewoo Electronics Corp., Daewoo Shipbuilding &
Marine Engineering and Daewoo Electronics Service of W117 billion, W79 billion,
W57 billion and W56 billion, respectively. Of our total loans and guarantees and
acceptances to the Daewoo Group companies, including Ssangyong Motors, Daewoo
Electronics Service, Daewoo Motors, Daewoo Telecom and Daewoo Capital, W210
billion were classified as impaired, for which we made aggregate allowances of
W124 billion. We classify loans and guarantees and acceptances to other Daewoo
Group companies, including Daewoo Construction and Daewoo Electronics Corp. as
performing in accordance with its internal credit rating methodology and
therefore no specific allowances are made against these loans or guarantees and
acceptances. Management believes the general allowance of W484 billion against
the performing element of the corporate loan portfolio in total is sufficient to
cover any incurred losses within these loans. See "Item 3. Key
Information -- Risk Factors -- Risks Relating to our banking business -- We have
significant exposure to the largest Korean commercial conglomerates, known as

                                       116
<PAGE>

"chaebols", and, as a result, recent and any future financial difficulties of
chaebols may have an adverse effect on us.

     No material changes have occurred with respect to Chohung Bank's exposures
to the former Daewoo Group companies since December 31, 2002.

 Exposures to the Credit Card Industry

     Recent adverse developments in the credit card industry such as
industry-wide increases in delinquencies and resulting increases in provisioning
for loan losses have had a negative impact on investors' perception of credit
card companies in the Korean corporate debt market, thereby significantly
limiting the ability of credit card companies to raise financing through
issuances of debt securities. As a result, Korean credit card companies have
been experiencing significant financial and liquidity difficulties.

     The following table shows, as of December 31, 2002, the breakdown of our
total exposure (both the Group and Chohung Bank combined) to credit card
companies.

<Table>
<Caption>
                                                           SECURITIES ISSUED
                                                DEBT      THROUGH ASSET-BACKED   LOANS IN WON
COMPANY                                      SECURITIES    SECURITIZATION(1)     CURRENCY(2)    TOTAL
- -------                                      ----------   --------------------   ------------   ------
                                                               (IN BILLIONS OF WON)
<S>                                          <C>          <C>                    <C>            <C>
Samsung Card(3)............................     W171              W273               W 50       W  494
LG Card....................................      108               223                 10          341
Kookmin Card(4)............................      237                82                761        1,080
KEB Card...................................      239                31                 --          270
Lotte Card(5)..............................       --                --                 40           40
Hyundai Card(6)............................       15                --                 45           60
Woori Card.................................       49                --                 --           49
                                                ----              ----               ----       ------
  Total....................................     W819              W609               W906       W2,334
                                                ====              ====               ====       ======
</Table>

- ---------------

Notes:

(1) Securities issued by special purpose vehicles of credit card companies,
    established with credit card receivables as underlying assets. In general,
    these special purpose vehicles are entitled to credit or collateral support
    from such credit card companies.

(2) Includes commercial papers issued by these credit card companies.

(3) Samsung Card conducted a rights offering of W200 billion in May 2003 and
    conducted an offering of W800 billion in convertible bonds.

(4) In July 2003, the board of directors of each of Kookmin Bank and Kookmin
    Card approved the plan to merge Kookmin Card, Kookmin Bank's principal
    subsidiary, into Kookmin Bank. This merger plan is currently subject to
    shareholders' approval. Upon the completion of this planned merger, our
    exposure to Kookmin Card will be converted into exposure to Kookmin Bank.

(5) The entire outstanding balance of these loans were repaid in 2003.

(6) In the first half of 2003, Hyundai Motor Company implemented a turnaround
    plan for Hyundai Card, which included (i) the acquisition by Hyundai Motor
    Company and two of its affiliates, Kia Motors Corporation and INI Steel
    Company, in the aggregate 44,680,971 shares of common stock of Hyundai Card,
    all of which were previously held by Hyundai Capital and (ii) the
    participation by Hyundai Motor, Kia Motors and INI Steel in a rights
    offering by Hyundai Card in the amount of W310 billion, including W10.0
    billion by Korea Asset Management Corporation.

     As of December 31, 2002, we had loans outstanding to credit card companies
in the aggregate principal amount of W906 billion. Despite the recent financial
difficulties of certain credit card companies, our loans to these credit card
companies are considered performing in accordance with our internal credit
rating methodology, and therefore we have not recognized a specific allowance
for loan losses against these. We

                                       117
<PAGE>

believe our general allowance of W484 billion against the performing element of
the corporate loan portfolio in total is sufficient to cover any incurred losses
within these specific loans.

     In light of the financial market instability in Korea resulting from the
liquidity problems faced by credit card companies during the first quarter of
2003, the Korean government announced temporary measures in April 2003 intended
to provide liquidity support to credit card companies. These measures included,
among other things:

     - a request by the government for credit card companies to effect capital
       increase in the aggregate amount of W4.6 trillion, as part of their
       self-rescue efforts;

     - banks and other financial institutions agreeing with each other to extend
       the maturity of all debt securities of credit card companies that they
       hold;

     - investment trust companies agreeing with each other to extend the
       maturity of 50% of the aggregate amount of the debt securities of credit
       card companies that they hold which are scheduled to mature by June 2003;
       and

     - with respect to the remaining 50% of such credit card company debt
       securities, banks and other financial institutions agreeing with each
       other to contribute an aggregate amount of W5.6 trillion to purchase such
       debt securities from investment trust companies.

     Pursuant to the above measures, the Group, at the holding company level,
injected new capital of W100 billion in the form of subordinated debt into
Shinhan Card in April 2003 and plan to inject an additional W100 billion in the
second half of 2003. The Group have funded and will fund this obligation through
the issuance of debt securities. In addition, the Group agreed to extend the
maturities of the W436 billion of credit card company debt securities that the
Group held in April 2003 or that have become due in June 2003 (including W426
billion of such debt securities the Group transferred from the Group's trust
accounts to the Group's bank accounts). Of the W5.6 trillion aggregate
contribution made by Korean financial institutions to purchase credit card
company debt securities held by investment trust companies, the portion
allocated for the Group to purchase was approximately W263 billion, all of which
were repaid as of July 31, 2003. Chohung Bank also agreed to extend the
maturities of the W177 billion of loans to and debt securities issued by credit
card companies that Chohung Bank held in April 2003 or that have become due in
June 2003. Of the W5.6 trillion aggregate contribution made by Korean financial
institutions to purchase credit card company debt securities held by investment
trust companies, the portion allocated for Chohung Bank to purchase was
approximately W183 billion, all of which was repaid as of July 31, 2003.

 Loan Concentration by Industry

     The following table shows the aggregate balance of our corporate loans
(both the Group and Chohung Bank combined) by industry concentration as of
December 31, 2002.

<Table>
<Caption>
                                                          AGGREGATE LOAN        PERCENTAGE OF
INDUSTRY                                                     BALANCE          TOTAL LOAN BALANCE
- --------                                               --------------------   ------------------
                                                       (IN BILLIONS OF WON)     (PERCENTAGES)
<S>                                                    <C>                    <C>
Manufacturing........................................        W23,234                 45.88%
Retail and wholesale.................................          8,233                 16.26
Real estate, leasing, and service....................          4,552                  8.99
Construction.........................................          2,569                  5.07
Hotel and leisure....................................          1,746                  3.45
Finance and insurance................................          1,946                  3.84
Transportation, storage and communication............          3,948                  7.80
Other service........................................          4,180                  8.25
Other................................................            234                  0.46
                                                             -------                ------
  Total..............................................        W50,642                100.00%
                                                             =======                ======
</Table>

                                       118
<PAGE>

 Loan Concentration by Size of Loans

     The following table shows the aggregate balances of our loans (both the
Group and Chohung Bank combined) by outstanding loan amount as of December 31,
2002.

<Table>
<Caption>
                                                          AGGREGATE LOAN        PERCENTAGE OF
                                                             BALANCE          TOTAL LOAN BALANCE
                                                       --------------------   ------------------
                                                       (IN BILLIONS OF WON)     (PERCENTAGES)
<S>                                                    <C>                    <C>
COMMERCIAL AND INDUSTRIAL
  Up to W10 million..................................        W   870                  0.96%
  Over W10 million to W50 million....................          2,101                  2.31
  Over W50 million to W100 million...................          2,160                  2.37
  Over W100 million to W500 million..................         10,877                 11.94
  Over W500 million to W1 billion....................          4,764                  5.23
  Over W1 billion to W5 billion......................          4,360                  4.79
  Over W5 billion to W10 billion.....................          2,998                  3.29
  Over W10 billion to W50 billion....................          2,499                  2.74
  Over W50 billion to W100 billion...................          1,188                  1.30
  Over W100 billion..................................            797                  0.88
                                                             -------                ------
     Sub-total.......................................         32,614                 35.81
                                                             -------                ------
OTHER COMMERCIAL
  Up to W10 million..................................            316                  0.35
  Over W10 million to W50 million....................            653                  0.72
  Over W50 million to W100 million...................            684                  0.75
  Over W100 million to W500 million..................          3,984                  4.36
  Over W500 million to W1 billion....................          2,952                  3.24
  Over W1 billion to W5 billion......................          2,955                  3.24
  Over W5 billion to W10 billion.....................          3,039                  3.34
  Over W10 billion to W50 billion....................          1,856                  2.04
  Over W50 billion to W100 billion...................            524                  0.58
  Over W100 billion..................................             --                    --
                                                             -------                ------
     Sub-total.......................................         16,963                 18.62
                                                             -------                ------
LEASE FINANCING
  Up to W10 million..................................              2                    --
  Over W10 million to W50 million....................             16                  0.02
  Over W50 million to W100 million...................             17                  0.02
  Over W100 million to W500 million..................            120                  0.13
  Over W500 million to W1 billion....................             91                  0.10
  Over W1 billion to W5 billion......................            271                  0.30
  Over W5 billion to W10 billion.....................            209                  0.23
  Over W10 billion to W50 billion....................            149                  0.16
  Over W50 billion to W100 billion...................            190                  0.21
  Over W100 billion..................................             --                    --
                                                             -------                ------
     Sub-total.......................................          1,065                  1.17
                                                             -------                ------
</Table>

                                       119
<PAGE>

<Table>
<Caption>
                                                          AGGREGATE LOAN        PERCENTAGE OF
                                                             BALANCE          TOTAL LOAN BALANCE
                                                       --------------------   ------------------
                                                       (IN BILLIONS OF WON)     (PERCENTAGES)
<S>                                                    <C>                    <C>
MORTGAGE AND HOME EQUITY
  Up to W10 million..................................            303                  0.33
  Over W10 million to W50 million....................          6,006                  6.59
  Over W50 million to W100 million...................          5,833                  6.40
  Over W100 million to W500 million..................          6,420                  7.06
  Over W500 million to W1 billion....................            119                  0.13
  Over W1 billion to W5 billion......................             25                  0.03
  Over W5 billion....................................             --                    --
                                                             -------                ------
     Sub-total.......................................         18,706                 20.54
                                                             -------                ------
CREDIT CARDS
  Up to W10 million..................................          6,397                  7.03
  Over W10 million to W50 million....................          1,428                  1.57
  Over W50 million to W100 million...................             73                  0.08
  Over W100 million to W500 million..................             47                  0.05
  Over W500 million to W1 billion....................             39                  0.04
  Over W1 billion to W5 billion......................            191                  0.21
  Over W5 billion to W10 billion.....................             59                  0.06
  Over W10 billion to W50 billion....................            225                  0.25
  Over W50 billion to W100 billion...................             74                  0.08
  Over W100 billion..................................             --                    --
                                                             -------                ------
     Sub-total.......................................          8,533                  9.37
                                                             -------                ------
OTHER CONSUMER
  Up to W10 million..................................          4,897                  5.38
  Over W10 million to W50 million....................          4,219                  4.63
  Over W50 million to W100 million...................          1,323                  1.45
  Over W100 million to W500 million..................          2,129                  2.34
  Over W500 million to W1 billion....................            465                  0.51
  Over W1 billion to W5 billion......................            132                  0.14
  Over W5 billion to W10 billion.....................              9                  0.01
  Over W10 billion to W50 billion....................             27                  0.03
  Over W50 billion...................................             --                    --
                                                             -------                ------
     Sub-total.......................................         13,201                 14.49
                                                             -------                ------
       TOTAL.........................................        W91,082                100.00%
                                                             =======                ======
</Table>

                                       120
<PAGE>

 MATURITY ANALYSIS

     The following table sets out the scheduled maturities (time remaining until
maturity) of our loan portfolio, consisting of the Group, Chohung Bank, and both
the Group and Chohung combined, as of December 31, 2002. The amounts disclosed
are before deduction of attributable loan loss reserves.

  Shinhan

<Table>
<Caption>
                                                             AS OF DECEMBER 31, 2002
                                                -------------------------------------------------
                                                1 YEAR    OVER 1 YEAR BUT NOT    OVER
                                                OR LESS    MORE THAN 5 YEARS    5 YEARS    TOTAL
                                                -------   -------------------   -------   -------
                                                              (IN BILLIONS OF WON)
<S>                                             <C>       <C>                   <C>       <C>
Corporate:
  Commercial and industrial...................  W14,063         W 1,524         W  213    W15,800
  Other commercial............................    6,258           2,232            862      9,352
  Lease financing.............................       48             474            114        636
                                                -------         -------         ------    -------
     Total -- Corporate.......................   20,369           4,230          1,189     25,788
                                                -------         -------         ------    -------
Consumer:
  Mortgages and home equity...................    1,763           8,908            868     11,539
  Other consumer..............................    3,412           1,526             24      4,962
  Credit cards................................    2,580             170             13      2,763
                                                -------         -------         ------    -------
     Total -- Consumer........................    7,755          10,604            905     19,264
                                                -------         -------         ------    -------
Total gross loans.............................  W28,124         W14,834         W2,094    W45,052
                                                =======         =======         ======    =======
</Table>

  Chohung

<Table>
<Caption>
                                                            AS OF DECEMBER 31, 2002
                                               -------------------------------------------------
                                               1 YEAR    OVER 1 YEAR BUT NOT    OVER
                                               OR LESS    MORE THAN 5 YEARS    5 YEARS    TOTAL
                                               -------   -------------------   -------   -------
                                                             (IN BILLIONS OF WON)
<S>                                            <C>       <C>                   <C>       <C>
Corporate:
  Commercial and industrial..................  W13,615         W2,442          W  757    W16,814
  Other commercial...........................    5,588          1,010           1,013      7,611
  Lease financing............................       28            194             207        429
                                               -------         ------          ------    -------
     Total -- Corporate......................   19,231          3,646           1,977     24,854
                                               -------         ------          ------    -------
Consumer:
  Mortgages and home equity..................    2,410          4,724              33      7,167
  Other consumer.............................    6,687          1,428             124      8,239
  Credit cards...............................    5,760             10              --      5,770
                                               -------         ------          ------    -------
     Total -- Consumer.......................   14,857          6,162             157     21,176
                                               -------         ------          ------    -------
Total gross loans............................  W34,088         W9,808          W2,134    W46,030
                                               =======         ======          ======    =======
</Table>

                                       121
<PAGE>

  Shinhan and Chohung Combined

<Table>
<Caption>
                                                             AS OF DECEMBER 31, 2002
                                                -------------------------------------------------
                                                1 YEAR    OVER 1 YEAR BUT NOT    OVER
                                                OR LESS    MORE THAN 5 YEARS    5 YEARS    TOTAL
                                                -------   -------------------   -------   -------
                                                              (IN BILLIONS OF WON)
<S>                                             <C>       <C>                   <C>       <C>
Corporate:
  Commercial and industrial...................  W27,678         W 3,966         W  970    W32,614
  Other commercial............................   11,846           3,242          1,875     16,963
  Lease financing.............................       76             668            321      1,065
                                                -------         -------         ------    -------
     Total -- Corporate.......................   39,600           7,876          3,166     50,642
                                                -------         -------         ------    -------
Consumer:
  Mortgages and home equity...................    4,173          13,632            901     18,706
  Other consumer..............................   10,099           2,954            148     13,201
  Credit cards................................    8,340             180             13      8,533
                                                -------         -------         ------    -------
     Total -- Consumer........................   22,612          16,766          1,062     40,440
                                                -------         -------         ------    -------
Total gross loans.............................  W62,212         W24,642         W4,228    W91,082
                                                =======         =======         ======    =======
</Table>

     We may roll over our working capital loans and consumer loans (which are
not payable in installments) after we conduct our normal loan review in
accordance with our loan review procedures. Working capital loans of the Group
may be extended on an annual basis for an aggregate term of three years for
unsecured loans and five years for secured loans and consumer loans may be
extended for additional terms of up to 12 months for an aggregate term of five
years for unsecured loans and ten years for secured loans. Working capital loans
of Chohung Bank may be extended on an annual basis for an aggregate term of five
years and consumer loans are commonly extended for additional terms of up to 12
months for an aggregate term of ten years, regardless of whether such loans are
secured or unsecured. Such loans have been classified as loans with maturity of
one year or less in the tables above.

 INTEREST RATE SENSITIVITY

     The following table shows our loans by interest rate sensitivity for each
of the Group, Chohung Bank, and both the Group and Chohung combined as of
December 31, 2002.

  Shinhan

<Table>
<Caption>
                                                      DUE WITHIN 1 YEAR   DUE AFTER 1 YEAR    TOTAL
                                                      -----------------   ----------------   -------
                                                                   (IN BILLIONS OF WON)
<S>                                                   <C>                 <C>                <C>
Fixed rate loans(1).................................       W15,844            W 3,742        W19,586
Variable rate loans(2)..............................        10,951             14,515         25,466
                                                           -------            -------        -------
  Total gross loans.................................       W26,795            W18,257        W45,052
                                                           =======            =======        =======
</Table>

- ---------------

Notes:
(1) Fixed rate loans are loans for which the interest rate is fixed for the
    entire term. Includes W5,513 billion of loans due within one year and W667
    billion of loans due after one year, which are priced based on one or more
    reference rates which may vary at the Group's discretion. However, it is not
    the Group's practice to change such reference rates during the life of a
    loan.

(2) Variable or adjustable rate loans are for which the interest rate is not
    fixed for the entire term.

                                       122
<PAGE>

  Chohung

<Table>
<Caption>
                                                     DUE WITHIN 1 YEAR   DUE AFTER 1 YEAR    TOTAL
                                                     -----------------   ----------------   -------
                                                                  (IN BILLIONS OF WON)
<S>                                                  <C>                 <C>                <C>
Fixed rate loans(1)................................       W10,685            W 3,313        W13,998
Variable rate loans(2).............................        23,403              8,629         32,032
                                                          -------            -------        -------
  Total gross loans................................       W34,088            W11,942        W46,030
                                                          =======            =======        =======
</Table>

- ---------------

Notes:

(1) Fixed rate loans are loans for which the interest rate is fixed for the
    entire term.

(2) Variable or adjustable rate loans are for which the interest rate is not
    fixed for the entire term.

  Shinhan and Chohung Combined

<Table>
<Caption>
                                                      DUE WITHIN 1 YEAR   DUE AFTER 1 YEAR    TOTAL
                                                      -----------------   ----------------   -------
                                                                   (IN BILLIONS OF WON)
<S>                                                   <C>                 <C>                <C>
Fixed rate loans(1).................................       W26,529            W 7,055        W33,584
Variable rate loans(2)..............................        34,354             23,144         57,498
                                                           -------            -------        -------
  Total gross loans.................................       W60,883            W30,199        W91,082
                                                           =======            =======        =======
</Table>

- ---------------

Notes:

(1) Fixed rate loans are loans for which the interest rate is fixed for the
    entire term.

(2) Variable or adjustable rate loans are for which the interest rate is not
    fixed for the entire term.

     For additional information regarding management of interest rate risk of
each of Shinhan Bank and Chohung Bank, see "-- Risk Management of Shinhan
Financial Group" and "-- Risk Management of Chohung Bank".

 NONACCRUAL LOANS AND PAST DUE ACCRUING LOANS

     We generally do not recognize interest income on nonaccrual loans unless it
is collected. Generally, loans are placed on nonaccrual status when payments of
interest and/or principal become past due by one day. Interest is no longer
recognized on these loans from the date the loan is placed on nonaccrual status.
Loans are not reclassified as accruing until interest and principal payments are
brought current.

     Interest foregone is the interest due on nonaccrual loans that has not been
accrued in our books of account. For the year ended December 31, 2002, the Group
would have recorded gross interest income of W69 billion compared to W73 billion
for the year ended December 31, 2001 on loans accounted for on a nonaccrual
basis throughout the year, or since origination for loans held for part of the
year, had the loans been current with respect to their original contractual
terms. The amount of interest income on those loans that was included in the
Group's net income for the years ended December 31, 2002 and December 31, 2001
was W43 billion and W49 billion, respectively. For the year ended December 31,
2002, Chohung Bank would have recorded gross interest income of W222 billion
compared to W142 billion for the year ended December 31, 2001 on loans accounted
for on a nonaccrual basis throughout the year, or since origination for loans
held for part of the year, had the loans been current with respect to their
original contractual terms. The amount of interest income on those loans that
was included in Chohung Bank's net income for the years ended December 31, 2001
and December 31, 2002 was W60 billion and W98 billion, respectively.

     The category "accruing but past due one day" includes loans which are still
accruing interest but on which principal or interest payments are contractually
past due one day or more. We continue to accrue interest on loans where the
total amount of loan outstanding, including accrued interest, is fully secured
by cash on deposits.

                                       123
<PAGE>

     The following table shows, at the dates indicated, the amount of loans that
are placed on a nonaccrual basis and accruing loans which are past due one day
or more for the Group, Chohung Bank and both the Group and Chohung Bank
combined.

  Shinhan

<Table>
<Caption>
                                                                AS OF DECEMBER 31,
                                                              ----------------------
                                                              2000    2001     2002
                                                              ----   ------   ------
                                                               (IN BILLIONS OF WON)
<S>                                                           <C>    <C>      <C>
Loans accounted for on a nonaccrual basis
     Corporate..............................................  W567   W  834   W  741
     Consumer...............................................    59       78      111
     Credit cards...........................................   169      234      358
                                                              ----   ------   ------
       Sub-total............................................   795    1,146    1,210
                                                              ----   ------   ------
Accruing loans which are contractually past due one day or
  more as to principal or interest
     Corporate(1)...........................................     1       29       32
     Consumer(2)............................................    20       32       38
     Credit cards...........................................    --       --       --
                                                              ----   ------   ------
       Sub-total............................................    21       61       70
                                                              ----   ------   ------
Total.......................................................  W816   W1,207   W1,280
                                                              ====   ======   ======
</Table>

- ---------------

Notes:
(1) Includes accruing loans which are contractually past due 90 days or more in
    the amount of W6 billion of corporate loans and W2 billion of corporate
    loans as of December 31, 2001 and 2002, respectively.
(2) Includes accruing loans which are contractually past due 90 days or more in
    the amount of W8 billion of consumer loans and W10 billion of consumer loans
    as of December 31, 2001 and 2002, respectively.

  Chohung

<Table>
<Caption>
                                                                 AS OF DECEMBER 31,
                                                              ------------------------
                                                               2000     2001     2002
                                                              ------   ------   ------
                                                                (IN BILLIONS OF WON)
<S>                                                           <C>      <C>      <C>
Loans accounted for on a nonaccrual basis
     Corporate..............................................  W1,295   W  963   W  825
     Consumer...............................................     460      737    1,726
     Credit cards...........................................     306      886    1,543
                                                              ------   ------   ------
       Sub-total............................................   2,061    2,586    4,094
                                                              ------   ------   ------
Accruing loans which are contractually past due one day or
  more as to principal or interest
     Corporate(1)...........................................     198       99      102
     Consumer...............................................      27        4        3
     Credit cards...........................................       2       --       --
                                                              ------   ------   ------
       Sub-total............................................     227      103      105
                                                              ------   ------   ------
Total.......................................................  W2,288   W2,689   W4,199
                                                              ======   ======   ======
</Table>

- ---------------

Note:
(1) Includes accruing loans which are contractually past due 90 days or more in
    the amount of W48 billion of corporate loans and W49 billion of corporate
    loans as of December 31, 2001 and 2002, respectively.

                                       124
<PAGE>

  Shinhan and Chohung Combined

<Table>
<Caption>
                                                                 AS OF DECEMBER 31,
                                                              ------------------------
                                                               2000     2001     2002
                                                              ------   ------   ------
                                                                (IN BILLIONS OF WON)
<S>                                                           <C>      <C>      <C>
Loans accounted for on a nonaccrual basis
     Corporate..............................................  W1,862   W1,797   W1,566
     Consumer...............................................     519      815    1,837
     Credit cards...........................................     475    1,120    1,901
                                                              ------   ------   ------
       Sub-total............................................   2,856    3,732    5,304
                                                              ------   ------   ------
Accruing loans which are contractually past due one day or
  more as to principal or interest
     Corporate(1)...........................................     199      128      134
     Consumer(2)............................................      47       36       41
     Credit cards...........................................       2       --       --
                                                              ------   ------   ------
       Sub-total............................................     248      164      175
                                                              ------   ------   ------
Total.......................................................  W3,104   W3,896   W5,479
                                                              ======   ======   ======
</Table>

- ---------------

Notes:
(1) Includes accruing loans which are contractually past due 90 days or more in
    the amount of W54 billion of corporate loans and W51 billion of corporate
    loans as of December 31, 2001 and 2002, respectively.
(2) Includes accruing loans which are contractually past due 90 days or more in
    the amount of W8 billion of consumer loans and W10 billion of consumer loans
    as of December 31, 2001 and 2002, respectively.

 TROUBLED DEBT RESTRUCTURINGS

     The following table presents, at the dates indicated, our loans which are
"troubled debt restructurings" for each of the Group, Chohung Bank, and the
Group and Chohung combined as defined under U.S. GAAP. These comprise of
corporate loans that have been restructured through the process of workout,
court receivership and composition. See "-- Credit Exposures to Companies in
Workout, Court Receivership and Composition". These loans accrue interest at
rates lower than the original contractual terms, or involve the extension of the
original contractual maturity as a result of a variation of terms upon
restructuring.

  Shinhan

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                              2000    2001    2002
                                                              -----   -----   -----
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>     <C>     <C>
Loans not included in "nonaccrual and past due loans" which
  are classified as "troubled debt restructurings"..........  W365    W360    W145
</Table>

     For the year ended December 31, 2002, interest income that would have been
recorded under the original contract terms of restructured loans amounted to W9
billion, out of which W7 billion was reflected as the Group's interest income
during 2002.

  Chohung

<Table>
<Caption>
                                                                AS OF DECEMBER 31,
                                                              ----------------------
                                                               2000     2001    2002
                                                              ------   ------   ----
                                                               (IN BILLIONS OF WON)
<S>                                                           <C>      <C>      <C>
Loans not included in "nonaccrual and past due loans" which
  are classified as "troubled debt restructurings"..........  W2,746   W1,318   W895
</Table>

                                       125
<PAGE>

     For the year ended December 31, 2002, Chohung Bank's interest income that
would have been recorded under the original contract terms of restructured loans
amounted to W65 billion, of which W36 billion was reflected as Chohung Bank's
interest income during 2002.

  Shinhan and Chohung Combined

<Table>
<Caption>
                                                                 AS OF DECEMBER 31,
                                                              ------------------------
                                                               2000     2001     2002
                                                              ------   ------   ------
                                                                (IN BILLIONS OF WON)
<S>                                                           <C>      <C>      <C>
Loans not included in "nonaccrual and past due loans" which
  are classified as "troubled debt restructurings"..........  W3,111   W1,678   W1,040
</Table>

     For the year ended December 31, 2002, interest income that would have been
recorded under the original contract terms of restructured loans amounted to W74
billion, out of which W43 billion was reflected as interest income during 2002.

 CREDIT EXPOSURES TO COMPANIES IN WORKOUT, COURT RECEIVERSHIP AND COMPOSITION

     Shinhan Bank's exposures in restructuring are managed and collected by our
Corporate Restructuring Team. Chohung Bank's exposures in restructuring are
managed and collected by Chohung Bank's Loan Recovery Division. As of December
31, 2002, W2,632 billion or 2.1% of our total exposure (both the Group and
Chohung Bank combined) was under restructuring. The legal form of our
restructurings are principally either workout, court receivership or
composition.

 Workout

     Under the Corporate Restructuring Promotion Act, which became effective in
September 2001, all creditor financial institutions of a borrower are required
to participate in a creditors' committee. The Corporate Restructuring Promotion
Act will be mandatorily applicable to more than 420 financial institutions in
Korea, which include commercial banks, insurance companies, investment trust
companies, securities companies, merchant banks, the Korea Deposit Insurance
Corporation and the Korea Asset Management Corporation. Under this new act, the
approval of creditor financial institutions holding not less than 75% of the
total debt outstanding of a borrower will finalize such borrower's restructuring
plan, including debt restructuring and provision of additional funds, which plan
will be binding on all the creditor financial institutions of the borrower,
except that any creditor financial institution that disagrees with the final
restructuring plan approved by the creditors' committee will have the right to
request the creditors' committee to purchase its claims at a mutually agreed
price. In the event that the creditors' committee and the dissenting creditor
financial institution fails to come to an agreement, a coordination committee
consisting of seven experts will be set up to resolve the matter. There is a
risk that these procedures may require us to participate in a plan that we do
not agree with or may require us to sell our claims at prices that we do not
believe are adequate. Absent further legislation, the Corporate Restructuring
Promotion Act expires on December 31, 2005.

     The total amount currently undergoing workout as of December 31, 2002 was
W2,132 billion, including W1,330 billion of loans and W802 billion of other
exposures.

 Court Receivership

     Court receivership or corporate reorganization procedures are court
supervised procedures to rehabilitate an insolvent company. The restructuring
plan is adopted at a meeting of interested parties and is subject to approval of
a court. In a court receivership, the management power of the company is taken
over by a court appointed receiver. Creditors must report their claims to the
court and if they fail to do so, their claims are discharged at the end of the
reorganization. Creditors may enforce their claims only in compliance with the
reorganization plan.

                                       126
<PAGE>


     The total amount currently undergoing court receivership as of December 31,
2002 was W338 billion, including W311 billion of loans and W27 billion of other
exposures.

 Composition

     Composition is also a court supervised procedure to rehabilitate an
insolvent company. The restructuring plan is adopted at a meeting of interested
parties and is subject to approval of a court. However, in composition
proceedings the management of the company retains its management power.
Unreported claims are not discharged at the end of a composition plan although
the creditors are required to report their claims to the court if they want to
exercise their votes at the meeting of interested parties. In addition, secured
creditors may enforce their security interest outside the composition proceeding
unless they waive their security interest and consent to the composition plan.

     The total amount currently undergoing composition as of December 31, 2002
was W141 billion, including W137 billion of loans and W4 billion of other
exposures.

     Loans in the process of workout, court receivership or composition continue
to be reported as loans on our balance sheet and are included as nonaccrual
loans described in "-- Nonaccrual Loans and Past Due Accruing Loans" above since
they are generally past due more than one day and on which, we do not generally
accrue any interest. Restructured loans that meet the U.S. GAAP definition of a
troubled debt restructuring are included within "-- Troubled Debt
Restructurings" described above. These are disclosed as loans or securities
after the restructuring within our balance sheet depending on the nature of the
instrument we receive.

     The following table shows, as of December 31, 2002, our ten largest
exposures (both the Group and Chohung Bank combined) that had been negotiated in
workouts, composition or court receivership.

<Table>
<Caption>
                                                                   AS OF DECEMBER 31, 2002
                                           -----------------------------------------------------------------------
                                                  LOANS
                                           -------------------                             GUARANTEES
                                             WON      FOREIGN      EQUITY        DEBT          AND         TOTAL
COMPANY                                    CURRENCY   CURRENCY   SECURITIES   SECURITIES   ACCEPTANCES   EXPOSURES
- -------                                    --------   --------   ----------   ----------   -----------   ---------
                                                                    (IN BILLIONS OF WON)
<S>                                        <C>        <C>        <C>          <C>          <C>           <C>
Hynix Semiconductor......................    W305       W112        W127         W  2         W --        W  546
Ssangyong Corporation....................      34        153           3           40          178           408
Ssangyong Cement Industrial..............     158         --          --           87           --           245
Inchon Oil Refinery......................     132         --          --           --           --           132
Hyundai Engineering & Construction.......      17         --          64           40           --           121
Ssangyong Motors.........................       6         --          63           --           48           117
Hyundai Petrochemical ...................      71         19          13            3            8           114
Saehan Industries Inc. ..................      87         18           3           --            1           109
Dong Bang Textile & Mart Co., Ltd. ......      35         31          --           13            6            85
Daewoo Electronics Service ..............      40         13          --            3           --            56
                                             ----       ----        ----         ----         ----        ------
  Total..................................    W885       W346        W273         W188         W241        W1,933
                                             ====       ====        ====         ====         ====        ======
</Table>

 POTENTIAL PROBLEM LOANS

     As of December 31, 2002, we (both the Group and Chohung Bank combined) had
W1,390 billion of loans which are current as to payment of principal and
interest but where there exists serious doubt as to the ability of the borrower
to comply with repayment terms in the near future, which consist primarily of
our loans to SK Global, Hyundai Merchant Marine, Daewoo Motor Co., Ltd. and
Hyundai Corporation. These loans are classified as impaired and therefore
included in our calculation of loan loss allowance under U.S. GAAP.

                                       127
<PAGE>

     We have certain other interest-earning assets that, if they were loans,
would be required to be disclosed as part of the nonaccrual, past due or
troubled debt restructuring or potential problem loan disclosures provided
above. As of December 31, 2002, we had debt securities with a book value of W24
billion on which interest was past due.

 SALES OF SUBSTANDARD OR BELOW LOANS TO KOREA ASSET MANAGEMENT CORPORATION

     In December 1997, in response to the financial difficulties faced by Korean
financial institutions as a result of the severe economic deterioration in
Korea, the Korean government required Korea Asset Management Corporation to
purchase certain assets which were classified as substandard or below from
Korean financial institutions at discounted prices. Korea Asset Management
Corporation was initially incorporated by the government in 1962 and
re-established in 1997 for the purpose of acquisition and resolution of
non-performing assets from Korean financial institutions and operation and
management of Non-Performing Asset Management Fund. Shares of Korea Asset
Management Corporation are held by the Korean government and Korean financial
institutions. Non-Performing Asset Management Fund was established with the
contributions from the Korean government and Korean financial institutions to
raise funds necessary for acquisition of non-performing assets from financial
institutions. Major decisions regarding operation and management of
Non-Performing Asset Management Fund and Korea Asset Management Corporation are
made by the Management Committee which consists of members from certain
governmental agencies including the Ministry of Finance and Economy, the
Financial Supervisory Commission and Korea Deposit Insurance Corporation while
managerial matters of Korea Asset Management Corporation are decided and
implemented by its board of directors.

     Accordingly, both the Group and Chohung Bank sold loans classified as
substandard or below to Korea Asset Management Corporation, subject to certain
purchase price adjustments. Pursuant to the purchase agreement with Korea Asset
Management Corporation, the purchase price of the substandard or below loans can
be adjusted by Korea Asset Management Corporation following the sale based on a
valuation of any underlying collateral or, for substandard or below loans
relating to borrowers in restructuring proceedings, based on the value of their
payments on the loans under the final restructuring plan.

     The original transfers of loans to Korea Asset Management Corporation by
the Group and Chohung Bank are accounted for as sales and therefore derecognized
from the balance sheet since we have surrendered control over these loans.

     In addition, Korea Asset Management Corporation can require us to
repurchase any substandard or below loan that we have sold to them in the event
that certain criteria of the loan are not met. We may also be required to
repurchase any loan relating to a borrower that has applied to a court for
restructuring or that is the subject of restructuring proceedings at the time of
our sale to Korea Asset Management Corporation if a court rejects the
application for restructuring, disapproves the restructuring plan or fails to
approve the restructuring plan within two years of the sale. We may also be
required to repurchase a loan if it is determined by a court that the borrower
cannot meet the terms of the repayment schedule developed in the restructuring
proceeding. The ability of Korea Asset Management Corporation to exercise its
right to require us to repurchase loans sold is without expiration.

     Since we may be liable for the failure of debtors to pay when due, and
where we may be required to repurchase loans in the event that they do not meet
the purchase criteria specified in the agreements, we also estimate a recourse
liability at the date of sale. This liability reflects an estimate of the loss
that is probable of occurring at the future date of repurchase and takes into
consideration actual repurchases which have occurred in subsequent periods, and
repurchases which are expected to occur based on an understanding of the current
status of the underlying loans.

     A gain or loss was recognized at the date of sale representing the
difference between the settled purchase price received from Korea Asset
Management Corporation and the carrying amount of the loan in respect of those
loans where no recourse liability existed, or for those that were not passed
back before the remaining outstanding balance was repaid by the borrower.

                                       128
<PAGE>

     For those loans where a recourse liability existed, a gain or loss was
still recognized as of the transfer date after reflecting this liability.

     Korea Asset Management Corporation will notify us when it is prepared to
transfer loans back or provide valuation adjustments. At this time the loans are
considered to be settled. When this settlement has occurred, we consider our
recourse liability to be settled.

     Almost every loan the Group or Chohung Bank had sold to Korea Asset
Management Corporation had been settled prior to December 2002 and no more
significant settlements are expected to occur. As of December 31, 2001, the
remaining loans of the Group for which Korea Asset Management Corporation has
recourse amounted to W159 billion against which the Group had recorded a
recourse liability of W41 billion. As of December 31, 2002 the remaining loans
of the Group for which Korea Asset Management Corporation has recourse amounted
to W96 billion of loans against which the Group had recorded a recourse
liability of W25 billion. As of December 31, 2001, the remaining loans of
Chohung Bank for which Korea Asset Management Corporation has recourse amounted
to W671 billion against which Chohung Bank had estimated a recourse liability of
W256 billion. As of December 31, 2002 the remaining loans for which Korea Asset
Management Corporation has recourse amounted to W160 billion against which
Chohung Bank had estimated a recourse liability of W66 billion.

 PROVISIONING POLICY

     We conduct periodic and systematic detailed reviews of our loan portfolios
to help identify credit risks and to evaluate the adequacy of the overall
allowance for loan losses. Our management believes the allowance for loan losses
reflects the best estimate of the probable loan losses incurred as of each
balance sheet date.

     Our loan loss allowance determined under U.S. GAAP comprises a specific
allowance and a general allowance. The specific allowance is applied to
corporate loans that are considered to be impaired and are either individually
or collectively evaluated for impairment. The general allowance is applied to
all other loans to reflect losses that have been incurred but not specifically
identified.

 Loan Classifications

     For Korean GAAP and regulatory reporting purposes, our banking operation
bases its provisioning on the following loan classifications that classify
corporate and consumer loans, with the exception of credit card receivables
which are classified based on the number of days past due, as required by the
Financial Supervisory Commission.

<Table>
<Caption>
LOAN CLASSIFICATION                           LOAN CHARACTERISTICS
- -------------------                           --------------------
<S>                       <C>
Normal..................  Loans made to customers whose financial position, future
                          cash flows and nature of business are deemed financially
                          sound. No problems in recoverability are expected.
Precautionary...........  Loans made to customers whose financial position, future
                          cash flows and nature of business show potential weakness,
                          although there is no immediate risk of nonrepayment.
Substandard.............  Loans to customers whose adverse financial position, future
                          cash flows and nature of business have a direct effect on
                          the repayment of the loan.
Doubtful................  Loans to customers whose financial position, future cash
                          flows and nature of business are so weak that significant
                          risk exists in the recoverability of the loan, to the extent
                          the outstanding amount exceeds any collateral pledged.
Estimated loss..........  Loans where write-off is unavoidable.
</Table>

     Under U.S. GAAP, a loan is impaired when, based on current information and
events, it is probable that the creditor will be unable to collect all amounts
due according to the contractual terms of the agreement.

                                       129
<PAGE>

We use our local loan classifications as a basis to identify impaired loans. We
consider the following loans to be impaired loans for the purpose of determining
our specific allowance:

     - loans classified as "substandard" or below according to the asset
       classification guidelines of Financial Supervisory Commission;

     - loans that are 90 days or more past due; and

     - loans which are "troubled debt restructurings" as defined under U.S.
       GAAP.

 Corporate Loans

     We review all corporate loans annually for potential impairment through a
formal credit review, however, our loan officers also consider the credits for
impairment throughout the year should information be presented that may indicate
an impairment event has occurred.

     Specific loan loss allowances for corporate loans are established based on
whether a particular loan is impaired. Smaller balance corporate loans are
evaluated collectively for impairment as these loans are managed collectively.

 -- Loans individually identified for review and considered impaired

     Consistent with the respective internal credit risk monitoring policies,
the Group evaluates impaired loans in excess of W1 billion individually for
impairment and Chohung Bank evaluates impaired loans in excess of W2 billion
individually for impairment.

     Loan loss allowances for these loans are generally established by
discounting the estimated future cash flows (both principal and interest) we
expect to receive using the loan's effective interest rate. We consider the
likelihood of all possible outcomes in determining our best estimate of expected
future cash flows. Management consults closely with individual loan officers and
reviews the cash flow assumptions used to ensure these estimates are valid.

     Alternatively, for impaired loans that are considered collateral dependent,
the amount of impairment is determined by reference to the fair value of the
collateral. We consider the reliability and timing of appraisals and determine
the reasonableness of fair value estimates, taking into account the time to
value the collateral and current market conditions.

     We may also measure impairment by reference to the loan's observable market
price, however the availability of this information is not commonplace in Korea.

     We establish a specific allowance when the discounted cash flow (or
collateral value) is lower than the carrying amount of the loan. The specific
allowance is equal to the difference between the discounted cashflow (or
collateral value) amount and the related carrying amount of the loan.

 -- Loans collectively evaluated for impairment

     The Group and Chohung Bank also establish specific allowances for impaired
corporate loans less than W1 billion and W2 billion, respectively. These loans
are managed on a portfolio basis and are therefore collectively evaluated for
impairment since it is not practical to analyze or provide for our smaller loans
on an individual, loan by loan basis.

     The allowance is determined based on loss factors taking into consideration
past performance of the portfolio, previous loan loss history and charge-off
information.

     These loss factors are developed through a migration model that is a
statistical tool used to monitor the progression of loans through different
classifications over a specific time period. We adjust these loss factors

                                       130
<PAGE>

developed for other qualitative or quantitative factors that affect the
collectibility of the portfolio as of the evaluation date including:

     - Prevailing economic and business conditions within Korea and foreign
       jurisdictions in which we operate;

     - Industry concentrations;

     - Changes in the size and composition of the relevant underlying
       portfolios;

     - Changes in lending policies and procedures, including underwriting
       standards and collection, charge-offs, and recovery practices.

     The following table sets out, at the dates indicated, the Group's loan loss
allowances as a percentage of outstanding loans allocable to the Group's
impaired corporate borrowers based on their loan classification.

<Table>
<Caption>
                                                                  AS OF
                                                              DECEMBER 31,
                                                              -------------
                                                              2001    2002
                                                              -----   -----
                                                              (PERCENTAGES)
<S>                                                           <C>     <C>
Normal......................................................   0.57%   2.09%
Precautionary...............................................   7.39   15.05
Substandard.................................................  27.24   31.06
Doubtful....................................................  70.97   75.39
Estimated loss..............................................  95.77   99.09
</Table>

     The following table sets out, at the dates indicated, Chohung Bank's loan
loss allowances as a percentage of outstanding loans allocable to Chohung Bank's
impaired corporate borrowers based on their loan classification.

<Table>
<Caption>
                                                                  AS OF
                                                              DECEMBER 31,
                                                              -------------
                                                              2001    2002
                                                              -----   -----
                                                              (PERCENTAGES)
<S>                                                           <C>     <C>
Normal......................................................   2.36%   2.21%
Precautionary...............................................  10.51   16.66
Substandard.................................................  35.39   33.58
Doubtful....................................................  60.16   66.74
Estimated loss..............................................  89.88   86.46
</Table>

 -- Loans not specifically identified as impaired

     We establish a general allowance for non-impaired corporate loans to
reflect losses incurred within the portfolio which have not yet been
specifically identified. The general allowance is also determined based on loss
factors developed through a migration model and are adjusted, as appropriate
using similar criteria as above.

 Leases

     For leases, we follow a similar approach to corporate loans collectively
evaluated for impairment and establish allowances based on loss factors
developed through a migration model and adjusted for specific circumstances
related to individual borrowers of the leased asset.

                                       131
<PAGE>

 Consumer loans

     Consumer loans are segmented into the following product types for the
purposes of evaluation of credit risk:

     - Mortgages;

     - Home equity loans;

     - Other consumer loans (consisting of unsecured and secured consumer
       loans); and

     - Credit cards.

 -- Mortgages, home equity loans and other consumer loans

     For loan losses on mortgages, home equity loans and other consumer loans,
we also establish allowances based on loss factors taking into consideration
historical performance of the portfolio, previous loan loss history and
charge-off information.

     We adjust the loss factors derived from the migration analysis as
appropriate to reflect the impact of any current conditions on loss recognition
that has not been adequately captured by our historical analysis. These include:

     - Changes in economic and business conditions such as levels of
       unemployment and house prices;

     - Change in the nature and volume of the portfolio, including any
       concentrations of credits;

     - The effect of external factors such as regulatory or government
       requirements.

 -- Credit Cards

     We establish an allowance for the credit card portfolio using a roll-rate
model. A roll-rate model is a statistical tool used to monitor the progression
of loans based on aging of the balance and established loss rates. The actual
loss rates derived from this model are used to project the percentage of losses
within each aging category based on performance over an established period of
time.

     The expected percentage of loss reflects estimates of both default
probability within each loan aging bucket. All loans in excess of six months
past due are charged off accordingly. We adjust our loans for severity of loss
when considering historical recovery of charged off credits when establishing
the allowance.

     We further segment our credit card portfolio and perform separate roll-rate
analyses for card balances, card loans and rewritten card loans to reflect the
different risks and characteristics of these portfolios.

     We adjust the results from the roll-rate analysis as appropriate to reflect
the impact of any current conditions on loss recognition that has not been
adequately captured by our historical analysis. These include:

     - Delinquency levels of cardholders;

     - Current Government involvement within the credit card industry (such as
       the 2001 Government Amnesty Program);

     - Key retail performance indicators (such as ratios of household debt to
       disposable income and household liabilities to financial assets).

     The actual amount of incurred loan losses may vary from the estimate of
incurred losses due to changing economic conditions or changes in industry or
geographic concentrations. We have procedures in place to monitor differences
between estimated and actual incurred loan losses, which include detailed
periodic assessments by senior management of both individual loans and credit
portfolios and the models used to estimate incurred loan losses in those
portfolios.

                                       132
<PAGE>

 LOAN AGING SCHEDULE

  Shinhan

     The following table shows the Group's loan aging schedule (excluding
accrued interest) as of the dates indicated.

<Table>
<Caption>
                                            PAST DUE         PAST DUE      PAST DUE MORE
                           CURRENT       UP TO 3 MONTHS     3-6 MONTHS     THAN 6 MONTHS
                       ---------------   ---------------   -------------   -------------    TOTAL
AS OF DECEMBER 31,     AMOUNT      %     AMOUNT     %      AMOUNT    %     AMOUNT    %     AMOUNT
- ------------------     -------   -----   ------   ------   ------   ----   ------   ----   -------
                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                    <C>       <C>     <C>      <C>      <C>      <C>    <C>      <C>    <C>
2000.................  W27,049   97.06%   W413     1.48%    W 79    0.28%   W328    1.18%  W27,869
2001.................   32,648   96.98     487     1.45      144    0.43     386    1.14    33,665
2002.................   43,962   97.58     572     1.27      121    0.27     397    0.88    45,052
</Table>

  Chohung

     The following table shows Chohung Bank's loan aging schedule (excluding
accrued interest) as of the dates indicated.

<Table>
<Caption>
                                            PAST DUE         PAST DUE      PAST DUE MORE
                           CURRENT       UP TO 3 MONTHS     3-6 MONTHS     THAN 6 MONTHS
                       ---------------   ---------------   -------------   -------------    TOTAL
AS OF DECEMBER 31,     AMOUNT      %     AMOUNT     %      AMOUNT    %     AMOUNT    %     AMOUNT
- ------------------     -------   -----   ------   ------   ------   ----   ------   ----   -------
                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                    <C>       <C>     <C>      <C>      <C>      <C>    <C>      <C>    <C>
2000.................  W29,024   93.75%  W  691    2.23%    W204    0.66%  W1,041   3.36%  W30,960
2001.................   33,366   94.09    1,049    2.96      276    0.78     771    2.17    35,462
2002.................   43,344   94.16    1,577    3.43      472    1.03     637    1.38    46,030
</Table>

  Shinhan and Chohung Combined

     The following table shows the loan aging schedule (excluding accrued
interest) of both the Group and Chohung Bank combined as of the dates indicated.

<Table>
<Caption>
                                            PAST DUE         PAST DUE      PAST DUE MORE
                           CURRENT       UP TO 3 MONTHS     3-6 MONTHS     THAN 6 MONTHS
                       ---------------   ---------------   -------------   -------------    TOTAL
AS OF DECEMBER 31,     AMOUNT      %     AMOUNT     %      AMOUNT    %     AMOUNT    %     AMOUNT
- ------------------     -------   -----   ------   ------   ------   ----   ------   ----   -------
                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                    <C>       <C>     <C>      <C>      <C>      <C>    <C>      <C>    <C>
2000.................  W56,073   95.32%  W1,104    1.88%    W283    0.48%  W1,369   2.33%  W58,829
2001.................   66,014   95.50    1,536    2.22      420    0.61    1,157   1.67    69,127
2002.................   87,306   95.85    2,149    2.36      593    0.65    1,034   1.14    91,082
</Table>

 NON-PERFORMING LOANS

     Non-performing loans are defined as loans greater than 90 days past due.
These loans are generally rated "substandard" or below.

     The following table shows, as of the dates indicated, certain details of
the total non-performing loan portfolio of the Group, Chohung Bank and both the
Group and Chohung combined.

  Shinhan

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                              2000    2001    2002
                                                              -----   -----   -----
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>     <C>     <C>
Total non-performing loans..................................  W 407   W 530   W 518
As a percentage of total loans..............................   1.46%   1.57%   1.15%
</Table>

                                       133
<PAGE>

  Chohung

<Table>
<Caption>
                                                                 AS OF DECEMBER 31,
                                                              ------------------------
                                                               2000     2001     2002
                                                              ------   ------   ------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>      <C>      <C>
Total non-performing loans..................................  W1,245   W1,047   W1,109
As a percentage of total loans..............................    4.02%    2.95%    2.41%
</Table>

  Shinhan and Chohung Combined

<Table>
<Caption>
                                                                 AS OF DECEMBER 31,
                                                              ------------------------
                                                               2000     2001     2002
                                                              ------   ------   ------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>      <C>      <C>
Total non-performing loans..................................  W1,652   W1,577   W1,627
As a percentage of total loans..............................    2.81%    2.28%    1.79%
</Table>

 ANALYSIS OF NON-PERFORMING LOANS

     The following table sets forth, for the periods indicated, the total
non-performing loans of the Group, Chohung Bank and both the Group and Chohung
Bank combined by type of borrower.

  Shinhan

<Table>
<Caption>
                                                                     AS OF DECEMBER 31,
                          ---------------------------------------------------------------------------------------------------------
                                        2000                                2001                                2002
                          ---------------------------------   ---------------------------------   ---------------------------------
                                                  RATIO OF                            RATIO OF                            RATIO OF
                                       NON-         NON-                   NON-         NON-                   NON-         NON-
                           TOTAL    PERFORMING   PERFORMING    TOTAL    PERFORMING   PERFORMING    TOTAL    PERFORMING   PERFORMING
                           LOANS      LOANS        LOANS       LOANS      LOANS        LOANS       LOANS      LOANS        LOANS
                          -------   ----------   ----------   -------   ----------   ----------   -------   ----------   ----------
                                                          (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                       <C>       <C>          <C>          <C>       <C>          <C>          <C>       <C>          <C>
CORPORATE
  Commercial and
    industrial..........  W13,847      W238         1.72%     W13,459      W342         2.54%     W15,800      W211         1.34%
  Other commercial......    6,746       121         1.79        6,748       125         1.85        9,352       205         2.19
  Lease financing.......       --        --           --          598         3         0.50          636         1         0.16
                          -------      ----         ----      -------      ----         ----      -------      ----         ----
    Total corporate.....   20,593       359         1.74       20,805       470         2.26       25,788       417         1.62
                          -------      ----         ----      -------      ----         ----      -------      ----         ----
CONSUMER
  Mortgage and home
    Equity..............    2,376        28         1.18        7,253        28         0.39       11,539        34         0.29
  Credit cards..........    1,570         9         0.57        2,070        16         0.77        2,763        48         1.74
  Other consumer........    3,330        11         0.33        3,537        16         0.45        4,962        19         0.38
                          -------      ----         ----      -------      ----         ----      -------      ----         ----
    Total consumer......    7,276        48         0.66       12,860        60         0.47       19,264       101         0.52
                          -------      ----         ----      -------      ----         ----      -------      ----         ----
TOTAL...................  W27,869      W407         1.46%     W33,665      W530         1.57%     W45,052      W518         1.15%
                          =======      ====         ====      =======      ====         ====      =======      ====         ====
</Table>

                                       134
<PAGE>

  Chohung
<Table>
<Caption>
                                              AS OF DECEMBER 31,
                       ----------------------------------------------------------------
                                       2000                              2001
                       -------------------------------------   ------------------------
                                                   RATIO OF
                                        NON-         NON-                       NON-
                                     PERFORMING   PERFORMING                 PERFORMING
                       TOTAL LOANS     LOANS        LOANS      TOTAL LOANS     LOANS
                       -----------   ----------   ----------   -----------   ----------
                                   (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                    <C>           <C>          <C>          <C>           <C>
CORPORATE
  Commercial and
    industrial.......    W14,862       W  579        3.90%       W13,902       W  498
  Other commercial...      6,995          574        8.21          7,080          410
  Lease financing....        786           31        3.94            553           30
                         -------       ------        ----        -------       ------
    Total
      corporate......     22,643        1,184        5.23         21,535          938
                         -------       ------        ----        -------       ------
CONSUMER
  Mortgage and home
    Equity...........      1,785            4        0.22          3,993            8
  Credit cards.......      2,954           43        1.46          4,869           77
  Other consumer.....      3,578           14        0.39          5,065           24
                         -------       ------        ----        -------       ------
    Total consumer...      8,317           61        0.73         13,927          109
                         -------       ------        ----        -------       ------
TOTAL................    W30,960       W1,245        4.02%       W35,462       W1,047
                         =======       ======        ====        =======       ======

<Caption>
                                       AS OF DECEMBER 31,
                       --------------------------------------------------
                          2001                      2002
                       ----------   -------------------------------------
                        RATIO OF                                RATIO OF
                          NON-                       NON-         NON-
                       PERFORMING                 PERFORMING   PERFORMING
                         LOANS      TOTAL LOANS     LOANS        LOANS
                       ----------   -----------   ----------   ----------
                            (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                    <C>          <C>           <C>          <C>
CORPORATE
  Commercial and
    industrial.......     3.58%       W16,814       W  394        2.34%
  Other commercial...     5.79          7,611          315        4.14
  Lease financing....     5.42            429           18        4.20
                          ----        -------       ------        ----
    Total
      corporate......     4.36         24,854          727        2.93
                          ----        -------       ------        ----
CONSUMER
  Mortgage and home
    Equity...........     0.20          7,167           13        0.18
  Credit cards.......     1.58          5,770          273        4.73
  Other consumer.....     0.47          8,239           96        1.17
                          ----        -------       ------        ----
    Total consumer...     0.78         21,176          382        1.80
                          ----        -------       ------        ----
TOTAL................     2.95%       W46,030       W1,109        2.41%
                          ====        =======       ======        ====
</Table>

  Shinhan and Chohung Combined
<Table>
<Caption>
                                              AS OF DECEMBER 31,
                       ----------------------------------------------------------------
                                       2000                              2001
                       -------------------------------------   ------------------------
                                                   RATIO OF
                                        NON-         NON-                       NON-
                                     PERFORMING   PERFORMING                 PERFORMING
                       TOTAL LOANS     LOANS        LOANS      TOTAL LOANS     LOANS
                       -----------   ----------   ----------   -----------   ----------
                                   (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                    <C>           <C>          <C>          <C>           <C>
CORPORATE
  Commercial and
    industrial.......    W28,709       W  817        2.85%       W27,361       W  840
  Other commercial...     13,741          695        5.06         13,828          535
  Lease financing....        786           31        3.94          1,151           33
                         -------       ------        ----        -------       ------
    Total
      corporate......     43,236        1,543        3.57         42,340        1,408
                         -------       ------        ----        -------       ------
CONSUMER
  Mortgage and home
    Equity...........      4,161           32        0.77         11,246           36
  Credit cards.......      4,524           52        1.15          6,939           93
  Other consumer.....      6,908           25        0.36          8,602           40
                         -------       ------        ----        -------       ------
    Total consumer...     15,593          109        0.70         26,787          169
                         -------       ------        ----        -------       ------
TOTAL................    W58,829       W1,652        2.81%       W69,127       W1,577
                         =======       ======        ====        =======       ======

<Caption>
                                       AS OF DECEMBER 31,
                       --------------------------------------------------
                          2001                      2002
                       ----------   -------------------------------------
                        RATIO OF                                RATIO OF
                          NON-                       NON-         NON-
                       PERFORMING                 PERFORMING   PERFORMING
                         LOANS      TOTAL LOANS     LOANS        LOANS
                       ----------   -----------   ----------   ----------
                            (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                    <C>          <C>           <C>          <C>
CORPORATE
  Commercial and
    industrial.......     3.07%       W32,614       W  605        1.86%
  Other commercial...     3.87         16,963          520        3.07
  Lease financing....     2.87          1,065           19        1.78
                          ----        -------       ------        ----
    Total
      corporate......     3.33         50,642        1,144        2.26
                          ----        -------       ------        ----
CONSUMER
  Mortgage and home
    Equity...........     0.32         18,706           47        0.25
  Credit cards.......     1.34          8,533          321        3.76
  Other consumer.....     0.47         13,201          115        0.87
                          ----        -------       ------        ----
    Total consumer...     0.22         40,440          483        1.19
                          ----        -------       ------        ----
TOTAL................     2.28%       W91,082       W1,627        1.79%
                          ====        =======       ======        ====
</Table>

                                       135
<PAGE>

 TOP TWENTY NON-PERFORMING LOANS

     As of December 31, 2002, our twenty largest non-performing loans accounted
for 35.7% of our total non-performing loan portfolio. The following table shows,
at the date indicated, certain information regarding our twenty largest
non-performing loans.

<Table>
<Caption>
                                                         AS OF DECEMBER 31, 2002
                              -----------------------------------------------------------------------------
                                                                          GROSS PRINCIPAL    ALLOWANCE FOR
                                              INDUSTRY                      OUTSTANDING       LOAN LOSSES
                              -----------------------------------------   ---------------   ---------------
                                                                                (IN BILLIONS OF WON)
<S>                           <C>                                         <C>               <C>
Borrower A..................  Manufacturing                                    W132              W 75
Borrower B..................  Manufacturing                                      73                31
Borrower C..................  Manufacturing                                      45                44
Borrower D..................  Manufacturing                                      43                29
Borrower E..................  Manufacturing                                      40                 7
Borrower F..................  Manufacturing                                      35                20
Borrower G..................  Manufacturing                                      20                16
Borrower H..................  Manufacturing                                      19                 1
Borrower I..................  Manufacturing                                      18                17
Borrower J..................  Construction                                       17                 5
Borrower K..................  Manufacturing                                      17                 7
Borrower L..................  Manufacturing                                      16                --
Borrower M..................  Retail & wholesale                                 15                 9
Borrower N..................  Manufacturing                                      15                15
Borrower O..................  Transportation, storage and communication          14                 1
Borrower P..................  Manufacturing                                      14                 7
Borrower Q..................  Construction                                       14                 4
Borrower R..................  Manufacturing                                      12                 9
Borrower S..................  Manufacturing                                      11                10
Borrower T..................  Construction                                       10                10
                                                                               ----              ----
  Total.....................                                                   W580              W317
                                                                               ====              ====
</Table>

 NON-PERFORMING LOAN STRATEGY

     One of our primary objectives is to prevent our loans from becoming
non-performing. Through our corporate credit rating system, we believe that we
have reduced its risks relating to future non-performing loans. Our credit
rating system is designed to prevent our loan officers from extending new loans
to borrowers with high credit risks based on the borrower's credit rating. Our
early warning system is designed to bring any sudden increase in a borrower's
credit risk to the attention of our loan officers, who then closely monitor such
loans.

     Notwithstanding the above, if a loan becomes non-performing, an officer at
the branch level responsible for monitoring non-performing loans will commence
due diligence of the borrower's assets, send a notice demanding payment or a
notice that we will take legal action and prepare for legal action.

     At the same time, we also initiate our non-performing loan management
process, which begins with:

     - identifying loans subject to a proposed sale by assessing the estimated
       losses from such sale based on the estimated recovery value of
       collateral, if any, for such non-performing loans;

     - identifying loans subject to charge-off based on the estimated recovery
       value of collateral, if any, for such non-performing loans and the
       estimated rate of recovery of unsecured loans; and

     - on a limited basis, identifying commercial loans subject to normalization
       efforts based on the cash-flow situation of the borrower.

                                       136
<PAGE>

     Once the details of a non-performing loan are identified, we pursue early
solutions for recovery. Actual recovery efforts on non-performing loans are
handled by several of our departments or units, depending on the nature of,
including the borrower, such loans.

     The officers or agents of the responsible departments and units mentioned
above use a variety of methods to resolve non-performing loans, including:

     - making phone calls and paying visits to the borrower requesting payment;

     - continuing to assess and evaluate assets of our borrowers; and

     - if necessary, initiating legal action such as foreclosures, attachments
       and litigation.

     In order to promote speedy recovery on loans subject to foreclosures and
litigation, our policy is to permit the branch responsible for handling these
loans to transfer them to the relevant unit at headquarters or regional
headquarters.

     Our policy is to commence legal action within one month after default on
promissory note and four months after delinquency of payment on loans. For loans
to insolvent or bankrupt borrowers, we take legal action immediately.

     In addition to making efforts to collect on these non-performing loans, we
also undertake measures to reduce the level of its non-performing loans, which
include:

     - selling non-performing loans to third parties including the Korea Asset
       Management Corporation;

     - entering into asset-backed securitization transactions with respect to
       non-performing loans;

     - managing consumer loans that are three months or more past due through
       Shinhan Credit Information under an agency agreement in the case of the
       Group and through Consumer Loan Collection Division in the case of
       Chohung Bank; and

     - using third-party collection agencies including the Solomon Credit
       Information.

 ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

  Shinhan

     The following table presents the allocation of the Group's loan loss
allowance by loan type. The ratio represents the percentage of loan loss
allowance of each loan type to total loan loss allowance.

<Table>
<Caption>
                                                           AS OF DECEMBER 31,
                                            ------------------------------------------------
                                                 2000             2001             2002
                                            --------------   --------------   --------------
                                                (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                         <C>     <C>      <C>     <C>      <C>     <C>
Corporate
  Commercial and Industrial...............  W 547    66.06%  W 323    44.86%  W 341    34.24%
  Other commercial........................    233    28.14     275    38.19     365    36.65
  Lease financing.........................     --       --      35     4.86      22     2.21
                                            -----   ------   -----   ------   -----   ------
     Total corporate......................    780    94.20     633    87.91     728    73.10
                                            -----   ------   -----   ------   -----   ------
Consumer
  Mortgages and home equity...............      3     0.36       9     1.25      30     3.01
  Credit cards............................     34     4.11      56     7.78     179    17.97
  Other consumer..........................     11     1.33      22     3.06      59     5.92
                                            -----   ------   -----   ------   -----   ------
     Total consumer.......................     48     5.80      87    12.09     268    26.90
                                            -----   ------   -----   ------   -----   ------
Total allowance for loan losses...........  W 828   100.00%  W 720   100.00%  W 996   100.00%
                                            =====   ======   =====   ======   =====   ======
</Table>

                                       137
<PAGE>

     The Group's total allowance for loan losses increased by W168 billion, or
20.3%, from W828 billion to W996 billion as of December 31, 2000 and 2002,
respectively. During 2001, the allowance for loan losses decreased by W108
billion, or 13.0%, due to decreases in allowances for loan losses in the
corporate sectors. During 2002, the allowance for loan losses increased by W276
billion, or 38.3%, to W996 billion as of December 31, 2002, as a result of
increases in allowances for loan losses in both the corporate and consumer
sectors.
     The allowance for corporate loan losses decreased by W147 billion, or
18.9%, from W780 billion to W633 billion as of December 31, 2000 and 2001,
respectively. This decrease is primarily attributable to a W386 billion, or
20.6%, decrease in the level of impaired corporate loans from W1,878 billion to
W1,492 billion during the period under review. The change in the level of the
corporate allowance for loan losses was principally related to the write-off of
impaired loans.
     The allowance for corporate loan losses increased by W95 billion, or 15.0%,
from W633 billion to W728 billion as of December 31, 2001 and 2002,
respectively. This change is the result of acquisition of subsidiaries and an
increase in new loans extended to SK Global.
     In the consumer sector, the Group's allowance for loan losses increased by
W39 billion, or 81.3%, from W48 billion as of December 31, 2000 to W87 billion
as of December 31, 2001, primarily due to an increase in consumer loans.
Allowance for loan losses increased 208.1% from W87 billion as of December 31,
2001 to W268 billion as of December 31, 2002 as a result of an increase in
consumer lending due to the extension of new consumer loans and the acquisition
of subsidiaries in 2002, as well as an increase in delinquency rate.

  Chohung

     The following table presents the allocation of Chohung Bank's loan loss
allowance by loan type. The ratio represents the percentage of loan loss
allowance of each loan type to total loan loss allowance.

<Table>
<Caption>
                                               AS OF DECEMBER 31,
                            --------------------------------------------------------
                                  2000                2001                2002
                            ----------------    ----------------    ----------------
                                    (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                         <C>       <C>       <C>       <C>       <C>       <C>
Corporate
  Commercial and
     Industrial...........  W1,720     57.22%   W  937     46.12%   W  957     35.74%
  Other commercial........     949     31.57       616     30.31       428     15.98
  Lease financing.........     167      5.56       105      5.17        50      1.87
                            ------    ------    ------    ------    ------    ------
     Total corporate......   2,836     94.35     1,658     81.60     1,435     53.59
                            ------    ------    ------    ------    ------    ------
Consumer
  Mortgages and home
     equity...............       4      0.13         7      0.34        13      0.49
  Credit cards............     135      4.49       300     14.76     1,061     39.61
  Other consumer..........      31      1.03        67      3.30       169      6.31
                            ------    ------    ------    ------    ------    ------
     Total consumer.......     170      5.65       374     18.40     1,243     46.41
                            ------    ------    ------    ------    ------    ------
Total allowance for loan
  losses..................  W3,006    100.00%   W2,032    100.00%   W2,678    100.00%
                            ======    ======    ======    ======    ======    ======
</Table>

     Chohung Bank's total allowance for loan losses decreased by W328 billion,
or 10.9%, from W3,006 billion to W2,678 billion as of December 31, 2000 and
2002, respectively. During 2001, the allowance for loan losses decreased by W974
billion, or 32.4%, due to decreases in allowances for loan losses in the
corporate sector. During 2002, the allowance for loan losses increased by W646
billion, or 31.8%, to W2,678 billion as of December 31, 2002, due to increases
in allowances for loan losses in the consumer sector.
     The allowance for corporate loan losses decreased by W1,178 billion, or
41.5%, from W2,836 billion to W1,658 billion as of December 31, 2000 and 2001,
respectively. This decrease is primarily attributable to a W1,732 billion, or
35.0%, decrease in the level of impaired corporate loans from W4,948 billion to

                                       138
<PAGE>

W3,216 billion during the period under review. The change in the level of the
corporate allowance for loan losses was principally related to the charge-off of
impaired loans.
     The allowance for corporate loan losses decreased by W223 billion, or
13.4%, from W1,658 billion to W1,435 billion as of December 31, 2001 and 2002,
respectively. This change is the result of a decrease in the impaired loan
amount.
     In the consumer sector, Chohung Bank's allowance for loan losses increased
by W204 billion, or 120.0%, from W170 billion as of December 31, 2000 to W374
billion as of December 31, 2001, primarily due to an increase in credit cards.
Allowance for loan losses increased 232.4% from W374 billion as of December 31,
2001 to W1,243 billion as of December 31, 2002 as a result of an increase in
consumer lending due to the extension of new consumer loans and an increase in
delinquency rate.

  Shinhan and Chohung Combined

     The following table presents the allocation of loan loss allowance of both
the Group and Chohung Bank combined by loan type. The ratio represents the
percentage of loan loss allowance of each loan type to total loan loss
allowance.

<Table>
<Caption>
                                                         AS OF DECEMBER 31,
                                         ---------------------------------------------------
                                              2000              2001              2002
                                         ---------------   ---------------   ---------------
                                              (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                      <C>      <C>      <C>      <C>      <C>      <C>
Corporate
  Commercial and Industrial............  W2,267    59.12%  W1,260    45.78%  W1,298    35.33%
  Other commercial.....................   1,182    30.83      891    32.38      793    21.58
  Lease financing......................     167     4.36      140     5.09       72     1.96
                                         ------   ------   ------   ------   ------   ------
     Total corporate...................   3,616    94.31    2,291    83.25    2,163    58.87
                                         ------   ------   ------   ------   ------   ------
Consumer
  Mortgages and home equity............       7     0.18       16     0.58       43     1.17
  Credit cards.........................     169     4.41      356    12.94    1,240    33.75
  Other consumer.......................      42     1.10       89     3.23      228     6.21
                                         ------   ------   ------   ------   ------   ------
     Total consumer....................     218     5.69      461    16.75    1,511    41.13
                                         ------   ------   ------   ------   ------   ------
Total allowance for loan losses........  W3,834   100.00%  W2,752   100.00%  W3,674   100.00%
                                         ======   ======   ======   ======   ======   ======
</Table>

     Our total allowance for loan losses decreased by W160 billion, or 4.2%,
from W3,834 billion to W3,674 billion as of December 31, 2000 and 2002,
respectively. During 2001, the allowance for loan losses decreased by W1,082
billion, or 28.2%, due to decreases in allowances for loan losses in the
corporate sectors. During 2002, the allowance for loan losses increased by W922
billion, or 33.5%, to W3,674 billion as of December 31, 2002, as a result of an
increase in allowance for loan losses in the consumer sector.
     The allowance for corporate loan losses decreased by W1,325 billion, or
36.6%, from W3,616 billion to W2,291 billion as of December 31, 2000 and 2001,
respectively. This decrease is primarily attributable to a W2,118 billion, or
31.0%, decrease in the level of impaired corporate loans from W6,826 billion to
W4,708 billion during the period under review. The change in the level of the
corporate allowance for loan losses was principally related to the write-off of
impaired loans.
     The allowance for corporate loan losses decreased by W128 billion, or 5.6%,
from W2,291 billion to W2,163 billion as of December 31, 2001 and 2002,
respectively. This change is the result of a decrease in the impaired loan
amount of Chohung Bank which more than offset the effect of the Group's
acquisition of subsidiaries and an increase in new loans extended to SK Global.
     In the consumer sector, our allowance for loan losses increased W243
billion, or 111.5%, from W218 billion as of December 31, 2000 to W461 billion as
of December 31, 2001, primarily due to an increase in consumer loans. Allowance
for loan losses increased 227.8% from W461 billion as of

                                       139
<PAGE>

December 31, 2001 to W1,511 billion as of December 31, 2002 as a result of an
increase in consumer lending due to the extension of new consumer loans and the
acquisition of subsidiaries in 2002, as well as an increase in delinquency rate.

 ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

  Shinhan

     The following table presents an analysis of the Group's loan loss
experience for each of the years indicated.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Balance at the beginning of the period......................    W 828       W 720
Amounts charged against income..............................      411         236
Allowance relating to loans repurchased from the Korea Asset
  Management Corporation....................................       45          65
Gross charge-offs:
  Corporate:
     Commercial and industrial..............................      379         105
     Other commercial.......................................      345          22
     Lease financing........................................        5          10
  Consumer:
     Mortgage and home equity...............................        2           2
     Credit cards...........................................       39          60
     Other consumer.........................................        9          17
                                                                -----       -----
       Total gross charge-offs..............................     (779)       (216)
                                                                -----       -----
Recoveries:
  Corporate:
     Commercial and industrial..............................       60          53
     Other commercial.......................................       58          21
     Lease financing........................................        1           2
  Consumer:
     Mortgage and home equity...............................       --          --
     Credit cards...........................................        7          17
     Other consumer.........................................        2           1
                                                                -----       -----
       Total recoveries.....................................      128          94
                                                                -----       -----
Net charge-offs.............................................     (651)       (122)
                                                                -----       -----
Acquisition of Jeju Bank....................................       --          20
Acquisition of Good Morning Securities......................       --          77
Acquisition of Shinhan Capital..............................       64          --
Acquisition of Shinhan Securities...........................       23          --
                                                                -----       -----
Balance at the end of the period............................    W 720       W 996
                                                                =====       =====
Ratio of net charge-offs during the period to average loans
  outstanding during the period.............................     2.07%       0.30%
</Table>

                                       140
<PAGE>

  Chohung

     The following table presents an analysis of Chohung Bank's loan loss
experience for each of the years indicated.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Balance at the beginning of the period......................   W 3,006     W 2,032
Amounts charged against income..............................       553       1,385
Allowance relating to loans repurchased from the Korea Asset
  Management Corporation....................................       216         385
Gross charge-offs:
  Corporate:
    Commercial and industrial...............................     1,048         644
    Other commercial........................................       937         190
    Lease financing.........................................        10          --
  Consumer:
    Mortgage and home equity................................         1           1
    Credit cards............................................       179         493
    Other consumer..........................................        18          68
                                                               -------     -------
       Total gross charge-offs..............................    (2,193)     (1,396)
                                                               -------     -------
Recoveries:
  Corporate:
    Commercial and industrial...............................       287         160
    Other commercial........................................        91          75
    Lease financing.........................................        --          --
  Consumer:
    Mortgage and home equity................................        --          --
    Credit cards............................................        42          28
    Other consumer..........................................        30           9
                                                               -------     -------
       Total recoveries.....................................       450         272
                                                               -------     -------
Net charge-offs.............................................    (1,743)     (1,124)
                                                               -------     -------
Balance at the end of the period............................   W 2,032     W 2,678
                                                               =======     =======
Ratio of net charge-offs during the period to average loans
  outstanding during the period.............................      5.43%       2.70%
</Table>

                                       141
<PAGE>

  Shinhan and Chohung Combined

     The following table presents an analysis of our loan loss experience, both
the Group and Chohung Bank combined, for each of the years indicated.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>         <C>
Balance at the beginning of the period......................   W3,834      W2,752
Amounts charged against income..............................      964       1,621
Allowance relating to loans repurchased from the Korea Asset
  Management Corporation....................................      261         450
Gross charge-offs:
  Corporate:
     Commercial and industrial..............................    1,427         749
     Other commercial.......................................    1,282         212
     Lease financing........................................       15          10
  Consumer:
     Mortgage and home equity...............................        3           3
     Credit cards...........................................      218         553
     Other consumer.........................................       27          85
                                                               ------      ------
       Total gross charge-offs..............................   (2,972)     (1,612)
                                                               ------      ------
Recoveries:
  Corporate:
     Commercial and industrial..............................      347         213
     Other commercial.......................................      149          96
     Lease financing........................................        1           2
  Consumer:
     Mortgage and home equity...............................       --          --
     Credit cards...........................................       49          45
     Other consumer.........................................       32          10
                                                               ------      ------
       Total recoveries.....................................      578         366
                                                               ------      ------
Net charge-offs.............................................   (2,394)     (1,246)
                                                               ------      ------
Acquisition of Jeju Bank....................................       --          20
Acquisition of Good Morning Securities......................       --          77
Acquisition of Shinhan Capital..............................       64          --
Acquisition of Shinhan Securities...........................       23          --
                                                               ------      ------
Balance at the end of the period............................   W2,752      W3,674
                                                               ======      ======
Ratio of net charge-offs during the period to average loans
  outstanding during the period.............................     3.77%       1.51%
</Table>

 LOAN CHARGE-OFFS

     The Group's level of gross charge-offs declined from W779 billion in 2001
to W216 billion in 2002 primarily due to a small number of large exposures
within our corporate portfolio that we deemed to be uncollectible in 2001, based
on events occurring in that year. The number of corporate loans charged off was
similar in both years but the amounts charged off in 2001 were, on average,
significantly higher. The five largest charge-offs in the aggregate were W419
billion and W49 billion in 2001 and 2002, respectively. The charge-offs in 2001
included W271 billion in respect of Hynix Semiconductor and W18 billion in
respect of

                                       142
<PAGE>

Inchon Oil Refinery. The exposures charged off in 2001 were individually
identified as impaired and therefore included within the Group's allowance as of
December 31, 2000 at an amount consistent with the level of gross charge off.
Similarly, charge-offs occurring in 2002 were recorded at a consistent amount
within the Group's allowance as of December 31, 2001. The decrease in gross
charge offs was partly mitigated by increases in credit card and other consumer
charge-offs from W48 billion in 2001 to W77 billion in 2002 reflecting increased
delinquencies within these portfolios.

     Chohung Bank's level of gross charge-offs declined from W2,193 billion in
2001 to W1,396 billion in 2002 due to a small number of large exposures within
the corporate portfolio that Chohung Bank deemed to be uncollectible in 2001,
based on events occurring in that year. The number of corporate loans charged
off was similar in both years but the amounts charged off in 2001 were, on
average, significantly higher. The five largest charge-offs in the aggregate
were W610 billion and W377 billion in 2001 and 2002, respectively. The
charge-offs in 2001 included W231 billion in respect of Jindo Corporation and
W118 billion in respect of Daewoo Corporation. See "Loan
Concentrations -- Exposures to Former Daewoo Group Companies". In addition,
charge offs in 2001 and 2002 included W671 billion and W4 billion in respect of
sales of impaired loans to third parties. The exposures charged off in 2001 were
individually identified as impaired and therefore included within our allowance
as of December 31, 2000 at an amount consistent with the level of gross
charge-off. Similarly, charge-offs occurring in 2002 were recorded at a
consistent amount within Chohung Bank's allowance as of December 31, 2001. The
decrease in gross charge-offs was offset by, an increase in credit card and
other consumer charge-offs from W197 billion in 2001 to W561 billion in 2002,
reflecting increased delinquencies within these portfolios in 2002.

 Basic Principles

     We attempt to minimize loans to be charged off, by practicing a sound
credit approval process based on credit risk analysis prior to extending loans
and a systematic management of outstanding loans. However, we charge off loans
subject to our charge-off policy on a timely basis in order to maximize
accounting transparency.

 Loans To Be Charged-Off

     Loans are charged-off if they are deemed to be uncollectible by falling
under any of the following categories:

     - loans for which collection is not foreseeable due to insolvency or
       bankruptcy, dissolution or the shutting down of the business of the
       debtor;

     - loans for which collection is not foreseeable due to the death or
       disappearance of debtors;

     - loans for which expenses of collection exceed the collectable amount;

     - loans on which collection is not possible through legal or any other
       means;

     - payments in arrears in respect of credit cards, which are overdue for
       more than six months;

     - payments outstanding on unsecured consumer loans, which have been overdue
       for more than six months;

     - payments in arrears in respect of leases, which have been overdue for
       more than twelve months; or

     - the portion of loans classified as "estimated loss", net of any recovery
       from collateral, which is deemed to be uncollectible.

 Procedure for Charge-off Approval

     An application for Shinhan Bank's loans to be charged-off is submitted by a
branch to the Corporate Credit Collection Department in the case of corporate
loans and foreign branches, and Consumer Credit Collection Team in the case of
individual loans. An application for charge off must be submitted four months
prior to the date of the write-off, which is the end of every quarter. The
General Manager in charge of review
                                       143
<PAGE>

evaluates the application. The General Manager of Audit and Examination
Department conducts review of compliance with our internal procedures for
charge-offs. The General Manager in charge of review gets approval from the
President of Shinhan Bank.

     An application for Chohung Bank's loans to be charged-off is submitted by a
branch to the Loan Recovery Division in the case of corporate loans in excess of
W20 million and mortgages and home equity loans, and to the Consumer Loan
Collection Division in the case of corporate loans below W20 million, other
consumer loans and credit cards. An application for charge off must be submitted
three months prior to the date of the write-off, which is the end of every
quarter. The General Manager in charge of review evaluates the application. The
General Manager of Audit and Examination Department conducts review of
compliance with our internal procedures for charge-offs. The General Manager in
charge of review gets approval from the President of Chohung Bank.

 Treatment of Loans Charged-Off

     Once loans are charged-off, they are derecognized from our balance sheet.
Shinhan Bank still continues its collection efforts in respect of these loans
through third-party collection agencies including the Korea Asset Management
Corporation and Shinhan Credit Information. Chohung Bank also continues its
collection efforts in respect of these loans internally using credit information
produced by third parties or through third-party collection agencies including
Solomon Credit Information.

 Treatment of Collateral

     When Shinhan Bank determines that a loan collateralized by real estate
cannot be recovered through normal collection channels, then Shinhan Bank will
petition a court to foreclose and sell the collateral through a court-supervised
auction within one month after default and insolvency and within four months
after delinquency. When Chohung Bank determines that a loan collateralized by
real estate cannot be recovered through normal collection channels, then Chohung
Bank will petition a court to foreclose and sell the collateral through a
court-supervised auction within one month after default and insolvency, within
four months after delinquency and immediately upon default occurring at the
branch level. However, this treatment does not apply to companies under
restructuring, composition, workout or other court proceedings subjecting them
to restrictions on such auction procedures. In our experience, the filing of
this petition with the court generally encourages the debtor to repay the
overdue loan. If a debtor ultimately fails to repay and the court grants its
approval for foreclosure, we will sell the collateral and recover the full
principal amount and accrued interest up to the sales price, net of expenses
incurred from the auction. Foreclosure proceedings under laws and regulations in
Korea typically take from seven months to one year from initiation to collection
depending on the nature of the collateral.

 U.S. GAAP Financial Statement Presentation

     Our U.S. GAAP financial statements include as charges-offs all unsecured
consumer loans, including credit cards, that are overdue for more than six
months. Leases are charged-off when past due for more than twelve months.

INVESTMENT PORTFOLIO

 INVESTMENT POLICY

     We invest in and trade Won-denominated and, to a lesser extent, foreign
currency-denominated securities for its own account to:

     - maintain the stability and diversification of our assets;

     - maintain adequate sources of back-up liquidity to match our funding
       requirements; and

     - supplement income from our core lending activities.

                                       144
<PAGE>

     In making securities investments, we takes into account a number of
factors, including macroeconomic trends, industry analysis and credit evaluation
in determining whether to make particular investments in securities.

     Our investments in securities are also subject to a number of guidelines,
including limitations prescribed under the Financial Holding Company Act and
Bank Act. Under these regulations, a financial holding company may not invest in
securities as defined in the Korean Securities and Exchange Act (other than
those securities issued by its direct and indirect subsidiaries) in excess of
the amount of its shareholders' equity less the total amount of investment in
subsidiaries, subject to certain exceptions. Generally, a financial holding
company is prohibited from acquiring more than 5% of the total issued and
outstanding shares of another finance-related company (other than its direct and
indirect subsidiaries). Furthermore, under these regulations Shinhan Bank and
Chohung Bank must limit its investments in equity securities and bonds with a
maturity in excess of three years (other than monetary stabilization bonds
issued by the Bank of Korea and national government bonds) to 60.0% of our total
Tier I and Tier II capital. Generally, Shinhan Bank and Chohung Bank are also
prohibited from acquiring more than 15.0% of the shares with voting rights
issued by any other corporation (other than for the purpose of establishing or
acquiring a subsidiary). Further information on the regulatory environment
governing our investment activities is set out in "Supervision and Regulation --
Regulations Applicable to Banks -- Restrictions on Investments in Property",
"-- Regulations Applicable to Banks -- Restrictions on Shareholdings in Other
Companies", "-- Regulations Applicable to Financial Holding
Companies -- Liquidity" and "-- Regulations Applicable to Financial Holding
Companies -- Restrictions on Shareholdings in Other Companies".

 BOOK VALUE AND MARKET VALUE

  Shinhan

     The following table sets out the book value and market value of securities
in the Group's investment portfolio as of the dates indicated.

<Table>
<Caption>
                                      AS OF               AS OF               AS OF
                                DECEMBER 31, 2000   DECEMBER 31, 2001   DECEMBER 31, 2002
                                -----------------   -----------------   -----------------
                                 BOOK     MARKET     BOOK     MARKET     BOOK     MARKET
                                 VALUE     VALUE     VALUE     VALUE     VALUE     VALUE
                                -------   -------   -------   -------   -------   -------
                                                  (IN BILLIONS OF WON)
<S>                             <C>       <C>       <C>       <C>       <C>       <C>
AVAILABLE-FOR-SALE
Equity securities.............  W   687   W   687   W 1,233   W 1,233   W 2,481   W 2,481
Debt securities:
  Korean treasury securities
     and government
     agencies.................    1,995     1,995     2,239     2,239     2,230     2,230
  Financial institutions......    1,879     1,879     1,831     1,831     2,103     2,103
  Corporations................    1,426     1,426     1,421     1,421     1,230     1,230
  Foreign government..........       27        27        15        15         8         8
  Mortgage-backed securities
     and asset-backed
     securities...............      220       220       348       348       685       685
                                -------   -------   -------   -------   -------   -------
Total -- Available-for-sale...    6,234     6,234     7,087     7,087     8,737     8,737
                                -------   -------   -------   -------   -------   -------
</Table>

                                       145
<PAGE>

<Table>
<Caption>
                                      AS OF               AS OF               AS OF
                                DECEMBER 31, 2000   DECEMBER 31, 2001   DECEMBER 31, 2002
                                -----------------   -----------------   -----------------
                                 BOOK     MARKET     BOOK     MARKET     BOOK     MARKET
                                 VALUE     VALUE     VALUE     VALUE     VALUE     VALUE
                                -------   -------   -------   -------   -------   -------
                                                  (IN BILLIONS OF WON)
<S>                             <C>       <C>       <C>       <C>       <C>       <C>
HELD-TO-MATURITY
Debt securities:
  Korean treasury securities
     and government
     agencies.................    3,970     4,104     3,932     4,055     3,132     3,253
  Financial institutions......    1,125     1,140     1,088     1,103       563       572
  Corporations................      865       871       646       658       439       454
  Mortgage-backed securities
     and asset-backed
     securities...............      163       167       372       376       274       279
                                -------   -------   -------   -------   -------   -------
  Total -- Held-to-maturity...    6,123     6,282     6,038     6,192     4,408     4,558
                                -------   -------   -------   -------   -------   -------
TRADING
Equity securities.............        4         4       151       151       196       196
Debt securities:
  Korean treasury securities
     and government
     agencies.................      411       411       241       241       346       346
  Financial institutions......      529       529       299       299       204       204
  Corporations................      381       381       166       166       180       180
                                -------   -------   -------   -------   -------   -------
     Total -- Trading.........    1,325     1,325       857       857       926       926
                                -------   -------   -------   -------   -------   -------
TOTAL SECURITIES..............  W13,682   W13,841   W13,982   W14,136   W14,071   W14,221
                                =======   =======   =======   =======   =======   =======
</Table>

                                       146
<PAGE>

  Chohung

     The following table sets out the book value and market value of securities
in Chohung Bank's investment portfolio as of the dates indicated.

<Table>
<Caption>
                                      AS OF               AS OF               AS OF
                                DECEMBER 31, 2000   DECEMBER 31, 2001   DECEMBER 31, 2002
                                -----------------   -----------------   -----------------
                                 BOOK     MARKET     BOOK     MARKET     BOOK     MARKET
                                 VALUE     VALUE     VALUE     VALUE     VALUE     VALUE
                                -------   -------   -------   -------   -------   -------
                                                  (IN BILLIONS OF WON)
<S>                             <C>       <C>       <C>       <C>       <C>       <C>
AVAILABLE-FOR-SALE
Equity securities.............  W   942   W   942   W   878   W   878   W   294   W   294
Debt securities:
  Korean treasury and
     government agencies......    7,095     7,095     6,861     6,861     7,030     7,030
  Financial institutions......    1,408     1,408     3,362     3,362     1,604     1,604
  Corporations................    1,421     1,421     1,145     1,145       659       659
  Foreign governments.........       18        18        11        11        12        12
  Mortgage-backed and asset-
     backed securities........      193       193        90        90        25        25
                                -------   -------   -------   -------   -------   -------
Total -- Available-for-sale...   11,077    11,077    12,347    12,347     9,624     9,624
                                -------   -------   -------   -------   -------   -------
TRADING
Equity securities.............      174       174        --        --        --        --
Debt securities:
  Korean treasury and
     government agencies......    1,176     1,176       685       685       579       579
  Financial institutions......      144       144       473       473       150       150
  Corporations................       35        35       189       189       312       312
  Foreign governments.........       10        10         3         3         3         3
  Mortgage-backed and asset-
     backed securities........       --        --        63        63        10        10
                                -------   -------   -------   -------   -------   -------
     Total -- Trading.........    1,539     1,539     1,413     1,413     1,054     1,054
                                -------   -------   -------   -------   -------   -------
TOTAL SECURITIES..............  W12,616   W12,616   W13,760   W13,760   W10,678   W10,678
                                =======   =======   =======   =======   =======   =======
</Table>

                                       147
<PAGE>

  Shinhan and Chohung Combined

     The following table sets out the book value and market value of securities
in the investment portfolio of both the Group and Chohung Bank combined as of
the dates indicated.

<Table>
<Caption>
                                      AS OF               AS OF               AS OF
                                DECEMBER 31, 2000   DECEMBER 31, 2001   DECEMBER 31, 2002
                                -----------------   -----------------   -----------------
                                 BOOK     MARKET     BOOK     MARKET     BOOK     MARKET
                                 VALUE     VALUE     VALUE     VALUE     VALUE     VALUE
                                -------   -------   -------   -------   -------   -------
                                                  (IN BILLIONS OF WON)
<S>                             <C>       <C>       <C>       <C>       <C>       <C>
AVAILABLE-FOR-SALE
Equity securities.............  W 1,629   W 1,629   W 2,111   W 2,111   W 2,775   W 2,775
Debt securities:
  Korean treasury securities
     and government
     agencies.................    9,090     9,090     9,100     9,100     9,260     9,260
  Financial institutions......    3,287     3,287     5,193     5,193     3,707     3,707
  Corporations................    2,847     2,847     2,566     2,566     1,889     1,889
  Foreign government..........       45        45        26        26        20        20
  Mortgage-backed securities
     and asset-backed
     securities...............      413       413       438       438       710       710
                                -------   -------   -------   -------   -------   -------
Total -- Available-for-sale...   17,311    17,311    19,434    19,434    18,361    18,361
                                -------   -------   -------   -------   -------   -------
HELD-TO-MATURITY
Debt securities:
  Korean treasury securities
     and government
     agencies.................    3,970     4,104     3,932     4,055     3,132     3,253
  Financial institutions......    1,125     1,140     1,088     1,103       563       572
  Corporations................      865       871       646       658       439       454
  Mortgage-backed securities
     and asset-backed
     securities...............      163       167       372       376       274       279
                                -------   -------   -------   -------   -------   -------
  Total -- Held-to-maturity...    6,123     6,282     6,038     6,192     4,408     4,558
                                -------   -------   -------   -------   -------   -------
TRADING
Equity securities.............      178       178       151       151       196       196
Debt securities:
  Korean treasury securities
     and government
     agencies.................    1,587     1,587       926       926       925       925
  Financial institutions......      673       673       772       772       354       354
  Corporations................      416       416       355       355       492       492
  Foreign government..........       10        10         3         3         3         3
  Mortgage-backed securities
     and asset-backed
     securities...............       --        --        63        63        10        10
                                -------   -------   -------   -------   -------   -------
     Total -- Trading.........    2,864     2,864     2,270     2,270     1,980     1,980
                                -------   -------   -------   -------   -------   -------
TOTAL SECURITIES..............  W26,298   W26,457   W27,742   W27,896   W24,749   W24,899
                                =======   =======   =======   =======   =======   =======
</Table>

                                       148
<PAGE>

 MATURITY ANALYSIS

  Shinhan

     The following table categorizes the Group's securities by maturity and
weighted average yield as of December 31, 2002.
<Table>
<Caption>
                                                        OVER 1 YEAR            OVER 5 YEARS
                                1 YEAR OR LESS        THROUGH 5 YEARS        THROUGH 10 YEARS        OVER 10 YEARS
                             --------------------   --------------------   --------------------   --------------------
                                        WEIGHTED-              WEIGHTED-              WEIGHTED-              WEIGHTED-
                             CARRYING    AVERAGE    CARRYING    AVERAGE    CARRYING    AVERAGE    CARRYING    AVERAGE
                              AMOUNT    YIELD(1)     AMOUNT    YIELD(1)     AMOUNT    YIELD(1)     AMOUNT    YIELD(1)
                             --------   ---------   --------   ---------   --------   ---------   --------   ---------
                                                     (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                          <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
AVAILABLE-FOR-SALE DEBT
 SECURITIES:
 Korean Treasury and
   governmental agencies...   W  719       8.2%      W1,331       6.2%       W180        5.6%        W--         --
 Corporate.................      244       5.8          965       5.1          21        4.2         --          --
 Financial institutions....    1,161       5.3          891       6.0          47        4.0          4         8.7%
 Foreign governments.......        7       4.0            1       4.0          --         --         --          --
 Mortgage-backed and asset-
   backed securities.......      217       6.5          468       6.3          --         --         --          --
                              ------                 ------                  ----                    --
   Total available-for-sale
     debt securities.......    2,348       6.3        3,656       5.9         248        5.1          4         8.7
                              ------                 ------                  ----                    --
HELD-TO-MATURITY DEBT
SECURITIES:
 Korean Treasury and
   governmental agencies...    1,352      10.1        1,220       7.5         469        7.0          1         8.4
 Corporate.................      142       6.9          297       6.9          --         --         --          --
 Financial institutions....      351       6.1          162       7.2          50        6.2         --          --
 Foreign governments.......       --        --           --        --          --         --         --          --
 Mortgage-backed and asset-
   backed securities.......       43       7.3          231       6.9          --         --         --          --
                              ------                 ------                  ----                    --
   Total held-to-maturity
     debt securities.......    1,888       9.1        1,910       7.3         519        6.9          1         8.4
                              ------                 ------                  ----                    --
TRADING DEBT SECURITIES:
 Korean Treasury and
   governmental agencies...      213       5.0          132       5.3          --         --         --          --
 Corporate.................      111       6.1           69       5.2          --         --         --          --
 Financial institutions....       86       4.9          118       6.3          --         --         --          --
                              ------                 ------                  ----                    --
   Total trading debt
     securities............      410       5.3          319       5.6          --         --         --          --
                              ------                 ------                  ----                    --
       Total debt
        securities.........   W4,646                 W5,885                  W767                    W5
                              ======                 ======                  ====                    ==

<Caption>
                              SECURITIES NOT DUE
                             IN A SINGLE MATURITY          TOTAL
                             --------------------   --------------------
                                        WEIGHTED-              WEIGHTED-
                             CARRYING    AVERAGE    CARRYING    AVERAGE
                              AMOUNT    YIELD(1)     AMOUNT    YIELD(1)
                             --------   ---------   --------   ---------
                              (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                          <C>        <C>         <C>        <C>
AVAILABLE-FOR-SALE DEBT
 SECURITIES:
 Korean Treasury and
   governmental agencies...    W--          --      W 2,230       6.8%
 Corporate.................     --          --        1,230       5.2
 Financial institutions....     --          --        2,103       5.6
 Foreign governments.......     --          --            8       4.0
 Mortgage-backed and asset-
   backed securities.......     --          --          685       6.4
                               ---                  -------
   Total available-for-sale
     debt securities.......     --          --        6,256       6.0
                               ---                  -------
HELD-TO-MATURITY DEBT
SECURITIES:
 Korean Treasury and
   governmental agencies...     90         7.6%       3,132       8.5
 Corporate.................     --          --          439       6.9
 Financial institutions....     --          --          563       6.4
 Foreign governments.......     --          --           --        --
 Mortgage-backed and asset-
   backed securities.......     --          --          274       7.0
                               ---                  -------
   Total held-to-maturity
     debt securities.......     90         7.6        4,408       8.0
                               ---                  -------
TRADING DEBT SECURITIES:
 Korean Treasury and
   governmental agencies...      1         5.4          346       5.1
 Corporate.................     --          --          180       5.7
 Financial institutions....     --          --          204       5.7
                               ---                  -------
   Total trading debt
     securities............      1         5.4          730       5.4
                               ---                  -------
       Total debt
        securities.........    W91                  W11,394
                               ===                  =======
</Table>

- ---------------

Note:

(1) The weighted-average yield for the portfolio represents the yield to
    maturity for each individual security, weighted using its amortized cost.

                                       149
<PAGE>

  Chohung

     The following table categorizes Chohung Bank's securities by maturity and
weighted average yield as of December 31, 2002.
<Table>
<Caption>

                                                        OVER 1 YEAR            OVER 5 YEARS
                                1 YEAR OR LESS        THROUGH 5 YEARS        THROUGH 10 YEARS        OVER 10 YEARS
                             --------------------   --------------------   --------------------   --------------------
                                        WEIGHTED-              WEIGHTED-              WEIGHTED-              WEIGHTED-
                             CARRYING    AVERAGE    CARRYING    AVERAGE    CARRYING    AVERAGE    CARRYING    AVERAGE
                              AMOUNT    YIELD(2)     AMOUNT    YIELD(2)     AMOUNT    YIELD(2)     AMOUNT    YIELD(2)
                             --------   ---------   --------   ---------   --------   ---------   --------   ---------
                                                     (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                          <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>
AVAILABLE-FOR-SALE DEBT
 SECURITIES:
 Korean treasury and
   government agencies.....   W1,275       9.0%      W5,576       7.5%       W146        6.5%       W--          --%
 Financial institutions....      976       5.0          628       6.2          --         --         --          --
 Corporations..............      118       5.0          392       4.2         146        2.3          3         1.5
 Foreign governments.......       10       4.7            2       7.0          --         --         --          --
 Mortgage-backed and asset-
   backed securities.......       25       7.3           --        --          --         --         --          --
                              ------      ----       ------       ---        ----       ----        ---         ---
   Total available-for-sale
     debt securities.......    2,404       7.2        6,598       7.2         292        4.3          3         1.5
                              ------      ----       ------       ---        ----       ----        ---         ---
TRADING DEBT SECURITIES:
 Korean treasury and
   government agencies.....       90       4.9          405       6.0          84        5.5         --          --
 Financial institutions....       61       5.1            2       4.3          87       13.0         --          --
 Corporations..............      301       5.1            4       0.3          --         --          7         7.0
 Foreign governments.......        3      10.4           --        --          --         --         --          --
 Mortgage-backed and asset-
   backed securities.......       10       5.0           --        --          --         --         --          --
                              ------      ----       ------       ---        ----       ----        ---         ---
   Total trading debt
     securities............      465       5.1%         411       5.9%        171        9.3%         7         7.0%
                              ------      ----       ------       ---        ----       ----        ---         ---
       Total debt
        securities.........   W2,869                 W7,009                  W463                   W10
                              ======                 ======                  ====                   ===

<Caption>
                              SECURITIES NOT DUE
                                 IN A SINGLE
                                 MATURITY(1)               TOTAL
                             --------------------   --------------------
                                        WEIGHTED-              WEIGHTED-
                             CARRYING    AVERAGE    CARRYING    AVERAGE
                              AMOUNT    YIELD(2)     AMOUNT    YIELD(2)
                             --------   ---------   --------   ---------
                              (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                          <C>        <C>         <C>        <C>
AVAILABLE-FOR-SALE DEBT
 SECURITIES:
 Korean treasury and
   government agencies.....    W33         9.2%     W  7,030      7.8%
 Financial institutions....     --          --         1,604      5.5
 Corporations..............     --          --           659      3.9
 Foreign governments.......     --          --            12      5.1
 Mortgage-backed and asset-
   backed securities.......     --          --            25      7.3
                               ---         ---      --------     ----
   Total available-for-sale
     debt securities.......     33         9.2         9,330      7.1
                               ---         ---      --------     ----
TRADING DEBT SECURITIES:
 Korean treasury and
   government agencies.....     --          --           579      5.7
 Financial institutions....     --          --           150      9.6
 Corporations..............     --          --           312      5.1
 Foreign governments.......     --          --             3     10.4
 Mortgage-backed and asset-
   backed securities.......     --          --            10      5.0
                               ---         ---      --------     ----
   Total trading debt
     securities............     --          --         1,054      6.1%
                               ---         ---      --------     ----
       Total debt
        securities.........    W33                  W 10,384
                               ===                  ========
</Table>

- ---------------

 Notes:

(1) The principal repayment schedule for such securities is based on installment
    due on different maturity dates.

(2) The weighted-average yield for the portfolio represents the yield to
    maturity for each individual security, weighted using its amortized cost.

                                       150
<PAGE>

 CONCENTRATIONS OF RISK

  Shinhan

     As of December 31, 2002, the Group held the following securities of
individual issuers where the aggregate book value of those securities exceeded
10.0% of our stockholders' equity at such date.

<Table>
<Caption>
                                                                      AS OF
                                                                DECEMBER 31, 2002
                                                              ---------------------
                                                                BOOK       MARKET
                                                                VALUE       VALUE
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>         <C>
NAME OF ISSUER:
Korea Deposit Insurance Corporation.........................    W2,723      W2,785
Bank of Korea...............................................     1,287       1,287
Korean Government...........................................     1,105       1,126
Korea Asset Management Corporation..........................       731         731
Kookmin Bank................................................       406         407
The Korea Development Bank..................................       371         376
                                                                ------      ------
  Total.....................................................    W6,623      W6,712
                                                                ======      ======
</Table>

     Our stockholders' equity as of December 31, 2002 was W3,263 billion.

     Except for Kookmin Bank and the Korean government itself, all of the above
entities are controlled and owned by the government.

  Chohung

     As of December 31, 2002, Chohung Bank held the following securities of
individual issuers where the aggregate book value of those securities exceeded
10.0% of Chohung Bank's stockholders' equity at such date.

<Table>
<Caption>
                                                                      AS OF
                                                                DECEMBER 31, 2002
                                                              ---------------------
                                                                BOOK       MARKET
                                                                VALUE       VALUE
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>         <C>
NAME OF ISSUER:
Korea Deposit Insurance Corporation.........................    W4,511      W4,511
Korean Government...........................................     1,813       1,813
The Bank of Korea...........................................     1,015       1,015
The Korea Development Bank..................................       412         412
Korea Asset Management Corporation..........................       361         361
Korea Land Corporation......................................       270         270
Korea Highway Corporation...................................       226         226
                                                                ------      ------
  Total.....................................................    W8,608      W8,608
                                                                ======      ======
</Table>

     Chohung Bank's stockholders' equity as of December 31, 2002 was W1,374
billion.

     Except for the Korean government itself, all of the above entities are
controlled and owned by the government.

CREDIT-RELATED COMMITMENTS

     We have other credit-related commitments that are not reflected on the
balance sheet, which primarily consist of commitments to extend credit and
commercial letters of credit. Commitments to extend credit

                                       151
<PAGE>

represent unfunded portions of authorizations to extend credit in the form of
loans. The commitments expire on fixed dates and a customer is required to
comply with predetermined conditions to draw funds under the commitments.
Commercial letters of credit are undertakings on behalf of customers authorizing
third parties to draw drafts on us up to a stipulated amount under specific
terms and conditions.

  Shinhan

     The following table sets forth the Group's credit-related commitments as of
the dates indicated.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>         <C>
Commitments to extend credit:
  Commercial(1).............................................   W19,686     W29,008
  Credit card lines(2)......................................     7,161       7,827
  Other consumer............................................     1,177       1,753
Commercial letters of credit(3).............................     1,607       2,202
Standby letters of credit, performance guarantees and
  financial guarantees......................................       808         945
                                                               -------     -------
  Total.....................................................   W30,439     W41,735
                                                               =======     =======
</Table>

- ---------------

Notes:

(1) The increase in commercial commitments to extend credit as of December 31,
    2002 was primarily due to an increase in unused lines of credit for general
    loans.

(2) Relates to the unused portion of credit card limits that may be cancelled by
    the Group after notice to the borrower if the Group determines that the
    borrower's repayment ability is significantly impaired.

(3) These are generally short-term and collateralized by the underlying
    shipments of goods to which they relate.

  Chohung

     The following table sets forth Chohung Bank's credit-related commitments as
of the dates indicated.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>         <C>
Commitments to extend credit:
  Commercial................................................   W13,010     W11,449
  Credit card lines(1)......................................    17,816      17,875
  Consumer..................................................     1,268       1,889
Commercial letters of credit(2).............................     1,496       1,492
Standby letters of credit and financial and performance
  guarantees................................................       867         926
                                                               -------     -------
  Total.....................................................   W34,457     W33,631
                                                               =======     =======
</Table>

- ---------------

Notes:

(1) Relates to the unused portion of credit card limits that may be cancelled by
    Chohung Bank after notice to the borrower if Chohung Bank determines that
    the borrower's repayment ability is significantly impaired.

(2) These are generally short-term and collateralized by the underlying
    shipments of goods to which they relate.

                                       152
<PAGE>

  Shinhan and Chohung Combined

     The following table sets forth the credit related commitments of the Group
and Chohung Bank combined as of the dates indicated.

<Table>
<Caption>
                                                               AS OF DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN BILLIONS OF WON)
<S>                                                           <C>         <C>
Commitments to extend credit:
  Commercial(1).............................................   W32,696     W40,457
  Credit card lines(2)......................................    24,977      25,702
  Consumer..................................................     2,445       3,642
Commercial letters of credit(3).............................     3,103       3,694
Standby letters of credit and financial and performance
  guarantees................................................     1,675       1,871
                                                               -------     -------
  Total.....................................................   W64,896     W75,366
                                                               =======     =======
</Table>

- ---------------

Notes:

(1) The increase in commercial commitments to extend credit as of December 31,
    2002 was primarily due to an increase in unused lines of credit for general
    loans.

(2) Relates to the unused portion of credit card limits that may be cancelled by
    us after notice to the borrower if we determine that the borrower's
    repayment ability is significantly impaired.

(3) These are generally short-term and collateralized by the underlying
    shipments of goods to which they relate.

     In the normal course of its banking activities, we, including Chohung Bank,
make various commitments and incur certain contingent liabilities in the form
of, among others, guarantees and acceptances. Guarantees and acceptances include
guarantees and acceptances relating to trade financings, such as letters of
credit or import freight, guarantees for debentures, guarantees for other types
of financings and performance guarantees, for which the guaranteed amounts were
determined.

     We have other credit-related commitments that are not reflected on the
balance sheet, which primarily consist of commitments to extend credit and
commercial letters of credit. Commitments to extend credit, including credit
lines, represent unfunded portions of authorizations to extend credit in the
form of loans. These commitments expire on fixed dates and a customer is
required to comply with predetermined conditions to draw funds under the
commitments. These commitments are in general subject to provisions that allow
us to withdraw such commitments in the event there are material adverse changes
affecting an obligor. As a result, we do not make provisions with respect to
these credit commitments given the material adverse change clause which allows
us to cancel the agreement if the underlying counterparty exposure is impaired.

     Commercial letters of credit are undertakings on behalf of customers
authorizing third parties to draw drafts on us up to a stipulated amount under
specific terms and conditions.

     Standby letters of credit, on the other hand, are irrevocable obligations
to pay third party beneficiaries when its customers fail to repay loans or debt
instruments, which are generally in foreign currencies. A substantial portion of
these standby letters of credit are secured by underlying assets, including
trade-related documents. See Note 30 in "Item 18. Financial Information -- Notes
to consolidated financial statements of Shinhan Financial Group" and Note 26 in
"Item 18. Financial Information -- Notes to consolidated financial statements of
Chohung Bank" for details.

     The commitments do not necessarily represent our exposure since they often
expire unused.

                                       153
<PAGE>

DERIVATIVES

  Shinhan

     As discussed under "-- Business Overview of Shinhan Financial Group -- Our
Principal Activities -- Treasury and Securities Investment" above, the Group
engages in derivatives trading activities primarily on behalf of its customers
so that they may hedge their risks and also enter into back-to-back derivatives
with other financial institutions to cover exposures arising from such
transactions. In addition, the Group enters into derivatives transactions to
hedge against risk exposures arising from its own assets and liabilities, some
of which nontrading derivatives do not qualify for hedge accounting treatment.

     The following shows, as of December 31, 2002, the gross notional or
contractual amounts of derivatives and foreign exchange contracts held or issued
for (i) trading and (ii) nontrading that qualify for hedge accounting.

<Table>
<Caption>
                                                                     AS OF DECEMBER 31, 2002
                                                              -------------------------------------
                                                              UNDERLYING   ESTIMATED     ESTIMATED
                                                               NOTIONAL    FAIR VALUE   FAIR VALUE
                                                              AMOUNT(1)      ASSETS     LIABILITIES
                                                              ----------   ----------   -----------
                                                                      (IN BILLIONS OF WON)
<S>                                                           <C>          <C>          <C>
TRADING:
Foreign exchange contracts:
  Forward contracts.........................................   W 3,730        W 55         W 35
  Futures...................................................        30          --           --
  Options purchased.........................................        18           1           --
  Options written...........................................        24          --            1
                                                               -------        ----         ----
     Sub-total..............................................     3,802          56           36
                                                               -------        ----         ----
Interest rate contracts:
  Swaps(2)..................................................     5,492          46           60
  Futures...................................................       378          --           --
  Forwards..................................................        20          --           --
                                                               -------        ----         ----
     Sub-total..............................................     5,890          46           60
                                                               -------        ----         ----
Cross currency swaps(3).....................................       648          13           18
Equity contracts............................................       606          15           17
                                                               -------        ----         ----
     Total..................................................   W10,946        W130         W131
                                                               =======        ====         ====
HEDGE ACCOUNTING:
Interest rate swaps.........................................   W   791        W  9         W --
Cross currency swaps........................................        --          --           --
                                                               -------        ----         ----
     Total..................................................   W   791        W  9         W --
                                                               =======        ====         ====
</Table>

- ---------------

Notes:

(1) Notional amounts in foreign currencies were converted into Won at prevailing
    exchange rates as of December 31, 2002.

(2) While the Group engages in derivatives trading activities to hedge the
    interest rate risk exposure that arise from its own assets and liabilities,
    as these nontrading derivative contracts do not qualify for hedge accounting
    under U.S. GAAP, they are accounted for as trading derivatives in the
    financial statements. As a result, includes interest rate swaps held for
    nontrading that do not qualify for hedge accounting treatment in the
    underlying notional amount, estimated fair value of assets and estimated
    fair value of liabilities of W870 billion, W22 billion and W32 billion,
    respectively.

                                       154
<PAGE>

(3) While the Group engages in derivatives trading activities to hedge the
    foreign currency risk exposure that arise from its own assets and
    liabilities, as these nontrading derivative contracts do not qualify for
    hedge accounting under U.S. GAAP, they are accounted for as trading
    derivatives in the financial statements. As a result, includes cross
    currency swaps held for nontrading that do not qualify for hedge accounting
    treatment in the underlying notional amount, estimated fair value of assets
    and estimated fair value of liabilities of W27 billion, W0 billion and W4
    billion, respectively.

  Chohung

     As discussed under "-- Business Overview of Chohung Bank -- Chohung Bank's
Principal Activities -- Treasury and International Business" above, Chohung Bank
engages in derivatives trading activities primarily on behalf of its customers
so that they may hedge their risks and Chohung Bank also enters into
back-to-back derivatives with other financial institutions to cover its
exposures arising from such transactions. In addition, Chohung Bank enters into
derivatives transactions to hedge against risk exposures arising from its own
assets and liabilities, but for none of which Chohung Bank applied hedge
accounting.

     The following shows, as of December 31, 2002, Chohung Bank's gross notional
or contractual amounts of derivatives and foreign exchange contracts held or
issued for trading as they do not qualify for hedge accounting.

<Table>
<Caption>
                                                                     AS OF DECEMBER 31, 2002
                                                              -------------------------------------
                                                              UNDERLYING   ESTIMATED     ESTIMATED
                                                               NOTIONAL    FAIR VALUE   FAIR VALUE
                                                              AMOUNT(1)      ASSETS     LIABILITIES
                                                              ----------   ----------   -----------
                                                                      (IN BILLIONS OF WON)
<S>                                                           <C>          <C>          <C>
Forward foreign exchange contracts..........................    W2,300        W 45          W41
Interest rate contracts:
  Swaps(2)..................................................    W3,187        W 90          W32
  Futures...................................................        54          --           --
                                                                ------        ----          ---
     Sub-total..............................................    W3,241        W 90          W32
                                                                ------        ----          ---
Cross currency swaps(3).....................................    W  393        W  5          W 9
Credit derivatives..........................................        30          --            1
Equity contracts(4).........................................        11          --           --
                                                                ------        ----          ---
     Total..................................................    W5,975        W140          W83
                                                                ======        ====          ===
</Table>

- ---------------

Notes:

(1) Notional amounts in foreign currencies were converted into Won at prevailing
    exchange rates as of December 31, 2002.

(2) While Chohung Bank engages in derivatives trading activities to hedge the
    interest rate risk exposure that arise from Chohung Bank's own assets and
    liabilities, Chohung Bank does not apply hedge accounting under U.S. GAAP,
    and therefore they are accounted for as trading derivatives in the financial
    statements. As a result, Chohung Bank includes interest rate swaps held for
    non-trading purpose that Chohung Bank does not apply hedge accounting
    treatment in the underlying notional amount, estimated fair value of assets
    and estimated fair value of liabilities of W771 billion, W68 billion and W4
    billion, respectively.

(3) While Chohung Bank engages in derivatives trading activities to hedge the
    foreign currency risk exposure and the interest rate risk exposure that
    arise from Chohung Bank's own assets and liabilities, Chohung Bank does not
    apply for hedge accounting under U.S. GAAP, and therefore they are accounted
    for as trading derivatives in the financial statements. As a result, Chohung
    Bank includes cross currency swaps held for non-trading that Chohung Bank
    does not apply for hedge accounting treatment in the underlying notional
    amount, estimated fair value of assets and estimated fair value of
    liabilities of W149 billion, W93 million and W401 million, respectively.

(4) Equity conversion options bifurcated from convertible bonds held as
    investments.

                                       155
<PAGE>

FUNDING

     We obtain funding for our lending activities from a variety of sources,
both domestic and foreign. Our principal source of funding is customer deposits
obtained from our banking operations. In addition, Shinhan Bank and Chohung Bank
acquire funding through call money, borrowings from the Bank of Korea, other
short-term borrowings and other long-term debt.

     Our primary funding strategy has been to achieve low-cost funding by
increasing the average balances of low-cost retail deposits. Customer deposits
accounted for 68.6% of the Group's total funding as of December 31, 2001, and
65.0% of the Group's total funding as of December 31, 2002. Customer deposits
accounted for 77.4% of Chohung Bank's total funding as of December 31, 2001, and
76.9% of Chohung Bank's total funding as of December 31, 2002. As of December
31, 2001 and 2002, W3,887 billion and W3,872 billion, or 10.7% and 9.2%,
respectively, of Chohung Bank's total deposits in Korean Won were deposits made
by litigants in connection with legal proceedings in Korean courts. Court
deposits carry interest rates, which are generally lower than market rates.
Chohung Bank's other sources of funding consist principally of borrowing from
the Bank of Korea and borrowings in foreign currencies.

     In addition, we acquire funding through the issuance of bonds, primarily
through Shinhan Bank and Chohung Bank. Our borrowings consist mainly of
borrowings from financial institutions, the government and government-affiliated
funds. Call money, which is available in both Won and foreign currencies, is
obtained from the domestic call loan market, a short-term loan market for loans
with maturities of less than one month.

 DEPOSITS

     Although the majority of our bank deposits are short-term, it has been our
experience that the majority of our depositors generally roll over their
deposits at maturity, providing our banking operation with a stable source of
funding.

  Shinhan

     The following table shows the average balances of the Group's deposits and
the average rates paid on its deposits for the periods indicated.

<Table>
<Caption>
                                                            2001                        2002
                                                  -------------------------   -------------------------
                                                   AVERAGE     AVERAGE RATE    AVERAGE     AVERAGE RATE
                                                  BALANCE(1)       PAID       BALANCE(1)       PAID
                                                  ----------   ------------   ----------   ------------
                                                               (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                               <C>          <C>            <C>          <C>
Interest-bearing deposits:
  Interest-bearing demand deposits..............   W   182         1.10%       W   432         1.39%
  Savings deposits..............................     8,121         2.52          9,924         1.85
  Certificates of deposit.......................     2,343         5.46          3,146         4.90
  Other time deposits...........................    16,714         6.70         19,468         4.91
  Mutual installment deposits(2)................     1,493         7.17          1,664         6.07
                                                   -------         ----        -------         ----
     Total interest-bearing deposits(3).........   W28,853         5.41%       W34,634         4.05%
                                                   =======         ====        =======         ====
</Table>

- ---------------

Notes:

(1) Average balances are based on daily balances for our primary banking
    operation and quarterly balances for subsidiaries.

(2) Mutual installment deposits are interest-bearing deposits offered by Shinhan
    Bank which enable customers to become eligible for loans while they maintain
    an account with us. The customer's account does not have to secure loan
    amounts once made but is a requirement for loan eligibility. Prior to
    qualifying for a loan a customer must make required periodic deposits to the
    mutual installment account for a contracted term of less than five years. A
    customer is not required to fulfill the deposit term prior to

                                       156
<PAGE>

    requesting a loan from Shinhan Bank, but loan amounts and terms are not as
    favorable in the event of a loan request prior to completing the deposit
    contract term.

(3) Under U.S. GAAP, does not include cover bills sold or bonds sold under
    repurchase agreements, which are offered to our customers as deposit
    products. These are reflected as short-term borrowings and secured
    borrowings, respectively.

  Chohung

     The following table shows the average balances of Chohung Bank's
interest-bearing deposits and the average rates paid on its deposits for the
periods indicated.

<Table>
<Caption>
                                                           2001                        2002
                                                 -------------------------   -------------------------
                                                  AVERAGE     AVERAGE RATE    AVERAGE     AVERAGE RATE
                                                 BALANCE(1)       PAID       BALANCE(1)       PAID
                                                 ----------   ------------   ----------   ------------
                                                       (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                              <C>          <C>            <C>          <C>
Interest-bearing deposits:
  Interest-bearing demand deposits.............   W 3,828         1.96%       W 4,122         1.94%
  Savings deposits.............................    10,737         2.55         12,210         1.61
  Certificates of deposit......................     1,495         5.89          3,195         5.04
  Other time deposits..........................    17,048         6.68         18,870         5.11
  Mutual installment deposits(2)...............       477         7.13            547         6.58
                                                  -------         ----        -------         ----
     Total interest-bearing deposits(3)........   W33,585         4.79%       W38,944         3.70%
                                                  =======         ====        =======         ====
</Table>

- ---------------

Notes:

(1) Average balances are based upon (a) daily balances for Chohung Bank and its
    overseas subsidiaries and (b) quarterly balances for domestic subsidiaries
    including Chohung Investment Trust Management Co., Ltd. and special purpose
    entities for Chohung Bank's asset securitizations.

(2) Mutual installment deposits are interest-bearing deposits offered by Chohung
    Bank which enable customers to become eligible for loans while they maintain
    an account with Chohung Bank. The customer's account does not have to secure
    loan amounts once made but is a requirement for loan eligibility. Prior to
    qualifying for a loan a customer must make required periodic deposits to the
    mutual installment account for a contracted term of less than five years. A
    customer is not required to fulfill the deposit term prior to requesting a
    loan from Chohung Bank, but loan amounts and terms are not as favorable in
    the event of a loan request prior to completing the deposit contract term.

(3) Under U.S. GAAP, total interest-bearing deposits do not include cover bills
    sold or bonds sold under repurchase agreements, which are offered to Chohung
    Bank's customers as deposit products. These are reflected as short-term
    borrowings and secured borrowings, respectively.

     For a breakdown of retail deposit products, see "-- Business Overview of
Shinhan Financial Group -- Our Principal Activities -- Deposit-taking
Activities" and "-- Business Overview of Chohung Bank -- Chohung Bank's
Principal Activities -- Deposit-taking Activities", except that cover bills sold
are reflected on short-term borrowings and securities sold under repurchase
agreements are reflected as secured borrowings.

                                       157
<PAGE>

 Certificates of Deposit and Other Time Deposits

  -- Shinhan

     The following table presents the balance and remaining maturities of the
Group's other time deposits, certificates of deposit and mutual installment
deposits which had a fixed maturity in excess of W100 million or more as of
December 31, 2002.

<Table>
<Caption>
                                                                 AS OF DECEMBER 31, 2002
                                                    -------------------------------------------------
                                                                                  MUTUAL
                                                    CERTIFICATES   OTHER TIME   INSTALLMENT
                                                     OF DEPOSIT     DEPOSITS     DEPOSITS      TOTAL
                                                    ------------   ----------   -----------   -------
                                                                     (IN BILLIONS OF WON)
<S>                                                 <C>            <C>          <C>           <C>
Maturing within three months......................     W1,673       W 3,407        W 96       W 5,176
After three but within six months.................        864         2,107          58         3,029
After six but within 12 months....................        105         5,109          94         5,308
After 12 months...................................         56           638         143           837
                                                       ------       -------        ----       -------
  Total...........................................     W2,698       W11,261        W391       W14,350
                                                       ======       =======        ====       =======
</Table>

  -- Chohung

     The following table presents the balance and remaining maturities of
Chohung Bank's other time deposits, certificates of deposit and mutual
installment deposits which had a fixed maturity in excess of W100 million or
more as of December 31, 2002.

<Table>
<Caption>
                                                                 AS OF DECEMBER 31, 2002
                                                    -------------------------------------------------
                                                                                  MUTUAL
                                                    CERTIFICATES   OTHER TIME   INSTALLMENT
                                                     OF DEPOSIT     DEPOSITS     DEPOSITS      TOTAL
                                                    ------------   ----------   -----------   -------
                                                                  (IN BILLIONS OF WON)
<S>                                                 <C>            <C>          <C>           <C>
Maturing within three months......................     W2,873       W 4,173         W 3       W 7,049
After three but within six months.................      1,162         2,509           1         3,672
After six but within 12 months....................         41         4,169          36         4,246
After 12 months...................................          1         1,192           1         1,194
                                                       ------       -------         ---       -------
  Total...........................................     W4,077       W12,043         W41       W16,161
                                                       ======       =======         ===       =======
</Table>

     A majority of our certificates of deposit accounts and other time deposits
issued by our foreign offices (including those of Chohung Bank) is in the amount
of US$100,000 or more.

 SHORT-TERM BORROWINGS

  Shinhan

     The following table presents information regarding the Group's short-term
borrowings (borrowings with an original maturity of one year or less) for the
periods indicated.
<Table>
<Caption>
                                                     2001                                    2002
                        ---------------------------------------------------------------   -----------
                                                        HIGHEST    WEIGHTED
                                         AVERAGE       BALANCES    AVERAGE    YEAR-END
                          BALANCE        BALANCE        AT ANY     INTEREST   INTEREST      BALANCE
                        OUTSTANDING   OUTSTANDING(1)   MONTH-END   RATE(2)      RATE      OUTSTANDING
                        -----------   --------------   ---------   --------   ---------   -----------
                                        (IN BILLIONS OF WON, EXCEPT FOR PERCENTAGES)
<S>                     <C>           <C>              <C>         <C>        <C>         <C>
Borrowings from
 BOK(3)..............     W1,403          W1,572        W1,724       2.93%    1.92-3.91%    W  334
Call money...........        244           1,077         1,576       4.46     0.35-5.60%       150
Other
 borrowings(4).......      4,112           4,568         4,951       5.34     0.22-7.05%     6,510
                          ------          ------        ------                              ------
                          W5,759          W7,217        W8,251       4.68%                  W6,994
                          ======          ======        ======                              ======

<Caption>
                                             2002
                       -------------------------------------------------
                                         HIGHEST    WEIGHTED
                          AVERAGE       BALANCES    AVERAGE    YEAR-END
                          BALANCE        AT ANY     INTEREST   INTEREST
                       OUTSTANDING(1)   MONTH-END   RATE(2)      RATE
                       --------------   ---------   --------   ---------
                         (IN BILLIONS OF WON, EXCEPT FOR PERCENTAGES)
<S>                    <C>              <C>         <C>        <C>
Borrowings from
 BOK(3)..............      W1,067        W 1,374      2.34%    1.39-6.75%
Call money...........       1,464          2,717      3.96     0.15-4.50%
Other
 borrowings(4).......       4,695          6,928      3.60     0.19-5.90%
                           ------        -------
                           W7,226        W11,019      3.50%
                           ======        =======
</Table>

                                       158
<PAGE>

- ---------------

Notes:

(1) Average outstanding balances have been calculated using daily balances for
    our primary banking operations and quarterly balances for subsidiaries.

(2) Weighted-average interest rates during this year are calculated by dividing
    the total interest expenses by the average amount borrowed.

(3) Borrowings from the Bank of Korea generally mature within one month for
    borrowings in Won and six months for borrowings on foreign currencies.

(4) Other short-term borrowings included borrowings from trust accounts, bills
    sold, borrowings in domestic and foreign currency and short-term debentures.

  Chohung

     The following table presents information regarding Chohung Bank's
short-term borrowings (borrowings with an original maturity of one year or less)
for the periods indicated.
<Table>
<Caption>
                                                    2001                                    2002
                       ---------------------------------------------------------------   -----------
                                                       HIGHEST    WEIGHTED
                                        AVERAGE       BALANCES    AVERAGE    YEAR-END
                         BALANCE        BALANCE        AT ANY     INTEREST   INTEREST      BALANCE
                       OUTSTANDING   OUTSTANDING(1)   MONTH-END   RATE(2)      RATE      OUTSTANDING
                       -----------   --------------   ---------   --------   ---------   -----------
                                       (IN BILLIONS OF WON, EXCEPT FOR PERCENTAGES)
<S>                    <C>           <C>              <C>         <C>        <C>         <C>
Borrowings from
 BOK(3)..............    W1,150          W1,466        W2,053       4.43%    1.90-3.90%    W  481
Call money...........       174             451         1,195       4.66     1.75-3.93%        79
Other
 borrowings(4).......     4,215           4,486         5,334       5.02     2.00-7.90%     4,965
                         ------          ------        ------                              ------
                         W5,539          W6,403        W8,582       4.86%                  W5,525
                         ======          ======        ======                              ======

<Caption>
                                             2002
                       -------------------------------------------------
                                         HIGHEST    WEIGHTED
                          AVERAGE       BALANCES    AVERAGE    YEAR-END
                          BALANCE        AT ANY     INTEREST   INTEREST
                       OUTSTANDING(1)   MONTH-END   RATE(2)      RATE
                       --------------   ---------   --------   ---------
                         (IN BILLIONS OF WON, EXCEPT FOR PERCENTAGES)
<S>                    <C>              <C>         <C>        <C>
Borrowings from
 BOK(3)..............      W  950        W1,263       2.53%    1.42-2.50%
Call money...........         751         1,419       3.73     0.75-4.15%
Other
 borrowings(4).......       5,058         6,177       3.38     0.34-5.90%
                           ------        ------
                           W6,759        W8,859       3.30%
                           ======        ======
</Table>

- ---------------

Notes:

(1) Average balances are based upon (a) daily balances for Chohung Bank and its
    overseas subsidiaries and (b) quarterly balances for domestic subsidiaries
    including Chohung Investment Trust Management Co., Ltd. and special purpose
    entities for Chohung Bank's asset securitizations.

(2) Weighted-average interest rates during this year are calculated by dividing
    the total interest expenses by the average amount borrowed.

(3) Borrowings from The Bank of Korea generally mature within one month for
    borrowings in Won and six months for borrowings on foreign currencies.

(4) Other short-term borrowings included borrowings from trust accounts, bills
    sold, borrowings in domestic and foreign currency.

     Our short-term borrowings have maturities of less than one year which are
generally unsecured with the exception of borrowings from the Bank of Korea.

RISK MANAGEMENT OF SHINHAN FINANCIAL GROUP

 OVERVIEW

     As a financial services provider, the Group is exposed to various risks
relating to its lending, securities investment, credit card, trading and leasing
businesses, its deposit taking and borrowing activities and its operating
environment. The principal risks to which the Group is exposed are credit risk,
market risk, liquidity risk and operational risk. These risks are recognized,
measured and reported in accordance with risk management guidelines established
at its holding company level.

                                       159
<PAGE>

     The Group's risk management is guided by several principles, including:

     - identifying and managing all inherent risks;

     - standardizing risk management process and methodology;

     - ensuring supervision and control of risk management independent of
       business activities;

     - continuously assessing risk preference;

     - preventing risk concentration;

     - operating a precise and comprehensive risk management system including
       statistical models; and

     - balancing profitability and risk management through risk-adjusted profit
       management.

 ORGANIZATION

     Risk management and oversight begins with the Group Risk Management
Committee of the Group's board of directors. The Group Risk Management Committee
establishes the overall risk management guidelines and risk limits applicable to
the group and each subsidiary, while delegating the day-to-day risk management
and oversight functions to the Senior Executive Vice President of Risk
Management. The Senior Executive Vice President of Risk Management discusses the
group's risk management policies and strategies at the Group Risk Management
Council, comprised of the Senior Executive Vice President of Risk Management, as
its chairperson, and the executive officers of risk management from its
subsidiaries.

     In order to maintain the group risk at an appropriate level, the Group has
established a hierarchical limit system, where the Group Risk Management
Committee establishes risk limits for the holding company and each subsidiary,
and each subsidiary establishes and manages more detailed risk limits by type of
risk and type of product for each department and division within the respective
subsidiary. In accordance with the group risk management policies and
strategies, each subsidiary's risk management committee establishes its own risk
management policies and strategies in more detail and the respective risk
management department implements those policies and strategies. The risk
management department, operating independently from business operations of each
subsidiary, monitors, assesses, manages and controls the overall risk of its
operations and reports all major risk-related issues through the holding company
channel to the Senior Executive Vice President of Risk Management.

                                       160
<PAGE>

     The following table sets forth the levels of the Group's risk management
system.

                         (RISK MANAGEMENT SYSTEM CHART)

     As the Group has recently acquired Chohung Bank, risk management of Chohung
Bank remains independent from that of Shinhan Bank at this time although subject
to overall group risk management policies. For a detailed description of Chohung
Bank's risk management, see "-- Risk Management of Chohung Bank".

  GROUP RISK MANAGEMENT COMMITTEE

     The Group Risk Management Committee consists of three outside directors of
the holding company. The Group Risk Management Committee convenes at least once
every quarter and may also convene on an ad hoc basis as needed. The Group Risk
Management Committee makes decisions related to:

     - establishing basic risk management policies consistent with business
       strategy;

     - establishing risk limits appropriate for the group and each subsidiary;

     - establishing and amending, as necessary, risk management regulations,
       which regulates risk management activities of the group as well as each
       subsidiary, establishes risk limits and provides risk management
       guidelines; and

     - other risk management-related issues the board of directors or the Group
       Risk Management Committee see fit to discuss.

                                       161
<PAGE>

     The results of Group Risk Management Committee meetings are reported to the
board of directors of the holding company. The Group Risk Management Committee
makes decisions through affirmative votes by a majority of the committee
members.

  GROUP RISK MANAGEMENT COUNCIL

     The Group Risk Management Council provides a forum for risk management
executives from each subsidiary to discuss the group's risk management
guidelines and strategy in order to maintain consistency in the group risk
policies and strategies. The Group Risk Management Council consists of the
holding company's Senior Executive Vice President of Risk Management, as
chairman, the head of the Treasury & Risk Management Team of the holding company
and the executive officer of risk management of each subsidiary. The Group Risk
Management Council discusses:

     - changes in risk management policies and strategies for each subsidiary;

     - the effect of externalities on the group's risk; and

     - other risk management-related matters.

     The Group Risk Management Council has established a sub-council, consisting
of working-level risk management officers, to discuss the above-related matters
in advance.

  CREDIT RISK MANAGEMENT

     Credit risk, which is the risk of loss from default by an obligor or
counter-party, is the greatest risk the Group faces. The majority of the Group's
credit risk is derived from Shinhan Bank. Its banking credit risk management is
guided by the following principles:

     - focus on the small- and medium-sized enterprises and retail markets;

     - avoid excessive loan concentration to a particular borrower or sector;

     - focus on borrower's ability to repay the debt;

     - improve asset quality;

     - financially support our select customers' growth; and

     - achieve profit level corresponding to the level of risks involved.

     Major policies for the Group's banking credit risk management are
determined by the Credit Committee, the executive decision-making body for its
banking credit risk management of credit risk, which convenes on a quarterly
basis. The Credit Committee is led by the Chief Credit Officer, who is the head
of the Credit Policy & Risk Management Department. The Credit Committee further
consists of chief officers from seven business divisions. In addition to making
all credit-related decisions, the Credit Committee evaluates and approves large
credits in excess of W5 billion for unsecured and W15 billion for secured
lending. Meetings to approve these large credits are held twice a week. The
Credit Committee makes decisions by 2/3 or more votes of the attending members,
which must constitute at least two-thirds of the committee members to satisfy
the quorum.

     The Group's banking operation performs credit risk management procedures
pursuant to internal guidelines and regulations and continually monitors and
improves these guidelines and regulations. Its banking credit risk management
procedures include:

     - credit evaluation and approval;

     - credit review and monitoring; and

     - credit risk measurement and control.

                                       162
<PAGE>

  CREDIT EVALUATION AND APPROVAL

     All loan applicants and guarantors are subject to credit review evaluation
before approval of any loans. Credit evaluation of loan applicants are carried
out on a separate level by Credit Officer and Senior Credit Officer and (senior)
credit officer committees consisting of loan evaluation specialists from
different areas. Loan evaluation is carried out by a group rather than by an
individual level through objective and deliberate process. The Group uses a
credit scoring system for consumer loans and credit-risk rating system for
commercial loans.

  Consumer loans

     Loan applications for consumer loans are reviewed in accordance with
Shinhan Bank's credit scoring system and the objective statistics methodology
regarding secured and unsecured loans maintained and operated by Shinhan Bank's
Retail Banking Division. The credit scoring system is an automated credit
approval systems used to evaluate loan applications and determine the
appropriate pricing for the loan.

     Shinhan Bank's credit scoring system takes into account factors such as a
borrower's personal information, transaction history with Shinhan Bank and other
financial institutions and other relevant credit information. The applicant is
given a score which is used to decide whether to approve loans as well as
determine loan amounts. The score determines whether the applicant is approved
for credit, denied or placed in a "gray-zone". If the applicant's score falls
into the "gray-zone", then the appropriate discretionary body, independent of
the Group's business operations, makes a reassessment, which considers
qualitative factors as well as quantitative factors, such as credit history,
occupation and past relationship with Shinhan Bank.

     For mortgage loans and loans secured by real estate, Shinhan Bank evaluates
the value of the real estate offered as collateral for a loan using a database
Shinhan Bank has developed, which contains information about real estate values
throughout Korea. In addition, Shinhan Bank uses information from a third party
provider of information about the real estate market in Korea, which gives
Shinhan Bank up-to-date market value information for Korean real estate values.
Staffs from the processing centers appraise the real estate. In addition, the
Group hires certified appraisers to appraise real estate collateral of which
value is W5 billion or greater. Shinhan Bank reevaluates internally, on a
summary basis, the appraisal value of collateral at least every two years. To
protect against fraudulent transfers, Shinhan Bank has established an
underwriting standard for adequacy of collaterals and the procedure of legal
screening for whether or not there is a perfection of ownership.

     For loans secured by securities, Shinhan Bank evaluates the value of the
securities based upon the market value of the securities. If the value of the
securities declines over the life of a loan, the borrower will be required to
post additional securities as collateral. For loans secured by deposits, Shinhan
Bank will grant loans in an amount up to 95% of the deposit amount if the
deposit is held with Shinhan Bank or, if the deposits are held with another
financial institution, up to 85% of the deposit amount. Shinhan Bank also
requires borrowers in respect of secured obligations to observe specified
collateral ratios.

  Corporate loans

     Shinhan Bank rates all of its corporate borrowers using a rating system.
Shinhan Bank uses internally developed credit evaluation models to rate
potential borrowers. Shinhan Bank fully integrated the corporate credit rating
systems in October 1998.

     The credit risk-rating systems take into account a variety of evaluation
criteria in order to standardize credit decisions, by focusing on the quality of
borrowers rather than the volume of loans. The systems include both quantitative
factors based on the borrower's financial and other data, and qualitative
factors based on the judgment of Shinhan Bank's credit officers. Financial
evaluation factors Shinhan Bank considers include financial variables and ratios
based on Shinhan Bank's customer's financial statements, such as return on
assets and cash flow to total debt ratios. Nonfinancial evaluation factors
include the industry in which the borrower operates, its competitive position in
its industry, its operating and funding capabilities, Shinhan Bank's belief
regarding its financial prospects, the quality of its management and controlling
stockholders

                                       163
<PAGE>

(based in part on interviews with its officers and employees), technological
capabilities, labor relations, the status of its auditors and information
gathered from outside sources such as rating agencies or industrial
associations.

     Shinhan Bank consults reports prepared by external credit rating services,
such as Korea Information Service, National Information & Credit Evaluation Inc.
and Korea Management Consulting & Credit Rating Corporation. Shinhan Bank uses
these services to provide it with support for the accuracy of the credit review
it conducts.

     Based on the scores calculated under the credit rating system, Shinhan Bank
assigns the borrower one of ten grades (1 to 10). Grades 1 through 6 are
classified as normal, grade 7 precautionary, and grades 8 through 10
non-performing. Grades 3 through 6 are further broken down into '+", "0" or "-".
In addition, the industry outlook also effects the grade; if the industry
outlook is good (A or B), then 1 grade is raised, and if the industry outlook is
not good (E or F), then 1 grade is lowered. The credit risk-rating model is
further differentiated by the size of the corporate borrower.

     Shinhan Bank monitors and improves the effectiveness of the credit
risk-rating systems using a database that it updates continually with actual
default records.

  Loan Approval Process

     Evaluations of general loans are approved after combined evaluation and
approval of the relationship manager of each branch and the committee of the
applicable business unit. Depending on the size and the importance of the loan,
the approval process passes through review of Credit Officer Committee and
Senior Credit Officer Committee. In the case where the loan is considered
significant or the amount exceeds the discretion limit of the Senior Credit
Officer Committee, the credit evaluation is carried out at the highest
decision-making credit approval body, the Credit Committee.

     The chart below summarizes the credit approval process of our banking
operation. The Senior Credit Officer and the Head of Business Division does not
make individual decisions on loan approval, but is part of the decision-making
process at the group level.

                          (CREDIT APPROVAL FLOW CHART)

     The discretion at each level of the approval process is determined by the
credit level of the applicant based on credit review, whether the loan is
secured by collateral and the level of credit risk established by the credit
rating system.

                                       164
<PAGE>

     The discretionary levels are divided into six categories depending on the
credit rating assigned and the existence and value of collateral. The loan
amount determines the approval body -- branch manager, branch manager and Credit
Officer, Credit Officer Committee, Senior Credit Officer Committee or Credit
Committee.

<Table>
<Caption>
CATEGORY                   APPROVAL BODY                    APPROVAL LIMIT OF LOAN AMOUNT
- --------   ---------------------------------------------   -------------------------------
<C>        <S>                                             <C>
  1        Branch Manager (Individual Loans)
             Unsecured..................................   W100 million or less
             Secured....................................   W500 million W1 billion or less
  2        Branch Manager (Corporate loans)
             Unsecured..................................   W300 million or less
             Secured....................................   W2 billion or less
  3        Branch Manager and Credit Officer
             Unsecured..................................   W500 million or less
             Secured....................................   W3 billion or less
  4        Credit Officer Committee
             Unsecured..................................   W1 billion or less
             Secured....................................   W5 billion or less
  5        Senior Credit Officer Committee
             Unsecured..................................   W5 billion or less
             Secured....................................   W15 billion or less
  6        Credit Committee
             Unsecured..................................   More than W5 billion
             Secured....................................   More than W15 billion
</Table>

  Credit Card Approval Process

     Approval of credit card applications is processed using automated credit
scoring system retooled for credit cards. Credit scoring system for credit cards
is divided into two sub-systems: Application Scoring System and Behavior Scoring
System. Behavior Scoring System is based largely on the credit history and
Application Scoring System is based largely on personal information of the
applicant. For credit card applicants with whom we have an existing
relationship, credit scoring system factors in internally gathered information
such as repayment ability, total assets, the length of the existing relationship
and the applicant's contribution to profitability. Credit scoring system also
automatically conducts credit checks on all credit card applicants. Shinhan Card
gathers information about applicants' transaction history with financial
institutions, including banks and credit card companies, from a number of third
party credit reporting agencies including National Information & Credit
Evaluation Inc., other credit card companies in Korea, the Korea Federation of
Banks, Korea Non-bank Financing Association and credit rating agencies. These
credit checks reveal a list of the delinquent customers of all the credit card
issuers in Korea.

     If the credit score awarded to an applicant is above a minimum threshold,
then the application is approved unless overridden by other policy factors such
as delinquencies with other credit card companies. In respect of credit card
applications by our long-standing customers with good credit history, Shinhan
Card has discretion to waive the application of the awarded credit score unless
overridden by other policy factors. All of these factors also act as the basis
for setting a credit limit if Shinhan Card approves an application.

  CREDIT REVIEW AND MONITORING

     Shinhan Bank continually reviews and monitors existing credit risks
primarily with respect to borrowers. In particular, Shinhan Bank's automated
early warning system conducts weekly examination for borrowers using over 60
financial and nonfinancial factors, and the relationship manager and the credit
officer must conduct periodic loan review and report to independent loan review
team which analyzes in detail the results and adjusts credit rating accordingly.
Based on these reviews, Shinhan Bank adjusts a borrower's credit

                                       165
<PAGE>

rating, credit limit, applied interest rates and credit policies. In addition,
the group credit rating of the borrower's group, if applicable, may be adjusted
following a periodic review of the main debtor groups identified by the Governor
of the Financial Supervisory Service based on their outstanding credit
exposures, of which 29 were identified most recently in April 2003. Shinhan Bank
also continually reviews other factors, such as industry conditions in which
borrowers operate and their domestic and overseas asset base and operations, to
ensure that ratings are appropriate. The Loan Review Team provides credit review
reports, independent of underwriting, to Chief Credit Officer and CEO on a
monthly basis.

     The early warning system makes automatic weekly check for borrowers with
whom Shinhan Bank has more than W1 billion of exposure. The relationship manager
and the Credit Officer monitor those borrowers, and then the Loan Review Team
further reviews the results of the monitoring. In addition, Shinhan Bank carries
out special review of each borrower in accordance with changing credit risk
based on changing commercial environment. The results of such special review are
continually reported to the Chief Credit Officer of Shinhan Bank.

     Depending on the nature of the problem detected by the early warning
system, a borrower may be classified as a "deteriorating credit" and undergo
evaluation for a possible downgrade in its customer rating, or may be initially
classified as a "borrower showing early warning signs" or re-attain "normal
borrower" status. For borrowers classified as "showing early warning signs," the
relevant relationship manager gathers information and conducts a review of the
borrower to determine whether it should be classified as a deteriorating credit
or whether to impose management improvement warnings or implement joint
creditors' management. In the case where the borrower becomes non-performing,
Shinhan Bank's collection department directly manages such borrower's account in
order to maximize recovery rate, and conducts auctions, court proceedings, sale
of assets or corporate restructuring as needed.

  CREDIT RISK ASSESSMENT AND CONTROL

     To assess credit risk in a systematic manner, Shinhan Bank has developed
systems designed to quantify credit risks based on selection and monitoring of
various statistic, including delinquency rate, non-performing loan ratio,
expected loan loss and weighted average risk rating.

     Shinhan Bank controls loan concentration by monitoring and managing loans
at two levels -- portfolio level and individual loan account level. In order to
prevent concentration of loans, Shinhan Bank has established a credit limit per
country, industry, affiliates, corporation and financial institution, and has
encouraged extension of credit to customers with good credit and reduction of
credit to customers with less than good credit. In addition, Shinhan Bank
utilizes the results of credit portfolio analysis in allocating asset quality
based on forward looking criteria, increasing discretion and adjusting loan to
value ratio.

     Shinhan Bank measures credit risk using internally accumulated data.
Shinhan Bank measures expected and unexpected losses with respect to total
assets monthly, which Shinhan Bank refers to when setting risk limits for, and
allocate capital to, its business groups. Expected loss is calculated based on
credit rating and the past bankruptcy rate and recovery rate, and Shinhan Bank
provides allowance for bad debts accordingly. Recently, the Financial
Supervisory Service has raised the provisioning level requirements, and Shinhan
Bank selects the higher of the two provisioning levels -- the Financial
Supervisory Service requirement or Shinhan Bank's internal calculation.
Unexpected loss is predicted based on Value at Risk, or "VaR", under the
historical simulation method. Shinhan Bank plans to apply the more advanced
"Monte Carlo" simulation method rather than the historical simulation method
going forward, and plans to operate an integrated and systematic credit risk
management rather than risk management based on credit limitation.

  MARKET RISK MANAGEMENT

     Market risk is the risk of loss generated by fluctuations in market prices
such as interest rates, foreign exchange rates and equity prices. The principal
market risks to which the Group is exposed are interest rate risk and, to a
lesser extent, equity price risk and foreign exchange risk. These risks stem
from the Group's trading and nontrading activities relating to financial
instruments such as loans, deposits, securities and financial derivatives. The
Group is not exposed to commodity risk, the other recognized form of market
risk,
                                       166
<PAGE>

as it does not hold any commodity positions. The Group divides market risk into
risks arising from trading activities and risks arising from nontrading
activities.

     Market risk to which the Group is exposed arises primarily from Shinhan
Bank and the other subsidiaries do not incur significant market risk, except for
Good Morning Shinhan Securities, the Group's securities trading and brokerage
subsidiary, which incurs market risk relating to its trading activities. For
Shinhan Bank's market risk management, the Risk Management Committee establishes
overall market risk management principles for both the trading and nontrading
activities of Shinhan Bank. Based on these principles, the Asset & Liability
Management Committee, or the ALM Committee, of Shinhan Bank assesses and
controls market risks arising from trading and nontrading activities. The ALM
Committee, which consists of eight executive vice presidents and the head of the
Treasury Department, is the executive decision-making body for Shinhan Bank's
risk management and asset and liability management operations, or ALM
operations. At least on a monthly basis, the ALM Committee reviews and approves
reports, which include the position and value-at-risk, or "VaR", with respect to
Shinhan Bank's trading activities and the position, VaR, duration gap and market
value analysis and net interest income simulation with respect to its nontrading
activities. Shinhan Bank measures market risk with respect to all assets and
liabilities in the bank accounts and trust accounts in accordance with the
regulations promulgated by the FSC. Good Morning Shinhan Securities manages its
market risk based on its overall risk limit established by its risk management
committee as well as the risk limits and detailed risk management guidelines for
each product and department established by its management's committee. Good
Morning Shinhan Securities assesses the adequacy of these limits at least
annually.

     The Group uses Korean GAAP numbers on a nonconsolidated basis for our
market risk management and, unless it specifies otherwise, the numbers presented
for quantitative market risk disclosure were prepared in accordance with Korean
GAAP on a nonconsolidated basis.

  MARKET RISK MANAGEMENT FOR TRADING ACTIVITIES

  Market Risk Exposure from Trading Activities

     The Group's trading activities consist of:

     - trading activities to realize short-term trading profits in debt and
       stock markets and foreign exchange markets based on the Group's
       short-term forecast of changes in market situation and customer demand,
       for its own account as well as for the account of the trust accounts of
       Shinhan Bank's customers; and

     - trading activities primarily to realize profits from arbitrage
       transactions in derivatives such as swap, forward, futures and option
       transactions, and, to a lesser extent, to sell derivative products to the
       Group's customers and to cover market risk incurred from those trading
       activities.

     As a result of these trading activities, the Group is exposed to interest
rate risk, foreign exchange risk and equity risk.

     Interest Rate Risk

     The Group's exposure to interest rate risk arises primarily from
Won-denominated debt securities, directly held or indirectly held through
beneficiary certificates, and, to a lesser extent, from interest rate
derivatives. The Group's exposure to interest rate risk arising from foreign
currency-denominated trading debt securities is minimal since its net position
in those securities is not significant. As the Group's trading accounts are
marked-to-market daily, it manages the interest rate risk related to its trading
accounts using VaR, a market value-based tool.

     Foreign Exchange Risk

     Foreign exchange risk arises because of the Group's assets and liabilities,
including derivatives such as foreign exchange forwards and futures and currency
swaps, which are denominated in currencies other than

                                       167
<PAGE>

the Won. The Group's exposure to foreign exchange risk arises primarily from
Shinhan Bank. Shinhan Bank manages foreign exchange risk on an overall position
basis, including its overseas branches, by covering all of its foreign exchange
spot and forward positions in both trading and nontrading accounts.

     Shinhan Bank's net foreign currency open position, which is the difference
between its foreign currency assets and liabilities as offset against forward
foreign exchange positions, is Shinhan Bank's foreign exchange risk. The ALM
Committee oversees Shinhan Bank's foreign exchange exposure for both trading and
nontrading activities by establishing limits for the net foreign currency open
position, stop loss limits and VaR limits. The management of Shinhan Bank's
foreign exchange position is centralized at the FX & Derivatives Department.
Dealers in the FX & Derivatives Department manage Shinhan Bank's overall
position within the set limits through spot trading, forward contracts, currency
options, futures and swaps and foreign exchange swaps. Shinhan Bank sets forth
the limit for net open position by currency and the limits for currencies other
than the U.S. dollars and Japanese yen are restrictive to minimize other foreign
exchange trading.

     The net open foreign currency positions held by the other subsidiaries are
not significant. In the case of Shinhan Capital which incurs a considerable
amount of foreign exchange exposure from its leasing business, it maintains its
net exposure below US$1 million by hedging its foreign exchange positions using
forwards and currency swaps.

     The following table shows Shinhan Bank's net foreign currency open
positions at the end of 2000, 2001 and 2002. Positive amounts represent long
exposures and negative amounts represent short exposures. Shinhan Bank's net
open position for Japanese yen increased in 2002 after its limit was raised in
late 2001 to increase profits from more active trading between Won and Japanese
yen.

<Table>
<Caption>
                                                                   AS OF DECEMBER 31,
                                                              -----------------------------
CURRENCY                                                       2000       2001       2002
- --------                                                      -------   --------   --------
                                                                  (IN MILLIONS OF US$)
<S>                                                           <C>       <C>        <C>
US dollars..................................................  US$(6.7)  US$(14.2)  US$(16.4)
Japanese yen................................................     (0.0)       0.2      (16.6)
Euro........................................................     (0.2)       0.8        1.1
Others......................................................      1.0        1.2        0.9
                                                              -------   --------   --------
  Total.....................................................     (5.9)     (12.0)     (31.0)
                                                              =======   ========   ========
</Table>

     Equity Risk

     Equity risk for the Group's trading activities results from the trading of
equity portfolio of Korean companies and Korea Stock Price Index futures and
options. The trading equity portfolio consists of stocks listed on the KSE or
the Kosdaq and nearest-month or second nearest-month futures contracts under
strict limits on diversification as well as limits on positions. This has been
an area of particular focus due to the level of volatility in the stock market.
In addition, the Group pays close attention to the loss limits. Although Shinhan
Bank holds a substantially smaller amount of equity securities than debt
securities in its trading accounts, the VaR of trading account equity risk is
generally higher than that of trading account interest rate risk due to high
volatility in the value of equity securities. As of December 31, 2002, Shinhan
Bank held W61.8 billion of equity securities in its trading accounts (including
the trust accounts).

 Management of Market Risk from Trading Activities

     The following tables present an overview of market risk, measured by VaR,
from trading activities of Shinhan Bank and Good Morning Shinhan Securities,
respectively, for the year ended and as of December 31, 2002. For the Group's
market risk management purposes, Shinhan Bank includes its trading

                                       168
<PAGE>

portfolio in bank accounts and assets in trust accounts for which it guarantees
principal or fixed return in accordance with the FSC regulations.

<Table>
<Caption>
                                                    TRADING PORTFOLIO VAR FOR THE YEAR 2002(1)
                                                  -----------------------------------------------
                                                  AVERAGE   MINIMUM   MAXIMUM   AS OF DECEMBER 31
                                                  -------   -------   -------   -----------------
                                                               (IN BILLIONS OF WON)
<S>                                               <C>       <C>       <C>       <C>
SHINHAN BANK:
  Interest rate.................................   W 1.3     W0.4      W2.8           W 0.7
  Foreign exchange(2)...........................     0.5      0.1       1.6             0.4
  Equities......................................     3.2      0.7       6.2             0.7
  Less: portfolio diversification(3)............    (1.5)     N/A       N/A            (0.9)
                                                   -----     ----      ----           -----
  Total VaR(4)..................................   W 3.5     W0.9      W6.6           W 0.9
                                                   =====     ====      ====           =====
GOOD MORNING SHINHAN SECURITIES:
  Interest rate.................................   W 0.1     W --(5)    0.6           W 0.1
  Equities......................................     1.8       --(5)    5.3             0.1
  Beneficiary certificates(6)...................     0.1       --(5)    0.2             0.2
  Less: portfolio diversification(3)............    (0.2)     N/A       N/A            (0.1)
                                                   -----     ----      ----           -----
  Total VaR.....................................   W 1.8     W0.2      W4.8           W 0.2
                                                   =====     ====      ====           =====
</Table>

- ---------------

(1) One-day VaR results with a 99% confidence level.

(2) Includes both trading and nontrading accounts as Shinhan Bank manages
    foreign exchange risk on a total position basis.

(3) Calculation of portfolio diversification effects for the minimum and maximum
    VaRs as the minimum and maximum may occur on different days for different
    risk components. The average and December 31, 2002 VaRs are less than the
    sum of the VaRs due to offsets resulting from portfolio diversification.

(4) Includes trading portfolio in Shinhan Bank's bank accounts and assets in
    trust accounts for which it guarantees principal or fixed return.

(5) Less than W0.1 billion.

(6) Beneficiary certificates that Good Morning Shinhan Securities holds
    temporarily in connection with its beneficiary certificate sales business.
    Most of market risk arising from the holding of these beneficiary
    certificates is interest rate risk and there is minimal amount of equity
    risk.

     The Group generally manages its market risk from trading activities at the
entire portfolio level. To control its market risk for trading portfolio, the
Group uses position limits, VaR limits, and stop loss limits. The Group prepared
its risk control and management guidelines for derivative trading based on the
regulations and guidelines promulgated by the FSC.

     The Group measures market risk from trading activities to monitor and
control the risk of its operating divisions and teams that perform trading
activities.

     Value-at-Risk analysis.  The Group use one-day VaRs to measure Shinhan
Bank's market risk. Shinhan Bank calculates VaRs on a monthly basis based on
data for the previous 12 months for the holding periods of one day. A one-day
VaR is a statistically estimated maximum amount of loss that can occur for a day
under normal market conditions. The Group uses a 99% confidence level to measure
the VaRs, which means the actual amount of loss may exceed the VaR, on average,
once out of 100 business days.

     The Group uses one-day VaRs to measure market risk of Good Morning Shinhan
Securities. Good Morning Shinhan Securities calculates VaRs on a daily basis
based on data for the previous 12 months for the holding periods of one day. The
Group uses a 99% confidence level to measure the VaRs for Good Morning Shinhan
Securities. Good Morning Shinhan Securities is currently using a
variance-covariance methodology called "delta-normal method" for its overall VaR
calculation and uses historical simulation and "Monte

                                       169
<PAGE>

Carlo" simulation for stress test and calculation of VaRs for individual risks
of options. Variance-covariance method assumes a normal distribution of risks
which may underestimate market risk when the distribution of market risk is not
normal. This method also does not provide accurate analysis for risks of
non-linear products such as options.

     Value-at-risk is a commonly used market risk management technique. However,
VaR models have the following shortcomings:

     - By its nature as a statistical approach, VaR estimates possible losses
       over a certain period at a particular confidence level using past market
       movement data. Past market movement, however, is not necessarily a good
       indicator of future events, particularly potential future events that are
       extreme in nature.

     - This model may underestimate the probability of extreme market movements.

     - The time periods used for the model, generally one or ten days, are
       assumed to be a sufficient holding period before liquidating the relevant
       underlying positions. If these holding periods are not sufficient, or too
       long, the VaR results may understate the potential loss.

     - The use of a 99% confidence level, does not take account of, nor makes
       any statement about, any losses that might occur beyond this confidence
       level.

     - Shinhan Bank calculates VaRs at the end of every month and therefore do
       not reflect market changes during a month until the end of the month.

     - VaR does not capture all complex effects of various risk factors on the
       value of positions and portfolios and could underestimate potential
       losses.

     Currently, Shinhan Bank does not perform back-testing of VaR results
whereas Good Morning Shinhan Securities conducts back-testing of VaR results
against actual outcomes on a daily basis.

     When Shinhan Bank calculates the VaRs for trading accounts, it measures
interest risk VaRs, but not equity risk VaRs, for its equity-linked securities
which are insignificant in amount. As of December 31, 2002, Shinhan Bank held no
equity-linked securities in its trading accounts except for convertible bonds of
US$0.9 million.

     Shinhan Bank plans to implement a new integrated market risk management
system which will manage both Shinhan Bank's Won-denominated and
foreign-denominated accounts. The new system is expected to use historical
simulation, "Monte Carlo" simulation and variance-covariance methods to measure
both linear risks arising from such products as equity and debt securities and
nonlinear risks arising from other products including options. Monte Carlo
simulation method is similar to historical simulation, except that it uses
random numbers to generate different levels of market values instead of using
historical data. Variance-covariance method is a parameter-based methodology,
which takes into account diversification effects among different market risk
components as well as within the same risk component to calculate VaRs. The
Group expects the new system, when implemented, would enable Shinhan Bank to
generate elaborate and consistent VaR numbers and perform sensitivity analysis
and back testing to check the validity of the models on a daily basis.

     Stress test.  In addition to VaR, the Group performs stress test to measure
market risk. As VaR assumes normal market situations, the Group assesses its
market risk exposure to unlikely abnormal market fluctuations through stress
test. Stress test is an important way of supplement VaR since VaR does not cover
potential loss if the market moves in a manner which is outside the Group's
normal expectations. Stress test projects the anticipated change in value of
holding positions under certain scenarios assuming that no action is taken
during a stress event to change the risk profile of a portfolio.

     Shinhan Bank uses relatively simple but fundamental seven scenarios for
stress test taking into account four market risk components such as foreign
exchange rates, stock prices and Won-denominated and foreign
currency-denominated interest rates. For the worst case scenario, the Group
assumed instantaneous and simultaneous movements in the four market risk
components -- depreciation of Won by 115.7%, decrease in
                                       170
<PAGE>

Korea Stock Exchange Composite Index by 46%, and increases in Won-denominated
and foreign currency-denominated interest rates by 150.7% and 1.2%,
respectively -- which were based on the historical worst case movements for
three months during the "Asian crisis" from September 1997 to December 1997. In
the case of this worst case scenario, the changes in market value of Shinhan
Bank's trading portfolio was W32.4 billion as of December 31, 2002. Shinhan Bank
performs stress test at least semiannually and reports the results to the Risk
Management Committee and the ALM Committee.

     Good Morning Shinhan Securities uses five scenarios for stress test taking
into account two market risk components: stock prices and Won-denominated
interest rates. As of December 31, 2002, for the worst case scenario, which was
in the case of instantaneous and simultaneous drops in Korea Stock Price Index
200 by 10% and a 1% point increase in the three-year government bond yield, the
changes in market value of Good Morning Shinhan Securities' trading portfolio
was W1.2 billion for one day.

     Although Shinhan Bank has not set any limits on stress testing, it monitors
the impact of market turmoil or any abnormality. Good Morning Shinhan Securities
sets limits on stress testing for its overall operations as well as at its
department level. Both in Shinhan Bank and Good Morning Shinhan Securities, if
the impact is large, their respective chief risk officer may request a portfolio
restructuring or other proper action.

 Hedging and Derivative Market Risk

     The principal objective of the Group's hedging strategy is to manage its
market risk within established limits. The Group uses derivative instruments to
hedge its market risk as well as to make profits by trading derivative products
within pre-approved risk limits. The Group's derivative trading includes
interest rate and cross-currency swaps, foreign currency forwards and futures,
stock index and interest rate futures, and stock index and currency options.

     While the Group uses derivatives for hedging purposes, derivative
transactions themselves incur market risk as the Group takes trading positions
and trades them for the purpose of making profits. These activities consist
primarily of the following:

     - arbitrage transactions to make profits from short-term discrepancies
       between the spot and derivative markets or within the derivative markets;

     - sales of tailor-made derivative products that meet various needs of the
       Group's corporate customers and related transactions to reduce its
       exposure resulting from those sales (in the case of Good Morning Shinhan
       Securities, these activities commenced from February 2003 when it
       acquired the relevant license);

     - taking positions in limited cases when the Group expects short-swing
       profits based on its market forecasts; and

     - trading to hedge the Group's interest rate and foreign currency risk
       exposure as described above.

     Market risk from derivatives is not significant since the Group's
derivative trading activities are primarily driven by arbitrage and customer
deals with very limited open trading positions.

 MARKET RISK MANAGEMENT FOR NONTRADING ACTIVITIES

 Interest Rate Risk

     Principal market risk from nontrading activities of Shinhan Bank is
interest rate risk. Interest rate risk is the risk of loss resulting from
interest rate fluctuations that adversely affect the financial condition and
results of operations of Shinhan Bank. Shinhan Bank's interest rate risk arises
primarily due to differences between the timing of rate changes for
interest-earning assets and interest-bearing liabilities.

     Interest rate risk affects Shinhan Bank's earnings and the economic value
of Shinhan Bank's net assets:

     - Earnings: interest rate fluctuations have an effect on Shinhan Bank's net
       interest income by affecting its interest-sensitive operating income and
       expenses.

                                       171
<PAGE>

     - Economic value of net assets: interest rate fluctuations influence
       Shinhan Bank's net worth by affecting the present value of cash flows
       from the assets, liabilities and other transactions of Shinhan Bank.

     Accordingly, Shinhan Bank measures and manages interest rate risk for
nontrading activities by taking into account effects of interest rate changes on
both its income and net asset value. Shinhan Bank measures and manages interest
rate risk on a daily basis with respect to all interest-earning assets and
interest-bearing liabilities in Shinhan Bank's bank accounts (including
derivatives denominated in Won) and in the trust accounts, except that it
measures VaRs on a monthly basis. Most of Shinhan Bank's interest-earning assets
and interest-bearing liabilities are denominated in Won.

    Interest Rate Risk Management

     The principal objectives of Shinhan Bank's interest rate risk management
are to generate stable net interest income and to protect Shinhan Bank's net
asset value against interest rate fluctuations. To this end, the ALM Committee
sets out Shinhan Bank's interest rate risk limits at least annually and the Risk
Management Team monitors Shinhan Bank's compliance with these limits and reports
the monitoring results to the ALM Committee on a monthly basis. Shinhan Bank
uses interest rate swaps to control its interest rate exposure limits.

     On a daily basis, Shinhan Bank uses various analytical methodologies to
measure and manage its interest rate risk for nontrading activities, including
the following:

     - Interest Rate Gap Analysis: Interest rate gap analysis measures the
       difference in the amounts of interest-earning assets and interest-bearing
       liabilities at each maturity and re-pricing date for a specific time
       frame.

     - Duration Gap Analysis: Duration gap analysis measures durations of
       Shinhan Bank's interest-earning assets and interest-bearing liabilities,
       which are weighted average maturities of these assets and liabilities
       calculated based on discounted cash flows from these assets and
       liabilities using yield curves.

     - Market Value Analysis: Market value analysis measures changes in the
       market value of Shinhan Bank's interest-earning assets and
       interest-bearing liabilities based on the assumption of parallel shifts
       in interest rates.

     - Net Interest Income Simulation Analysis: Net interest income simulation
       analysis uses statistical analysis methodology to measure changes in
       Shinhan Bank's annual net interest income (interest income less interest
       expenses) under the current maturity structure, using different scenarios
       for interest rates (assuming parallel shifts) and funding requirements.

     - Earnings at Risk Analysis: Earnings-at-risk analysis, or "EaR" analysis,
       measures changes in Shinhan Bank's annual pretax earnings from its
       interest-earning assets and interest-bearing liabilities at a 99%
       confidence level using Monte Carlo simulation. Currently, Shinhan Bank
       uses EaR analysis as a supplemental measure for interest rate risk
       management.

    Interest Rate Gap Analysis

     Interest rate gap analysis measures the difference in the amounts of
interest-earning assets and interest-bearing liabilities at each maturity and
re-pricing date by preparing interest rate gap tables in which Shinhan Bank's
interest-earning assets and interest-bearing liabilities are allocated to the
applicable time buckets based on the expected cash flows and re-pricing dates.
On a daily basis, the Group performs interest rate gap analysis for Won and
foreign currency denominated assets and liabilities in Shinhan Bank's bank and
trust accounts. Shinhan Bank's gap analysis includes Won-denominated derivatives
(which are interest rate swaps) but excludes foreign currency-denominated
derivatives, whose management is centralized at the FX & Derivatives Department.
Through the interest rate gap analysis that measures interest rate sensitivity
gaps, cumulative gaps and gap ratios, Shinhan Bank assesses its exposure to
future interest risk fluctuations.

                                       172
<PAGE>

From the second half of 2003, Shinhan Bank plans to include derivatives in the
analyses of both Won-denominated and foreign currency-denominated assets and
liabilities.

     For interest rate gap analysis, the Group assumes and uses the following
maturities for different assets and liabilities:

     - With respect to the maturities and re-pricing dates of Shinhan Bank's
       assets, the Group assumes that maturity of Shinhan Bank's prime
       rate-linked loans the same as its fixed-rate loans. The Group also
       assumes that the debt securities in Shinhan Bank's trading accounts have
       maturities three months. Shinhan Bank excludes equity securities from
       interest-earning assets.

     - With respect to the maturities and re-pricing of Shinhan Bank's
       liabilities, the Group assumes that money market deposit accounts have a
       maturity of one day and that "non-core" demand deposits under the FSC
       guidelines have a maturity of 30 days. With respect to "core" demand
       deposits under the FSC guidelines, the Group assumes a maturity of over
       five years.

     The following tables show Shinhan Bank's interest rate gaps as of December
31, 2002 for (1) Won-denominated nontrading bank accounts, including derivatives
and (2) foreign currency-denominated nontrading bank accounts, excluding
derivatives.

       WON-DENOMINATED NONTRADING BANK ACCOUNTS (INCLUDING DERIVATIVES):

<Table>
<Caption>
                                                                 AS OF DECEMBER 31, 2002
                                -----------------------------------------------------------------------------------------
                                0-3 MONTHS   3-6 MONTHS   6-12 MONTHS   1-2 YEARS   2-3 YEARS   OVER 3 YEARS     TOTAL
                                ----------   ----------   -----------   ---------   ---------   ------------   ----------
                                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                             <C>          <C>          <C>           <C>         <C>         <C>            <C>
INTEREST-EARNING ASSETS.......  W 26,794.1   W 3,819.5     W 6,098.2    W 5,278.8   W 1,698.2    W 2,043.9     W 45,732.7
  Fixed rates.................     6,473.7     2,710.1       4,903.3      5,174.1     1,328.2      2,042.7       22,632.1
  Floating rates..............    20,272.9     1,109.4         748.2         54.7         0.0          1.2       22,186.4
  Interest rate swaps.........        47.5         0.0         446.7         50.0       370.0          0.0          914.2
INTEREST-BEARING
  LIABILITIES.................    20,800.4     5,675.6       8,390.3      2,004.4       968.7      6,414.9       44,254.3
  Fixed liabilities...........     9,944.9     5,569.8       8,151.7      1,900.2       909.2      6,414.9       32,890.7
  Floating liabilities........     9,941.3       105.8         238.6        104.2        59.5          0.0       10,449.4
  Interest rate swaps.........       914.2         0.0           0.0          0.0         0.0          0.0          914.2
Sensitivity gap...............     5,993.7    (1,856.1)     (2,292.1)     3,274.4       729.5     (4,371.0)       1,478.4
Cumulative gap................     5,993.7     4,137.6       1,845.5      5,119.9     5,849.4      1,478.4             --
% of total assets.............       13.11%       9.05%         4.04%       11.20%      12.79%        3.23%            --
</Table>

 FOREIGN CURRENCY-DENOMINATED NONTRADING BANK ACCOUNTS (EXCLUDING DERIVATIVES):

<Table>
<Caption>
                                                        AS OF DECEMBER 31, 2002
                              ---------------------------------------------------------------------------
                              0-3 MONTHS   3-6 MONTHS   6-12 MONTHS   1-3 YEARS   OVER 3 YEARS    TOTAL
                              ----------   ----------   -----------   ---------   ------------   --------
                                               (IN MILLIONS OF USD, EXCEPT PERCENTAGES)
<S>                           <C>          <C>          <C>           <C>         <C>            <C>
Interest-earning assets.....   $5,579.4     $1,349.1      $228.5        $22.8       $  14.4      $7,194.2
Interest-bearing
  liabilities...............    4,938.7      1,355.4       284.7         11.7         170.8       6,761.3
Sensitivity gap.............      640.7         (6.3)      (56.2)        11.1        (156.4)        432.9
Cumulative gap..............      640.7        634.4       578.2        589.3         432.9            --
% of total assets...........        8.9%         8.8%        8.0%         8.2%          6.0%           --
</Table>

    Duration and Market Value Analysis

     Shinhan Bank performs a duration gap analysis to measure effects of
interest rate risk on the market value of its assets and liabilities. Shinhan
Bank measures, on a daily basis and for each operating department, account,
product and currency, durations of interest-earning assets and interest-bearing
liabilities. Shinhan Bank also measures, on a daily basis, changes in the market
value of Shinhan Bank's interest-earning assets and interest-bearing
liabilities.

                                       173
<PAGE>

     The following tables show duration gaps and market values of Shinhan Bank's
Won-denominated interest-earning assets and interest-bearing liabilities in its
not-trading accounts as of December 31, 2002 and changes in these market values
when interest rate increases by one percentage point.

<Table>
<Caption>
                                                                  DURATION AS OF
                                                               DECEMBER 31, 2002(1)
                                                               --------------------
                                                                   (IN MONTHS)
<S>                                                            <C>
Interest-earning assets.....................................           8.39
Interest-bearing liabilities................................          11.62
Gap.........................................................          (3.23)
</Table>

<Table>
<Caption>
                                                         MARKET VALUE AS OF DECEMBER 31, 2002(1)
                                                        ------------------------------------------
                                                         ACTUAL      1% POINT INCREASE     CHANGES
                                                        ---------   --------------------   -------
                                                                    (IN BILLIONS OF WON)
<S>                                                     <C>         <C>                    <C>
Interest-earning assets...............................  W47,387.6        W47,150.2         W(237.4)
Interest-bearing liabilities..........................   44,190.0         43,882.2          (307.8)
Gap...................................................    3,197.6          3,268.0            70.4
</Table>

- ---------------

Note:

(1) Includes interest rate swaps.

    Net Interest Income Simulation

     Shinhan Bank performs a net interest income simulation to measure effects
of interest rate risk on Shinhan Bank's results of operations. Net interest
income simulation measures changes in Shinhan Bank's annual net interest income
(interest income less interest expenses) under the current maturity structure,
using different scenarios for interest rates and funding requirements. Shinhan
Bank applies three scenarios of parallel shifts in interest rate: (1) no change,
(2) a 1% point increase in interest rates and (3) a 1% point decrease in
interest rates. For funding requirement changes, Shinhan Bank uses three
scenarios: (1) no change in funding requirement, (2) a 10% increase in funding
requirement and (3) an increase in funding requirement by the growth rate
assumed in Shinhan Bank's annual financial plan.

     The following tables illustrate by way of an example the simulated changes
in Shinhan Bank's annual net interest income for 2003 with respect to
Won-denominated interest-earning assets and interest-bearing liabilities, using
the Group's net interest income simulation model, when it assumes (a) the
maturity structure and funding requirement of Shinhan Bank as of December 31,
2002 and (b) the same interest rates as of December 31, 2002 and a 1% point
increase in the interest rates.

<Table>
<Caption>
                                                      SIMULATED NET INTEREST INCOME FOR 2003
                                                 (FOR NONTRADING WON-DENOMINATED BANK ACCOUNTS)(1)
                                                 -------------------------------------------------
                                                                                   CHANGE IN NET
                                                    ASSUMED INTEREST RATES        INTEREST INCOME
                                                 -----------------------------   -----------------
                                                 NO CHANGE   1% POINT INCREASE   AMOUNT   % CHANGE
                                                 ---------   -----------------   ------   --------
                                                     (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                              <C>         <C>                 <C>      <C>
Simulated interest income......................  W3,275.8        W3,551.3        W275.5     8.41%
Simulated interest expense.....................   1,979.4         2,232.7         253.3    12.80%
Net interest income............................   1,296.3         1,318.7          22.4     1.73%
</Table>

- ---------------

Note:

(1) Includes interest rate swaps.

     Shinhan Bank's Won-denominated interest earning assets and interest-bearing
liabilities in nontrading accounts have a maturity structure that benefits from
an increase in interest rates, because the re-pricing periods of the
interest-earning assets in Shinhan Bank's nontrading accounts are shorter than
those of the interest-bearing liabilities in these accounts. This is primarily
due to a continuous decrease in interest rate in the recent years in Korea,
which resulted in a significant increase in floating rate loans, making the
maturities

                                       174
<PAGE>

or re-pricing periods of Shinhan Bank's loans shorter, while fixed-rate
longer-term deposits have increased. As a result, Shinhan Bank's net interest
income increases when the interest rates rise.

    Interest Rate VaRs for Nontrading Assets and Liabilities

     Shinhan Bank measures VaRs for interest rate risk from nontrading
activities on a monthly basis. The following table shows, for the year and as of
December 31, 2002, the VaRs of (1) interest rate risk from Shinhan Bank's
available-for-sale investment securities and (ii) interest rate mismatch risk
for other assets and liabilities, which arises from mismatches in the re-pricing
dates of Shinhan Bank's nontrading interest-earning assets and interest-bearing
liabilities other than the available-for-sale investment securities. Under the
FSC regulations, Shinhan Bank includes in calculation of these VaRs
interest-earning assets and interest-bearing liabilities in its bank accounts
and its trust accounts.

<Table>
<Caption>
                                                             VAR FOR THE YEAR 2002(1)
                                                  -----------------------------------------------
                                                  AVERAGE   MINIMUM   MAXIMUM   AS OF DECEMBER 31
                                                  -------   -------   -------   -----------------
                                                               (IN BILLIONS OF WON)
<S>                                               <C>       <C>       <C>       <C>
Interest rate -- available-for-sale
  securities....................................   W18.0     W9.5      W26.3          W16.5
Interest rate mismatch -- other assets and
  liabilities...................................     4.8      3.2        7.1            5.7
</Table>

- ---------------

Note:

(1) One-day VaR results with a 99% confidence level.

 Equity Risk

     Substantially all of the Group's equity risk results primarily from its
equity portfolio of Korean companies. As of December 31, 2002, the Group held
approximately US$0.5 million of a foreign company's shares.

     The equity securities in Won held in Shinhan Bank's investment portfolio
consist of stocks listed on the KSE or the Kosdaq and certain non-listed stocks.
Shinhan Bank measures VaRs for all of these equity securities but does not
manage most of the related risk using VaR limits, as most of these securities
are held for reasons other than normal investment purposes. As of December 31,
2002, Shinhan Bank held equity securities in an aggregate amount of W511.6
billion in its nontrading accounts, which included the Group's common shares of
W370.4 billion, unlisted securities that Shinhan Bank held for private equity
investment in the amount of W29.4 billion and other equity securities that it
held, among other reasons, for management control purposes or as a result of
debt-to-equity conversion as a part of reorganization proceedings of the
companies to which it had extended loans. Shinhan Bank holds 29,873,674 shares
of the Group's common stock, which were received in exchange for its treasury
shares Shinhan Bank held when the Group formed the holding company in September
2001. Under the Financial Holding Company Act, Shinhan Bank is required to
dispose of these shares within three years from the date of purchase.

     As of December 31, 2002, Shinhan Bank also held Won-denominated convertible
and exchangeable bonds in an aggregate amount of W150.7 billion (all of which
contained conversion or exchange rights) and foreign currency convertible and
exchangeable bonds in an aggregate amount of US$132.3 million (of which
convertible bonds in an amount of US$8.4 million had conversion rights) in its
nontrading accounts. Shinhan Bank does not measure equity risk with respect to
convertible and exchangeable bonds and the interest rate risk of these bonds are
measured together with the other debt securities. As such, Shinhan Bank measures
interest rate risk VaRs but not equity risk VaRs for these equity-linked
securities.

                                       175
<PAGE>

     The following table shows the VaRs of Shinhan Bank's equity risk from
nontrading activities for the year and as of December 31, 2002.

<Table>
<Caption>
                                                             VAR FOR THE YEAR 2002(1)
                                                  -----------------------------------------------
                                                  AVERAGE   MINIMUM   MAXIMUM   AS OF DECEMBER 31
                                                  -------   -------   -------   -----------------
                                                               (IN BILLIONS OF WON)
<S>                                               <C>       <C>       <C>       <C>
Equities(2).....................................   W39.7     W33.7     W43.8          W35.2
</Table>

- ---------------

Notes:

(1) One-day VaR results with a 99% confidence level.

(2) Includes 29,873,674 shares of the Group's common stock held by Shinhan Bank,
    which were received in exchange for its treasury shares when the Group
    formed the holding company.

 LIQUIDITY RISK MANAGEMENT

     Liquidity risk is the risk of insolvency, default or loss due to disparity
between inflow and outflow of funds, including having to obtain funds at a high
price or to dispose of securities at an unfavorable price due to lack of
available funds or losing attractive investment opportunities.

     The Group has the following basic principles for liquidity risk management:

     - maintain an appropriate level of liquidity risk through liquidity risk
       management based on liquidity gap or debt-to-equity ratio at each
       maturity date;

     - assess and monitor net cash flows by currency and by maturity and
       continuously evaluate available sources of funds and possibility of
       disposal of any liquid assets;

     - diversify sources and uses of funds by product and by maturity to prevent
       excessive concentration in certain periods or products; and

     - prepare contingency plans to cope with liquidity crisis.

     Each subsidiary manages liquidity risk in accordance with the risk limits
and guidelines established internally as well as those directed by the relevant
regulatory authorities. Pursuant to regulations applicable to financial holding
companies and banks as promulgated by Korean Financial Supervisory Commission,
the Group is required to keep specific Won and foreign currency liquidity
ratios. These ratios require the Group to keep the ratio of liquid assets to
liquid liabilities above certain minimum levels.

     Shinhan Bank manages its liquidity risk within the limits set on Won and
foreign currency accounts in accordance with the regulations of the FSC. The FSC
requires Korean banks to maintain a Won liquidity ratio of at least 105.0% and a
foreign currency liquidity ratio of at least 80%. The FSC defines the liquidity
ratio as liquid assets (including marketable securities) due within three months
divided by liabilities due within three months.

     The Treasury Department is in charge of liquidity risk management with
respect to Shinhan Bank's Won and foreign currency funds. The Treasury
Department submits Shinhan Bank's monthly funding and asset management plans to
the ALM Committee for its approval, based on the analysis of various factors,
including macroeconomic indices, interest rate and foreign exchange movements
and maturity structures of Shinhan Bank's assets and liabilities. The Risk
Management Team measures Shinhan Bank's liquidity ratio and liquidity gap ratio
on a monthly basis and reports whether they are in compliance with the limits to
the ALM Committee on a monthly basis.

                                       176
<PAGE>

     The following tables show Shinhan Bank's liquidity status and limits for
Won and foreign currency accounts as of December 31, 2002 in accordance with the
regulations of the FSC.

<Table>
<Caption>
                                                              AS OF DECEMBER 31, 2002
                            -------------------------------------------------------------------------------------------
                                                                                               SUBSTANDARD
WON-DENOMINATED ACCOUNTS    0-3 MONTHS   3-6 MONTHS   6-12 MONTHS   1-3 YEARS   OVER 3 YEARS    OR BELOW       TOTAL
- ------------------------    ----------   ----------   -----------   ---------   ------------   -----------   ----------
                                                      (IN BILLIONS OF WON EXCEPT PERCENTAGE)
<S>                         <C>          <C>          <C>           <C>         <C>            <C>           <C>
Assets:...................  W15,838.4     W4,456.6     W10,097.0    W13,530.6     W5,965.8       W495.8      W 50,384.2
Liabilities:..............   14,736.2      6,016.3      11,802.9      3,505.0     14,597.5           --        50,657.9
For three months or less:
  Liquidity gap...........  W 1,102.2
  Liquidity ratio.........     107.48%
  Limit:..................     105.00%
</Table>

<Table>
<Caption>
                                                                 AS OF DECEMBER 31, 2002
                                -----------------------------------------------------------------------------------------
FOREIGN CURRENCIES DENOMINATED                   7 DAYS-
ACCOUNTS:                       7 DAYS OR LESS   1 MONTHS   3 MONTHS   3-6 MONTHS   6-12 MONTHS   OVER 1 YEARS    TOTAL
- ------------------------------  --------------   --------   --------   ----------   -----------   ------------   --------
                                                         (IN MILLIONS OF US$ EXCEPT PERCENTAGE)
<S>                             <C>              <C>        <C>        <C>          <C>           <C>            <C>
Assets:.....................       $2,116.2      $1,224.1   $1,797.6    $1,360.5     $1,488.1        $961.4      $8,947.9
Liabilities.................        1,609.1       1,439.2    2,075.0     1,686.9      1,386.5         944.1       9,140.8
For three months or less:
  Assets....................                                $5,137.9
  Liabilities...............                                 5,123.3
  Liquidity ratio...........                                  100.29%
  Limit.....................                                   80.00%
</Table>

     The Group maintains diverse sources of liquidity to facilitate flexibility
in meeting its funding requirements. Shinhan Bank funds its operations
principally by accepting deposits from retail and corporate depositors,
accessing the call loan market (a short-term market for loans with maturities of
less than one month), issuing debentures and borrowing from the Bank of Korea.
Shinhan Bank uses the funds primarily to extend loans or purchase securities.
Generally, deposits are of shorter average maturity than loans or investments.

     The Group's subsidiaries other than Shinhan Bank fund their operations
primarily through call money, bank loans, commercial paper, corporate debentures
and asset-backed securities. The Group's holding company acts as a funding
vehicle for long-term financing of the Group's subsidiaries whose credit ratings
are lower than its holding company, including Shinhan Card and Shinhan Capital,
to lower the overall funding costs within regulatory limitations. Under the
Monopoly Regulation and Fair Trade Act of Korea, however, a financial holding
company is prohibited from borrowing funds in excess of 100% of its total
stockholders' equity. In addition, pursuant to the Group's liquidity risk
management policies designed to ensure compliance with required capital adequacy
and liquidity ratios, it has set limits to the amount of liquidity support by
its holding company to the Group's subsidiaries to 70% of its total
stockholders' equity and the amount of liquidity support to a single subsidiary
to 35% of its total stockholders' equity.

     In addition to liquidity risk management under the normal market
situations, the Group has contingent plans to effectively cope with possible
liquidity crisis. Liquidity crisis arises when the Group would not be able to
effectively manage the situations with its normal liquidity management measures
due to, among other reasons, inability to access its normal sources of funds or
epidemic withdrawals of deposits as a result of various external or internal
factors, including a collapse in the financial markets or abrupt deterioration
of our credit. The Group has contingency action plans corresponding to different
stages of liquidity crisis, "cautionary stage", "near-crisis stage" and "crisis
stage", based on the following liquidity indices:

     - indices that reflect the market movements such as interest rates and
       stock prices;

     - indices that reflect financial market psychology such as the size of
       money market funds; and

     - indices that reflect our internal financial condition.

                                       177
<PAGE>

 OPERATIONAL RISK MANAGEMENT

     Operational risk is difficult to quantify and subject to different
definitions. The Group defines operational risk as the risks related to its
overall management other than credit risk, market risk, interest rate risk and
liquidity risk. These include risks arising from system failure, human error or
non-adherence to systems and procedures, from fraud or inadequate internal
controls and procedures, from a mistake in strategic decision or from
environmental changes, resulting in financial or reputational loss.

     The Group Internal Audit Activity, reporting directly to the Group Audit
Committee, oversees the Group's operational activities, with a special focus on
legal, operational and reputational risk. The Group Audit Committee, which is a
committee under the Group's Board of Directors, oversees and monitors the
compliance with legal and regulatory requirements. For the operational risk
management at the Group level, the Group clearly defines each subsidiary's
operational process and establishes an internal review system for each
subsidiary. Each subsidiary's operational risk is internally managed and
controlled at the subsidiary level and the Group Internal Audit Activity
continuously monitors the integrity of our subsidiaries' operational risk
management system. The Group's Board of Directors, the Group Risk Management
Committee and the Group Audit Committee establish the basic principles for the
Group's operational risk management and monitor and review management of its
operational risk at the Group level.

     To monitor and control operational risk, Shinhan Bank maintains a system of
comprehensive policies and has put in place a control framework designed to
provide a stable and well-managed operational environment throughout the
organization. The primary responsibility for ensuring compliance with Shinhan
Bank's operational risk procedures remains with its business units and
operational departments. In addition, the Audit & Examination Department, Risk
Management Team and Compliance Team also play important roles in reviewing and
maintaining the integrity of Shinhan Bank's internal control environment.

     The Audit Committee, which consists of three board members, including two
outside directors, is an independent inspection authority that supervises
Shinhan Bank's internal controls and its observance of ethical and legal
principles in addition to reviewing the financial statements. The Audit
Committee performs audits of, among other matters, Shinhan Bank's overall
management and accounting, and has the Audit & Examination Department as its
execution body. The Audit Committee also reviews and evaluates Shinhan Bank's
accounting policies and their changes, financial activities and accuracy of
financial reporting.

     The Audit Committee and the Audit & Examination Department supervise and
perform the following audits:

     - general audits, including full-scale audits performed annually for the
       overall operations, sectional audits of selected operations performed
       when necessary, and periodic and irregular spot audits;

     - special audits, performed when the Audit Committee or standing auditor
       deems it necessary or pursuant to requests by the chief executive officer
       or supervisory authorities such as the Financial Supervisory Service;

     - day-to-day audits, performed by the standing auditor for material
       transactions or operations that are subject to approval by the heads of
       Shinhan Bank's operational departments or senior executives;

     - real-time monitoring audits, performed by the computerized audit system
       to identify any irregular transactions and take any necessary actions;
       and

     - self-audits as a self-check by each operational department to ensure its
       compliance with Shinhan Bank's business regulations and policies, which
       include daily audits, monthly audits and special audits.

     General audits, special audits, day-to-day audits and real-time monitoring
audits are performed by Shinhan Bank's examiners and self-audits are performed
by the self-auditors of the relevant operational departments.

     The Financial Supervisory Service conducts general annual audits of the
Group's operations at the holding company level and also performs general audits
of Shinhan Bank's operations. The Financial Supervisory Service's audit of
Shinhan Bank is currently performed biannually as a result of a high rating

                                       178
<PAGE>

that Shinhan Bank received in its previous audit. The FSS also performs special
audits as the need arises on particular aspects of the operations such as risk
management, credit monitoring and liquidity.

     The Compliance Team operates Shinhan Bank's compliance inspection system.
This system is designed to ensure that all of Shinhan Bank's employees comply
with the law. The compliance inspection system's main function is to monitor the
degree of improvement in compliance with the law, maintain internal controls
(including ensuring that each department has established proper internal
policies and that it complies with those policies) and educate employees about
observance of the law.

     The Group considers legal risk as a part of operational risk. The
uncertainty of the enforceability of obligations of Shinhan Bank's customers and
counterparties, including foreclosure on collateral, creates legal risk. Changes
in laws and regulations could also adversely affect the Group. Legal risk is
higher in new areas of business where the law is often untested in the courts
although legal risk can also increase in Shinhan Bank's traditional business to
the extent that the legal and regulatory landscape in Korea is changing and many
new laws and regulations governing the banking industry remain untested. The
Compliance Team seeks to minimize legal risk by using stringent legal
documentation, employing procedures designed to ensure that transactions are
properly authorized and consulting legal advisers. Shinhan Bank's compliance
officers review loan documentation to ensure that these are correctly drawn up
to withstand scrutiny in court should such scrutiny occur.

     In addition to these audits and compliance activities, the Risk Management
Team continuously monitors, manages and reports important operational risk
related matters, including risk limit monitoring results, trading status and
sources and uses of funds. The Risk Management Team also reviews in advance new
business or service plans proposed by Shinhan Bank's operational departments to
minimize operational risk.

     The Risk Management Team is currently performing ground work, including our
internal process review and data accumulation, for adoption of a new firm-wide
system for operational risk management to apply a standardized approach that
meets the recommendations by the "BIS New Basle Accord for Measurement and
Management of Operational Risk". The Group intends to complete the necessary
process setup and data accumulation by 2006 to implement the new system in 2007,
although this schedule is subject to change.

RISK MANAGEMENT OF CHOHUNG BANK

     Chohung Bank's overall risk management policy is set by the Risk Policy
Committee ("RPC"), which consists of three non-standing directors and two
standing directors: one of the three non-standing directors chairs the
committee. Chohung Bank's overall risk management is overseen by the Risk
Management Committee ("RMC"). The RMC consists of the Heads of the Planning
Group, the Institutional Banking & Treasury Group, the Credit Management Group,
the Trust Business Group, the Risk Management Group and whichever additional
group is responsible for the matter under review. The Head of the Risk
Management Group chairs the RMC. The primary functions of the RMC are risk
reduction within the overall aim of durable profit improvement. The RMC
regularly reviews various risk profiles of Chohung Bank together with its
liquidity position and uses the information to adjust the direction and strategy
of Chohung Bank.

     For the risk management infrastructure, Chohung Bank has implemented the
following systems:

     - implemented in September 2000, the Credit Management System (CMS)
       measures default rates by credit rating and credit risk based on the
       default volatility in order to apply such results to credit portfolio
       management and management of credit risks limit for each business unit;

     - implemented in September 2000, the Market Risk Management System measures
       Value-at-Risk (VaR) to be used for management of market risk;

     - upgraded in December 2000, the Asset-Liability System for accurate cash
       flow management and for improved measurement of interest rate risk using
       Monte Carlo simulations; and

     - implemented in April 2001, the Capital Allocation System and Risk
       Adjusted Performance Measurement System allocates risk adjusted capital,
       to set risk limits and to measure risk adjusted return on risk capital
       and economic value-added for risk adjusted performance measurement.
                                       179
<PAGE>

 CREDIT RISK MANAGEMENT

     Chohung Bank formulates and implements its credit policies in compliance
with relevant regulations issued by the Financial Supervisory Commission. See
"-- Supervision and Regulation -- Regulations Applicable to Banks".

 Credit Planning

     The Credit Management Group functions as a centralized policy-making and
planning division, and allocates and coordinates Chohung Bank's resources. The
Credit Management Group establishes, among others, broad lending guidelines. One
of the main objectives of the guidelines is to construct a policy framework to
meet Chohung Bank's objectives of strengthening Chohung Bank's retail and SME
business and enhancing asset quality. The Credit Management Group gathers data
from Chohung Bank's various operating groups and produces various internal and
external reports. For example, it reports to the Bank of Korea, as well as to
Chohung Bank's senior management, Chohung Bank's loan portfolio and average
interest rates on a monthly basis, as required by the Korean banking
regulations. The Credit Management Group also monitors Chohung Bank's operating
groups' compliance with internal guidelines and procedures. It monitors loans
approved at the branch level, as well as loans approved at the head office
level.

 Credit and Approval Limits

     The following table shows the credit limits for a single borrower and
levels of approval.

<Table>
<Caption>
LEVEL OF APPROVAL                                                 CREDIT LIMITS
- -----------------                                              --------------------
                                                               (IN BILLIONS OF WON)
<S>                                                            <C>
Headquarters level
Credit Review Committee(1)..................................   More than W40 - W60
Credit Officer Committee(2).................................   Up to W40 - W60
Review Team(3)..............................................   Up to W10 - W20
Branch level
Collateralized
  Chief Relationship Manager................................   Up to W2 - W4
Non-collateralized
  Chief Relationship Manager................................   Up to W0.2 - W1
</Table>

- ---------------

Notes:

(1) Consists of heads of the Credit Management Group, Treasury and International
    Business Group, Corporate Banking Group and the head of the relevant
    business group.

(2) Consists of general managers of the Credit Assessment Division, Loan
    Recovery Division and Credit Planning Office.

(3) Consists of three to four loan review officers.

 Loan Review

     In order to ensure the quality of its loans, Chohung Bank's Loan Review
Division reviews and monitors its existing loans. In reviewing a loan, Chohung
Bank focuses on (i) whether the loan has been approved in compliance with the
credit approval procedures in place, (ii) whether the loan's current asset
quality and the borrower's credit rating are adequate and (iii) whether such
loan is profitable. In addition, according to the circumstances, Chohung Bank
takes other factors into account in conducting its loan review. Chohung Bank's
loan reviews consist of regular reviews and spot reviews.

                                       180
<PAGE>

     The purposes of loan reviews include:

     - evaluation of the validity of loan approval and credit ratings;

     - evaluation of the validity and timeliness of the follow-up management of
       the borrowers subject to credit monitoring, the borrowers in workout
       plans and the borrowers who have non-performing loans; and

     - evaluation of Chohung Bank's credit portfolio based on various factors
       that affect asset quality.

     Chohung Bank performs regular reviews for borrowers and the review
frequency depends on the credit score of the borrower. In addition to regular
reviews, Chohung Bank performs spot reviews for branches with large amount of
payments overdue and branches which received low grades in their regular
reviews.

     Following a loan review, Chohung Bank's Loan Review Division may, if it
deems necessary, take the following actions:

     - request a reclassification of the loan's asset quality or its borrower's
       credit rating;

     - change the terms of the loan;

     - transfer the loan to the Loan Recovery Division for special management if
       the loan is classified to be substandard or below; and

     - request a special audit by the Internal Audit Division in respect of such
       loan if misconduct or negligence has been found during the review.

     The responsible divisions or branch offices must then report to the Loan
Review Division on the implementation of such actions. The Internal Audit
Division must also notify the Loan Review Division of the results of the special
audit if such audit had been requested and performed. With respect to certain
borrowers, the Loan Review Division must report the results of its reviews to
the President and the Executive Committee of Chohung Bank.

     Since July 1999, all borderline lending decisions regarding SMEs, such as
non-collateralized or under-collateralized credits to be extended to SMEs, must
be approved by an independent committee comprised of four representatives of
outside credit rating agencies. In addition, in order to be more proactive and
cautious with respect to its lending procedures, Chohung Bank recently
implemented a new policy which requires the Credit Review Committee to review
and approve any and all new credits to SK Group companies, Kumho, Ssangyong
Group companies and Hyundai Merchant Marine regardless of the amount of the
proposed new credit.

 Credit Management System

     In September 2000, Chohung Bank implemented CMS, an integrated credit
management system that combines the functions of credit approval, monitoring and
follow-up management. CMS is designed to efficiently manage the entire process
from loan application, approval, extension, credit ratings, and limit control,
to follow-up management, and credit risk management.

     CMS consists of the following three modules:

     - Credit Risk Control:  A module consisting of two systems, a credit risk
       measurement system and a credit portfolio management system.

     - Loan Approval Support:  A module consisting of a financial analysis
       support system, credit risk rating system (CRRS), loan limit management
       system, collateral management system, loan pricing system, loan
       application support system and loan approval system.

     - Follow-up Management:  This module includes a loan monitoring and review
       system, default/delinquency information management system and credit
       information analysis system.

                                       181
<PAGE>

 Total Exposure Management System

     Total Exposure Management System (TEMS) was developed in late 1997. This
system enables Chohung Bank to make real-time inquiries on the exposures to
customers by company or by business group and to manage the credit limits for
all kinds of business transactions.

     Chohung Bank manages its total exposure in respect of the assets of (i) the
top 60 chaebol companies designated by the FSC based on the outstanding total
credits from all financial institutions and (ii) companies with total credits in
the outstanding amount of W30 billion. The assets that are subject to total
exposure management include credits (which is defined to include loans, loans
from trust accounts, guarantees and acceptances, advances for customers, foreign
exchange related credits, credits from overseas branches and international
financing credits), securities (which include equity securities, commercial
papers, corporate debt securities and securities in foreign currencies), call
loans, due from banks, advances, derivatives and other assets designated by the
head of the Credit Planning Office.

     In connection with its total exposure management, Chohung Bank also manages
its foreign currency exposure in respect of the assets of certain companies
(including their overseas branches and subsidiaries) whose outstanding foreign
currency exposure is US$10 million or more. The assets that are subject to
foreign currency exposure management include loans in foreign currencies,
guarantees and acceptances in foreign currencies (which guarantees and
acceptances are included in the calculation of individual credit limitation
pursuant to the Bank Act and which include guarantees and acceptances related to
derivatives, securities in foreign currencies (including investment securities
in connection with capital contributions), offshore financing, advances for
customers under guarantees and acceptances in foreign currencies, due from banks
in foreign currencies and other assets designated by the head of the Credit
Planning Office.

     Chohung Bank's total exposure or foreign currency exposure to each group is
managed by both the Risk Management Division and the Credit Planning Office.
While the Risk Management Division is responsible for managing Chohung Bank's
overall risk, including market risk and credit risk, reviewing Chohung Bank's
overall policy and its asset portfolio and coordinating the operations of
several of Chohung Bank's departments in respect of Chohung Bank's credit and
foreign currency limits, the Credit Planning Office is responsible for all
practical operations related to TEMS and reports management results periodically
to the Risk Management Committee. The Credit Planning Office is responsible for
creating and managing the total risk management guidelines, setting credit and
foreign currency limits, reviewing Chohung Bank's compliance with such limits,
reviewing the credit risks of the companies under review, establishing and
implementing Chohung Bank's risk management policy, reporting the management
status of Chohung Bank's total exposure and foreign currency exposure and
carrying out other related activities.

 Credit Risk Rating System

     Chohung Bank's credit risk rating system for corporate customers (CRRS)
standardizes Chohung Bank's credit decisions, focusing on forward-looking
criteria based on the probability of recovery of the credits and the likelihood
of defaults.

     Chohung Bank implemented CRRS in late 1999. CRRS enables Chohung Bank to
make risk-based pricing decisions. The system was designed to aid Chohung Bank
to focus more on the quality of its assets rather than its market share or asset
size. This system focuses on forward-looking criteria by estimating the
probability of recovery of the extended credits and calibrating the likelihood
of defaults. It is also designed to perform sensitivity analysis with respect to
macroeconomic indices such as interest rates or foreign exchange rates. The main
components of Chohung Bank's new credit risk rating system consist of the
following:

     - A standardized credit application form that contains detailed questions
       for credit evaluation;

     - A comprehensive risk assessment framework that enables Chohung Bank's
       relationship managers and credit officers to assess risks;

     - Quantitative risk scores calibrated to probability of defaults and
       recovery; and

     - Risk premiums and loan loss provisions linked to such credit risk
       ratings.
                                       182
<PAGE>

     To estimate non-recovery risks, the system evaluates various factors such
as the existence of a priority in collateral and the nature and the location of
such collateral. To measure default risks, the system takes into account various
factors such as a customer's financial condition, its competitive position in
the industry, its industry situation, the quality of its management, its
technological merits and its operations. In calculating the probability of
default and recovery, the system also takes into account non-financial
information and adjusts the calculation to best reflect the characteristics of
the customer groups.

     Chohung Bank's credit risk rating system consists of eight different models
that customize the credit risk ratings to reflect different characteristics of
Chohung Bank's customer groups. The system categorizes industries into four
groups to best capture the characteristics and differences of the industries:
manufacturing, construction, financial services and services. It also applies
different weights and procedures to customers who are audited by independent
auditors and those who are not subject to independent audits. Less weight is
placed on the financial information of customers which are not subject to audits
by independent auditors than on independently audited financial information.

     For instance, Chohung Bank's credit risk evaluation model for customers in
the manufacturing industry that are subject to independent audits, analyzes and
assesses the following five risk factors: (i) financial risks, (ii) industry
risks, (iii) managerial risks, (iv) operational risks and (v) technological
risks. To assess these risks, the model asks 23 principal questions, seven for
financial risks and three or four for each other risk factor. Each principal
question consists of three or four sub-questions. The relative weight for each
question is determined by an analysis of estimated weights in the credit risk
rating systems of internationally renowned financial institutions. With weighted
average scores, the model assigns the credit risk rating of one to ten. Grades
one through six are "normal" (six being "watch"), grade seven is
"precautionary", eight "substandard", nine "doubtful" and ten "estimated loss".

 CREDIT SCORING SYSTEM

     For consumer customers, Chohung Bank operates a credit scoring system
(CSS). This system was developed in April 1999 for consumer customers and has
been used for individual loan management, credit card management and other
individual-based credit management. CSS is an automated credit approval system
used to evaluate loan applications by assigning a credit score to each
application based on a predetermined set of criteria. One of the principal
benefits of this system is to significantly limit the scope of employee
discretion in the loan assessment and approval process.

     CSS is applied to the extension of credits of W50 million or less to
individuals (including sole proprietorships) and the issuance of credit cards.
CSS consists of (i) an application scoring system (ASS) which evaluates
information on applicants' credits, transaction records and default records (ii)
a marketing scoring system (MSS) which applies only to the existing customers to
evaluate their transaction and default records for faster loan approval for the
existing customers, and (iii) a behavioral scoring system (BSS) for follow-up
management whereby Chohung Bank will trace the behavioral patterns of borrowers
after loans are extended to them, such as checking whether borrowers paid
interest on loans on time or whether they fulfilled their financial obligations
on credit cards. The adoption of CSS has improved the speed and accuracy of
retail loan underwritings, and is expected to improve the accuracy and
efficiency of retail loan approval and credit card issuance procedures.

  MARKET RISK MANAGEMENT

     Market risk is the risk of loss that results from changes in market prices
such as interest rates, foreign exchange rates and equity prices. The principal
market risks to which Chohung Bank is exposed are interest rate risk and, to a
lesser extent, foreign exchange risk and equity price risk. These risks stem
from Chohung Bank's trading and non-trading activities relating to financial
instruments such as loans, deposits, securities and financial derivatives.
Chohung Bank is not exposed to commodity risk, the other recognized form of
market risk, as Chohung Bank does not hold any commodity positions. Chohung Bank
divides market risk into risks arising from trading activities and risks arising
from non-trading activities.

                                       183
<PAGE>

     Chohung Bank's Risk Policy Committee establishes and oversees
implementation of the overall risk management policies for both trading and
non-trading activities of Chohung Bank.

     Chohung Bank uses Korean GAAP numbers on a nonconsolidated basis for its
market risk management and, unless specified otherwise, the numbers presented
for quantitative market risk disclosure were prepared in accordance with Korean
GAAP on a nonconsolidated basis.

  MARKET RISK EXPOSURE FROM TRADING ACTIVITIES

     Chohung Bank's trading activities consist of:

     - Trading activities to realize short-term trading profits in debt and
       equity markets and foreign exchange markets based on its short-term
       forecasts of changes in market conditions and customer demand, for its
       proprietary account as well as for the trust accounts of its customers;
       and

     - Trading activities primarily to realize profits from arbitrage
       transactions in derivatives such as swap, forward, futures and option
       transactions, and, to a lesser extent, to sell derivative products to its
       customers and to hedge market risk incurred from those trading
       activities.

     As a result of these trading activities, Chohung Bank is exposed to
interest rate risk, foreign exchange risk and equity risk.

  Interest Rate Risk

     Chohung Bank's exposure to interest rate risk arises primarily from
Won-denominated debt securities, directly held or indirectly held through
beneficiary certificates, and, to a lesser extent, from interest rate
derivatives and foreign currency-denominated trading debt securities. As its
trading accounts are marked-to-market daily, Chohung Bank manages the interest
rate risk related to its trading accounts using "value at risk" or "VaR", a
market value-based tool.

  Foreign Exchange Risk

     Foreign exchange risk arises because its assets and liabilities, including
derivatives such as foreign exchange forwards, futures, options and currency
swaps, are denominated in currencies other than the Won. Chohung Bank's exposure
to foreign exchange risk arises primarily from bank's foreign exchange spot and
forward positions in both trading and non-trading accounts.

     Chohung Bank measures foreign exchange risk with its net foreign currency
open position, which is the difference between its foreign currency assets and
liabilities as offset against forward foreign exchange positions. Chohung Bank's
Risk Management Committee establishes limits for the net foreign currency open
position, stop loss limits and VaR limits.

     The management of Chohung Bank's foreign exchange position is centralized
at the Treasury Department. Dealers in the Treasury Department manage Chohung
Bank's overall position within the set limits through spot trading, forward
contracts, currency options, futures and swaps and foreign exchange swaps.
Chohung Bank sets VaR limit for each dealer to control foreign exchange risk.

                                       184
<PAGE>

     The following table shows Chohung Bank's net foreign currency open
positions at the end of 2000, 2001 and 2002. Positive amounts represent long
exposures and negative amounts represent short exposures.

<Table>
<Caption>
                                                                   AS OF DECEMBER 31,
                                                              -----------------------------
CURRENCY                                                        2000       2001      2002
- --------                                                      --------   --------   -------
                                                                  (IN MILLIONS OF US$)
<S>                                                           <C>        <C>        <C>
US Dollars..................................................  US$(48.4)  US$(63.2)  US$(5.7)
Japanese Yen................................................      (1.1)      (4.4)     10.5
Euro........................................................       0.7        0.0       1.3
Others......................................................      (3.3)      (2.5)      7.9
                                                              --------   --------   -------
  Total.....................................................  US$(52.1)  US$(70.1)  US$14.0
                                                              ========   ========   =======
</Table>

     As the interest rate on Japanese Yen decreased in 2002, Chohung Bank
increased its net open position for Japanese Yen while reducing its U.S. Dollar
net position.

     Equity Risk

     Equity risk for Chohung Bank's trading activities results from the trading
of equity portfolio of Korean companies and Korea Stock Price Index futures and
options. Although Chohung Bank holds a substantially smaller amount of equity
securities than debt securities in its trading accounts, the equity risk VaR of
trading accounts is relatively higher than that of trading account interest rate
risk due to high volatility in the prices of equity securities. As of December
31, 2002, Chohung Bank held W0.8 billion of trading equity securities in trust
accounts for which it guaranteed principal and fixed return. Chohung Bank's own
trading accounts had no equity securities as of December 2002.

  MARKET RISK MANAGEMENT FOR TRADING ACTIVITIES

     The following tables present an overview of market risk, measured by VaR,
from trading activities of Chohung Bank for the year ended and as of December
31, 2002. For market risk management purposes, Chohung Bank includes its trading
portfolio in bank accounts and trading assets in trust accounts for which it
guarantees principal or fixed return in accordance with the FSC regulations.

<Table>
<Caption>
                                                  TRADING PORTFOLIO TEN-DAY VAR FOR THE YEAR 2002(1)
                                                  ---------------------------------------------------
                                                  AVERAGE    MINIMUM    MAXIMUM    AS OF DECEMBER 31
                                                  --------   --------   --------   ------------------
                                                                 (IN BILLIONS OF WON)
<S>                                               <C>        <C>        <C>        <C>
CHOHUNG BANK:
  Interest rate.................................    W5.3       W1.9      W13.1            W2.7
  Foreign exchange(2)...........................     2.1        0.1        8.7             0.2
  Equities......................................     0.2        0.1        0.3             0.2
                                                    ----       ----      -----            ----
  Total VaR(3)..................................    W5.9       W1.9      W14.6            W2.7
                                                    ====       ====      =====            ====
</Table>

- ---------------

Notes:

(1) Ten-day VaR results at a 99% confidence level.

(2) Includes both trading and non-trading accounts as Chohung Bank manages
    foreign exchange risk on a total position basis.

(3) Due to portfolio diversification effects, the total VaR figures are
    different from the simple additions of interest rate, foreign exchange and
    equity risks.

     Chohung Bank generally manages market risk from trading activities at the
entire trading portfolio level. To control its market risk for trading
portfolio, Chohung Bank uses VaR limits, and stop loss limits. Chohung Bank has
prepared risk control and management guidelines for derivative trading based on
the regulations and guidelines promulgated by the FSC.

                                       185
<PAGE>

     Chohung Bank measures market risk from trading activities to monitor and
control the risk of operating divisions and teams that perform trading
activities.

     Value-at-Risk Analysis.  Chohung Bank uses ten-day VaRs to measure market
risk. Chohung Bank calculates VaRs on a daily basis using data for the previous
12 months or 250 business days based on a holding period of one day. Chohung
Bank then calculates ten-day VaRs using these one-day VaRs. A VaR is a
statistically estimated maximum amount of loss that can occur for the specified
period under normal market conditions. Chohung Bank uses a 99% confidence level
to measure the VaRs, which means the actual amount of loss may exceed the VaR,
on average, once out of 100 business days. Chohung Bank is currently using:

     - a variance-covariance methodology called delta-normal method for its
       overall VaR calculations;

     - a Monte Carlo simulation for its back testing and stress testing to
       measure nonlinear risk products such as options; and

     - a historical simulation for its back testing.

     The Variance-covariance method is a parameter-based methodology, which
takes into account diversification effects among different market risk
components as well as within the same risk component to calculate VaRs. The
Variance-covariance method assumes a normal distribution of risks which may
underestimate market risk when the distribution of market risk if not normal.
This method also does not provide accurate analysis for risks of non-linear
products such as options. The Monte Carlo simulation method is similar to
historical simulation, except that it uses random numbers to generate different
levels of market values instead of using historical data.

     Value-at-risk is a commonly used market risk management technique. However,
VaR models have the following shortcomings:

     - By its nature as a statistical approach, VaR estimates possible losses
       over a certain period at a particular confidence level using past market
       movement data. Past market movement, however, is not necessarily a good
       indicator of future events, particularly potential future events that are
       extreme in nature.

     - This model may underestimate the probability of extreme market movements.

     - The time periods used for the model, generally one or ten days are
       assumed to be a sufficient holding period before liquidating the relevant
       underlying positions. If these holding periods are not sufficient, or too
       long, the VaR results may understate the potential loss.

     - The use of a 99% confidence level, does not take account of, nor makes
       any statement about, any losses that might occur beyond this confidence
       level.

     - VaR does not capture all complex effects of various risk factors on the
       value of positions and portfolios and could underestimate potential
       losses.

     Back Testing.  Chohung Bank currently performs back testing of VaR results
on a daily basis, using both (1) actual losses and (2) estimated losses when the
actual movements of interest rates, foreign exchange rates and equity values
were applied while assuming that its portfolio position remains same. In 2002,
there were three days when Chohung Bank's estimated loss exceeded the VaR limits
set by the FSS.

     Since February 2001, Chohung Bank has implemented an integrated market risk
management system which manages its Won-denominated and foreign-denominated bank
accounts and trust accounts which are marked to market and guaranteed by Chohung
Bank. This system uses the historical simulation, the Monte Carlo simulation and
the variance-covariance method to measure both linear risks arising from such
products as equity and debt securities and nonlinear risks arising from other
products including options. This system enables Chohung Bank to generate
elaborate and consistent VaR numbers and perform sensitivity analysis and back
testing to check the validity of the models on a daily basis.

     Stress Testing.  In addition to VaR, Chohung Bank performs stress test to
measure market risk. As VaR assumes normal market situations, Chohung Bank
assesses its market risk exposure to unlikely abnormal
                                       186
<PAGE>

market fluctuations through stress test. Stress test is an important way of
supplement VaR since VaR does not cover potential loss if the market moves in a
manner which is outside Chohung Bank's normal expectations. Stress test projects
the anticipated change in value of holding positions under certain scenarios
assuming that no action is taken during a stress event to change the risk
profile of a portfolio.

     For stress testing, Chohung Bank assumes unexpected changes in the
following four market risk components: foreign exchange rates, stock prices and
Won-denominated and foreign currency-denominated interest rates. For the worst
case scenario, Chohung Bank assumed instantaneous and simultaneous movements in
these four market risk components within the following ranges: (1) depreciation
and appreciation of Won against the U.S. dollars by 45% in the direction adverse
to Chohung Bank, (2) decline in Korea Stock Exchange Composite Index by 25%, (3)
increase in Won-denominated interest rates by 250 basis points, and (4) increase
in foreign currency-denominated interest rates by 100 basis points. In the worst
case scenario assuming appreciation of Won against the U.S. dollars by 45%, a
decline in Korea Stock Exchange Composite Index by 25%, and increases in
Won-denominated and foreign currency-denominated interest rates by 250 basis
points and 100 basis points, respectively, the changes in market value of
Chohung Bank's trading portfolio was W45.7 billion as of December 31, 2002.

     Chohung Bank performs stress testing at least monthly and reports the
results to the Risk Management Committee. Based on these stress testing results,
Chohung Bank takes measures to manage the risk exposure, including warnings and
contingency plans. In addition, Chohung Bank's Risk Management Division
continuously monitors movements of the market risk components and takes actions
to prevent crisis situation when there is an abrupt market movement.

  Hedging and Derivative Market Risk

     The principal objective of Chohung Bank's hedging strategy is to manage
market risk within established limits. Chohung Bank uses derivative instruments
to hedge its market risk as well as to generate profits by trading derivative
products within pre-approved risk limits. Chohung Bank's derivative trading
includes interest rate and cross-currency swaps, foreign currency forwards and
futures, stock index and interest rate futures, and stock index and currency
options.

     While Chohung Bank uses derivatives for hedging purposes, derivative
transactions themselves incur market risk as Chohung Bank take trading positions
and trade them for the purpose of making profits. These activities consist
primarily of the following:

     - arbitrage transactions to make profits from short-term discrepancies
       between the spot and derivative markets or within the derivative markets;

     - sales of tailor-made derivatives products to meet various needs of
       Chohung Bank's corporate customers and the related transactions to reduce
       its exposure resulting from those sales;

     - taking positions in limited cases when Chohung Bank expects short-swing
       profits based on its market forecasts; and

     - trading to hedge Chohung Bank's interest rate and foreign currency risk
       exposure as described above.

     Market risk from derivatives is not significant since Chohung Bank's
derivative positions are primarily driven by arbitrage and customer transactions
which result in very limited open trading positions.

  MARKET RISK MANAGEMENT FOR NON-TRADING ACTIVITIES

  Interest Rate Risk

     The principal market risk from non-trading activities of Chohung Bank is
interest rate risk. Interest rate risk is the risk of loss resulting from
interest rate fluctuations that adversely affect the financial condition and
results of operations of Chohung Bank. Chohung Bank's interest rate risk arises
primarily due to differences between the timing of rate changes for
interest-earning assets, such as loans and investment securities, and
interest-bearing liabilities, such as deposits and borrowings.

                                       187
<PAGE>

     Interest rate risk affects Chohung Bank's earnings and the economic value
of Chohung Bank's net assets:

     - Earnings:  interest rate fluctuations have an effect on Chohung Bank's
       net interest income by affecting its interest-sensitive operating income
       and expenses.

     - Economic value of net assets:  interest rate fluctuations influence
       Chohung Bank's net worth by affecting the present value of cash flows
       from the assets, liabilities and other transactions of Chohung Bank.

     Accordingly, Chohung Bank measures and manages interest rate risk for
non-trading activities by taking into account effects of interest rate changes
on both its income and net asset value. Chohung Bank measures and manages
interest rate risk on a monthly basis with respect to all interest-earning
assets and interest-bearing liabilities in Chohung Bank's bank accounts
(including derivatives denominated in Won) and in the trust accounts. Most of
Chohung Bank's interest-earning assets and interest-bearing liabilities are
denominated in Won.

     Interest Rate Risk Management

     The principal objectives of Chohung Bank's interest rate risk management
are to generate stable net interest income and to protect Chohung Bank's net
asset value against interest rate fluctuations. To this end, Chohung Bank's Risk
Management Committee sets Chohung Bank's interest rate risk limits at least
annually and the Risk Management Division monitors compliance with these limits
and reports the monitoring results to the Risk Management Committee on a monthly
basis. Chohung Bank primarily uses interest rate swaps to control its interest
rate exposure limits.

     On a monthly basis, Chohung Bank uses various analytical methodologies to
measure and manage its interest rate risk for non-trading activities. The
principal methodology that Chohung Bank uses for its non-trading interest rate
risk is an "earnings at risk" analysis, or "EaR" analysis, which measures
changes in Chohung Bank's annual net interest income at a 99% confidence level
based on various interest rate scenarios generated by Monte Carlo simulation.

     Other supplemental analytical methodologies that Chohung Bank uses include
the following:

     - Interest Rate Gap Analysis:  Interest rate gap analysis measures the
       difference in the amounts of interest-earning assets and interest-bearing
       liabilities at each maturity and re-pricing date for a specific time
       frame.

     - Duration Gap Analysis:  Duration gap analysis measures durations of
       Chohung Bank's interest-earning assets and interest-bearing liabilities,
       which are weighted average maturities of these assets and liabilities
       calculated based on discounted cash flows from these assets and
       liabilities using yield curves.

     - Market Value Analysis:  Market value analysis measures changes in the
       market value of Chohung Bank's interest-earning assets and
       interest-bearing liabilities based on the assumption of parallel shifts
       in interest rates.

     - Net Interest Income Simulation Analysis:  Net interest income simulation
       analysis uses statistical analysis methodology to measure changes in
       Chohung Bank's annual net interest income (interest income less interest
       expenses) under the current maturity structure, using different scenarios
       for interest rates (assuming parallel shifts) and funding requirements.

     Earnings-at-Risk Analysis

     Chohung Bank measures EaRs for interest rate risk from non-trading
activities on a monthly basis. Chohung Bank uses EaR as the principal analytical
tool to measure and manage its interest rate risk for non-trading activities.

                                       188
<PAGE>

     Chohung Bank calculates EaRs with respect to Won-denominated and
foreign-currency denominated non-trading assets and liabilities in its bank
accounts. On a monthly basis, Chohung Bank calculates 500 sets of annual
interest income and expense scenarios based on 500 different sets of yield
curves generated by a Monte Carlo simulation. Based on these annual interest and
expense scenarios, it then calculates the average and the minimum of the
interest income, interest expense and net interest income at a 99% confidence
level. EaRs are the differences between these average and minimum values.

     The following table presents the minimum and average values of interest
income, interest expense and net interest income, and the EaRs corresponding to
them for 2002.

<Table>
<Caption>
                                                               SIMULATION RESULTS FOR 2002
                                                              ------------------------------
                                                              MINIMUM(1)   AVERAGE    EAR(1)
                                                              ----------   --------   ------
                                                                   (IN BILLIONS OF WON)
<S>                                                           <C>          <C>        <C>
Interest income (from interest-earning assets)..............   W4,565.2    W4,689.5   W124.3
Interest expense (from interest-bearing liabilities)........    2,342.3     2,426.9     84.6
Net interest income.........................................    2,223.0     2,262.6     39.6
</Table>

- ---------------

Note:

(1) At a 99% confidence level.

  Interest Rate Gap Analysis

     Interest rate gap analysis measures the difference in the amounts of
interest-earning assets and interest-bearing liabilities at each maturity and
re-pricing date by preparing interest rate gap tables in which Chohung Bank's
interest-earning assets and interest-bearing liabilities are allocated to the
applicable time buckets based on the expected cash flows and re-pricing dates.
On a monthly basis, Chohung Bank performs interest rate gap analysis for Won and
foreign currency denominated assets and liabilities in Chohung Bank's bank and
trust accounts. Chohung Bank's gap analysis includes Won-denominated derivatives
(which are interest rate swaps) but excludes foreign currency-denominated
derivatives, whose management is centralized at the Treasury Department. Through
the interest rate gap analysis that measures interest rate sensitivity gaps,
cumulative gaps and gap ratios, Chohung Bank assesses its exposure to future
interest risk fluctuations.

     For interest rate gap analysis, Chohung Bank assumes and uses the following
maturities for different assets and liabilities:

     - With respect to the maturities and re-pricing dates of Chohung Bank's
       assets, Chohung Bank assumes that maturity of Chohung Bank's prime
       rate-linked loans are the same as its fixed-rate loans. For debt
       securities in its trading accounts, Chohung Bank assumes a maturity of
       three months. Chohung Bank excludes equity securities from
       interest-earning assets and also excluded assets classified as
       substandard or below from its interest rate gap analysis.

     - With respect to the maturities and re-pricing of Chohung Bank's
       liabilities, Chohung Bank assumes that money market deposit accounts and
       "non-core" demand deposits have a maturity of 3 months. With respect to
       "core" demand deposits under the FSC guidelines, Chohung Bank assumes a
       maturity of three years.

                                       189
<PAGE>

     The following tables show Chohung Bank's interest rate gaps as of December
31, 2002 for (1) Won-denominated non-trading bank accounts, including
derivatives and (2) foreign currency-denominated non-trading bank accounts,
excluding derivatives.

       WON-DENOMINATED NON-TRADING BANK ACCOUNTS (INCLUDING DERIVATIVES):

<Table>
<Caption>
                                                          AS OF DECEMBER 31, 2002
                                ----------------------------------------------------------------------------
                                0-3 MONTHS   3-6 MONTHS   6-12 MONTHS   1-3 YEARS   OVER 3 YEARS     TOTAL
                                ----------   ----------   -----------   ---------   ------------   ---------
                                                  (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                             <C>          <C>          <C>           <C>         <C>            <C>
INTEREST-EARNING ASSETS.......  W28,935.1     W3,977.9     W5,390.8     W4,590.4      W2,797.2     W45,691.4
(Including interest rate
  swaps)
INTEREST-BEARING
  LIABILITIES.................   18,333.0      6,435.4      7,521.1      4,596.2       8,715.1      45,600.8
(Including interest rate
  swaps)
Sensitivity gap...............   10,602.1     (2,457.5)    (2,130.3)        (5.8)     (5,918.0)         90.6
Cumulative gap................   10,602.1      8,144.6      6,014.3      6,008.4          90.6            --
% of total assets.............      18.12%       (4.20)%      (3.64)%      (0.01)%      (10.11)%       (0.15)%
</Table>

FOREIGN CURRENCY-DENOMINATED NON-TRADING BANK ACCOUNTS (EXCLUDING DERIVATIVES):

<Table>
<Caption>
                                                             AS OF DECEMBER 31, 2002
                                   ---------------------------------------------------------------------------
                                   0-3 MONTHS   3-6 MONTHS   6-12 MONTHS   1-3 YEARS   OVER 3 YEARS    TOTAL
                                   ----------   ----------   -----------   ---------   ------------   --------
                                                 (IN MILLIONS OF US DOLLARS, EXCEPT PERCENTAGES)
<S>                                <C>          <C>          <C>           <C>         <C>            <C>
Interest-earning assets..........   $4,005.9     $1,116.9       $39.4       $  8.0        $77.8       $5,248.0
Interest-bearing liabilities.....    4,218.8        654.8        80.6          0.1          1.1        4,955.4
Sensitivity gap..................     (212.9)       462.1       (41.2)         7.9         76.7          292.6
Cumulative gap...................     (212.9)       249.2       208.0        215.9        292.6             --
% of total assets................      (4.02)%       8.73%      (0.79)%       0.15%        1.45%          5.53%
</Table>

  Duration and Market Value Analysis

     Chohung Bank performs a duration gap analysis to measure effects of
interest rate risk on the market value of its assets and liabilities. Chohung
Bank measures, on a monthly basis and for each operating department, account,
product and currency, durations of interest-earning assets and interest-bearing
liabilities. Chohung Bank also measures, on a monthly basis, changes in the
market value of Chohung Bank's interest-earning assets and interest-bearing
liabilities.

     The following tables show duration gaps and market values of Chohung Bank's
Won-denominated interest-earning assets and interest-bearing liabilities in its
non-trading accounts as of December 31, 2002 and changes in these market values
when interest rate increases by 100 basis point.

<Table>
<Caption>
                                                                  DURATION AS OF
                                                               DECEMBER 31, 2002(1)
                                                               --------------------
                                                                   (IN MONTHS)
                                                               --------------------
<S>                                                            <C>
Interest-earning assets.....................................           7.32
Interest-bearing liabilities................................           9.12
Gap.........................................................          (1.78)
</Table>

                                       190
<PAGE>

<Table>
<Caption>
                                                           MARKET VALUE AS OF DECEMBER 31, 2002(1)
                                                           ----------------------------------------
                                                                        100 BASIS POINT
                                                             ACTUAL         INCREASE       CHANGES
                                                           ----------   ----------------   --------
                                                                     (IN BILLIONS OF WON)
<S>                                                        <C>          <C>                <C>
Interest-earning assets..................................  W45,072.4       W44,802.8       W(269.6)
Interest-bearing liabilities.............................   44,962.5        44,731.5        (231.0)
Gap......................................................      109.9            71.3         (38.6)
</Table>

- ---------------

Note:

(1) Includes interest rate swaps.

  Net Interest Income Simulation

     Chohung Bank performs a net interest income simulation to measure effects
of interest rate risk on Chohung Bank's results of operations. Net interest
income simulation measures changes in Chohung Bank's annual net interest income
(interest income less interest expenses) under the current maturity structure,
using different scenarios for interest rates and funding requirements. Chohung
Bank applies three scenarios of parallel shifts in interest rate: (1) no change,
(2) a 100 basis point increase in interest rates and (3) a 100 basis point
decrease in interest rates. For funding requirement changes, Chohung Bank uses
simulated funding requirements based on its funding plans.

     The following table illustrates by way of an example the simulated changes
in Chohung Bank's annual net interest income for 2003 with respect to
Won-denominated interest-earning assets and interest-bearing liabilities, using
its net interest income simulation model, when Chohung Bank assumes (a) the
maturity structure and funding requirement of Chohung Bank as of December 31,
2002 and (b) the same interest rates as of December 31, 2002 and a 100 basis
point increase in the interest rates.

<Table>
<Caption>
                                                         SIMULATED NET INTEREST INCOME FOR 2003
                                                   (FOR NON-TRADING WON-DENOMINATED BANK ACCOUNTS)(1)
                                                   --------------------------------------------------
                                                      ASSUMED INTEREST RATES         CHANGE IN NET
                                                   ----------------------------     INTEREST INCOME
                                                                   100 BASIS      -------------------
                                                   NO CHANGE    POINT INCREASE    AMOUNT    % CHANGE
                                                   ----------   ---------------   -------   ---------
                                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                <C>          <C>               <C>       <C>
Simulated interest income........................   W4,628.7       W4,862.8       W234.1      5.06%
Simulated interest expense.......................    2,378.8        2,564.1        185.3      7.78%
Net interest income..............................    2,249.9        2,298.7         48.8      2.17%
</Table>

- ---------------

Note:

(1) Includes interest rate swaps.

     Chohung Bank's Won-denominated interest earning assets and interest-bearing
liabilities in non-trading accounts have a maturity profile that benefits from
an increase in interest rates, because the re-pricing periods of the
interest-earning assets in Chohung Bank's non-trading accounts are shorter than
those of the interest-bearing liabilities in these accounts. This is primarily
due to a continuous decrease in interest rate in the recent years in Korea,
which has resulted in a significant increase in floating rate loans, making the
maturities or re-pricing periods of Chohung Bank's loans shorter, while
fixed-rate longer-term deposits have increased. As a result, Chohung Bank's net
interest income increases when the interest rates rise.

  Interest Rate VaRs for Non-trading Assets and Liabilities

     Chohung Bank measures VaRs for interest rate risk from non-trading
activities on a monthly basis, except for available-for-sale securities for
which it measures interest rate risk on a daily basis. The following table
shows, for the year and as of December 31, 2002, the ten-day VaRs of (1)
interest rate risk from Chohung Bank's available-for-sale investment securities
and (2) interest rate mismatch risk for other assets and liabilities, which
arises from mismatches in the re-pricing dates of Chohung Bank's non-trading
interest-earning assets and interest-bearing liabilities other than the
available-for-sale investment securities. Under the

                                       191
<PAGE>

FSC regulations, Chohung Bank includes in the calculation of these VaRs
interest-earning assets and interest-bearing liabilities in its bank accounts
and its trust accounts.

<Table>
<Caption>
                                                         TEN-DAY VAR FOR THE YEAR 2002(1)
                                                  -----------------------------------------------
                                                  AVERAGE   MINIMUM   MAXIMUM   AS OF DECEMBER 31
                                                  -------   -------   -------   -----------------
                                                               (IN BILLIONS OF WON)
<S>                                               <C>       <C>       <C>       <C>
Interest rate -- available-for-sale
  securities....................................   W26.5     W20.0     W45.6          W20.7
Interest rate mismatch -- other assets and
  liabilities...................................    73.9      35.7     112.7           35.7
</Table>

- ---------------

Note:

(1) Ten-day VaR results at a 99% confidence level.

  Equity Risk

     All of Chohung Bank's equity risk results from listed and unlisted equity
securities issued by Korean companies. Chohung Bank measures VaRs the listed
equity securities but does not manage most of the related risk using VaR limits,
as most of these securities are held for reasons other than normal investment
purposes. For unlisted equity securities, Chohung Bank does not measure VaRs.
These unlisted securities were equities of its consolidated subsidiary and
affiliates and those held as a result of debt-to-equity conversion as a part of
reorganization proceedings of companies to which it had extended loans. As of
December 31, 2002, Chohung Bank held equity securities in an aggregate amount of
W583.3 billion in its non-trading accounts, including W183.6 billion of unlisted
securities.

     As of December 31, 2002, Chohung Bank also held Won-denominated convertible
bonds in an aggregate amount of W135.0 billion (all of which contained
conversion rights) and foreign currency-denominated convertible and exchangeable
bonds in an aggregate amount of US$12.4 million (all of which did not contain
conversion or exchange rights). Chohung Bank does not measure equity risk with
respect to these convertible and exchangeable bonds and only measures their
interest rate risk.

     The following table shows the VaRs of Chohung Bank's equity risk from
non-trading activities for the year and as of December 31, 2002.

<Table>
<Caption>
                                                        TEN-DAY VAR FOR THE YEAR 2002(1)
                                                 -----------------------------------------------
                                                 AVERAGE   MINIMUM   MAXIMUM   AS OF DECEMBER 31
                                                 -------   -------   -------   -----------------
                                                              (IN BILLIONS OF WON)
<S>                                              <C>       <C>       <C>       <C>
Equities.......................................  W123.7     W60.5    W211.2         W107.1
</Table>

- ---------------

(1) Ten-day VaR results at a 99% confidence level.

  LIQUIDITY RISK MANAGEMENT

     Liquidity risk is the risk of insolvency, default or loss due to disparity
between inflow and outflow of funds, including having to obtain funds at a high
price or to dispose of securities at an unfavorable price due to lack of
available funds or losing attractive investment opportunities.

     Chohung Bank has the following basic principles for liquidity risk
management:

     - maintain an appropriate level of liquidity risk through liquidity risk
       management based on liquidity gap or debt-to-equity ratio at each
       maturity date;

     - assess and monitor net cash flows by currency and by maturity and
       continuously evaluate available sources of funds and the possibility of
       disposal of any liquid assets;

     - diversify sources and uses of funds by product and by maturity to prevent
       excessive concentration in certain periods or products; and

     - prepare contingency plans to cope with a potential liquidity crisis.

                                       192
<PAGE>

     Each subsidiary manages liquidity risk in accordance with the risk limits
and guidelines established internally as well as those directed by the relevant
regulatory authorities. Pursuant to regulations applicable to financial holding
companies and banks as promulgated by the FSC, Chohung Bank is required to keep
specific Won and foreign currency liquidity ratios. These ratios require us to
keep the ratio of liquid assets to liquid liabilities above certain minimum
levels.

     Chohung Bank manages its liquidity risk within the limits set on Won and
foreign currency accounts in accordance with the regulations of the FSC. The FSC
requires Korean banks to maintain a Won liquidity ratio of at least 105.0% and a
foreign currency liquidity ratio of at least 80%. The FSC defines the liquidity
ratio as liquid assets (including marketable securities) due within three months
divided by liabilities due within three months.

     The Treasury Department is in charge of liquidity risk management with
respect to Chohung Bank's Won and foreign currency funds. The Treasury
Department submits Chohung Bank's monthly funding and asset management plans to
the Risk Management Committee for approval, based on the analysis of various
factors, including macroeconomic indices, interest rate and foreign exchange
movements and the maturity profile of Chohung Bank's assets and liabilities. The
Risk Management Division measures Chohung Bank's liquidity ratio and liquidity
gap ratio on a monthly basis and reports whether they are in compliance with the
limits to the Risk Management Committee on a monthly basis.

     The following tables show Chohung Bank's liquidity status and limits for
Won and foreign currency accounts as of December 31, 2002 in accordance with the
regulations of the FSC.

<Table>
<Caption>
                                                          AS OF DECEMBER 31, 2002
                       ---------------------------------------------------------------------------------------------
WON-DENOMINATED                                                                           SUBSTANDARD OR
ACCOUNTS:              0-3 MONTHS   3-6 MONTHS   6-12 MONTHS   1-3 YEARS   OVER 3 YEARS       BELOW          TOTAL
- ---------------        ----------   ----------   -----------   ---------   ------------   --------------   ---------
                                                  (IN BILLIONS OF WON EXCEPT PERCENTAGE)
<S>                    <C>          <C>          <C>           <C>         <C>            <C>              <C>
Assets:..............  W20,496.4     W6,449.5     W9,820.3     W8,081.2     W13,918.5        W1,768.4      W60,534.3
Liabilities:.........   17,683.3      5,744.9      9,745.0      5,535.5      21,825.5              --       60,534.2
For three months or
  less:
  Liquidity gap......  W 2,813.1
  Liquidity ratio....     115.91%
  Limit..............     105.00%
</Table>

<Table>
<Caption>
                                                        AS OF DECEMBER 31, 2002
                       ------------------------------------------------------------------------------------------
FOREIGN CURRENCIES                      7 DAYS-
DENOMINATED ACCOUNTS:  7 DAYS OR LESS   1 MONTHS   3 MONTHS   3-6 MONTHS   6-12 MONTHS   OVER 1 YEARS     TOTAL
- ---------------------  --------------   --------   --------   ----------   -----------   ------------   ---------
                                                 (IN BILLIONS OF US$ EXCEPT PERCENTAGE)
<S>                    <C>              <C>        <C>        <C>          <C>           <C>            <C>
Assets:..............     $1,552.3        $909.9   $1,124.6      $807.7      $1,453.0      $1,673.2      $7,520.7
Liabilities..........      1,331.3         913.5    1,469.3       728.5       1,742.8       1,369.5       7,554.9
For three months or
  less:
  Assets.............                              $3,586.8
  Liabilities........                               3,714.1
  Liquidity ratio....                                 96.58%
  Limit..............                                 80.00%
</Table>

     Chohung Bank maintains diverse sources of liquidity to facilitate
flexibility in meeting its funding requirements. Chohung Bank funds its
operations principally through deposits from retail and corporate customers,
accessing the call loan market (a short-term market for loans with maturities of
less than one month), issuing debentures and borrowings from the Bank of Korea.
Chohung Bank uses the funds primarily to extend loans or purchase securities.
Generally, deposits are of shorter average maturity than loans or investments.

     In addition to liquidity risk management under the normal market
conditions, Chohung Bank has contingency plans to cope with a potential
liquidity crisis. A liquidity crisis arises when Chohung Bank would not be able
to effectively manage the situations with Chohung Bank's normal liquidity
management

                                       193
<PAGE>

measures due to, among other reasons, inability to access its normal sources of
funds or epidemic withdrawals of deposits as a result of various external or
internal factors, including a collapse in the financial markets or abrupt
deterioration of its credit. Chohung Bank has contingency plans corresponding to
different stages of liquidity crisis, "cautionary stage", "near-crisis stage"
and "crisis stage", based on the following liquidity indices:

     - indices that reflect the market movements such as interest rates and
       stock prices;

     - indices that reflect financial market psychology such as the size of
       money market funds; and

     - indices that reflect Chohung Bank's internal financial condition.

  OPERATIONAL RISK MANAGEMENT

     Operational risk is risk that is difficult to quantify and subject to
different definitions. The Basle Committee defines operational risk as the risk
of loss resulting from inadequate or failed internal processes, people and
systems or from other external events. Similarly, Chohung Bank defines
operational risk as the risk related to overall management other than credit
risk, market risk, interest rate risk and liquidity risk. Chohung Bank monitors
and assesses operational risks related to its business operations, including
administrative risk, information technology risk, managerial risk, legal risk
and reputation risk.

     To monitor and control operational risk, Chohung Bank maintains a system of
comprehensive policies and has put in place a control framework designed to
provide a stable and well-managed operational environment throughout the
organization. The primary responsibility for ensuring compliance with Chohung
Bank's operational risk procedures remains with its business units and
operational teams. In addition, Examination Division, Risk Management Division
and Compliance Department also play important roles in reviewing and maintaining
the integrity of Chohung Bank's internal control environment.

     Each operational team checks operational risk based on the checklists
established by the Risk Management Committee and reports the results to the Risk
Management Division that collects the operational divisions' results to report
to the Risk Policy Committee and the Risk Management Committee.

     The Risk Management Division is currently performing ground work, including
Chohung Bank's internal process review and data accumulation, for adoption of a
new firm-wide system for operational risk management to apply a standardized
approach that meets the recommendations by the "BIS New Basle Accord for
Measurement and Management of Operational Risk". Chohung Bank intends to
complete the necessary process setup and data accumulation by 2006 to implement
the new system in 2007, although this schedule is subject to change.

                                       194
<PAGE>

                           SUPERVISION AND REGULATION

REGULATIONS APPLICABLE TO FINANCIAL HOLDING COMPANIES

 GENERAL

     The Korean financial holding companies and their subsidiaries are regulated
by the Financial Holding Company Act (Law No. 6274, October 23, 2000). In
addition, Korean financial holding companies and their subsidiaries come under
the regulations and supervision of the Financial Supervisory Commission and the
Financial Supervisory Service.

     The Financial Supervisory Commission, established on April 1, 1998, exerts
direct control over financial holding companies pursuant to the Financial
Holding Company Act, including approval for the establishment of financial
holding companies, issuing regulations on capital adequacy of financial holding
companies and their subsidiaries, and drafting regulations relating to the
supervision of financial holding companies.

     The Financial Supervisory Service was established on January 2, 1999, as a
unified body of the former Banking Supervisory Authority (the successor to the
Office of Bank Supervision, the Securities Supervisory Board, the Insurance
Supervisory Board and the Credit Management Fund). The Financial Supervisory
Service is subject to the instructions and directives of the Financial
Supervisory Commission and carries out supervision and examination of financial
holding companies and their subsidiaries. In particular, the Financial
Supervisory Service sets requirements regarding financial holding companies'
liquidity and for capital adequacy and establishes reporting requirements within
the authority delegated under the Financial Supervisory Commission regulations,
pursuant to which financial holding companies are required to submit quarterly
reports on business performance, financial status and other matters identified
in the Enforcement Decree of the Financial Holding Company Act.

     Under the Financial Holding Company Act, the establishment of a financial
holding company must be approved by the Financial Supervisory Commission. A
financial holding company is required to be mainly engaged in controlling its
subsidiaries by holding the shares or equities of the subsidiaries in the amount
of not less than 50% of aggregate amount of such financial holding company's
assets based on the latest balance sheet. A financial holding company is
prohibited from engaging in any profit-making businesses other than controlling
the management of its subsidiaries and certain ancillary businesses as
identified in the Enforcement Decree of the Financial Holding Company Act which
include the following businesses:

     - financially supporting its subsidiaries and the subsidiaries of its
       subsidiaries (the "direct and indirect subsidiaries");

     - raising capital necessary for the investment in subsidiaries or providing
       financial support to its direct and indirect subsidiaries;

     - supporting the business of its direct and indirect subsidiaries for the
       joint development and marketing of new product and the joint utilization
       of facilities or IT systems; and

     - any other businesses exempted from authorization, permission or approval
       under the applicable laws and regulations.

     The Financial Holding Company Act requires every financial holding company
or its subsidiaries to obtain the prior approval from, or file a prior report
with, the Financial Supervisory Commission before acquiring control of another
company. Permission to liquidate or to merge with any other company must be
obtained in advance from the Financial Supervisory Commission. A financial
holding company must report to the Financial Supervisory Commission when there
is a change in its officers or largest shareholder, or when it ceases to control
any of its direct and indirect subsidiaries by disposing of the shares of such
direct and indirect subsidiaries.

 CAPITAL ADEQUACY

     The Financial Holding Company Act does not provide for a minimum paid-in
capital of financial holding companies. All financial holding companies,
however, are required to maintain a specified level of solvency.
                                       195
<PAGE>

In addition, in its allocation of the net profit earned in a fiscal term, a
financial holding company is required to set aside in its legal reserve an
amount equal to at least 10% of the net income after tax each time it pays
dividends on its net profits earned until its legal reserve reaches at least the
aggregate amount of its paid-in capital.

     All financial holding companies must meet the minimum Requisite Capital
Ratio of 100%, as regulated by the Financial Supervisory Commission.

     "Requisite Capital Ratio" means (1) "Net Total Equity Capital", as defined
and calculated below, to (2) "Requisite Capital", as defined and calculated
below.

     1. "Net Total Equity Capital" means:

          (a) the sum of:

             (i) in the case of a financial institution subsidiary (except for a
        financial holding company's indirect subsidiary which is consolidated
        into a direct subsidiary of a financial holding company), that is
        subject to minimum capital requirements under the Financial Supervisory
        Commission regulations, the actual equity capital maintained by such
        financial institution (e.g., in the case of commercial banks and
        merchant banks, total Tier I and Tier II capital actually maintained by
        a bank or a merchant bank); and

             (ii) in the case of a financial holding company or a financial
        institution subsidiary (except for a financial holding company's
        indirect subsidiary which is consolidated into a direct subsidiary of a
        financial holding company), that is not subject to minimum capital
        requirements under the Financial Supervisory Commission regulations, the
        total stockholders' equity as recorded on its balance sheet less (x)
        intangible assets and (y) deferred tax assets, if any.

          (b) less the sum of:

             (i) the book value of investments among a financial holding company
        and its direct and indirect subsidiaries, if any; and

             (ii) the book value of investments among direct and indirect
        subsidiaries, if any.

     2. "Requisite Capital" means the sum of:

          (a) in the case of a financial institution subsidiary (except for a
     financial holding company's indirect subsidiary which is consolidated into
     a direct subsidiary of a financial holding company), that is subject to
     minimum capital requirements under the Financial Supervisory Commission
     regulations, the minimum equity capital amount necessary to meet such
     requirements (e.g., in the case of commercial banks and merchant banks, the
     amount of Total Tier I and Tier II capital necessary to meet the 8% minimum
     capital adequacy ratio requirement);

          (b) in the case of a financial institution subsidiary (except for a
     financial holding company's indirect subsidiary which is consolidated into
     a direct subsidiary of a financial holding company), that is not subject to
     minimum capital requirements under the Financial Supervisory Commission
     regulations, 8% of its total assets on its balance sheet (including
     off-balance assets, if any); and

          (c) in the case of a financial holding company, 8% of its total assets
     on its balance sheet (including off-balance assets, if any, but excluding
     the book value of investments in and financial supports to its direct and
     indirect subsidiaries, if any).

 LIQUIDITY

     All financial holding companies are required to match the maturities of
their assets and liabilities in accordance with the Financial Holding Company
Act in order to ensure liquidity. Financial holding

                                       196
<PAGE>

companies are required to make quarterly reports regarding their liquidity to
the Financial Supervisory Service and must:

     - maintain a Won liquidity ratio (defined as Won assets due within three
       months, including marketable securities, divided by Won liabilities due
       within three months) of not less than 100%;

     - maintain a foreign currency liquidity ratio (defined as foreign currency
       liquid assets due within three months divided by foreign currency
       liabilities due within three months) of not less than 80%;

     - maintain a ratio of foreign currency liquid assets due within seven days
       less foreign currency liabilities due within seven days divided by total
       foreign currency assets of not less than 0%; and

     - maintain a ratio of foreign currency liquid assets due within a month
       less foreign currency liabilities due within a month divided by total
       foreign currency assets of not less than negative 10%.

     A financial holding company may not invest in securities as defined in the
Securities and Exchange Act (other than those securities issued by its direct
and indirect subsidiaries) in excess of the amount of its shareholders' equity
less the total amount of investment in subsidiaries, subject to certain
exceptions.

 FINANCIAL EXPOSURE TO ANY INDIVIDUAL CUSTOMER AND MAJOR SHAREHOLDER

     Subject to certain exceptions, the total sum of credit (as defined in the
Financial Holding Company Act, the Bank Act, the Merchant Bank Act and the
Securities and Exchange Act, respectively) of the financial holding company and
its direct and indirect subsidiaries which are banks, merchant banks or
securities companies ("Financial Holding Company Total Credit") to a single
group of companies that belong to the same conglomerate as defined in the
Monopoly Regulations and Fair Trade Act will not be permitted to exceed 25% of
the Net Total Equity Capital.

     "Net Total Equity Capital" for the purpose of the calculation of financial
exposure to any individual customers and Major Shareholder is defined under the
Enforcement Decree of the Financial Holding Company Act as

          (a) the sum of:

             (i) in case of a financial holding company, the net asset which is
        total assets less total liabilities on balance sheet as of the end of
        the most recent quarter;

             (ii) in case of a bank, the capital amount as defined in article
        2(1), item 7 of the Bank Act;

             (iii) in case of a merchant bank, the capital amount as defined in
        article 2, item 3 of the Merchant Bank Act; and

             (iv) in case of a securities company, the total asset amount less
        the total liability amount in the balance sheet as of the end of the
        recent financial year and adjusted as determined by the Financial
        Supervisory Commission, such as the amount of increase or decrease of
        paid-in capital after the end of the recent financial year;

          (b) less the sum of:

             (i) the amount of shares of direct and indirect subsidiaries held
        by the financial holding company;

             (ii) the amount of shares which are cross-held by each direct and
        indirect subsidiary that is a bank, merchant bank or securities company;
        and

             (iii) the amount of shares of a financial holding company held by
        such direct and indirect subsidiaries which are banks, merchant banks or
        securities companies.

     The Financial Holding Company Total Credit to a single individual or
judicial person will not be permitted to exceed 20% of the Net Total Equity
Capital. In addition, the Financial Holding Company Total Credit to a
shareholder holding (together with the persons who have special relationship
with such

                                       197
<PAGE>

shareholder (as defined under the Enforcement Decree of the Financial Holding
Company Act)) in aggregate more than 10% of the total issued and outstanding
shares of the financial holding company will not be permitted to exceed the
smaller of (x) 25% of the Net Total Equity Capital and (y) the amount of the
equity capital of the financial holding company multiplied by the shareholding
ratio of such shareholder (together with the persons who have special
relationship with such shareholder).

     Furthermore, the total sum of credits (as defined under the Financial
Holding Company Act, the Bank Act, the Merchant Bank Act and the Korean
Securities and Exchange Act, respectively) of a financial holding company
controlling banks and its direct and indirect subsidiaries that are banks,
merchant banks or securities companies as applicable ("Financial Holding Company
Total Credit") extended to a "Major Shareholder" (together with the persons who
have special relationship with such Major Shareholder) (as defined below) will
not be permitted to exceed the smaller of (x) 25% of the Net Total Equity
Capital and (y) the amount of the equity capital of the financial holding
company multiplied by the shareholding ratio of such Major Shareholder, except
for certain cases.

     "Major Shareholder" is defined under the Financial Holding Company Act as
follows:

          (a) a shareholder holding (together with persons who have a special
     relationship with such shareholder as defined in the Presidential Decree of
     the Financial Holding Company Act) in excess of 10% (or in the case of a
     financial holding company controlling regional banks only, 15%) in the
     aggregate of the financial holding company's total issued voting shares; or

          (b) a shareholder holding (together with persons who have a special
     relationship with such shareholder as defined in the Presidential Decree of
     the Financial Holding Company Act) more than 4% in the aggregate of the
     total issued voting shares of the financial holding company controlling
     nationwide banks (excluding a financial holding company controlling
     regional banks only), excluding shares related to the shareholding
     restrictions on nonfinancial group business companies as described above,
     where such shareholder is the largest shareholder or has actual control
     over the major business affairs of the financial holding company through,
     for example, appointment and dismissal of the officers pursuant to the
     Presidential Decree of the Financial Holding Company Act.

     In addition, the total sum of the Financial Holding Company Total Credit
granted to all of a financial holding company's Major Shareholder must not
exceed 25% of the Net Total Equity Capital. Furthermore, the financial holding
company and its direct and indirect subsidiaries that intend to extend the
Financial Holding Company Total Credit to the financial holding company's Major
Shareholder not less than the lesser of (i) the amount equivalent to 0.1% of the
Net Total Equity Capital or (ii) W5 billion, with respect to a single
transaction, must obtain prior unanimous board resolutions and then immediately
after the completion of credits, must file a report to the Financial Supervisory
Commission and disclose the filing of such report (e.g., via the internet).

 RESTRICTIONS ON TRANSACTIONS AMONG DIRECT AND INDIRECT SUBSIDIARIES AND
 FINANCIAL HOLDING COMPANY

     Generally, a direct or indirect subsidiary of a financial holding company
may not extend credit to the financial holding company which directly or
indirectly controls such subsidiary. In addition, a direct and indirect
subsidiary of a financial holding company may not extend credit to the other
single direct or indirect subsidiary of the financial holding company in excess
of 10% of its shareholders' equity and to the other direct and indirect
subsidiaries of the financial holding company in excess of 20% of its
shareholders' equity in the aggregate. The direct or indirect subsidiaries of a
financial holding company must obtain appropriate collaterals for the credits
extended to the other direct and indirect subsidiaries unless otherwise approved
by the Financial Supervisory Commission.

     Subject to certain exceptions, a direct or indirect subsidiary of a
financial holding company is prohibited from owning the shares of any other
direct or indirect subsidiaries (other than those directly controlled by the
direct and indirect subsidiaries in question) in common control by the financial
holding company. A direct or indirect subsidiary of a financial holding company
is also generally prohibited from owning the shares of the financial holding
company controlling the direct or indirect subsidiary in question. The transfer
of certain

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assets subject to or below the precautionary criteria between the financial
holding company and its direct or indirect subsidiary or between the direct and
indirect subsidiaries of a financial holding company is prohibited except for
(i) the transfer to an asset-backed securitization company (an SPV), or the
entrustment with a trust company, under the Asset-Backed Securitization Act,
(ii) the transfer to a mortgage-backed securitization company under the
Mortgage-Backed Securitization Company Act or (iii) the transfer or in-kind
contribution to a corporate restructuring vehicle under the Corporate
Restructuring Investment Company Act.

 DISCLOSURE OF MANAGEMENT PERFORMANCE

     For the purpose of protecting the depositors and investors in the
subsidiaries of the financial holding companies, the Financial Supervisory
Commission requires financial holding companies to disclose certain material
matters including (i) financial condition and profit and loss of the financial
holding company and its direct and indirect subsidiaries, (ii) raising capital
by the financial holding company and its direct and indirect subsidiaries and
the appropriation of such capital, (iii) any sanctions levied on the financial
holding company and its direct and indirect subsidiaries under the Financial
Holding Company Act or any corrective measures or sanctions under the Law on
Improvement of Structure of Financial Industry or (iv) occurrence of any non-
performing assets or financial incident which may have a material adverse
effect.

 RESTRICTIONS ON SHAREHOLDINGS IN OTHER COMPANIES

     Subject to certain exceptions, a financial holding company may not own more
than 5% of the total issued and outstanding shares of another company (other
than its direct and indirect subsidiaries). If the financial holding company
owns shares of another company (other than its direct and indirect subsidiaries)
which is not a finance-related company, the financial holding company is
required to exercise its voting rights in the same manner and same proportion as
the other shareholders of the company exercise their voting rights in favor of
or against any resolutions under consideration before the shareholders' meeting
of the company.

     Generally, a financial holding company is not allowed to own its
subsidiary's outstanding shares in excess of its net assets (total assets minus
total liabilities), except, among other reasons, (i) where the financial holding
company invests in its subsidiary up to 130% of its net assets (total assets
minus total liabilities) for the purpose of the improvement of the financial
condition of a subsidiary which is classified as an unsound financial
institution under the Law on the Improvement of Structure of Financial Industry
or as an unsound or potentially unsound financial institution under the
Depositor Protection Act, (ii) where the financial holding company invests in a
company controlled by the indirect subsidiaries up to 130% of its net assets
(total assets minus total liabilities) in order to make the company as a
subsidiary of the financial holding company, (iii) where the financial holding
company has already been holding the outstanding shares of its subsidiary not
more than 130% of its net assets (total assets minus total liabilities) at the
time when it becomes a financial holding company, (iv) where in order to make
its subsidiary as a 100% owned subsidiary or a special purpose vehicle under the
Asset Backed Securitization Act as its subsidiary, the financial holding company
invests in such company up to 130% of its net assets, (v) where as the amount of
investments in the subsidiaries increases, the financial holding company's net
assets increase so that the ratio of the total amount of investments in
subsidiaries divided by the financial holding company's net assets do not
increase, or (vi) where the total investment amount in its subsidiaries exceeds
its net assets due to (a) a reduction of the financial holding company's net
assets, (b) a spin-off, merger or transfer of its whole business of a financial
holding company, (c) a spin-off, merger or transfer of their whole business of
its direct or indirect subsidiaries, or (d) a foreclosure of collaterals or
receipts under accord and satisfaction. The financial holding company, however,
must reduce the ownership of excessive shares within two years in case of (i)
through (v) and within six months in case of (vi), unless otherwise extended by
the Financial Supervisory Commission.

 RESTRICTIONS ON SHAREHOLDINGS BY DIRECT AND INDIRECT SUBSIDIARIES

     In principal, a direct subsidiary of a financial holding company is
prohibited from controlling any other company; provided that a direct subsidiary
of a financial holding company may control (as an indirect subsidiary of the
financial holding company): (i) subsidiaries in foreign jurisdiction which are
engaged in the
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same business as the direct subsidiary, (ii) certain financial institutions
which are engaged in the business that the direct subsidiary may conduct without
any licenses or permits, (iii) certain financial institutions whose business is
related to the business of the direct subsidiary as described by the Enforcement
Decree of the Financial Holding Company Act (e.g., the companies which a bank
subsidiary may control are limited to credit information companies, credit card
companies, trust business companies, securities investment management companies,
investment advisory companies, futures business companies, and asset management
companies), (iv) certain financial institutions whose business is related to
financial business as prescribed by the regulations of the Ministry of Finance
and Economy and (v) certain companies which are not financial institutions but
whose business is related to the financial business of the financial holding
company as prescribed by the Enforcement Decree of the Financial Holding Company
Act (e.g. finance-related research company, finance-related IT company, etc.).
Acquisition by the direct subsidiaries of such indirect subsidiaries requires
prior permission from the Financial Supervisory Commission or report to be
submitted to the Financial Supervisory Commission, depending on the types of the
indirect subsidiaries and the amount of total assets of the indirect
subsidiaries.

     The indirect subsidiary of a financial holding company is prohibited from
controlling any other company.

 RESTRICTIONS ON TRANSACTIONS BETWEEN A FINANCIAL HOLDING COMPANY AND ITS MAJOR
 SHAREHOLDER

     A financial holding company which controls banks and its direct and
indirect subsidiaries is prohibited from acquiring (including acquisition by a
trust account of its subsidiary bank) shares issued by such financial holding
company's Major Shareholder in excess of 1% of the Net Total Equity Capital as
used in the calculation of financial exposure to Major Shareholder. In addition,
the financial holding company and its direct and indirect subsidiaries which
intends to acquire shares issued by such Major Shareholder not less than the
lesser of (i) the amount equivalent to 0.1% of the Equity Capital or (ii) W5
billion, with respect to a single transaction, must obtain prior unanimous board
resolutions and then, immediately after the acquisition, must file a report to
the Financial Supervisory Commission and disclose the filing of such report
(e.g., via the internet).

 RESTRICTION ON FINANCIAL HOLDING COMPANY OWNERSHIP

     Under the Financial Holding Company Act, subject to certain exceptions, a
financial institution may not control any financial holding company. In
addition, any single shareholder and persons who stand in a special relations
with such shareholder (as described in the Presidential Decree to the Financial
Holding Company Act) may acquire beneficial ownership of up to 10% of the total
issued and outstanding shares with voting rights of a financial holding company
controlling nationwide banks and 15% of the total issued and outstanding shares
with voting rights of a financial holding company controlling regional banks
only. The Government and KDIC are not subject to such ceiling.

     However, "nonfinancial business group companies" (as defined below) may not
acquire beneficial ownership of shares of a financial holding company which
controls nationwide banks in excess of 4% of such financial holding company's
outstanding voting shares, provided that such nonfinancial business group
companies may acquire beneficial ownership of up to 10% of such financial
holding company's outstanding voting shares with the approval of the Financial
Supervisory Commission under the condition that such nonfinancial business group
companies will not exercise voting rights in respect of such shares in excess of
the 4% limit. In addition, any person (whether a Korean national or a
foreigner), with the exception of nonfinancial business group companies
described above, may also acquire in excess of 10% of total voting shares issued
and outstanding of a financial holding company which controls nationwide bank,
provided that an approval from the Financial Supervisory Commission is obtained
in instances where the total holding exceeds 10% (or 15% in the case of a
financial holding company controlling regional banks only), 25% or 33% of the
total voting shares issued and outstanding of such financial holding company
which controls nationwide banks.

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     "Nonfinancial business group companies" are defined under the Financial
Holding Company Act as the companies, which include:

          (i) any same shareholder group with aggregate net assets of all
     nonfinancial business companies belonging to such group of not less than
     25% of the aggregate net assets of all members of such group;

          (ii) any same shareholder group with aggregate assets of all
     nonfinancial business companies belonging to such group of not less than W2
     trillion; or

          (iii) any mutual fund in which a same shareholder group identified in
     (1) or (2) above owns more than 4% of the total shares issued and
     outstanding of such mutual fund.

REGULATIONS APPLICABLE TO BANKS

 GENERAL

     The banking system in Korea is governed by the Bank Act of 1950, as amended
(the "Bank Act") and the Bank of Korea Act of 1950, as amended (the "Bank of
Korea Act"). In addition, Korean banks come under the regulations and
supervision of the Bank of Korea, the Bank of Korea's Monetary Policy Committee,
the Financial Supervisory Commission and its executive body, the Financial
Supervisory Service.

     The Bank of Korea, established in June 1950 under the Bank of Korea Act,
performs the customary functions of a central bank. It seeks to contribute to
the sound development of the national economy by price stabilization through
establishing and implementing efficient monetary and credit policies. The Bank
of Korea acts under instructions of the Monetary Policy Committee, the supreme
policy-making body of the Bank of Korea.

     Under the Bank of Korea Act, the Monetary Policy Committee's primary
responsibilities are to formulate monetary and credit policies and to determine
the operations, management and administration of the Bank of Korea. The
Financial Supervisory Commission, established on April 1, 1998, exerts direct
control over commercial banks pursuant to the Bank Act, including establishing
guidelines on capital adequacy of commercial banks, and prepares regulations
relating to supervision of banks. Furthermore, pursuant to the Amendment to the
Government Organization Act and the Bank Act on May 24, 1999, the Financial
Supervisory Commission, instead of the Ministry of Finance and Economy, now
regulates market entry into the banking business.

     The Financial Supervisory Service is subject to the instructions and
directives of the Financial Supervisory Commission and carries out supervision
and examination of commercial banks. In particular, the Financial Supervisory
Service sets requirements both for prudent control of liquidity and for capital
adequacy and establishes reporting requirements within the authority delegated
to it under the Financial Supervisory Commission regulations, pursuant to which
banks are required to submit annual reports on financial performance and
shareholdings, regular reports on management strategy and non-performing loans,
including write-offs, and management of problem companies and plans for the
settlement of bad loans.

     Under the Bank Act, permission to commence a commercial banking business or
a long-term financing business must be obtained from the Financial Supervisory
Commission. Commercial banking business is defined as the lending of funds
acquired predominantly from the acceptance of deposits for a period not
exceeding one year or subject to the limitation established by the Financial
Supervisory Commission, for a period between one year and three years. Long-term
financing business is defined as the lending, for periods in excess of one year,
of funds acquired predominantly from paid-in capital, reserves or other retained
earnings, the acceptance of deposits with maturities of at least one year, or
the issuance of bonds or other securities. A bank wishing to enter into any
business other than commercial banking and long-term financing businesses, such
as the trust business, must obtain permission from the Financial Supervisory
Commission. Permission to merge with any other banking institution, to
liquidate, to close a banking business or to transfer all or a part of a
business must also be obtained from the Financial Supervisory Commission.

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     If the Korean government deems a bank's financial condition to be unsound
or if a bank fails to meet the applicable capital adequacy ratio set forth under
Korean law, the government may order:

     - capital increases or reductions;

     - stock cancellations or consolidations;

     - transfers of business;

     - sales of assets;

     - closures of branch offices;

     - mergers with other financial institutions;

     - suspensions of a part or all of business operation; or

     - assignments of contractual rights and obligations relating to financial
       transactions.

 CAPITAL ADEQUACY
     The Bank Act provides for a minimum paid-in capital of W100 billion in the
case of nationwide banks, such as Shinhan Bank, and W25 billion in the case of
regional banks such as our Jeju Bank.

     In addition to minimum capital requirements, all banks including foreign
bank branches in Korea are required to maintain a prescribed solvency position.
Until March 31, 1999, a bank's outstanding liabilities arising from guarantees
and other contingent liabilities (except those specifically excluded under the
Bank Act) were not permitted to exceed 20 times its equity capital amount.
However, beginning on April 1, 1999, such limitation on guarantees and
contingent liabilities was eliminated and, for regulatory purposes, guarantees
provided by banks are counted as an extension of credit and will be regulated
accordingly. See "-- Financial Exposure to Any Individual Customer and Major
Shareholders" below. Also, in its allocation of the net profit earned in a
fiscal term, a bank is required to credit at least 10% of such profit to a legal
reserve each time it pays dividends on net profits earned until such time when
the reserve equals the amount of its total paid-in capital.

     Under the Bank Act, the capital of a bank is divided into two categories
pursuant to Bank for International Settlements standards, which were originally
envisaged by the Basel Committee. Tier I capital (core capital) consists of
stockholders' equity, capital surplus, retained earnings, minority interest in
consolidated subsidiaries (only for capital adequacy ratio purposes) and
unissued stock dividends. Tier II capital (supplementary capital) consists of
revaluation reserves, gain on valuation of investment in securities, allowance
for bad debts set aside for loans classified as "normal' or "precautionary',
perpetual subordinated debt, cumulative preferred shares and certain other
subordinated debt.

     All banks must meet standards regarding minimum ratios of Tier I and Tier
II capital (less any capital deductions) to risk-weighted assets, determined in
accordance with the Financial Supervisory Commission requirements that have been
formulated based on Bank for International Settlements ("BIS") Standards. These
standards were adopted by the Monetary Board and the Office of Bank Supervision
(the predecessor of the Financial Supervisory Service) and became effective in
1993. Under these regulations, all domestic banks and foreign bank branches were
required to satisfy at least 8% as of the end of 1995, and thereafter, in
accordance with the standards regarding minimum ratios of Tier I and Tier II
capital (less any capital deductions) to risk-weighted assets.

     The Financial Supervisory Commission amended the Regulation on the
Supervision of the Banking Business in November 2002 to include a more
conservative risk-weighting system on certain newly extended mortgage and home
equity loans. As a result, for mortgage and home equity loans extended after
November 13, 2002, Korean banks are required to calculate a risk-weight of 60%
on certain mortgage and home equity loans if either of the following two
conditions are satisfied, and a risk-weight of 70% if both of the following two
conditions are satisfied: (1) if the mortgage and home equity loans are overdue
for at least 30 consecutive days as of the date of calculating the bank's BIS
capital adequacy ratio, or the total number of overdue days for the past one
year from the date of calculating the bank's BIS capital adequacy ratio is at
least 30 days; and (2) the borrower's debt ratio (i.e., total borrowed amount,
including the borrowed amount

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provided by other financial institutions, of the borrower against the borrower's
annual income) exceeds 250%. For all other home mortgages, a 50% risk-weight is
applicable.

     Under Korean GAAP, pursuant to the loan loss allowance guidelines
established by the Financial Supervisory Commission, banks are generally
required to maintain allowances for outstanding loans and other credits
(including confirmed guarantees and acceptances and trust account loans) in an
aggregate amount covering not less than 0.5% of normal credits (excluding
confirmed guarantees and acceptances), 2% of precautionary credits (excluding
confirmed guarantees and acceptances), 20% of substandard credits, 50% of
doubtful credits and 100% of estimated loss credits.

     In April 2002, the Financial Supervisory Service issued guidelines pursuant
to which the minimum ratio of allowances for outstanding loans by banks to
individuals and households was increased to 0.75% of normal credits, 5% of
precautionary credits and 55% of doubtful credits, and the minimum ratio of
allowances for in respect of their outstanding credit card receivables and
credit card loans was increased to 1% of normal credits, 7% of precautionary
credits and 60% of doubtful credits. In addition, in October 2002, the Financial
Supervisory Service issued new guidelines pursuant to which the minimum ratio of
allowance for their outstanding loans to individuals and households was
increased to 8% of credits classified as precautionary and the minimum ratio of
allowance for their outstanding credit card receivables and credit card loans
was increased to 12% of credits classified as precautionary. These guidelines
were reflected in the Regulation on Supervision of Banking Business prescribed
by the Financial Service Commission in November 2002.

     The Bank for International Settlements adopted changes to its capital
adequacy standards to take into account market risk from equity securities,
foreign exchange and derivative instruments held by banks. These changes have
become applicable to most Korean banks commencing in 2002. Before 2002, all
assets received risk weighting according to the risk weights applicable to the
type of assets. For example, assets relating to government received a risk weigh
of 0%, assets relating to securities companies and banks received a 20% risk
weight and assets relating to general corporate received a risk weight of 100%.
Starting from 2002, risk weights for assets that are subject to market risks,
such as trading securities, foreign exchange and interest rate, are calculated
in accordance with a formula based on market risk.

 LIQUIDITY

     All banks are required to match the maturities of their assets and
liabilities in accordance with the Bank Act in order to ensure adequate
liquidity. Banks may not invest in excess of an amount exceeding 60% of their
Tier I and Tier II capital (less any capital deductions) in stocks and other
securities with a remaining to maturity of over three years. However, this
stipulation does not apply to government bonds or to Monetary Stabilization
Bonds issued by the Bank of Korea.

     In 1999, the Financial Supervisory Commission adopted a new requirement to
ascertain a bank's liquidity. Starting from January 1, 1999, the Financial
Supervisory Commission requires each Korean bank to maintain a Won liquidity
ratio (defined as Won assets due within three months, including marketable
securities, divided by Won liabilities due within three months) of not less than
100% and to make quarterly reports to the Financial Supervisory Service. The
Financial Supervisory Commission also requires each Korean bank to (1) maintain
a foreign currency liquidity ratio (defined as foreign currency liquid assets
due within three months divided by foreign-currency liabilities due within three
months) of not less than 80%, (2) maintain a ratio of foreign currency liquid
assets due within seven days less foreign currency liabilities due within seven
days, divided by total foreign-currency assets of not less than 0% and (3)
maintain a ratio of foreign currency liquid assets due within a month less
foreign currency liabilities due within a month, divided by total
foreign-currency assets, of not less than negative 10%. The Financial
Supervisory Commission also requires each Korean bank to submit monthly reports
with respect to maintenance of these ratios.

     The Monetary Policy Committee is empowered to fix and alter minimum reserve
requirements that banks must maintain against their deposit liabilities. The
current minimum reserve ratio is 5.0% of average balances for Won currency
demand deposits outstanding, 1.0% of average balances for Won currency employee
asset establishment savings deposits, employee long-term savings deposits,
employee house purchase savings
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deposits, long-term house purchase savings deposits, household long-term savings
deposits and employee preferential savings deposits outstanding and 2.0% of
average balances for Won currency time and savings deposits, mutual
installments, housing installments and certificates of deposit outstanding. For
foreign currency deposit liabilities, a 2.0% minimum reserve ratio is applied to
savings deposits outstanding and a 5% minimum reserve ratio is applied to demand
deposits, while a 1.0% minimum reserve ratio is applied for offshore accounts,
immigrant accounts and resident accounts opened by foreign exchange banks.

 FINANCIAL EXPOSURE TO ANY INDIVIDUAL CUSTOMER AND MAJOR SHAREHOLDERS

     Under the Bank Act, the sum of large exposures by a bank, that is, the
total sum of its credits to single individuals, juridical persons or business
groups that exceed 10% of the sum of Tier I and Tier II capital (less any
capital deductions), must not exceed five times the sum of Tier I and Tier II
capital (less any capital deductions), subject to certain exceptions. Beginning
on January 1, 2000, subject to certain exceptions, no bank is permitted to
extend credit (including loans, guarantees, purchases of securities (only in the
nature of a credit) and such other transactions which directly or indirectly
create credit risk) in excess of 20% of the sum of Tier I and Tier II capital
(less any capital deductions) to a single individual or juridical person, and no
bank may grant credit in excess of 25% of the sum of Tier I and Tier II capital
(less any capital deductions) to a single group of companies that belong to the
same conglomerate as defined in the Monopoly Regulations and Fair Trade Act.

     Pursuant to an amendment to the Bank Act, which became effective on July
28, 2002, the restrictions on extending credits to a major shareholder have been
amended. The definition of a "major shareholder" is as follows:

     - a shareholder holding (together with persons who have a special
       relationship with such shareholder as defined in the Enforcement Decree
       of the Bank Act) in excess of 10% (or in the case of regional banks, 15%)
       in the aggregate of the bank's total issued voting shares; or

     - a shareholder holding (together with persons who have a special
       relationship with such shareholder as defined in the Enforcement Decree
       of the Bank Act) more than 4% in the aggregate of the bank's (excluding
       regional banks) total issued voting shares (excluding shares relating to
       the shareholding restrictions on nonfinancial group companies, which
       include:

             1. any same shareholder group with the aggregate net assets of all
        nonfinancial companies belonging to such group of not less than 25% of
        the aggregate net assets of all members that are company of such group;

             2. any same shareholder group with aggregate assets of all
        nonfinancial companies belonging to such group of not less than W2
        trillion; or

             3. any mutual fund in which a same shareholder group identified in
        (1) or (2) above, owns more than 4% of the total shares issued and
        outstanding),

        where such shareholder is the largest shareholder or is able to actually
        control the major business affairs of the bank, for example, through
        appointment and dismissal of the chief executive officer or of the
        majority of the executives.

     According to such amendment, banks are prohibited from extending credits in
the amount greater than the lesser of (1) 25% of the sum of such bank's Tier I
and Tier II capital (less any capital deductions) or (2) the relevant major
shareholder's shareholding ratio multiplied by the sum of the bank's Tier I and
Tier II capital (less any capital deductions) to a major shareholder (together
with persons who have special relationship with such major shareholder as
defined in the Enforcement Decree of the Bank Act). Also, no bank is allowed to
grant credit to all of its major shareholders in excess of 25% of its Tier I and
Tier II capital (less any capital deductions).

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 INTEREST RATES

     Korean banks remain dependent on the acceptance of deposits as their
primary source of funds. There are no legal controls on interest rates on loans
in Korea. Historically, interest rates on deposits and lending rates were
regulated by the Monetary Board of the Bank of Korea. Under the government's
Financial Reform Plan issued in May 1993, controls on deposit interest rates in
Korea have been gradually reduced. Restrictions were removed in stages with
respect to interest rates on most time deposits and savings deposits in 1994 and
1995. In July 1997, restrictions on all interest rates, except demand deposits,
were removed. As a result of the government's deregulation program, the interest
income generated by our banking operation's loan portfolio and the interest
expense resulting from deposits are determined to a greater extent than in the
past by market interest rates and the Bank of Korea monetary policy, including
deposit reserve requirements. Deregulation of interest rates on deposits has
increased competition for deposits based on interest rates offered and therefore
may increase our banking operation's interest expense.

 LENDING TO SMALL- AND MEDIUM-SIZED ENTERPRISES

     In order to obtain funding from the Bank of Korea at concessionary rates
for their small- and medium-sized enterprise loans, banks are required to extend
to small- and medium-sized enterprises a certain, minimum percentage of any
monthly increase in their Won currency lending. Currently, this minimum
percentage is 45% in the case of nationwide banks and 60% in the case of
regional banks. If a bank does not comply with the foregoing, all or a portion
of the Bank of Korea funds provided to such bank in support of loans to
small-and medium-sized enterprises may have to be prepaid to the Bank of Korea
or the credit limit from the Bank of Korea for such bank may be decreased.

 DISCLOSURE OF MANAGEMENT PERFORMANCE

     For the purpose of reinforcing mandatory disclosure of management
performance so that the general public, especially depositors and stockholders,
will be in a better position to monitor banks, the Financial Supervisory
Commission requires commercial banks to disclose certain matters as follows:

          1. loans bearing no profit made to a single business group in an
     amount exceeding 10% of the sum of the bank's Tier I and Tier II capital
     (less any capital deductions) as of the end of the previous month (where
     the loan exposure to such borrower is calculated as the sum of substandard
     credits, doubtful credits and estimated loss credits) except where the loan
     exposure to a single business group is not more than W4 billion;

          2. any financial incident involving embezzlement, malfeasance or
     misappropriation of funds the amount of which exceeds 1% of the sum of the
     bank's Tier I and Tier II capital (less any capital deductions) occurs,
     unless the bank has lost or expects to lose not more than 1 billion as a
     result thereof, or the Governor of the Financial Supervisory Service has
     made a public announcement regarding such an occurrence; and

          3. any loss due to court judgments or similar decisions in civil
     proceedings in an amount exceeding 1% of the sum of the bank's Tier I and
     Tier II capital (less any capital deductions) as of the end of the previous
     month except where the loss is not more than 1 billion.

 RESTRICTIONS ON LENDING

     According to the Bank Act, commercial banks are prohibited from making any
of the following categories of loans:

     - loans made for the purpose of speculation in commodities or securities;

     - loans made directly or indirectly on the pledge of a bank's own shares,
       or on the pledge of shares in excess of 20% of the issued and outstanding
       shares of any other corporation (subject to certain exceptions with
       respect to financing for infrastructure projects);

     - loans made directly or indirectly to enable a natural or juridical person
       to buy the bank's own shares;
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     - loans made directly or indirectly to finance political campaigns and
       other activities;

     - loans made to any of the bank's officers or employees other than petty
       loans of up to (1) W20 million in the case of a general loan, (2) W50
       million in the case of a general loan plus a housing loan, or (3) W60
       million in the aggregate for general loans, housing loans and loans to
       pay damages arising from wrongful acts of employees in financial
       transactions;

     - credit (including loans) provided on the pledge of shares of a subsidiary
       corporation of the bank or to enable a natural or juridical person to buy
       shares of a subsidiary corporation of the bank; and

     - loans made to any officers or employees of a subsidiary corporation of
       the bank other than petty loans of up to W20 million in the case of a
       general loan or W50 million in the aggregate in the case of general and
       housing loans.

 RESTRICTIONS ON INVESTMENTS IN PROPERTY

     A bank may possess real estate property only to the extent necessary for
the conduct of its business; provided that the aggregate value of such real
estate property must not exceed 60% of the sum of its Tier I and Tier II capital
(less any capital deductions). Any property acquired by a bank (1) through the
exercise of its rights as a secured party or (2) the acquisition of which is
prohibited by the Bank Act must be disposed of within one year, subject to
certain exceptions.

 RESTRICTIONS ON SHAREHOLDINGS IN OTHER COMPANIES

     Under the amended Bank Act, which became effective on July 28, 2002,
restrictions against banks owning shares in other banking institutions have been
abolished. In addition, in principle, a bank may not own more than 15% of shares
outstanding with voting rights of another company, except, among other reasons,
(1) where the company issuing such shares is engaged in category of financial
businesses set forth by the Financial Supervisory Commission or where the
acquisition of shares by the bank is necessary for the corporate restructuring
of the issuer and is approved by the Financial Supervisory Commission and (2)
where the total investment in companies in which the bank owns more than 15% of
the outstanding shares with voting rights does not exceed 15% of the sum of Tier
I and Tier II capital (less any capital deductions) or where the acquisition
satisfies the requirements determined by the Financial Supervisory Commission.

     According to an amendment to the Bank Act, which became effective on July
28, 2002, a bank using its bank accounts and its trust accounts is not permitted
to acquire the shares issued by the Major Shareholder of such bank in excess of
an amount equal to 1% of the sum of Tier I and Tier II capital (less any capital
deductions).

 RESTRICTIONS ON BANK OWNERSHIP

     Under an amendment to the Bank Act, which became effective on July 28,
2002, subject to certain exceptions, a single shareholder and persons who stand
in a special relationship with such shareholder (as described in the Enforcement
Decree to the Bank Act) may acquire beneficial ownership of up to 10% of a
nationwide bank's total issued and outstanding shares with voting rights and up
to 15% of a regional bank's total issued and outstanding shares with voting
rights. The government, the Korea Deposit Insurance Corporation and financial
holding companies qualifying under the Financial Holding Company Act are not
subject to such ceilings. However, nonfinancial group companies (i.e., (1) any
same shareholder group with an aggregate net assets of all nonfinancial
companies belonging to such group of not less than 25% of the aggregate net
assets of all members that are corporations of such group, (2) any group with
aggregate assets of all nonfinancial companies belonging to such group of not
less than W2 trillion or (3) any mutual fund in which a same shareholder group,
as described in items (1) and (2) above, owns more than 4% of the total shares
issued and outstanding) may not acquire beneficial ownership of shares of a
nationwide bank in excess

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<PAGE>

of 4% of such bank's outstanding voting shares, provided that such nonfinancial
group companies may acquire beneficial ownership of:

          1. up to 10% of a nationwide bank's outstanding voting shares with the
     approval of the Financial Supervisory Commission under the condition that
     such nonfinancial group companies will not exercise voting rights in
     respect of such shares in excess of the 4% limit; and

          2. in the event that a foreigner, as defined in the Foreign Investment
     Promotion Act, owns in excess of 4% of a nationwide bank's outstanding
     voting shares, up to 10% of such bank's outstanding voting shares without
     the approval of the Financial Supervisory Commission, and in excess of 10%,
     25% or 33% of such bank's outstanding voting shares, with the approval of
     the Financial Supervisory Commission, up to the number of shares owned by
     such foreigner.

     In addition, any person (whether a Korean national or a foreigner), with
the exception of nonfinancial group companies described above, may also acquire
in excess of 10% of a nationwide bank's total voting shares issued and
outstanding, provided that an approval from the Financial Supervisory Commission
is obtained in instances where the total holding exceeds 10% (or 15% in the case
of regional banks), 25% or 33% of the bank's total voting shares issued and
outstanding.

 DEPOSIT INSURANCE SYSTEM

     The Depositor Protection Act provides, through a deposit insurance system,
insurance for certain deposits of banks in Korea. Under the Depositor Protection
Act, all banks governed by the Bank Act, including Shinhan Bank and Jeju Bank,
are required to pay to the Korea Deposit Insurance Corporation an insurance
premium on a quarterly basis at such rate as determined by the Presidential
Decree to the Depositor Protection Act, which shall not exceed 0.5% of the
bank's insurable deposits in any given year. The current insurance premium is
0.025% of insurable deposits for each quarter. If the Korea Deposit Insurance
Corporation pays the insured amount, it will acquire the claims of the
depositors within the payment amount. Under current rules, the Korea Deposit
Insurance Corporation insures only up to a total of W50 million for deposits and
interest, regardless of when the deposits were made and the size of the
deposits. However, the maximum limit of W50 million is not applicable to
interest-free settlement accounts (for example, a checking account) during the
period from January 1, 2001 to December 31, 2003.

 RESTRICTIONS ON FOREIGN EXCHANGE POSITION

     Under the Korean Foreign Exchange Transaction Regulations, a bank's net
overpurchased and oversold positions are each limited to 20% of the
stockholders' equity as of the end of the prior month.

 TRUST BUSINESS

     A bank that intends to enter into the trust business must obtain the
approval of the Financial Supervisory Commission. Trust activities of banks are
governed by the Trust Act and Trust Business Act. Banks engaged in the banking
business and trust business are subject to certain legal and accounting
procedures requirements, including the following:

          1. under the Bank Act, assets accepted in trust by a bank in Korea
     must be segregated from its other assets in the accounts of such bank;
     accordingly, banks engaged in the banking and trust businesses must
     maintain two separate accounts, the "banking accounts" and the "trust
     accounts," and two separate sets of records which provide details of their
     banking and trust businesses, respectively; and

          2. assets comprising the trust accounts are not available to
     depositors or other general creditors of such bank in the event the trustee
     is liquidated or is wound up.

     With respect to each unspecified money trust account for which a bank
guarantees the principal amount and a minimum yield thereon, the bank must make
a special reserve of 25% or more of fees and commissions from such trust account
until the total reserve for such trust account equals 5% of the trust amount in
such trust account. However, effective January 1, 1999, Korean banks have been
prohibited from

                                       207
<PAGE>

offering new guaranteed fixed rate trust account products whose principal and
interest are guaranteed by the bank.

     In addition, a trustee bank must deposit with a court an amount equal to
0.05% of its paid-in capital each year until the aggregate amount of such court
deposits reaches 10% or more of its paid-in capital. In the event that a trustee
bank breaches its duty of care as a trustee and causes loss to its customers,
the court deposits will be available as compensation for such loss.

 LAWS AND REGULATIONS GOVERNING OTHER BUSINESS ACTIVITIES

     To enter the foreign exchange business, a bank must register with the
Ministry of Finance and Economy. The foreign exchange business is governed by
the Foreign Exchange Transaction Law. To enter the securities business, a bank
must obtain the permission of the Financial Supervisory Commission. The
securities business is governed by regulations under the Korean Securities and
Exchange Act. Pursuant to the above-mentioned laws, we are permitted to engage
in the foreign exchange business, sale of securities under repurchase
agreements, governmental/public bond underwriting business and governmental bond
dealing business.

REGULATIONS APPLICABLE TO CREDIT CARD COMPANIES

 GENERAL

     The credit card business is regulated and governed by the Specialized
Credit Financial Business Act. The Specialized Credit Financial Business Act,
enacted on August 28, 1997 and last amended on August 26, 2002, establishes
guidelines on capital adequacy and provides for other regulations relating to
the supervision of credit card companies. The Specialized Credit Financial
Business Act delegates regulatory authority over credit card companies to the
Financial Supervisory Commission and its executive body, the Financial
Supervisory Service. Any person wishing to engage in the credit card business
must obtain a license from the Financial Supervisory Commission.

 RESTRICTIONS ON SCOPE OF BUSINESS

     Under the Specialized Credit Financial Business Act, a credit card company
may conduct only the following types of business: (i) credit card business as
licensed pursuant to the Specialized Credit Financial Business Act; (ii) the
businesses ancillary to the credit card business, (i.e., providing funds to
existing credit card members, issuing and settling of debit cards and issuing,
selling and settling of pre-paid cards); (iii) provision of unsecured or secured
loans; (iv) notes discount; (v) purchase, management and collection of account
receivables originated by companies in the course of providing goods and
services; (vi) provision of payment guarantee; (vii) asset management business
under the Asset Backed Securitization Act; (viii) credit investigation; and (ix)
other incidental businesses related to the foregoing.

 CAPITAL ADEQUACY

     The Specialized Credit Financial Business Act provides for a minimum
paid-in capital amount of: (i) W20 billion in the case of a specialized credit
financial business company which wishes to engage in no more than two kinds of
core businesses (i.e. credit card, installment finance, leasing and new
technology business) and (ii) W40 billion in the case of an specialized credit
financial business company, which wishes to engage in three or more kinds of
core businesses.

     Under the Specialized Credit Financial Business Act and regulations
thereof, a credit card company must maintain a capital adequacy ratio (adjusted
equity capital/adjusted total asset). The total Tier I and Tier II capital
adequacy ratio of a credit card company must be 8% or more.

     Under the Specialized Credit Financial Business Act and regulations
thereof, the minimum ratio of allowances for losses on loans, leased assets and
suspense receivables as of the date of accounting settlement (including
semiannual preliminary accounts settlement) would be 0.5% of normal assets, 1%
of precautionary assets and 20% of substandard assets, 75% of doubtful assets
and 100% of estimated loss assets, and the minimum ratio of allowances for
losses on credit card receivables and cash advances would be 1% of normal
                                       208
<PAGE>

assets, 0.5% of the amount calculated by deducting sum of cash advances which
were actually drawn by card members, from the maximum limit of sum of cash
advances times 0.75 (excluding the maximum limit of sum of cash advances for
card members who have not drawn cash advances for the latest 6 months), 12% of
precautionary assets and 20% of substandard assets, 60% of doubtful assets and
100% of estimated loss assets.

 LIQUIDITY

     Under the Specialized Credit Financial Business Act and regulations
thereof, a credit card company must maintain a Won liquidity ratio
(Won-denominated current assets/Won-denominated current liabilities) of 100% or
more. In addition, once a credit card company is registered as a foreign
exchange business institution with the Ministry of Finance and Economy, such
credit card company is required to (1) maintain a foreign-currency liquidity
ratio (defined as foreign-currency liquid assets due within three months divided
by foreign-currency liabilities due within three months) of not less than 80%,
(2) maintain a ratio of foreign-currency liquid assets due within seven days
less foreign-currency liabilities due within seven days, divided by total
foreign-currency assets of not less than 0% and (3) maintain a ratio of
foreign-currency liquid assets due within a month less foreign-currency
liabilities due within a month, divided by total foreign-currency assets, of not
less than negative 10%. The Financial Supervisory Commission requires a credit
card company to submit quarterly reports with respect to maintenance of these
ratios.

 RESTRICTIONS ON FUNDING

     Under the Specialized Credit Financial Business Act, a credit card company
may raise funds using only the following methods: (i) borrowing from financial
institutions, (ii) issuing corporate debentures or notes, (iii) selling
securities held by the credit card company, (iv) transferring claims held by the
credit card company, (v) transferring claims held by the credit card company in
connection with its businesses, or (vi) issuing securities backed by the claims
held by the credit card company relating to its businesses.

     Further, the credit card company may borrow funds offshore or issue foreign
currency denominated securities once it is registered as a foreign exchange
business institution with the Ministry of Finance and Economy.

     With respect to the issuance of debentures and notes, the credit card
company may issue debentures up to an amount equal to ten times the company's
total Tier I capital. In addition, a credit card company may issue, on a
temporary basis, debentures exceeding the maximum limit for the purpose of
redeeming the outstanding debentures, but must repay such outstanding debentures
within one month after the date of issuance of new debentures.

 RESTRICTIONS ON LOANS TO AFFILIATE COMPANIES

     Under the Specialized Credit Financial Business Act and regulations
thereof, a credit card company may not provide loans exceeding 100% of its
equity capital, in the aggregate, to its specially related persons (as defined
under the relevant laws) including, but not limited to, its affiliates.

 RESTRICTIONS ON ASSISTANCE TO OTHER COMPANIES

     Under the Specialized Credit Financial Business Act, a credit card company
shall not engage in any of the following in conjunction with other financial
institutions or companies; (i) holding voting shares under cross shareholding or
providing credit for the purpose of avoiding the restrictions on loans to
affiliate companies; (ii) acquiring shares under cross shareholding for the
purpose of avoiding the limitation on purchase of its treasury shares under the
Commercial Code or the Korean Securities and Exchange Act; or (iii) other acts
which are likely to be very much against the interests of transaction parties as
stipulated by the Enforcement Decree to the Specialized Credit Financial
Business Act, which are not yet provided.

     A credit card company shall not grant credit for enabling to purchase the
shares of such credit card company or to intermediate funds for the purpose of
avoiding the restrictions on loans to affiliate companies.

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<PAGE>

 RESTRICTIONS ON INVESTMENT IN REAL PROPERTY

     Under the Specialized Credit Financial Business Act and the regulations
thereof, the Financial Supervisory Commission may limit the maximum amount a
credit card company may invest in real estate investments for business purposes
up to a percentage equal to or in excess of 100% of its equity capital.

 RESTRICTIONS ON SHAREHOLDING IN OTHER COMPANIES

     Under the Specialized Credit Financial Business Act and the Law on
Improvement of Structure of Financial Industry, a credit card company and its
affiliate financial institutions (together a "group") are required to obtain
prior approval of the Financial Supervisory Commission if such credit card
company, together with its affiliate financial institutions, (i) owns 20% or
more of voting shares outstanding of a target company or (ii) owns 5% or more of
voting shares outstanding of a target company, and shall be deemed to have
control of the target company, including being the largest shareholder of such
target company or otherwise.

     The indirect subsidiary of the financial holding company is prohibited from
controlling any other company.

 DISCLOSURE AND REPORTS

     Pursuant to the Specialized Credit Financial Business Act, a credit card
company is required to disclose any material matters relating to management
(ordinary disclosure) within four months (two months in the case of disclosure
relating to the first half of the fiscal year) from the date of the closing of
books for each fiscal year. Also, a credit card company is required to disclose
certain matters (on-going disclosure) such as the occurrence of non-performing
loans, a financial accident or the occurrence of losses exceeding certain
amounts.

     A credit card company is required to submit its business reports and
reports on actual results of management to the Financial Supervisory Commission
through the Korea Non-Bank Financing Association within one month from the end
of each quarter.

 RISK OF LOSS DUE TO LOST, STOLEN, FORGED OR ALTERED CREDIT CARDS

     Under the Specialized Credit Financial Business Act, upon notice from the
holder of a credit card or debit card of its loss or theft, the credit card
company is thereafter liable for any loss arising from the unauthorized use of
credit cards or debit cards. Moreover, a credit card company shall bear the
burden of responsibility arising from the use of forged or altered credit cards,
debit cards and pre-paid cards. However, a credit card company may transfer all
or part of its burden from risk of loss with respect to forged or altered credit
cards, debit cards or pre-paid cards in the event of willful misconduct or gross
negligence by holders of such cards; provided that the terms and conditions of
the agreement entered between the credit card company and members of such cards
specifically provides for instances in which the transfer of the risk of loss
will be made from a credit card company to the holders of such cards.

     For purposes of the Specialized Credit Financial Business Act, willful
misconduct or gross negligence is recognized in the event of (i) a disclosure of
the password, whether made intentionally or through gross negligence, or (ii)
the transfer of or giving as collateral, a credit card or debit card. Under the
Specialized Credit Financial Business Act, a holder of a credit card or debit
card will be liable for any losses arising from the unauthorized use of his or
her credit card or debit card, up to a maximum of W100,000; provided, however,
that such losses must not arise from such holder's willful misconduct or gross
negligence. Such limitation on liability will be applicable whether the losses
arose before or after notice from the holder of the loss or theft of his or her
credit or debit card.

     The Specialized Credit Financial Business Act obligates a credit card
company to institute appropriate measures such as establishing provisions,
purchasing insurance or joining a cooperative association in order to fulfill
its obligations due to the risk of loss from unauthorized use due to lost,
stolen, forged or altered credit cards, debit cards or pre-paid cards.
                                       210
<PAGE>

     In addition, the Specialized Credit Financial Business Act prohibits a
credit card company from transferring to merchants the risk of loss arising from
lost, stolen, forged or altered credit cards, debit cards or pre-paid cards.

     The Specialized Credit Financial Business Act provides that the Financial
Supervisory Commission may either restrict the limit or take other necessary
measures against a credit card company with respect to the following: (i)
maximum limits for cash advances on credit cards; (ii) use restrictions on debit
cards with respect to per day or per transaction usage; or (iii) aggregate
issuance limits and maximum limits on the amount per card on pre-paid cards.

 LENDING RATIO IN ANCILLARY BUSINESS

     Pursuant to the Enforcement Decree of the Specialized Credit Financial
Business Act which was newly provided for on June 29, 2002, a credit card
company is required to maintain its aggregate quarterly average outstanding
lending balance to credit card holders (including cash advances and credit card
loans) at an amount that does not exceed its aggregate quarterly average
outstanding credit card balance arising from the purchase of goods and services.
This decree will be effective beginning December 31, 2003. Until December 31,
2004, those credit card receivables that have been already disposed of or sold
by a credit card company will not be considered for purposes of calculating the
outstanding credit card balance of credit card members. On March 17, 2003, the
Government announced its plan to extend the grace period for the above lending
restriction by one year.

     The Government has recently announced its plan to introduce a draft
amendment to the Specialized Credit Financial Business Act to impose upon all
specialized credit financial business companies similar lending restrictions as
those imposed upon credit card companies in the manner described in the above
paragraph within 2003. In particular, under such announcement, the amendment to
the Specialized Credit Financial Business Act requires each Specialized
Financial Business company to ensure that transactions entered into as part of
the licensed or registered business of such company and which provide credit in
connection with goods purchases (including among other things, factoring and
purchase of promissory notes) do not exceed the volume of its lending
transactions. The proposed amendment to the Specialized Credit Financial
Business Act also provides for measures that would require credit card agents to
register with the Korea Non-Bank Financing Association.

 ISSUANCE OF NEW CARDS AND SOLICITATION OF NEW CARD HOLDERS

     The Enforcement Decree to the Specialized Credit Financial Business Act
establishes the conditions under which a credit card company may issue new cards
and solicit new members. Specifically, new credit cards may be issued only to
the following persons: (i) persons who are at the age of 18 years or more at the
time of applying for issuance of a credit card; (ii) persons whose capability to
pay bills as they come due, as determined according to standards established by
the credit card company, is verified; and (iii) in the case of minors, persons
who submit a guardian's consent along with documents evidencing income, such as
an employment certificate or a tax certificate.

     In addition, a credit card company may not engage in the following methods
of soliciting credit card members: (i) providing economic benefits or
conditioning such benefits in excess of 10% of the annual credit card fee (in
the case of no-annual fee credit cards, the average annual fees will be W10,000)
in connection with issuance of credit cards; (ii) street solicitation of card
members on roads and private roads as prescribed under the Road Act and Private
Road Act, public place and along corridors used by the general public; and (iii)
solicitation through visits, except those visits made upon prior consent and
visits to a business area.

 COMPLIANCE RULES ON COLLECTION OF RECEIVABLE CLAIMS

     A recent amendment to the Financial Supervisory Commission Supervisory
Regulation of the Specialized Credit Financial Business Act effected on July 4,
2002 prescribes certain behavioral limits against credit card companies in
connection with its collection efforts on receivable claims.

                                       211
<PAGE>

     Specifically, a credit card company may not engage in the following
practices:

     - exerting violence or threat of violence;

     - demanding payment or pressuring a Related Party (a guarantor of the
       debtor, blood relative or fiancee of the debtor, a person living in the
       same household as the debtor or a person working in the same workplace as
       the debtor) without just cause with respect to payment for the
       obligations of the debtor;

     - providing false information relating to the debtor's obligation to the
       debtor or his/her Related Party;

     - providing false information or overstating the negative consequences of
       being registered as a person of poor credit;

     - threatening to sue or suing the debtor for fraud despite lack of
       affirmative evidence to establish that the debtor has submitted forged or
       false documentation with respect to his/her capacity to make payment;

     - visiting or telephoning the debtor during late hours between
       21:00 -- 08:00 hours; or

     - utilizing other uncustomary methods to collect the receivables thereby
       injuring the privacy or the peacefulness in the workplace of the debtor
       or his/her related party.

REGULATIONS APPLICABLE TO SECURITIES COMPANIES

  GENERAL

     The securities business is regulated and governed by the Securities and
Exchange Act of 1976, as amended (the "Securities and Exchange Act"). Securities
companies are under the regulation and supervision of the Financial Supervisory
Commission, the Securities Supervisory Service and the Securities and Futures
Commission.

     Under the Securities and Exchange Act, permission to commence a brokerage
business, a dealing business or an underwriting business must be obtained from
the Financial Supervisory Commission. A securities company may also engage in
certain businesses ancillary to the primary business without obtaining any
separate license and certain other additional businesses by obtaining separate
licenses from the Financial Supervisory Commission. Permission to merge with any
other entity or transfer all or a part of a business must also be obtained from
the Financial Supervisory Commission.

     If the Korean government deems a securities company's financial condition
to be unsound or if a securities company fails to meet the applicable Net
Operating Equity Ratio (as defined below), the government may order any of the
following:

     - a stock cancellation or consolidation;

     - a transfer of business;

     - closing of branch offices;

     - a merger with other financial institutions;

     - a suspension of a part or all of business operation; or

     - an assignment of contractual rights and obligations relating to financial
       transactions.

  REGULATIONS ON FINANCIAL SOUNDNESS

     The financial soundness of a securities company is to be assessed under the
regulations of the Financial Supervisory Commission in accordance with the net
operating equity ratio of the company, which is to be calculated as follows and
to be expressed as a percentage.

     Net operating equity ratio = Net operating equity/Total risk X 100

                                       212
<PAGE>

     The terms "Net Operating Equity" and "Total Risk" for the purpose of the
above-stated formula are defined and elaborated in the regulations of the
Financial Supervisory Commission. Generally, the net operating equity and the
Total risk is to be calculated according to the following formula:

     Net operating equity = Net assets (total assets - total
                            liabilities) - total deductible items
                            + total addible items

     Total risk = market risk + counterparty risk + basic risk
                  + credit concentration risk - risk offsetting factor

     The regulations of the Financial Supervisory Commission requires securities
companies to maintain the net operating equity ratio at a level equal to or
higher than 150%, in principle, at the end of the each half of the fiscal year.

     In addition, a securities company should set aside, as a legal reserve, 10%
of the net profit in each fiscal year until the reserve reaches 50% of the
operating fund.

  OTHER PROVISIONS ON FINANCIAL SOUNDNESS

     The Securities and Exchange Act, the Enforcement Decree of the Securities
and Exchange Act and the regulations of the Financial Supervisory Commission
also include certain provisions which are designed to regulate certain types of
activities relating to the management of the assets of a securities company.
Such provisions include:

     - restrictions on the holdings by a securities company of securities issued
       by another company which is the largest shareholder or the major
       shareholder (each as defined under the Securities and Exchange Act) of
       such securities company;

     - restrictions on providing money or credit to the largest shareholder,
       major shareholders, officers and specially-related persons of the
       securities company; and

     - special provisions concerning the payment guarantee by a securities
       company. For instance, a securities company is not allowed to provide
       payment guarantees for third parties other than its overseas
       subsidiaries. Also, a securities company is prohibited from providing new
       guarantees for corporate bonds, except for roll-over guarantees in
       connection with repayment of bonds previously guaranteed by the
       securities company with certain restrictions.

     A securities company may invest in shares, bonds (whether or not listed or
unlisted) and stock price index futures/options. However, a securities company
is not permitted to enter into cross-border financial futures, swaps, options
and other derivative transactions without obtaining a prior approval of the Bank
of Korea.

  BUSINESS CONDUCT RULES

     Effective May 2001, the Financial Supervisory Commission adopted the
"business conduct rules" applicable to securities companies. The business
conduct rules impose greater responsibilities on securities companies, strictly
banning unfair practices such as front running or scalping and ensuring
suitability of investment solicitation by securities companies.

  DISCLOSURE AND REPORTS

     Pursuant to the Securities and Exchange Act, a securities company is
required to disclose certain material matters including (i) financial condition,
and profit and loss of the securities company, (ii) any sanctions levied on the
securities company under the Securities and Exchange Act or any corrective
measures or sanctions under the Law on Improvement of Structure of Financial
Industry or (iii) occurrence of any matters which may have a material adverse
effect to the operation or management of the securities company.

     A securities company is also required to submit reports on actual results
of management to the Financial Supervisory Commission within 45 days from the
end of each quarter.
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<PAGE>

  CUSTOMER PROTECTION

     Under Korean law, the relationship between a customer and a securities
company in connection with a securities sell or buy order is deemed to be
consignment and the securities acquired by a consignment agent (i.e., the
securities company) through such sell or buy order are regarded as belonging to
the customer in so far as the customer and the consignment agent's creditors are
concerned. Therefore, in the event of a bankruptcy or reorganization procedure
involving a securities company, the customer of the securities company is
entitled to the proceeds of the securities sold by the securities company.

     As the cash deposited with a securities company is regarded as belonging to
the securities company, which is liable to return the same at the request of its
customer, the customer cannot take back deposited cash from the securities
company if a bankruptcy or reorganization procedure is instituted against the
securities company and, therefore, can suffer from loss or damage as a result.
However, the Depositor Protection Act provides that Korea Deposit Insurance
Corporation will, upon the request of the investors, pay investors up to W50
million per depositor per financial institution in case of the securities
company's bankruptcy, liquidation, cancellation of securities business license
or other insolvency events. Securities companies pay the premiums related to
this insurance. Pursuant to the Securities and Exchange Act, securities
companies are required to deposit the cash received from its customers with the
Korea Securities Finance Corporation, a special entity established pursuant to
the Securities and Exchange Act. Set-off or attachment of cash deposits by
securities companies with the Korea Securities Finance Corporation is
prohibited. In addition, in the event of bankruptcy or dissolution of the
securities company, the cash so deposited shall be withdrawn and paid to the
customer senior to other creditors of the securities company.

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<PAGE>

                                   PROPERTIES

SHINHAN FINANCIAL GROUP

     Our registered office and corporate headquarters are located at 120, 2-Ga,
Taepyung-Ro, Jung-Gu, Seoul 100-102, Korea. Information regarding certain of our
properties in Korea is presented in the following table:

<Table>
<Caption>
                                                                                    AREA (SQUARE METERS)
                                                                                  -------------------------
                                                                                                  SITE
TYPE OF FACILITY                                        LOCATION                  BUILDING   (IF DIFFERENT)
- ----------------                         --------------------------------------   --------   --------------
<S>                                      <C>                                      <C>        <C>
Registered office and Corporate
  Headquarters.........................  120, 2-Ga, Taepyung-Ro, Jung-Gu, Seoul    59,743        4,416
                                         100-102, Korea
IT Center..............................  781, Janghang-Dong, Ilsan-Gu,             24,496        5,856
                                         Goyang-Si, Kyunggi Province, Korea
Good Morning Shinhan Securities........  23-2, Yoido-Dong, Youngdungpo-Gu,         70,170        4,765
                                         Seoul, Korea 150-312
</Table>

     As of December 31, 2002, through Shinhan Bank, we had a countrywide network
of 341 branches. Approximately 21% of these facilities are housed in buildings
owned by us, while the remaining branches are leased properties. As of December
31, 2002, Good Morning Shinhan Securities had 95 branches of which we own 12 (in
other words, 13%) of the buildings in which the facilities are located. Lease
terms are generally from two to three years and seldom exceed five years. We
house our central mainframe computer system at its information technology center
in Ilsan, one of the suburban districts outside of Seoul. We do not own any
material properties outside of Korea.
     The net book value of all the properties owned by us at December 31, 2002
was W565 billion.

CHOHUNG BANK

     Chohung Bank's registered office and corporate headquarters are located at
14, 1-Ga, Namdaemun-Ro, Jung-Gu, Seoul, Korea. Information regarding certain of
Chohung Bank's properties in Korea is presented in the following table:

<Table>
<Caption>
                                                                                    AREA (SQUARE METERS)
                                                                                  -------------------------
                                                                                                  SITE
TYPE OF FACILITY                                        LOCATION                  BUILDING   (IF DIFFERENT)
- ----------------                         --------------------------------------   --------   --------------
<S>                                      <C>                                      <C>        <C>
Registered office and Corporate
  Headquarters.........................  14, 1-Ga, Namdaemun-Ro, Jung-Gu,          20,379        6,724
                                         Seoul, Korea
Centennial Building....................  117, Samgak-Dong, Jung-Gu, Seoul,         19,697        1,389
                                         Korea
IT Center..............................  731, Yoksam-Dong, Kangnam-Gu, Seoul,      23,374        7,964
                                         Korea
Myongdong Branch.......................  53-1, 1-Ga, Myong-Dong, Jung-Gu,           8,936        1,014
                                         Seoul, Korea
Youngdungpo Branch.....................  57, 4-Ga, Youngdungpo-Dong,                6,171        1,983
                                         Youngdungpo-Gu, Seoul, Korea
Cheongju IT Back-up Center.............  1704-Ga, Yongam-Dong, Sangdang-Gu,         5,756        6,398
                                         Cheongju-Si, Chungcheongbuk-Do
</Table>

     Chohung Bank's principal establishment is its headquarters building located
in Seoul, Korea, which it owns. In addition, Chohung Bank owns or leases various
land and buildings for its branches. As of December 31, 2002, Chohung Bank had a
countrywide network of 536 branches. Approximately 37% of these facilities are
housed in buildings owned by us, while the remaining branches are leased
properties. Lease terms are generally from two to three years and seldom exceed
five years. Chohung Bank's central mainframe computer system is located at its
information technology center in Kangnam-Gu, Seoul and the back-up center is
located separately in Chungju, Korea.

     The net book value of all the properties owned by Chohung Bank at December
31, 2002 was W549 billion. Chohung Bank does not own any material properties
outside of Korea.

                                       215
<PAGE>

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

                                    OVERVIEW

THE KOREAN ECONOMY

     Economic conditions in Korea, elsewhere in Asia, in the United States and
elsewhere in the world materially affect our business. Financial turmoil in Asia
in the late 1990's adversely affected the Korean economy and in turn Korean
financial institutions. In 1997 and 1998, Korea experienced a severe financial
and economic downturn characterized by, among other things, significant
corporate failures, instability in the financial sector, credit and liquidity
concerns and volatility in the domestic financial and currency markets. In
response, the International Monetary Fund provided a financial aid package to
Korea and in late 1997, the government initiated a comprehensive program to
address some of the structural weaknesses in the Korean economy. As part of that
program, there have been certain significant changes in regulations specifically
affecting financial institutions, including changes in loan classification and
loss provisioning guidelines, Korean GAAP, securities valuation methods and
liquidity requirements.

     As a result of the downturn, in 1998 there was a general increase in
interest rates in Korea and we experienced a decrease in the demand for loans
and other products. In addition, Shinhan's general level of non-performing loans
increased. During 1999 and 2000, financial and economic conditions began to
improve in Korea. The general level of interest rates decreased, demand for
financial products increased, and Shinhan's overall level of non-performing
loans decreased. Chohung Bank experienced significant losses in its large
corporate loan portfolio that led to government intervention and a support
package. As a result, Korea Deposit Insurance Corporation acquired 80.04% of the
outstanding shares of Chohung Bank. After the government intervention, Chohung
Bank continued to be adversely affected by its exposure to the large corporate
sector. During 1999 and 2000, financial and economic conditions began to improve
in Korea. The general level of interest rates decreased and demand for financial
products increased and Chohung Bank diversified its business into the retail,
credit card and small- and medium-sized enterprises markets.

     Deterioration in the Korean economy can also occur as a result of
deterioration in the global economic conditions. The worldwide economy has been
in a slump since the beginning of 2001, as the United States and other G8
countries have experienced recessionary conditions which have been exacerbated
by the terrorist attacks in the United States on September 11, 2001, the looming
prospect of war in Iraq throughout much of 2002, on-going tensions between the
United States and North Korea and the impact of SARS, on global exports or GDP
growth rates. Any prolonged stagnation or future deterioration in global
economic conditions would continue to have an adverse impact on the Korean
economy and in turn on us or Chohung Bank.

GOVERNMENT REGULATION AND POLICY

     Over the past twelve years successive Korean government administrations
have taken steps to reform the Korean economy in line with prevailing
international standards. The reforms have focused on restructuring the large
corporate sector and reducing Chaebol influence; modernizing the banking sector
to eliminate policy lending and most interest rate regulations, to improve
credit risk evaluation and provisioning, and to increase transparency; creating
a more liquid and efficient domestic capital market; and fostering changes in
the law to support these developments. This ongoing proactive government role
has had, and will continue to have, a profound effect on the Korean banking
sector. Over the past several years nationwide banks have undergone
consolidation and banks lending primarily to large corporate borrowers,
including Chohung Bank, have shifted their focus to the retail and SME sectors.
This shift has led to very intense competition in sectors which have
historically been our principal markets. The result so far has been a major
increase in retail sector lending levels, including credit cards and home
mortgages, with attendant pressures on margins and credit quality for the sector
as a whole. Government initiatives to further regulate this sector have also
affected the market. We expect that the current focus on SME lending will lead
to competitive pressures and possibly regulatory initiatives in this segment as
well. Our ability and Chohung Bank's ability to anticipate and respond to
government initiatives and their competitive implications will have a
significant effect on the future performance of us and Chohung Bank.

                                       216
<PAGE>

INTEREST RATES

     Over the past ten years Chohung Bank and we have operated in environments
characterized by high interest rates, periods of significant interest-rate
volatility and low interest rates. The following table shows certain benchmark
Won-denominated borrowing interest rates as of the dates indicated.

<Table>
<Caption>
                                                                                           CERTIFICATE
                                                            CORPORATE       TREASURY        OF DEPOSIT
                                                          BOND RATES(1)   BOND RATES(2)      RATES(3)
                                                          -------------   -------------   --------------
<S>                                                       <C>             <C>             <C>
June 30, 1998...........................................      16.00            N/A            16.30
December 31, 1998.......................................       8.00           6.95             7.70
June 30, 1999...........................................       7.96           7.20             6.35
December 31, 1999.......................................       9.95           9.03             7.34
June 30, 2000...........................................       9.37           8.31             7.18
December 31, 2000.......................................       8.13           6.70             6.87
June 30, 2001...........................................       7.10           5.93             5.57
December 31, 2001.......................................       7.04           5.91             4.86
June 30, 2002...........................................       6.59           5.66             4.91
December 31, 2002.......................................       5.68           5.11             4.90
March 31, 2003..........................................       5.38           4.62             4.70
June 30, 2003...........................................       5.45           4.16             4.30
</Table>

- ---------------

Source: The Bank of Korea.

N/A = not available.

Notes:

(1) Measured by the yield on three-year AA- rated corporate bonds.

(2) Measured by the yield on three-year treasury bonds.

(3) Measured by the yield on certificates of deposit (with maturity of 91 days).

     Interest rate movements on the asset and liability side have often been
divergent, both in terms of the size of the movement as well as the timing
thereof, and the movements together with this divergence have had a significant
impact on our margins and Chohung Bank's margins, particularly with respect to
financial products that are sensitive to such fluctuations. We and Chohung Bank
continually manage our respective balance sheet to minimize volatility exposure,
but the impact has been, and may continue to be, significant in analyzing
period-to-period margin comparisons and the trends that they may indicate for
our business and Chohung Bank's business.

                                       217
<PAGE>

                            SHINHAN FINANCIAL GROUP

     You should read the following discussion and analysis of the Group's
financial condition and results of operations together with the Group's
consolidated financial statements included in this document. The following
discussion is based on the Group's consolidated financial statements, which have
been prepared in accordance with U.S. GAAP, and does not include a discussion of
Chohung Bank. For a discussion and analysis of Chohung Bank's financial
condition and results of operations, see "-- Chohung Bank".

FINANCIAL HOLDING COMPANY RESTRUCTURING

     On September 1, 2001, the Group restructured its corporate existence as a
financial holding company by exchanging the shares of the Group's common stock
for the respective shares of common stock held by the shareholders of Shinhan
Bank, Shinhan Capital, Shinhan Securities and Shinhan Investment Trust
Management Company. Upon the successful restructuring into a financial holding
company, Shinhan Bank, Shinhan Capital, Shinhan Securities and Shinhan
Investment Trust Management Company have all become the Group's wholly-owned
subsidiaries. This restructuring has been accounted for using the purchase
method of accounting, with Shinhan Bank being the accounting acquirer. The
Group's consolidated financial statements prior to September 1, 2001 reflect the
historical financial results of operations and financial position of Shinhan
Bank.

FINANCIAL IMPACT OF ACQUISITIONS

  ACQUISITION OF GOOD MORNING SECURITIES

     During 2002, through a series of transactions, we acquired 31.7% of common
stock (or 30.7% of voting equity securities) of Good Morning Securities.
Subsequently, we merged Shinhan Securities into Good Morning Securities and
renamed it Good Morning Shinhan Securities. As of December 31, 2002, following
the foregoing transactions, we effectively owned 60.5% of Good Morning Shinhan
Securities. The total fair value of net assets acquired amounted to W237
billion. In connection with this acquisition, the Group recorded goodwill of
W285 billion, of which W247 billion relates to the brokerage unit and W38
billion relates to the capital markets unit, a component of the Group's
business. In addition, W80 billion of the intangible assets, primarily the
brokerage relationship intangible assets, were acquired.

     Later in 2002, however, the Group recorded W137 billion of impairment loss
on goodwill due to a severe downturn in market conditions affecting Good Morning
Shinhan Securities in the last six months of 2002, which deterioration is
continuing. We believe that this market downturn is due primarily to:

     - the uncertainties of the global economy following the terrorist attack in
       Bali, Indonesia and as the Iraqi war began to unfold;

     - the uncertainties of the Korean economy due to the presidential election
       in late 2002 and increased tensions on the Korean peninsula with North
       Korea reported to have resumed its nuclear program; and

     - significant deterioration of the financial market and a 40% decline in
       the share price of Good Morning Shinhan Securities since the acquisition.

     These adverse market developments have resulted in a significant decline in
the market trading volume of the Good Morning Shinhan Securities' brokerage
unit, negatively impacting brokerage commission income, which is the main source
of revenue for the brokerage unit. In addition, anticipated growth in the
futures and options market and beneficial certificate products did not occur.
This was further aggravated by a decline in the market share of Good Morning
Shinhan Securities since the acquisition, which contradicted our original
projection at the time of acquisition. The downturn in market conditions also
had a negative impact on profits generated from proprietary trading at the
capital market unit of Good Morning Shinhan Securities, resulting in a
significant decline in the value of the capital market unit.

     The period-to-period comparison of our results of operations from Good
Morning Shinhan Securities in 2001 and 2002 is not meaningful for the following
reasons. Prior to the Group's restructuring into a financial holding company,
Shinhan Securities was not consolidated in the Group's financial statements.
Following the
                                       218
<PAGE>

restructuring on September 1, 2001, Shinhan Securities became subject to
consolidation and, for accounting purposes, the results of operations of Shinhan
Securities from July 1, 2001 to December 31, 2001 were reflected in the Group's
consolidated results of operations for the year ended December 31, 2001. The
Group's consolidated results of operations for the year ended December 31, 2002
reflect a combination of the results of operations of Shinhan Securities from
January 1 to July 31, 2002, the merger effective date for accounting purposes,
and the results of operations of Good Morning Shinhan Securities, the new merged
entity following the Group's acquisition of Good Morning Securities, from August
1, 2002 to December 31, 2002. In respect of the Group's balance sheet, the
Group's acquisition of Good Morning Securities has also resulted in an increase
in the Group's assets and liabilities by W1,207 billion and W854 billion,
respectively, as of July 31, 2002.

  ACQUISITION OF JEJU BANK

     On April 4, 2002, the Group acquired 51% of the total outstanding common
stock of Jeju Bank from Korea Depository Insurance Corporation and subsequently
increased the Group's ownership to 62% on July 5, 2002. The total purchase price
was approximately W43 billion in cash. The acquisition of Jeju Bank was
accounted for under the purchase method of accounting and has been reflected in
the Group's consolidated financial statements as of the acquisition date. The
fair value of net assets acquired amounted to W69 billion. In connection with
this acquisition, the Group recorded core deposit intangible assets aggregating
W17 billion. In addition, a negative goodwill of W26 billion was recognized. The
negative goodwill was allocated to identifiable intangible assets and premises
and equipment on a pro rata basis.

  SPIN-OFF OF SHINHAN CARD

     On June 4, 2002, the Group spun off its credit card business, which was
previously managed and run by Shinhan Bank, into Shinhan Card Co., Ltd., a
"monoline" credit card subsidiary. As a result of the spin-off, Shinhan Card was
required to obtain its own funding, primarily through the issuance of short-term
corporate debt securities with maturities of less than one year and commercial
papers with maturities of three months. The amount of short-term borrowings of
Shinhan Card was W1,634 billion as of December 31, 2002. While the Group, at the
holding company level, may provide long-term funding to Shinhan Card, the Group
is subject to certain regulatory limitations. See "-- Liquidity and Capital
Resources".

     With the deterioration in asset quality of Korean credit card companies and
investors' reluctance to invest in corporate debt securities of credit card
companies, many credit card companies, including Shinhan Card, have begun to
experience financial and liquidity difficulties. In respect of Shinhan Card,
these change of events has led to increased funding requirements at the holding
company level to provide liquidity support for our credit card operations,
subject to regulatory and internal limitations described above. The Group's
long-term debt, as a result, increased in the first half of 2003 and is expected
to continue to increase throughout 2003. In addition, to the extent that Shinhan
Card needs funding in excess of what the holding company's is able to provide,
Shinhan Card will be compelled to seek its own funding in an environment
unfavorable to it, resulting in increased funding costs and/or liquidity
difficulties for Shinhan Card and us.

CRITICAL ACCOUNTING POLICIES

     The Group's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States, including
prevailing practices within the financial services industry. The preparation of
consolidated financial statements requires management to make judgments,
involving significant estimates and assumptions, in the application of certain
accounting policies about the effects of matters that are inherently uncertain.
These estimates and assumptions, which may materially affect the reported
amounts of certain assets, liabilities, revenues and expenses, are based on
information available as of the date of the financial statements, and changes in
this information over time could materially impact amounts reported in the
financial statements as a result of the use of different estimates and
assumptions. Certain accounting policies, by their nature, have a greater
reliance on the use of estimates and assumptions, and could produce results
materially different from those originally reported.

                                       219
<PAGE>

     Based on the sensitivity of financial statement amounts to the methods,
estimates and assumptions underlying reported amounts, the relatively more
significant accounting policies followed by the Group have been identified by
management as the determination of the allowance for loan losses, the valuation
of financial instruments and accounting for goodwill and income tax. These
policies require subjective or complex judgments, and as such could be subject
to revision as new information becomes available. The following is a discussion
of these significant accounting policies. These accounting policies are
described in more detail in note 1 in "Item 18. Financial Statements -- Notes to
consolidated financial statements of Shinhan Financial Group".

  ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses represents the amount available for estimated
probable credit losses existing in our lending portfolio. The methodology used
to provide the appropriate level of reserve is inherently subjective and
involves many complex estimates and assumptions. The Group performs periodic
systematic reviews of our credit portfolios to identify inherent losses and
assess the overall probability of collection. Each loan portfolio is evaluated
based on its respective characteristics.

     The Group evaluates large impaired corporate loans individually as part of
our normal corporate review practice due to the unique characteristics of such
borrowers. As described in more detail in the footnotes to our consolidated
financial statements, we consider a loan impaired when, after consideration of
risk characteristics and current information and events, the Group believes it
is probable that the Group will be unable to collect all amounts owed under the
contractual terms of the agreement, including principal and interest, according
to the contractual terms of the loan. Once the Group has identified a loan as
impaired, the Group values that loan either based on the present value of
expected future cash flows discounted at the loan's effective interest rate or,
as a practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. Each of these
variables involves judgment and the use of estimates. For instance, discounted
cash flows are based on estimates of the amount and timing of expected future
cash flows. Forecasts of expected future cash flows are based on various data
including restructuring plans, due diligence reports, as well as industry
forecasts among other quantitative tools. The fair value of collateral is
determined by using third party valuation reports. Additional consideration is
given to recent auction results and court valuations. If the resulting value is
less than the carrying amount of the loan, the Group establishes a specific
allowance for the difference.

     The Group generally evaluates consumer loans and certain smaller balance
corporate loans, including mortgages and home equity loans and credit card
balances, as individual pools for credit loss reserve purposes due to their
homogeneous nature based on historical loss experience. Such allowances have
been established using a risk rating migration model when considering consumer
loans and a delinquency roll-rate model when considering credit cards.

     The adequacy of the allowance requires a great deal of judgment and the use
of estimates as discussed above. As such, the Group has also considered changes
in underwriting, credit monitoring, the Korean and global economic environment,
industry concentrations, and delinquency among other factors when concluding on
the level of the allowance for loan losses.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     Our securities and trading assets and liabilities include debt and
marketable equity securities, equity securities that do not have readily
determinable fair values and derivatives. Fair value of financial instruments is
the current amount that would be exchanged between willing parties, other than
in a forced sale or liquidation. The fair values of our securities and trading
assets and liabilities are estimated based on quoted market prices or internally
developed pricing models.

     Fair value is best determined based on quoted market prices, if available.
If quoted market prices are not available, fair value is estimated using the
present value of expected future cash flows calculated by using market interest
rates comparable with the credit rating and maturity of the security. An
alternative to estimate fair value is to use internally developed pricing models
based on external market variables including interest
                                       220
<PAGE>

rate yield curves, option volatilities and foreign exchange rates. The
estimation of fair value involves the assessment of various financial variables,
prices of comparable financial instruments, credit ratings of counterparties,
liquidity of the financial instruments and transaction costs. The Group's
management applies judgments in assessing the variables used in the fair
valuation process and also if certain external market variables are less readily
available. Changes in model assumptions, market conditions and unexpected
circumstances can affect the fair values of the securities and trading assets
and liabilities.

     Securities classified as available-for-sale are carried at fair value with
corresponding changes recognized in other comprehensive income within
stockholders' equity net of taxes. Debt securities classified as held-to-
maturity securities are recorded at amortized cost. Equity securities that do
not have readily determinable fair values are carried at cost. Declines in
values of available-for-sale securities, held-to-maturity debt securities and
equity securities that do not have readily determinable fair values that are
deemed to be other-than-temporary are reflected in earnings as realized losses.
The Group performs regular assessments of various quantitative and qualitative
factors to determine whether impairment is other-than-temporary. Such factors
include the duration and extent of the decline, the current operating and future
expected performance, market values of comparable companies, and changes in
industry and market prospects. These factors can be adversely affected by
changing economic conditions that are global or regional in nature or are issuer
or industry specific.

     Trading assets and liabilities are carried at fair value with the
corresponding changes recognized in earnings. The majority of the Group's
trading assets and liabilities that are actively traded are valued based on
quoted market prices except for derivatives. Since few derivatives are actively
traded, the majority of the Group's derivatives are valued using internally
developed models based on external market variables that can be independently
validated by third party sources. However, certain derivatives are valued based
on external market variables that are less readily available and are subject to
management judgment to support or make adjustments to the model valuation.

 GOODWILL AND OTHER INTANGIBLE ASSETS

     Effective January 1, 2002, we adopted Statement of Financial Accounting
Standards (SFAS) No. 142 (SFAS No. 142), Goodwill and Other Intangible Assets,
as required by the accounting principles generally accepted in the United
States.

     SFAS No. 142 classified intangible assets into three categories: (1)
intangible assets with definite lives subject to amortization; (2) intangible
assets with indefinite lives not subject to amortization; and (3) goodwill. For
intangible assets with definite lives, tests for impairment must be performed if
conditions exist that indicate the carrying amount may not be recoverable. For
intangible assets with indefinite lives and goodwill, tests for impairment must
be performed at least annually.

     The Group recognized a significant amount of goodwill in connection with
the acquisition of Good Morning Securities. In addition, the Group acquired core
deposit, brokerage customer relationship and Korea Securities Finance
Corporation deposit in connection with the acquisitions of Good Morning
Securities and Jeju Bank in 2002. For discussions on the nature and accounting
for goodwill and intangible assets see notes 1, 3 and 10 in "Item 18. Financial
Statements -- Notes to consolidated financial statements of Shinhan Financial
Group".

     The Group's core deposit, brokerage customer relationship and Korea
Securities Finance Corporation deposit intangibles determined to have definite
lives are amortized over their useful lives. If conditions exist that indicate
the carrying amount may not be recoverable, the Group reviews these intangible
assets with definite lives for impairment to ensure they are appropriately
valued. Such conditions may include adverse changes in business or political
climate, actions by regulators and customer account run-off rates.

     The Group does not amortize goodwill. Instead, the Group performs tests for
impairment of goodwill annually or more frequently if events or circumstances
indicate it might be impaired. Such tests include comparing the fair value of a
reporting unit with its carrying amount, including goodwill. Impairment
assessments are performed using a variety of valuation methodologies, including
discounted cash flow

                                       221
<PAGE>

estimates and market multiple analyses. An estimated discount rate is applied
considering the Group's cost of capital rate and specific country and industry
risk factors. The sharp decline in the Korean financial industry during the
second half of 2002 prompted a re-assessment of all key assumptions underlying
our goodwill valuation judgments. As result of the Group's review, the Group
determined that goodwill impairment charges of W115 billion and W22 billion were
required on the goodwill recorded in the brokerage and capital market units of
Good Morning Shinhan Securities. The amount of these charges were equal to the
difference between the carrying amount of goodwill and its implied fair value,
which is based on the fair value of the net assets in respect of reporting
units.

     Management estimates the future cash flows expected to derive from the use
and, if applicable, the terminal value of the assets. The key variables that
management must estimate include, among other factors, market trading volume,
market share, fee income, growth rate and profitability margin. Although the
assumptions used are consistent with our internal planning, significant
management judgment is involved in estimating these variables, which include
inherent uncertainties. If such assets are considered impaired, they are written
down to fair value as appropriate.

     The assumptions and conditions for goodwill and other intangible assets
reflect management's best assumptions and estimates. However, these items
involve inherent uncertainties, as described above, that may or may not be
controllable by management. Economic and political conditions, such as tension
with North Korea, represent uncertainties that are not controllable by
management. As a result, if other assumptions and conditions had been used in
the current period, the carrying amount of goodwill and other intangible assets
could have been materially different. Furthermore, if management uses different
assumptions or if different conditions occur in future periods, future operating
results could be materially impacted.

 INCOME TAX

     Income taxation charged to income is comprised of current and deferred tax.
Current tax is calculated based on the taxable income at the prevailing
applicable rates of taxation of the year that is payable in tax. Deferred
taxation is provided for under the asset and liability method, at the current
taxation rate, in respect of temporary timing differences between profit as
computed for taxation purposes and profit as stated in the consolidated
financial statements to the extent that a liability or an asset is expected to
be payable or recoverable in the foreseeable future. In forming a conclusion
about whether a tax asset is recoverable in the foreseeable future, the Group
uses judgment in assessing the potential events and circumstances affecting
future recoverability while at the same time considering past experience. If the
Group's interpretations or judgments differ from those of tax authorities with
respect to the utilization of tax losses carried forward, the income tax
provision may vary in future periods.

                                       222
<PAGE>

AVERAGE BALANCE SHEET AND VOLUME AND RATE ANALYSIS

 AVERAGE BALANCE SHEET AND RELATED INTEREST

     The following table shows the Group's average balances and interest rates,
as well as the net interest spread, net interest margin and asset liability
ratio, for the past two years.

<Table>
<Caption>
                                                             YEAR ENDED DECEMBER 31,
                                        -----------------------------------------------------------------
                                                     2001                              2002
                                        -------------------------------   -------------------------------
                                                     INTEREST                          INTEREST
                                         AVERAGE     INCOME /   YIELD /    AVERAGE     INCOME /   YIELD /
                                        BALANCE(1)   EXPENSE     RATE     BALANCE(1)   EXPENSE     RATE
                                        ----------   --------   -------   ----------   --------   -------
                                                    (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                     <C>          <C>        <C>       <C>          <C>        <C>
ASSETS:
Interest-bearing deposits in banks....   W 1,618      W   75      4.64%    W 1,181      W   49      4.15%
Call loans and securities purchased
  under resale agreements.............     1,235          52      4.21       1,150          42      3.65
Trading assets........................       984          56      5.69         967          52      5.38
Securities(2).........................    11,501         965      8.39      11,143         749      6.72
Loans:(3)
  Commercial and industrial...........    14,138       1,006      7.12      14,690         822      5.60
  Other Commercial....................     7,231         570      7.88       8,616         631      7.32
  Lease financing.....................       315          35     11.11         617          62     10.05
                                         -------      ------     -----     -------      ------     -----
     Total commercial.................    21,684       1,611      7.43      23,923       1,515      6.33
                                         -------      ------     -----     -------      ------     -----
  Mortgage and home equity............     4,605         346      7.51       9,973         627      6.29
  Credit cards........................     1,807         230     12.73       2,371         301     12.70
  Other consumer......................     3,311         334     10.09       4,530         390      8.61
                                         -------      ------     -----     -------      ------     -----
     Total consumer...................     9,723         910      9.36      16,874       1,318      7.81
                                         -------      ------     -----     -------      ------     -----
          Total loans.................    31,407       2,521      8.03      40,797       2,833      6.94
                                         -------      ------     -----     -------      ------     -----
Other interest-earning assets.........       414          25      6.04         154          10      6.49
                                         -------      ------     -----     -------      ------     -----
TOTAL INTEREST-EARNING ASSETS.........   W47,159      W3,694      7.83%    W55,392      W3,735      6.74%
                                         =======      ======     =====     =======      ======     =====
Non-interest-earning assets:
  Cash and cash equivalents...........       975          --                 1,201          --
  Other assets........................     4,526          --                 5,951          --
                                         -------      ------               -------      ------
  TOTAL ASSETS........................   W52,660      W3,694               W62,544      W3,735
                                         =======      ======               =======      ======
</Table>

                                       223
<PAGE>

<Table>
<Caption>
                                                             YEAR ENDED DECEMBER 31,
                                        -----------------------------------------------------------------
                                                     2001                              2002
                                        -------------------------------   -------------------------------
                                                     INTEREST                          INTEREST
                                         AVERAGE     INCOME /   YIELD /    AVERAGE     INCOME /   YIELD /
                                        BALANCE(1)   EXPENSE     RATE     BALANCE(1)   EXPENSE     RATE
                                        ----------   --------   -------   ----------   --------   -------
                                                    (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                     <C>          <C>        <C>       <C>          <C>        <C>
LIABILITIES:
Interest-bearing deposits:
  Interest-bearing demand deposits....   W   182      W    2      1.10%    W   432      W    6      1.39%
  Savings deposits....................     8,121         205      2.52       9,924         184      1.85
  Certificates of deposit.............     2,343         128      5.46       3,146         154      4.90
  Other time deposits.................    16,714       1,120      6.70      19,468         956      4.91
  Mutual installment deposits.........     1,493         107      7.17       1,664         101      6.07
                                         -------      ------     -----     -------      ------     -----
       Total interest-bearing
          deposits....................    28,853       1,562      5.41      34,634       1,401      4.05
                                         -------      ------     -----     -------      ------     -----
Short-term borrowings.................     7,217         338      4.68       7,226         253      3.50
Secured borrowings....................     4,014         248      6.18       4,508         243      5.39
Long-term debt........................     3,560         255      7.16       6,184         391      6.32
Other interest-bearing liabilities....       305          36     11.80         384          17      4.43
                                         -------      ------     -----     -------      ------     -----
TOTAL INTEREST BEARING LIABILITIES....   W43,949      W2,439      5.55%    W52,936      W2,305      4.35%
                                         =======      ======     =====     =======      ======     =====
Non-interest-bearing liabilities:
  Non-interest-bearing deposits.......       821          --                   982          --
  Trading liabilities.................       302          --                   424          --
  Acceptance outstanding..............     2,658          --                 2,515          --
  Accrued expenses and other
     liabilities......................     1,856          --                 2,003          --
  Minority interest...................        --          --                    --          --
  Stockholders' equity................     3,074          --                 3,684          --
                                         -------      ------               -------      ------
       TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY........   W52,660      W2,439               W62,544      W2,305
                                         =======      ======               =======      ======
Net interest spread(4)................                  2.28%                             2.39%
Net interest margin(5)................                  2.66                              2.58
Average asset liability ratio(6)......                107.30                            104.64
</Table>

- ---------------

Notes:

(1) Average balances are based on (a) daily balances for Shinhan Bank and (b)
    quarterly balances for other subsidiaries.

(2) The average balance and yield on securities are based on amortized cost. The
    yield on the available-for-sale portfolio is based on average historical
    cost balances, therefore, the yield information does not give effect to
    changes in fair value that are reflected as a component of stockholders'
    equity.

(3) Non-accruing loans are included in the respective average loan balances.
    Income on such non-performing loans is no longer recognized from the date
    the loan is placed on nonaccrual status. We reclassify loans as accruing
    when interest and principal payments are current.

(4) The difference between the average rate of interest earned on
    interest-earning assets and the average rate of interest paid on
    interest-bearing liabilities.

(5) The ratio of net interest income to average interest-earning assets.

(6) The ratio of average interest-earning assets to average interest-bearing
    liabilities.

                                       224
<PAGE>

 ANALYSIS OF CHANGES IN NET INTEREST INCOME -- VOLUME AND RATE ANALYSIS

     The following table provides an analysis of changes in interest income,
interest expense and net interest income between changes in volume and changes
in rates for 2002 compared to 2001. Volume and rate variances have been
calculated on the movement in average balances and the change in the interest
rates on average interest-earning assets and average interest-bearing
liabilities in proportion to absolute volume and rate change.

     The variance caused by the change in both volume and rate has been
allocated in proportion to the absolute volume and rate change.

<Table>
<Caption>
                                                                    FROM 2001 TO 2002
                                                              INTEREST INCREASE (DECREASE)
                                                                   DUE TO CHANGE IN(1)
                                                              -----------------------------
                                                               VOLUME     RATE      CHANGE
                                                              --------   -------   --------
                                                                  (IN BILLIONS OF WON)
<S>                                                           <C>        <C>       <C>
INCREASE (DECREASE) IN INTEREST INCOME
Interest-bearing deposits in banks..........................    W(19)     W  (7)     W (26)
Call loans and securities purchased under resale
  agreements................................................      (3)        (7)       (10)
Trading assets..............................................      (1)        (3)        (4)
Securities..................................................     (29)      (187)      (216)
Loans:
  Commercial and industrial.................................      38       (222)      (184)
  Other Commercial..........................................     104        (43)        61
  Lease financing...........................................      31         (4)        27
                                                                ----      -----      -----
     Total corporate........................................     173       (269)       (96)
                                                                ----      -----      -----
  Mortgage and home equity..................................     346        (65)       281
  Credit cards..............................................      72         (1)        71
  Other consumer............................................     110        (54)        56
                                                                ----      -----      -----
     Total consumer.........................................     528       (120)       408
                                                                ----      -----      -----
       Total loans..........................................     701       (389)       312
                                                                ----      -----      -----
Other interest-earning assets...............................     (17)         2        (15)
                                                                ----      -----      -----
       Total interest income................................     632       (591)        41
                                                                ----      -----      -----
INCREASE (DECREASE) IN INTEREST EXPENSE
Interest bearing deposits:
  Demand deposits...........................................       3          1          4
  Savings deposits..........................................      40        (61)       (21)
  Certificates of deposit...................................      40        (14)        26
  Other time deposits.......................................     166       (330)      (164)
  Mutual installment deposits...............................      11        (17)        (6)
                                                                ----      -----      -----
       Total interest-bearing deposits......................     260       (421)      (161)
                                                                ----      -----      -----
  Short-term borrowings.....................................      --        (85)       (85)
  Secured borrowings........................................      29        (34)        (5)
  Long-term debt............................................     169        (33)       136
  Other interest-bearing liabilities........................       8        (27)       (19)
                                                                ----      -----      -----
       Total interest expense...............................     466       (600)      (134)
                                                                ----      -----      -----
NET INCREASE (DECREASE) IN NET INTEREST INCOME..............    W166      W   9      W 175
                                                                ====      =====      =====
</Table>

                                       225
<PAGE>

- ---------------

Note:

(1) The changes for each category of interest income and expense are divided
    between the portion of change attributable to the variance in volume or rate
    for that category. The change in rate / volume variance has been allocated
    to the rate variance.

OPERATING RESULTS

 2002 COMPARED TO 2001

 Net Interest Income

     The following table shows, for the periods indicated, the principal
components of the Group's net interest income.

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31,
                                                              --------------------------
                                                               2001     2002    % CHANGE
                                                              ------   ------   --------
                                                                 (IN BILLIONS OF WON,
                                                                 EXCEPT PERCENTAGES)
<S>                                                           <C>      <C>      <C>
Interest and dividend income:
  Interest and fees on loans................................  W2,521   W2,833     12.4%
  Interest and dividends on securities......................     965      749    (22.4)
  Trading assets............................................      56       52     (6.9)
  Other interest income.....................................     152      101    (33.7)
                                                              ------   ------    -----
     Total interest and dividend income.....................  W3,694   W3,735      1.1%
                                                              ======   ======    =====
Interest expense:
  Interest on deposits......................................  W1,562   W1,401    (10.3)%
  Interest on short-term borrowings.........................     338      253    (25.3)
  Interest on secured borrowings............................     248      243     (2.0)
  Interest on long-term debt................................     255      391     52.9
  Other interest expense....................................      36       17    (51.6)
                                                              ------   ------    -----
     Total interest expense.................................   2,439    2,305     (5.5)
                                                              ------   ------    -----
Net interest income.........................................  W1,255   W1,430     13.9%
                                                              ======   ======    =====
Net interest margin(1)......................................    2.66%    2.58%     N/M
</Table>

- ---------------

N/M = not meaningful.

Note:

(1) The ratio of net interest income to average interest earning assets. See
    "-- Average Balance Sheet and Volume and Rate Analysis -- Average Balance
    Sheet and Related Interest."

     Interest and dividend income.  The 1.1% increase in interest and dividend
income is primarily due to the 12.4% increase in interest and fees on loans,
which was substantially offset by a 22.4% decrease in interest and dividends on
investment securities. The average balance of the Group's interest earning
assets increased 17.5% from W47,159 billion in 2001 to W55,392 billion in 2002,
principally as a result of growth in mortgage and home equity loans and credit
cards, which more than offset a 109 basis point decline in average yields from
7.83% in 2001 to 6.74% in 2002.

     The 12.4% increase in interest and fees on loans was primarily a result of:
     - a 116.6% increase in average volume of mortgage and home equity loans
       from W4,605 billion in 2001 to W9,973 billion in 2002, and partially
       offset by a decline of 122 basis points in the average yield on such
       loans from 7.51% in 2001 to 6.29% in 2002;

                                       226
<PAGE>

     - a 31.2% increase in average volume of credit cards from W1,807 billion in
       2001 to W2,371 billion in 2002; and

     - a 3.9% increase in average volume of commercial and industrial loans from
       W14,138 billion in 2001 to W14,690 billion in 2002, which was more than
       offset by a decline of 152 basis points in the average yield on such
       loans from 7.12% in 2001 to 5.60% in 2002.

     The average volume of the Group's loans increased as a result of increased
consumer loan demand in Korea. The Group's average yield on loans decreased by
109 basis points from 8.03% to 6.94% as a result of the continued decline in the
general levels of interest rates in Korea during the periods under review. The
Group's average volume growth in consumer loans, in particular mortgage and home
equity loans and credit cards, is primarily due to its increased efforts to
market these consumer loans. The average volume growth in corporate loans is a
result of the Group's increased efforts to market loans to small- and
medium-sized enterprises.

     Interest and dividends on securities decreased 22.4% from W965 billion in
2001 to W749 billion in 2002. Approximately 61.1% of the Group's securities
portfolio consists of debt securities issued or guaranteed by the Korean
government or government-controlled entities and debt securities issued by
financial institutions and other Korean banks as of December 31, 2002. The
decrease in interest and dividends on securities in 2002 was primarily due to a
decline in average yields on the Group's investment securities from 8.39% in
2001 to 6.72% in 2002. The principal reason for the decline in gross yields on
these securities is the general decline in market interest rates.

     The overall increase in interest and dividend income for 2002 is expected
to continue in 2003 with moderate increases in consumer lending, in particular
mortgages and home equity lending and lending to small unincorporated
businesses, and increased lending to small- and medium-sized enterprises being
partially offset by lower credit card lending and by lower average lending rates
due to the low interest rate environment and intense competition.

     Interest Expense.  Interest expense decreased 5.5% from W2,439 billion in
2001 to W2,305 billion in 2002, primarily due to a 10.3% decrease in interest on
deposits and a 25.3% decrease in interest on short-term borrowings, partially
offset by a 52.9% increase in interest on long-term debt.

     The 10.3% decrease in interest expense on deposits from W1,562 billion in
2001 to W1,401 billion in 2002 was primarily the result of a decline of 136
basis points in the cost of interest bearing deposits from 5.41% in 2001 to
4.05% in 2002, partially offset by a 20.4% increase in average volume of
interest bearing liabilities from W43,949 billion in 2001 to W52,936 billion in
2002. The principal reason for the decline in interest rates payable on these
liabilities is the general decline in market interest rates. The average
interest rate paid on the Group's time deposits other than certificates of
deposit, which accounted for 36.8% of its average interest-bearing liabilities
in 2002, decreased from 6.70% in 2001 to 4.91% in 2002 primarily due to a
general decline in market interest rates in 2002 and also due to the fact that
most of the Group's other time deposits that carry higher interest rates matured
in 2001. The average interest rate paid on the Group's savings deposits, which
accounted for 18.7% of its average interest-bearing liabilities in 2002,
decreased from 2.52% in 2001 to 1.85% in 2002.

     The 20.4% increase in average balance of the Group's interest bearing
liabilities was primarily due to a 20.0% increase in average interest-bearing
deposits. The 20.0% increase in average interest-bearing deposit volume from
W28,853 billion in 2001 to W34,634 billion in 2002 was due to a 16.5% increase
in average volume of other time deposits from W16,714 billion in 2001 to W19,468
billion in 2002 and a 22.2% increase in average volume of savings deposits from
W8,121 billion in 2001 to W9,924 billion in 2002, reflecting the inflow of
highly liquid funds into short-term deposits for lack of investment
opportunities in light of stock market conditions and, to a lesser extent, the
effects from our acquisition of Jeju Bank in 2002.

     The 25.3% decrease in interest on short-term borrowings was primarily a
result of a decline of 118 basis points in average interest rates paid on our
short-term borrowings from 4.68% in 2001 to 3.50% in 2002, reflecting a
continued decline in the market interest rates during the period under review.

                                       227
<PAGE>

     The 52.9% increase in interest expense on long-term debt was due to a 73.7%
increase in average long-term debt from W3,560 billion in 2001 to W6,184 billion
in 2002 as a result of issuance of long-term bonds by Shinhan Bank in 2002,
partially offset by a decrease in average interest rates. These bonds were
issued primarily to fund increased mortgage and home equity lending volumes
which exceeded the growth of the Group's deposit base.

     Interest expense is expected to increase in line with the portfolio
expansion and to continue to benefit from the low interest rate environment.

     Net interest margin.  Net interest margin represents the ratio of net
interest income to average interest earning assets. As net interest income
increased 13.9% from W1,255 billion in 2001 to W1,430 billion in 2002 and the
average volume of the Group's interest earning assets increased 17.5% from
W47,159 billion in 2001 to W55,392 billion in 2002, its overall net interest
margin decreased 8 basis points from 2.66% in 2001 to 2.58% in 2002. This
decline is attributable to transfers of W769 billion and W1,757 billion in 2001
and 2002, respectively, of average interest-earning securities by Shinhan Bank
to investment trust companies, principally to Shinhan BNP Paribas Investment
Trust Management, an affiliate of the Group not subject to consolidation, in
return for beneficiary certificates which are reflected as non-interest-earning
assets in its consolidated financial statements. Absent this transfer, the net
interest margin would have remained approximately the same during the periods
under review. This stability reflects the fact that the impact of a substantial
increase in mortgage and home equity lending, which generally carries a lower
yield, and higher levels of long-term borrowing at rates generally higher than
deposit rates, were offset by increases in higher rate consumer and credit card
lending and a widening spread across all lending categories. The Group expects
continued pressure on its margins during 2003 due to the low level of economic
growth and intense competition in retail lending and lending to small-and
medium-sized enterprises.

 Provision for Loan Losses
     The Group's provision for loan losses decreased from W411 billion in 2001
to W236 billion in 2002 reflecting an overall improvement in the quality of its
corporate loan portfolio that was partially offset by higher allowance levels
for credit card and consumer loans and the higher allowance in 2002 relating to
the Group's exposure to SK Global.

     The following table sets forth for the periods indicated the components of
provision for loan losses by product type.

<Table>
<Caption>
                                                                AS OF DECEMBER 31,
                                                              ----------------------
                                                              2001   2002   % CHANGE
                                                              ----   ----   --------
                                                               (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>    <C>    <C>
Corporate...................................................  W331   W (6)   (101.8)%
Mortgages and home equity...................................     8     23     187.5
Other consumer..............................................    18     53     194.4
Credit cards................................................    54    166     207.4
                                                              ----   ----    ------
Total provision for loan losses.............................  W411   W236     (42.6)%
                                                              ====   ====    ======
</Table>

     The Group's provision for loan losses against corporate loans fell from
W331 billion in 2001 to W(6) billion in 2002 primarily due to W228 billion of
new loans provided to Hynix Semiconductor in 2001 that were subsequently charged
off in the same year, based on events occurring during the year. Total net-
charge offs fell 90.0% from W610 billion in 2001 to W61 billion in 2002 due to a
small number of large exposures, including Hynix, being deemed uncollectible in
2001, based on events occurring during that year.
     The provision for loan losses against SK Global increased from W15 billion
in 2001 to W58 billion in 2002 reflecting the increase in loans provided to the
company from 2000 until 2002. The Group's loans to SK Global were reclassified
from normal to substandard following discovery of accounting irregularities in
March 2003 where management of the company had been concealing liabilities of
the company for several

                                       228
<PAGE>

years. The Group has classified our loans to SK Global as substandard and
therefore impaired as of December 31, 2002 and earlier years since the nature of
these accounting irregularities would have caused the loans to SK Global to have
been classified as substandard in those earlier periods had information as to
the true financial condition of the company been known at that time. The
additional provision for loan losses against the Group's impaired loans to
former Hyundai Group companies was W255 billion in 2001 reflecting increases in
provisions against Inchon Oil Refinery and Hynix Semiconductor. Some of these
additional provisions against Hynix Semiconductor were also charged off during
the same year. The additional provision of W26 billion in 2002 reflects an
increase in provisions against Hyundai Merchant Marine and Inchon Oil Refinery
that was partially offset by a reduction in the allowance against Hyundai
Petrochemical.
     The Group's loan loss allowance against corporate loans increased 15.0%
from W633 billion as of December 31, 2001 to W728 billion as of December 31,
2002. The increase in allowance reflects an increase of 24.0% in the overall
size of the portfolio from W20,805 billion as of December 31, 2001 to W25,788
billion as of December 31, 2002, inherited allowances related to acquisition of
subsidiaries, the reacquisition of impaired loans from KAMCO and increases in
exposures to certain impaired borrowers such as SK Global. The increase is
partially mitigated by an overall increase in the quality of the portfolio. Non-
performing corporate loans fell from W470 billion as of December 31, 2001 to
W417 billion as of December 31, 2002, representing 2.3% and 1.6% of the total
corporate loan portfolio respectively.
     The allowance for loan losses against SK Global increased 92.0% from W63
billion as of December 31, 2001 to W121 billion as of December 31, 2002
reflecting the increase in our loans to the company from W198 billion to W323
billion, respectively and the continual decline in financial condition of the
company over that period. The allowance for loan losses against former Hyundai
Group companies fell 29.5% from W139 billion as of December 31, 2001 to W98
billion as of December 31, 2002 primarily due to a reduction in the Group's
allowance against Hynix Semiconductor and Hyundai Petrochemical.

     The Group's provision for loan losses against mortgage and home equity
loans increased 187.5% from W8 billion as of December 31, 2001 to W23 billion as
of December 31, 2002 primarily due to an increase in the size of the portfolio.
The Group's loan loss allowance against mortgage and home equity loans increased
233.3% from W9 billion in 2001 to W30 billion in 2002 for the same reason. The
Group's mortgage and home equity loans have increased 59.1% from W7,253 billion
as of December 31, 2001 to W11,539 billion as of December 31, 2002 reflecting
its strategy on expanding this area of the Group's business. The ratio of
non-performing loans to total loans within this portfolio fell from 0.4% in 2001
to 0.3% reflecting the overall improvement in credit quality. The Group's
provisions and allowances continue to be lower than the allowances recognized in
other countries and the United States, reflecting its relatively low loan to
value lending criteria. Net-charge offs remained constant at W2 billion for both
years.
     The Group's provision for loan losses against other consumer loans
increased 194.4% from W18 billion in 2001 to W53 billion in 2002 primarily
reflecting increased delinquencies within 2002 and the size of the portfolio.
Other consumer loans have increased 36.8% from W3,537 billion as of December 31,
2001 to W4,962 billion as of December 31, 2002 primarily due to the Group's
strategy to expand this activity. The allowance for loan losses has increased
168.2% from W22 billion as of December 31, 2001 to W59 billion as of December
31, 2002 reflecting increased levels of delinquencies within the portfolio. The
ratio of non-performing loans to total loans within this portfolio fell from
0.5% as of December 31, 2001 to 0.4% as of December 31, 2002 due to the increase
in the size of the portfolio, rather than any improvement in the credit quality
of these loans which continues to experience credit quality problems.
     The Group's provision for loan losses against credit cards increased 207.4%
from W54 billion in 2001 to W166 billion in 2002 reflecting increased
delinquencies within 2002 and an increase in the size of the portfolio. The
level of net charge-offs within the credit card portfolio have also increased
from W32 billion in 2001 to W43 billion in 2002 reflecting the higher
delinquency problems. The Group continued to focus on expanding its credit card
business in 2002 that has resulted in an increase of 33.5% in loan balances from
W2,070 billion as of December 31, 2001 to W2,763 billion as of December 31,
2002. The Group's allowance has increased 219.6% from W56 billion to W179
billion due to growth in the portfolio but primarily due to the significantly
higher level of delinquencies within the portfolio, consistent with the
experiences of other

                                       229
<PAGE>

credit card providers within the industry. The ratio of non-performing loans to
total loans within this portfolio increased from 0.8% as of December 31, 2001 to
1.7% as of December 31, 2002.

 Noninterest Income

     The following table sets forth for the periods indicated the components of
our noninterest income.

<Table>
<Caption>
                                                                 AS OF DECEMBER 31,
                                                              ------------------------
                                                              2001    2002    % CHANGE
                                                              ----   ------   --------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>    <C>      <C>
Commissions and fees from non-trust management:
  Brokerage fees and commissions(1).........................  W 42   W  170     301.3%
  Other fees and commissions(2).............................   228      304      33.5
Trust management fees(3)....................................   135      129      (4.2)
Net trading profits.........................................     7       88   1,145.8
Net gains on securities.....................................    97      143      47.4
Other(4)....................................................   123      203      65.0
                                                              ----   ------   -------
  Total noninterest income..................................  W632   W1,037      64.2%
                                                              ====   ======   =======
</Table>

- ---------------

Notes:

(1) Consists of commissions, fees and markup on securities brokerage activities.

(2) Includes commissions received on remittance, commissions received on imports
    and export letters of credit and commissions received from foreign exchange
    transactions.

(3) Consists principally of fees from management of trust accounts in our
    banking operations.

(4) Includes primarily gain on disposal of premise and equipment and gain on
    foreign exchange spot contracts.

     The 64.2% increase in noninterest income was attributable primarily to:

     - a 75.6% increase in commissions and fees from non-trust management
       activities, consisting principally of commissions, fees and markup on
       securities brokerage activities such as fees from brokerage services,
       primarily as a result of the acquisition of Good Morning Securities and
       the resulting growth in brokerage business volume;
     - a 47.4% increase in net gain on securities primarily due to a W103
       billion in net realized gains from disposal of securities as market
       interest rates continue to decline, partially offset by a W20 billion
       increase in impairment loss recognized on debt securities of SK Global in
       the Group's securities portfolio;

     - a 1,145.8% increase in net trading profits from increased net trading
       gains on derivative instruments of W71 billion as volume trading of
       derivatives nearly doubled during the periods under review, primarily due
       to the growth in the derivatives market and the resulting increase in
       transactions with the Group's customers; and

     - a 65.0% increase in other noninterest income, which consists mostly of
       income from sale of properties, plants and equipments and foreign
       exchange spot contracts, primarily due to an increase of financial lease
       assets.

                                       230
<PAGE>

 Noninterest Expenses

     The following table shows, for the periods indicated, the components of our
noninterest expense.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                              2001    2002    % CHANGE
                                                              ----   ------   --------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>    <C>      <C>
Employee compensation and severance benefits................  W239   W  357     49.7%
Depreciation and amortization...............................    68      104     52.6
General and administrative expenses.........................   279      409     46.7
Impairment loss on goodwill.................................    --      137      N/A
Write-down of other investments.............................    47       31    (33.0)
Other(1)....................................................   195      264     35.4
                                                              ----   ------    -----
  Total noninterest expenses................................  W828   W1,302     57.3%
                                                              ====   ======    =====
</Table>

- ---------------

N/A = not applicable.

Note:

(1) Includes credit card fees, which consist principally of expenses related to
    awarding mileages and bonus points to credit card customers and fees and
    commissions paid to our member merchants, other taxes, fees and losses from
    sale of tangible assets.

     The 57.3% increase in noninterest expenses was primarily due to:

     - a 46.7% increase in general and administrative expenses primarily
       attributable to increases in employee welfare expenses and advertisement
       and marketing expenses to promote the Group's corporate brand image as an
       integrated financial holding company;

     - a 49.7% increase in employee compensation and benefits primarily due to
       (i) increased employee compensation and severance and bonus payments of a
       one-time nature resulting from the acquisition of Good Morning
       Securities, (ii) an increase in average salaries and wages; and
     - a W137 billion of an impairment loss on goodwill recorded in 2002
       resulting from the Group's acquisition of Good Morning Securities as
       described under "-- Financial Impact of Acquisitions -- Acquisition of
       Good Morning Securities".

 Income Tax Expense
     Income tax expense increased from W223 billion in 2001 to W320 billion in
2002 as a result of the Group's increased income. The statutory tax rate was
30.8% in 2001 and 29.7% in 2002.

     The Group's effective rate of income tax remained relatively constant at
34.8% in 2002 as compared to 34.1% in 2001.

 Net Income Before Extraordinary Item
     The 36.3% increase in net income before extraordinary item from W432
billion in 2001 to W589 billion in 2002 was primarily due to lower provisions.
During 2001, Shinhan Bank experienced a number of net writeoffs of large
corporate loans deemed uncollectible. The absence of such writeoffs in 2002 was
partially offset by higher provisions for credit card delinquencies reflecting
increased lending and a decline in credit quality and provisions with respect to
SK Global. Aside from provisions, the significant growth in mortgages and home
equity loans contributed to the increase in net income, although at lower
margins. This increase was partially offset by increased noninterest expense for
wages, advertising and an impairment loss on goodwill.

                                       231
<PAGE>

BUSINESS OUTLOOK

     As a result of reduced domestic consumption, increase in credit card and
other consumer loan delinquencies, lower levels of investments by corporations,
increased unemployment, together with the on-going tensions between the United
States and North Korea and the impact of SARS on global exports or GDP growth
rates, the Group expects the Korean economy to continue to experience
difficulties, with prospects of recovery remaining uncertain. These weak
economic conditions in Korea, coupled with intense competition in the banking
sector, will have an adverse impact on the Group in the near future.

     In retail banking, over the past sixteen months the Group has experienced a
significant growth in home mortgage-based secured consumer lending, both for
home purchases as well as for general purpose borrowing through home equity
loans. The Group's mortgage and home equity lending portfolio increased from an
average balance of W4,605 billion during 2001 to W9,973 billion during 2002. The
volume of such lending by the Group is significantly dependent on competitive
conditions, real estate prices, interest rate levels and government policies
affecting these markets, and the trends indicated by prior periods will be
altered accordingly. As a result of recent policy announcements by the Korean
government to stabilize the Korean real estate market, the Group expects the
rate of growth in mortgage and home equity lending volume to decrease in 2003.
The Group has also experienced a significant increase in other consumer loans
(principally general unsecured loans) as it seeks to diversify its consumer
lending portfolio. The Group's other consumer loans increased from an average
balance of W3,311 billion during 2001 to W4,530 billion during 2002. This
increase in lending has brought with it increasing delinquencies in this portion
of its portfolio.

     In corporate banking, lending to small and medium-sized enterprises has
long been the Group's core focus of business. The Group's small- and
medium-sized enterprises lending portfolio has grown steadily from a balance of
W10,898 billion in 2000 to W11,690 billion in 2001, and to W14,649 billion in
2002. During this period, most of the nationwide banks have shifted their focus
to, or increased their emphasis on, this type of lending, as opportunities in
the large corporate and retail sectors diminish. While the Group expects the
competition in this sector to intensify and result in lower margins from lending
to this customer sector, the Group's established customer base, quality brand
image and experienced lending staff will provide an opportunity to maintain
steady growth in this environment.

     In the credit card business, the Group has witnessed its customers become
more active borrowers over the past two years as the credit card markets
expanded rapidly. However, the Group's growth in this sector was not so dramatic
as that experienced by other Korean banks and credit card companies, some of
whom were shifting from large corporate lending to the credit card sector and
others of whom chose to expand more aggressively. The Group's credit card
portfolio growth trend reflects this difference, and this in turn was reflected
in a lower level of credit defaults and delinquencies. As a result of depressed
consumption and strengthened risk management relating to credit cards, the Group
expects its interest and fee income from this segment to decrease and its
provision for possible losses on credit cards to increase, resulting in lower
net income from this sector in 2003.

     In securities brokerage services, the Group expects a decrease in brokerage
fees and commissions due to poor stock market performance of late, partially
offset by an anticipated increase in volume through the use of its banking
network to promote products offered by Goodmorning Shinhan Securities.

     The Group believes that, over the long term, the establishment of the
Shinhan Financial Group as a diversified financial services platform and the
addition of Chohung Bank to that platform will provide significant opportunities
to enhance its prospects as and when economic conditions improve.

RESULTS BY PRINCIPAL BUSINESS SEGMENT UNDER KOREAN GAAP

     The Group is organized into seven major business segments: retail banking,
corporate banking, treasury and securities investment, other banking services,
securities brokerage services, credit card operations and others. The following
discussion of the Group's results by principal business segment is provided on a
Korean GAAP basis since this is the basis of accounting that it currently uses
to manage its business. The Group's chief operating decision maker regularly
makes decisions about resources to be allocated to these

                                       232
<PAGE>

activities and assesses performance of the activities using this information,
and consequently this forms the basis of its segment reporting included in Note
34 to its consolidated financial statements.

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                                         ----------------------------------------
                                                          2001       2002       2001       2002
                                                         -------    -------    -------    -------
                                                         SEGMENT RESULTS(1)    TOTAL REVENUES(2)
                                                         ------------------    ------------------
                                                         (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                      <C>        <C>        <C>        <C>
Retail banking.........................................   W408       W422      W  799     W  923
Corporate banking......................................    105        351         638        641
Treasury and securities investment.....................     78        103         569        737
Other banking services.................................   (244)      (190)        250        348
Securities brokerage services..........................     20         35         142        582
Credit card............................................    149        158         224        291
Others.................................................    (37)        34          61        208
                                                          ----       ----      ------     ------
  Total(3).............................................   W479       W913      W2,683     W3,730
                                                          ====       ====      ======     ======
</Table>

- ---------------

Notes:

(1) Represents income per segment before income taxes.

(2) Represents net interest income plus noninterest income.

(3) Before elimination or adjustments.

 RETAIL BANKING

     The Group's retail banking segment products include mortgage and home
equity loans and other consumer loans, deposits and other savings products.

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                              2001    2002    % CHANGE
                                                              -----   -----   ---------
                                                                (IN BILLIONS OF WON,
                                                                 EXCEPT PERCENTAGES)
<S>                                                           <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.........................................  W612    W718      17.4%
Noninterest income..........................................   187     205       9.7
                                                              ----    ----      ----
  Total revenue.............................................   799     923      15.6
Provision for loan losses(1)................................   (23)    (46)     97.4
Noninterest expense including depreciation and
  amortization..............................................  (368)   (455)     23.8
                                                              ----    ----      ----
Segment result(2)...........................................  W408    W422       3.6%
                                                              ====    ====      ====
</Table>

- ---------------

Notes:
(1) Includes provision for guarantees and acceptances of W0.3 billion and W(0.5)
    billion in 2001 and 2002, respectively.

(2) Net income per segment before income taxes.
     The Group's overall segment result increased by 3.6% from W408 billion in
2001 to W422 billion in 2002.

     The 17.4% increase in net interest income from retail banking activities
was primarily due to an increase in average lending volume to individuals and
households, particularly, mortgage and home equity loans, partially offset by a
decline in average interest rates in respect of such loans.

     The increase in average lending volume to individuals, mortgage and home
equity loans in particular, is primarily due to the recent trend and preference
by commercial banks, including ourselves, to lend to

                                       233
<PAGE>

consumers on a secured basis. Average interest rates declined as market interest
rates continued to decline from 2001 to 2002.

     Noninterest income increased 9.7% primarily due to an increase in early
repayment fees from the Group's increased lending volume.

     Provision for loan losses on consumer loans increased by 97.4% primarily
due to the increase in the Group's lending volume resulting in higher level of
allowance for loan losses required at the end of 2002.

     Noninterest expense including depreciation and amortization increased 23.8%
from W368 billion in 2001 to W455 billion in 2002, primarily due to an increase
in fee expenses for secured lending, increased salaries and wages paid to the
Group's employees, increased premiums paid to the Korea Deposit Insurance
Corporation for deposit insurance due to the higher volume of customer deposits
taken by the Group.

 CORPORATE BANKING

     The Group's large corporate banking segment handles its transactions with
all of its corporate customers, including small- and medium-sized enterprises,
chaebols and public enterprises. Activities within the segment include loans,
overdrafts and other credit facilities, gathering deposits and investment
banking activities.

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                              2001    2002    % CHANGE
                                                              -----   -----   ---------
                                                                (IN BILLIONS OF WON,
                                                                 EXCEPT PERCENTAGES)
<S>                                                           <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.........................................  W390    W366       (6.1)%
Noninterest income..........................................   248     275       10.7
                                                              ----    ----      -----
  Total revenue.............................................   638     641        0.4
Provision for loan losses(1)................................  (288)    (15)     (94.8)
Noninterest expense including depreciation and
  amortization..............................................  (245)   (275)      12.1
                                                              ----    ----      -----
Segment result(2)...........................................  W105    W351      233.3%
                                                              ====    ====      =====
</Table>

- ---------------

Notes:
(1) Includes provision for guarantees and acceptances of W0.7 billion and W(8.4)
    billion in 2001 and 2002, respectively.

(2) Net income per segment before income taxes.

     The Group's overall segment result increased from W105 billion in 2001 to
W351 billion in 2002, primarily due to a 94.8% decrease in provision for loan
losses during the period under review.

     Net interest income decreased 6.1% due primarily to the effects of the
decline in average interest rates applicable to overall commercial loans and the
decrease in average volume of lending to large corporations, which more than
offset an increase in average volume of lending to small- and medium-sized
enterprises. The increase in the average volume of lending to small- and
medium-sized enterprises is the result of the continued growth in the small-and
medium-sized lending market, together with the Group's continued efforts to
focus its marketing on this customer sector.

     Noninterest income increased 10.7% due primarily to the increase in fees
and commissions from the Group's investment banking activities, including
asset-backed securitization.

     The higher level of provision for loan losses in 2001 is primarily due to
increased charge-offs and a deterioration in the financial condition of certain
large corporate borrowers, including Hynix Semiconductor and other troubled
companies that have been experiencing significant financial difficulties since
the late 1990's.

                                       234
<PAGE>

     Noninterest expense including depreciation and amortization increased 12.1%
due to increased salaries and wages paid to our employees, increased premiums
paid to the Korea Deposit Insurance Corporation for deposit insurance due to the
higher volume of customer deposits taken by the Group.

 TREASURY AND SECURITIES INVESTMENT

     The Group's treasury and securities investment segment primarily handles
the trading of and investment in debt securities and, to a lesser extent, in
equity securities for the Group's own accounts, handling its treasury activities
such as correspondence banking, and entering into derivatives transactions.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                              2001    2002    % CHANGE
                                                              -----   -----   --------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.........................................  W  74   W  54    (27.6)%
Noninterest income..........................................    495     683     38.0
                                                              -----   -----    -----
  Total revenue.............................................    569     737     29.5
Provision for loan losses...................................     18      20     13.9
Noninterest expense including depreciation and
  amortization..............................................   (509)   (654)    28.7
                                                              -----   -----    -----
Segment result(1)...........................................  W  78   W 103     30.7%
                                                              =====   =====    =====
</Table>

- ---------------

Note:

(1) Net income per segment before income taxes.
     The Group's overall segment result increased 30.7% from W78 billion in 2001
to W103 billion in 2002.

     Net interest income decreased 27.6% primarily due to a decline in our rate
sensitive investment securities, which more than offset an increase in average
volume of the Group's securities. Average interest rates declined as market
interest rates continued to decline from 2001 to 2002.

     Noninterest income increased 38.0% from W495 billion in 2001 to W683
billion in 2002 due primarily to an increase in volume of the Group's
derivatives transactions with customers, which nearly doubled in line with
derivatives market growth, which was partially offset by a decrease in realized
gains on disposition of investment securities reflecting a continued decline in
market interest rates.

     In 2001 and 2002, the Group recorded reversals of provision for loan losses
in this segment of W18 billion in 2001 and W20 billion in 2002 in order to make
adjustments in the contra-account to reflect increased provisioning in its
overseas branches.


     Noninterest expense including depreciation and amortization increased 28.7%
primarily due to an increase in derivative liabilities resulting from increase
in volume of back-to-back transactions to cover risk exposures that arose in
connection with the Group's transactions with customers, which was partially
offset by a decrease in losses from disposition of securities.

 OTHER BANKING SERVICES

     The revenue-generating activities in this segment consist primarily of the
Group's trust account management services and any gains and losses from our
overseas branches. This segment also reflects the expenses and provision for
loan losses of Shinhan Bank that are not, as a matter of management policy,
allocated to either retail banking or corporate banking.

     For management reporting purposes, each of the retail banking and corporate
banking segments computes and reflects provision for loan losses that are
discounted based on average balances of loans to show a meaningful comparison of
performance within and vis-a-vis other activities. This has the effect of
understating the provisions for loan losses that are reflected in the Group's
segment reporting as compared to

                                       235
<PAGE>

the bankwide provision for loan losses reflected in Shinhan Bank's financial
statements. The excess provision for loan losses arising from the difference in
computations are not allocated to retail banking or corporate banking but are
reflected in this segment. As a result, segment results will generally be in the
negative. In 2001 and 2002, those excess provision for loan losses that were not
allocated to either retail banking or corporate banking amounted to W58 billion
and W116 billion, respectively.

     In addition, Shinhan Bank frequently issues subordinated debt securities,
which carry interests that are higher than market interest rates. As
subordinated debt securities has the overall effect of improving Shinhan Bank's
capital adequacy and benefits Shinhan Bank in its entirety, the management
believes it is inappropriate to allocate the higher costs associated with
issuing subordinated debt to a particular business segment. Accordingly, the
Group allocates and reflects the difference between the higher costs associated
with subordinated debt and market interest rates in this segment as interest
expenses.

<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                            ------------------------
                                                            2001    2002    % CHANGE
                                                            -----   -----   --------
                                                              (IN BILLIONS OF WON,
                                                              EXCEPT PERCENTAGES)
<S>                                                         <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.......................................  W  73   W 179    143.3%
Noninterest income........................................    177     169     (4.4)
                                                            -----   -----    -----
     Total revenue........................................    250     348     39.0
Provision for loan losses(1)..............................   (214)   (129)   (40.0)
Noninterest expense including depreciation and
  amortization............................................   (280)   (409)    46.2
                                                            -----   -----    -----
Segment result(2).........................................  W(244)  W(190)   (22.1)%
                                                            =====   =====    =====
</Table>

- ---------------

Notes:
(1) Includes provision for guarantees and acceptances of W0 billion and W(0.5)
    billion in 2001 and 2002, respectively.

(2) Net income per segment before income taxes.

     The Group's overall segment result improved from a loss of W244 billion in
2001 to a loss of W190 billion in 2002, showing a 22.1% decrease, primarily as a
result of a 143.3% increase in net interest income combined with a 40.0%
decrease in provision for loan losses.

     Net interest income increased 143.3% due to a W100 billion of interest
income from securities issued by Korea Asset Management Corporation obtained in
connection with our sale of non-performing loans in the past and securities
issued by Korea Deposit Insurance Corporation which the Group obtained through
corporate restructuring of failed banks in Korea following the financial crisis
of late 1990s, which were transferred into this segment in 2002, and increased
collection and recoveries on non-performing or charged-off loans in 2002 as
compared to 2001.

     Noninterest income decreased 4.4% due primarily to a decrease in
derivatives business income from foreign branches as the Group's treasury and
securities investment segment actively attracted customers for its derivatives
business.

     Provision for loan losses decreased 40.0% due primarily to higher
provisioning at the Group's overseas branches in 2001, which did not recur in
2002. In 2001, the Group's overseas branches recorded provision for loan losses
of W135 billion primarily due to increased provisions at our Tokyo and Osaka
branches resulting from economic depression affecting its Japanese customers.

     Noninterest expense including depreciation and amortization increased 46.2%
due primarily to increased losses from disposition of and impairment losses on
securities obtained through corporate restructuring, including equity securities
of Hynix Semiconductor.

                                       236
<PAGE>

 SECURITIES BROKERAGE SERVICE

     Securities brokerage service segment primarily handles securities brokerage
and dealing services on behalf of customers, which is conducted principally by
Good Morning Shinhan Securities, the Group's principal securities brokerage
subsidiary.

<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                            ------------------------
                                                            2001    2002    % CHANGE
                                                            -----   -----   --------
                                                              (IN BILLIONS OF WON,
                                                              EXCEPT PERCENTAGES)
<S>                                                         <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.......................................  W   5   W  22    308.4%
Noninterest income........................................    136     559    310.7
                                                            -----   -----    -----
     Total revenue........................................    141     581    310.7
Provision for loan losses.................................     (2)      6      N/M
Noninterest expense including depreciation and
  amortization............................................   (120)   (552)   361.6
                                                            -----   -----    -----
Segment result(1).........................................  W  19   W  35     73.7%
                                                            =====   =====    =====
</Table>

- ---------------

N/M = not meaningful.

Note:

(1) Net income per segment before income taxes.
     The Group's overall segment result increased 73.7% from W20 billion in 2001
to W35 billion in 2002, reflecting the effects of its acquisition of Good
Morning Securities and its merger into Shinhan Securities in 2002.

     Noninterest income increased 310.7% due primarily to the positive effect on
the Group's volume of brokerage activities resulting from its acquisition by
Good Morning Securities. Noninterest expense including depreciation and
amortization increased 361.6% also due to the effects of the Group's acquisition
of Good Morning Securities in 2002.

 CREDIT CARD

     The Group's credit card segment handles credit card activities primarily
managed by Shinhan Card, the Group's wholly-owned subsidiary.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                             -------------------------
                                                             2001    2002    % CHANGE
                                                             -----   -----   ---------
                                                               (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                          <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income........................................  W224    W291       30.1%
Noninterest income.........................................    --      --       (3.1)
                                                             ----    ----      -----
     Total revenue.........................................   224     291       30.1
Provision for loan losses..................................   (47)    (63)      35.7
Noninterest expense including depreciation and
  amortization.............................................   (28)    (70)     143.8
                                                             ----    ----      -----
Segment result(1)..........................................  W149    W158        6.5%
                                                             ====    ====      =====
</Table>

- ---------------

Note:

(1) Net income per segment before income taxes.
     The Group's overall segment result increased 6.5% from W149 billion in 2001
to W158 billion in 2002.

                                       237
<PAGE>

     The 30.1% increase in net interest income was primarily due to the increase
in average volume of credit card accounts. Noninterest expense increased
primarily as a result of one-time expenses related to the spin-off and increased
marketing expenses.

 OTHER

     "Other" includes all other activities of our subsidiaries, including the
results of operations of Jeju Bank and Shinhan Capital, and back-office
functions maintained at the holding company.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                             -------------------------
                                                             2001    2002    % CHANGE
                                                             -----   -----   ---------
                                                               (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                          <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income........................................  W 41    W108      161.1%
Noninterest income.........................................    20     100      417.1
                                                             ----    ----      -----
     Total revenue.........................................    61     208      242.8
                                                             ----    ----      -----
Provision for loan losses..................................   (53)    (21)     (60.5)
Noninterest expense including depreciation and
  amortization.............................................   (45)   (153)     241.3
                                                             ----    ----      -----
Segment result(1)..........................................  W(37)   W 34        N/M
                                                             ====    ====      =====
</Table>

- ---------------

N/M = not meaningful.

Note:

(1) Net income per segment before income taxes.

     The Group's overall segment result recorded an income of W34 billion in
2002 as compared to a loss of W37 billion in 2001, primarily due to a 417.1%
increase in noninterest income and 161.1% increase in net interest income.

     The increases in both net interest income and noninterest income are due
primarily to improved operations at Shinhan Capital, the Group's leasing
subsidiary, and its acquisition of Jeju Bank.

     Provision for loan losses decreased 60.5% due primarily to higher
provisioning by Shinhan Capital in 2001 to write-off existing non-performing
assets.

     Noninterest expense including depreciation and amortization increased
241.3% due primarily to more business activities at Shinhan Capital, the Group's
leasing subsidiary, and its acquisition of Jeju Bank.

                                       238
<PAGE>

FINANCIAL CONDITION

 ASSETS

     The following table sets forth, as of the dates indicated, the principal
components of the Group's assets.

<Table>
<Caption>
                                                                   AS OF DECEMBER 31,
                                                        ----------------------------------------
                                                           2001          2002         % CHANGE
                                                        -----------   -----------   ------------
                                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                     <C>           <C>           <C>
Cash and cash equivalents.............................       W580          W282          (51.4)%
Restricted cash.......................................        678         1,365          101.3
Interest-bearing deposits in banks....................        255           125          (51.0)
Call loans and securities purchased under resale
  agreements..........................................      1,816           576          (68.3)
Trading assets:
  Trading securities..................................        858           926            7.9
  Derivative assets...................................         98           139           41.8
Securities:
  Available-for-sale securities.......................      7,087         8,737           23.3
  Held-to-maturity securities.........................      6,038         4,408          (27.0)
Loans:
  Corporate...........................................     20,805        25,788           24.0
  Consumer............................................     12,860        19,264           49.8
                                                          -------       -------        -------
     Total loans, gross...............................     33,665        45,052           33.8
     Deferred origination costs.......................         52            83           59.6
     Less allowance for loan losses...................        720           996           38.3
                                                          -------       -------        -------
          Total loans, net............................     32,997        44,139           33.8
                                                          -------       -------        -------
Customers' liability on acceptances...................      1,566           928          (40.7)
Premises and equipment, net...........................        530           828           56.2
Goodwill..............................................          4           219        5,375.0
Security deposits.....................................        390           466           19.5
Other assets..........................................      2,205         1,648          (25.3)
                                                          -------       -------        -------
          Total assets................................    W55,102       W64,786           17.6%
                                                          =======       =======        =======
</Table>

     The Group's assets increased 17.6% from W55,102 billion as of December 31,
2001 to W64,786 billion as of December 31, 2002 principally due to increased
lending. The Group's loans increased 33.8% from W32,997 billion as of December
31, 2001 to W44,139 billion as of December 31, 2002. This increase was due
largely to increases in consumer loans, in particular mortgage and home equity
loans, and commercial and industrial loans. Mortgage and home equity lending
increased 59.1% from W7,253 billion as of December 31, 2001 to W11,539 billion
as of December 31, 2002. Commercial and industrial lending increased 17.4% from
W13,459 billion as of December 31, 2001 to W15,800 billion as of December 31,
2002, which included a 19.4% increase in commercial and industrial loans to
small- and medium-sized enterprises from W6,566 billion as of December 31, 2001
to W7,842 billion as of December 31, 2002. Other commercial lending also
increased by 38.6% from W6,748 billion as of December 31, 2001 to W9,352 billion
as of December 31, 2002. All of these increases in lending were due mainly to
increased loan demand and to the fact that the Group's funding increased in 2002
due to an increase in deposits.

     For further information on the Group's assets, see "Item 4. Information on
the Company -- Description of Assets and Liabilities".

                                       239
<PAGE>

 LIABILITIES AND STOCKHOLDERS' EQUITY

     The following table sets forth, as of the dates indicated, the principal
components of the Group's liabilities.

<Table>
<Caption>
                                                                   AS OF DECEMBER 31,
                                                        ----------------------------------------
                                                           2001          2002         % CHANGE
                                                        -----------   -----------   ------------
                                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                     <C>           <C>           <C>
Deposits:
  Interest bearing....................................    W31,036       W35,886          15.6%
  Noninterest bearing.................................      1,184         1,163          (1.8)
Trading liabilities...................................        119           131         (10.1)
Bank acceptances outstanding..........................      1,566           928         (40.7)
Short-term borrowings.................................      5,759         6,994          21.4
Secured borrowings....................................      4,088         4,706          15.1
Long-term debt........................................      4,876         8,235          68.9
Accrued expenses and other liabilities................      3,562         3,193         (10.4)
                                                          -------       -------         -----
  Total liabilities...................................     52,190        61,236          17.3
                                                          -------       -------         -----
Minority interest.....................................          2           288           N/M
Stockholders' equity..................................      2,910         3,262          12.1
                                                          -------       -------         -----
     Total liabilities, minority interest and
       stockholders' equity...........................    W55,102       W64,786          17.6%
                                                          =======       =======         =====
</Table>

     The Group's total liabilities increased 17.3% from W52,190 billion as of
December 31, 2001 to W61,236 billion as of December 31, 2002. This increase was
primarily due to an increase in interest bearing deposits and long-term debt
and, to a lesser extent, an increase in short-term borrowings.

     The Group's interest bearing deposits increased 15.6% from W31,036 billion
as of December 31, 2001 to W35,886 billion as of December 31, 2002 primarily due
to the inflow of highly liquid funds into short-term deposits for lack of
alternative investment opportunities in light of poor stock market performance
and, to a much lesser extent, the positive effects on the Group's deposit volume
due to its acquisitions of Jeju Bank.

     The 68.9% increase in long-term debt from W4,876 billion as of December 31,
2001 to W8,235 billion as of December 31, 2002 is due primarily to increased
issuances of debt securities, including subordinated debt, to finance asset
growth as well as to improve the Group's capital base.

     Short-term borrowings increased 21.4% from W5,759 billion as of December
31, 2001 to W6,994 billion as of December 31, 2002 due primarily to the issuance
of commercial paper and short-term debt securities to fund the growth in the
Group's credit card operations.

     The Group's stockholders' equity increased 12.1% from W2,910 billion as of
December 31, 2001 to W3,262 billion as of December 31, 2002. This increase was
due principally to increased retained earnings from improved results of
operations in 2002 as compared to 2001.

     For further information on the Group's sources of funding, see "Item 4.
Information on the Company -- Description of Assets and Liabilities -- Funding".

 LIQUIDITY AND CAPITAL RESOURCES

     The Group is exposed to liquidity risk arising from the funding of its
lending, trading and investment activities and in the management of trading
positions. The goal of liquidity management is for the Group to be able, even
under adverse conditions, to meet all of its liability repayments on time and
fund all investment opportunities. For an explanation of how the Group manages
its liquidity risk, see "Item 4. Information on the Company -- Risk Management
of Shinhan Financial Group -- Liquidity Risk Management".

                                       240
<PAGE>

     The following table sets forth our capital resources as of December 31,
2002.

<Table>
<Caption>
                                                              AS OF DECEMBER 31, 2002
                                                              -----------------------
                                                               (IN BILLIONS OF WON)
<S>                                                           <C>
Deposits....................................................        W   37,049
Long-term debt..............................................             8,235
Call money..................................................               150
Borrowings from the Bank of Korea...........................               334
Other short-term borrowings.................................             6,510
Asset securitizations.......................................             4,706
Stockholders' equity........................................             3,263
                                                                    ----------
     Total..................................................        W   60,247
                                                                    ==========
</Table>

     Due to the Group's history as a traditional commercial bank, its primary
source of funding has historically been and continues to be customer deposits.
Deposits amounted to W32,220 billion and W37,049 billion as of December 31, 2001
and 2002, which represented approximately 68.6% and 65.0%, respectively, of the
Group's total funding as of such dates.

     As Shinhan Bank offers competitive interest rates on the Group's deposits,
it does not anticipate any material losses in deposit customers to other banks
and financial institutions. As of December 31, 2002, approximately 94.2% of the
Group's total deposits had current maturities of one year or less or were
payable on demand. However, in the past, a substantial portion of such customer
deposits has been rolled over upon maturity or otherwise maintained with the
Group, and such short-term deposits have been a stable source of funding over
time. For example, of the Group's total deposits outstanding as of December 31,
2002 with remaining maturities of six months or less, approximately 73% were
rolled over or otherwise maintained with the Group.

     The Group may use secondary and other funding sources to complement, or, if
necessary, replace funding through customer deposits. As Shinhan Bank maintains
the highest debt rating in the fixed-income market in Korea, the Group believes
that Shinhan Bank will be able to obtain replacement funding through the
issuance of long-term debt securities. Shinhan Bank's interest rates on
long-term debt securities are in general 20 to 30 basis points higher than the
interest rates offered on its deposits. However, since long-term debt are not
subject to premiums paid for deposit insurance and the Bank of Korea reserves,
the Group estimates that its funding costs on long-term debt securities are on a
par with its funding costs on deposits.

     The Group depends on long-term debt as a significant source of funding,
principally in the form of corporate debt securities. Since 1999, the Group has
actively issued and continues to issue long-term debt securities with maturities
of over one year in the Korean fixed-income market. Shinhan Bank has maintained
the highest credit rating in the domestic fixed-income market since 1999 and the
Group's holding company has also maintained the highest credit rating since its
inception in 2001. In addition, Shinhan Bank may also issue long-term debt
securities denominated in foreign currency in the overseas market. As of July
31, 2003, the credit ratings by S&P and Moody's assigned to Shinhan Bank were
BBB and Baa1, respectively.

     The cost and availability of unsecured financing are influenced by credit
ratings. The Group expects its domestic credit ratings to remain at the highest
level and, accordingly, does not anticipate any material increase in funding
cost. Shinhan Bank's overseas credit ratings have continued to improve since the
financial crisis of late 1997 until 2002. During 2003, S&P lowered the debt
ratings of Shinhan Bank one notch to BBB following the announcement of our
acquisition of Chohung Bank. However, the Group does not believe that this
downgrade has materially affected its cost of funds. The Group's holding company
did not receive ratings by either of these credit rating agencies since it has
not obtained funding from overseas sources to date.

     As of December 31, 2001 and 2002, the Group's long-term debt amounted to
W4,876 billion and W8,235 billion, respectively.

                                       241
<PAGE>

     Secondary funding sources include call money, borrowings from The Bank of
Korea and other short-term borrowings which amounted to W5,759 billion and
W6,994 billion as of December 31, 2001 and 2002 and represented 12.3% and 12.3%,
respectively, of the Group's total funding as of such dates. These types of
borrowings have maturities of less than one year.

     Additional funding flexibility is provided by the Group's ability to access
the repurchase and asset securitization markets. These alternatives are
evaluated on an ongoing basis to achieve the appropriate balance of secured and
unsecured funding. The ability to securitize loans, and the associated gains on
those securitizations, are principally dependent on the credit quality and
yields on the assets securitized and are generally not dependent on the ratings
of the issuing entity. Transactions between the Group and its securitization
structures are reflected in its financial statements. See Note 14 to the Group's
consolidated financial statements.

     The Group's policy is to encourage its subsidiaries to secure its own
funding and liquidity source. With respect to Shinhan Capital and Shinhan Card,
the Group has, in certain cases, provided funding through its holding company to
take advantage of lower cost of funding within regulatory limitations. Under the
Monopoly Regulation and Fair Trade Act of Korea, however, a financial holding
company is prohibited from borrowing funds in excess of 100% of its total
stockholders' equity. In addition, pursuant to the Group's liquidity risk
management policies designed to ensure compliance with required capital adequacy
and liquidity ratios, it has set limits to the amount of liquidity support by
its holding company to its subsidiaries to 70% of the Group's total
stockholders' equity and the amount of liquidity support to a single subsidiary
to 35% of its total stockholders' equity.

     In light of the financial market instability in Korea resulting from the
liquidity problems faced by credit card companies during the first quarter of
2003, the Korean government announced temporary measures in April 2003 intended
to provide liquidity support to credit card companies. These measures included,
among other things:

     - a request by the government for credit card companies to effect capital
       increase in the aggregate amount of W4.6 trillion, as part of their
       self-rescue efforts;

     - banks and other financial institutions agreeing with each other to extend
       the maturity of all debt securities of credit card companies that they
       hold;

     - investment trust companies agreeing with each other to extend the
       maturity of 50% of the aggregate amount of the debt securities of credit
       card companies that they hold which are schedule to mature by June 2003;
       and

     - with respect to the remaining 50% of such credit card company debt
       securities, banks and other financial institutions agreeing with each
       other to contribute an aggregate amount of W5.6 trillion to purchase such
       debt securities from investment trust companies.

     Pursuant to the above measures, the Group, at the holding company level,
injected new capital of W100 billion in the form of subordinated debt into
Shinhan Card in April 2003 and plan to inject an additional W100 billion in the
second half of 2003. The Group has and will fund this obligation through the
issuance of debt securities. In addition, the Group agreed to extend the
maturities of the W436 billion of credit card company debt securities that it
held in April 2003 or that have become due in June 2003 (including W426 billion
of such debt securities it transferred from its trust accounts to the Group's
bank accounts). Of the W5.6 trillion aggregate contribution made by Korean
financial institutions to purchase credit card company debt securities held by
investment trust companies, the portion allocated for the Group to purchase was
approximately W263 billion, all of which were repaid as of July 31, 2003. The
Group does not believe that its obligation under these measures has had or will
have a significant impact on its short-term or long-term liquidity, business,
financial condition or results of operations.

     The Group generally may not acquire its own shares except in certain
limited circumstances including, without limitation, a reduction in capital.
Notwithstanding, pursuant to the Securities and Exchange Act and regulations
under the Financial Holding Company Act, the Group may purchase its own shares
on the Korea

                                       242
<PAGE>

Stock Exchange or through a tender offer, subject to the restrictions that (1)
the aggregate purchase price of such shares may not exceed the total amount
available for distribution of dividends at the end of the preceding fiscal year
less the amounts of dividends and reserves for such fiscal year, and (2) the
purchase of such shares shall meet the requisite ratio under the Financial
Holding Company Act and regulations thereunder. The Group may purchase its own
shares for the purpose of cancellation with profits through the Korea Stock
Exchange, or acquire interests in its own shares through agreements with trust
companies, subject to the same restrictions on the purchase price as described
in this paragraph. Shinhan Bank is also subject to similar restrictions on
acquisition of its own shares.

     In July and August 2001, pursuant to these procedures, Shinhan Bank
repurchased 32,432,800 shares of common stock of Shinhan Bank and sold 5,935,721
shares of common stock so repurchased to BNP Paribas in connection with the
Group's alliance with BNP Paribas as described under "Item 7. Major Shareholders
and Related Party Transaction -- Related Party Transactions". The Group does not
use equity derivatives contracts to hedge the risk relating to these
repurchases. In addition, pursuant to the Securities and Exchange Act of Korea,
in certain limited circumstances, dissenting holders of shares have the right to
require us to purchase their shares. In connection with the Group's
restructuring into a holding company, in August 2001, Shinhan Bank repurchased
3,376,216 shares of its common stock from the dissenting shareholders of Shinhan
Bank. These shares were subsequently exchanged for shares of the holding company
and, under Korean laws and regulations, Shinhan Bank is required to dispose of
such shares by the end of August 2004. No share repurchases were made in 2002.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     In the ordinary course of the Group's business, it has certain contractual
cash obligations and commitments which extend for several years. As the Group is
able to obtain liquidity and funding through various sources as described in
"-- Liquidity and Capital Resources" above, it does not believe that these
contractual cash obligations and commitments will have a material effect on its
liquidity or capital resources.

  CONTRACTUAL CASH OBLIGATIONS

     The following table sets forth the Group's contractual cash obligations as
of December 31, 2002. Operating lease obligations are not included within its
consolidated balance sheet.

<Table>
<Caption>
                                                             DECEMBER 31, 2002
                                                           PAYMENTS DUE BY PERIOD
                                                       ------------------------------
                                                       UP TO     BETWEEN 1    BEYOND
                                                       1 YEAR   AND 5 YEARS   5 YEARS   TOTAL
                                                       ------   -----------   -------   ------
                                                            (IN BILLIONS OF WON)
<S>                                                    <C>      <C>           <C>       <C>
Long-term debt.......................................  W3,380     W3,991      W1,259    W8,630
Operating lease obligations..........................      13         13           1        27
                                                       ------     ------      ------    ------
Total................................................  W3,393     W4,004      W1,260    W8,657
                                                       ======     ======      ======    ======
</Table>

     Long-term debt includes senior and subordinated debt as shown in Note 15 to
our consolidated financial statements.

     The above table excludes short-term borrowings, secured borrowings and
deposits since these are generally short-term in nature. The contractual
maturity of deposits is given in Note 12 to the Group's consolidated financial
statements.

                                       243
<PAGE>

  COMMITMENTS

     The following table sets forth the Group's other commitments as of December
31, 2002. These commitments, apart from acceptances, are not included within its
consolidated balance sheet.

<Table>
<Caption>
                                                            DECEMBER 31, 2002
                                                     COMMITMENT EXPIRATION BY PERIOD
                                                     -------------------------------
                                                      UP TO     BETWEEN 1    BEYOND
                                                     1 YEAR    AND 5 YEARS   5 YEARS    TOTAL
                                                     -------   -----------   -------   -------
                                                               (IN BILLIONS OF WON)
<S>                                                  <C>       <C>           <C>       <C>
Commitments to extend credit:
  Commercial.......................................  W25,239     W 3,262     W  506    W29,007
  Credit card lines................................    1,726          27         --      1,753
  Consumer.........................................      646       7,175          6      7,827
Commercial letters of credit.......................    2,202          --         --      2,202
Standby letters of credit..........................      224          17          1        242
Financial guarantees...............................      424          82         17        523
Performance guarantees.............................      128          37         16        181
Liquidity facilities to SPEs.......................      411       1,411         45      1,867
Loans sold with recourse...........................       --          --         78         78
Market value guarantee on trust funds..............      425         401        766      1,592
Acceptances........................................      928          --         --        928
Other commitments..................................        9          --         --          9
                                                     -------     -------     ------    -------
Total..............................................  W32,362     W12,412     W1,435    W46,209
                                                     =======     =======     ======    =======
</Table>

     Commitments to extend credit represent unfunded portions of authorizations
to extend credit in the form of loans. The commitments expire on fixed dates and
a customer is required to comply with predetermined conditions to draw funds
under the commitments.

     Commercial letters of credit are undertakings on behalf of customers
authorizing third parties to draw drafts on the Group up to a stipulated amount
under specific terms and conditions. Commitments to extend credit, including
credit lines, are in general subject to provisions that allow the Group to
withdraw such commitments in the event there are material adverse changes
affecting an obligor.

     Standby letters of credit are irrevocable obligations to pay third party
beneficiaries when its customers fail to repay loans or debt instruments, which
are generally in foreign currencies. A substantial portion of these standby
letters of credit are secured by underlying assets, including trade-related
documents.

     Financial guarantees are used in various transactions to enhance the credit
standing of the Group's customers. They represent irrevocable assurance, subject
to satisfaction of certain conditions, that the Group will make payment in the
event that its customers fail to fulfill their obligations to third parties.
Such financial obligations include a return of security deposits and the payment
of service fees.

     Performance guarantees are issued to guarantee customers' tender bids on
construction or similar projects or to guarantee completion of such projects in
accordance with contractual terms. They are also issued to support a customer's
obligation to supply products, commodities, maintenance or other services to
third parties.

     Liquidity facilities to SPEs represent irrevocable commitments to provide
contingent credit lines including commercial paper purchase agreements to SPEs
for which the Group serves as the administrator.

     Loans sold with recourse represent certain non-performing loans the Group
sold to Korea Asset Management Corporation prior to 1999. The sales agreements
contain a recourse obligation under which Korea Asset Management Corporation can
obligate the Group to repurchase the related loans. The recourse obligation has
no expiration date.

                                       244
<PAGE>

     Market value guarantees on trust funds represent guarantee of principal or
fixed rate of return issued to trust fund investors.

     Acceptances are a guarantee by the Group to pay a bill of exchange drawn on
a customer. The Group expects most acceptances to be presented, but
reimbursement by the customer is normally immediate.

     Details of the Group's credit commitments and obligations under guarantees
are provided in Note 30 to its consolidated financial statements.

  OFF-BALANCE SHEET ARRANGEMENTS

     The Group is involved in several types of off-balance sheet arrangements,
including guarantees for loans, debentures, trade financing arrangements,
guarantees for other financings, credit lines, letters of credit and credit
commitments. See "Item 4. Information on the Company -- Description of Assets
and Liabilities -- Credit-Related Commitments".

SELECTED FINANCIAL INFORMATION UNDER KOREAN GAAP

     The selected consolidated financial and other data shown below have been
derived from the Group's consolidated financial statements, prepared in
accordance with Korean GAAP.

     Under Korean GAAP, consolidated financial statements include the accounts
of fully or majority owned subsidiaries and substantially controlled affiliates
that have assets in the amount equal to or more than 7 billion as of the end of
the previous fiscal year. Substantial control is deemed to exist when the
investor is the largest shareholder and owns more than 30% of the investee's
voting shares. Korean GAAP does not require the consolidation of subsidiaries,
or substantially controlled affiliates, where activities are dissimilar from the
Group's.

     Under Korean GAAP effective since 1994, financial statements of our trust
accounts, on which the Group guarantees a fixed rate of return and/or the
repayment of principal, are consolidated, whereby assets and liabilities of
third parties held by such trusts are reflected as assets and liabilities, and
revenues and expenses generated from such third party assets are reflected in
the statement of operations. Activities between trust accounts and the Group are
eliminated.

     Until December 31, 1998, the Group's financial statements were prepared in
accordance with the financial accounting standards generally accepted in the
Republic of Korea, as modified by the accounting and reporting guidelines
prescribed by the Office of Banking Supervision. Beginning January 1, 1999, the
financial statements are prepared in accordance with financial accounting
standards generally accepted for banking institutions issued by the Korean
Securities and Futures Commission.

     Capital adequacy ratios have been calculated from the financial statements
prepared in accordance with Korean GAAP and using the guidelines issued by the
FSC.

     Because of significant changes in Korean GAAP which were applied by us in
1998 and 1999, the financial information included herein for those years is not
directly comparable with previous periods. The Group has included narrative
disclosure in the footnotes to more clearly identify where significant
accounting policy changes have taken place, which line items would be affected
and how the balances would be affected. The areas where such significant changes
have occurred are as follows:

     - Trading and investment securities;

     - Deferred taxation;

     - Guarantees and acceptances (including allowances for losses); and

     - Provision for loan loss allowances.

                                       245
<PAGE>

  CONSOLIDATED INCOME STATEMENT DATA

<Table>
<Caption>
                                                          YEAR ENDED DECEMBER 31,
                                      ---------------------------------------------------------------
                                      1998(1)   1999(1)   2000(1)    2001(1)    2002(2)    2002(2)(3)
                                      -------   -------   --------   -------   ---------   ----------
                                                                                SHINHAN     SHINHAN
                                      SHINHAN   SHINHAN   SHINHAN    SHINHAN   FINANCIAL   FINANCIAL
                                       BANK      BANK       BANK      BANK       GROUP       GROUP
                                      -------   -------   --------   -------   ---------   ----------
                                      (IN BILLIONS OF WON AND MILLIONS OF US$, EXCEPT PER SHARE DATA)
<S>                                   <C>       <C>       <C>        <C>       <C>         <C>
Interest income.....................  W3,945    W3,283     W3,627    W3,607     W3,646       $3,074
Interest expense....................   3,381     2,544      2,734     2,542      2,352        1,983
                                      ------    ------     ------    ------     ------       ------
Net interest income.................     564       739        893     1,065      1,294        1,091
Provision for loan losses(4)........      --       734        510       510        193          162
                                      ------    ------     ------    ------     ------       ------
Net interest income after provision
  for loan losses...................     564         5        383       555      1,101          929
Noninterest revenue(5)..............   3,283       865      1,173     1,206      2,284        1,925
Noninterest expenses(6).............   3,534       788      1,094     1,309      2,446        2,062
                                      ------    ------     ------    ------     ------       ------
Operating income....................     313        82        462       452        939          792
Non-operating income (loss), net....    (274)       88         93        44        (86)         (73)
                                      ------    ------     ------    ------     ------       ------
Net income before income tax
  expense...........................      39       170        555       496        853          719
Income tax expenses(7)..............       7        57        182       149        255          215
                                      ------    ------     ------    ------     ------       ------
Net income before consolidation
  adjustment........................      32       113        373       347        598          504
Minority interest in loss (earnings)
  of consolidated subsidiaries......      (6)        1         (4)       --          4            4
Other(8)............................       2        --         --        --         --           --
                                      ------    ------     ------    ------     ------       ------
Net income..........................  W   28    W  114     W  369    W  347     W  602       $  508
                                      ======    ======     ======    ======     ======       ======
Per common share data (in currency
  unit):
Earnings per share-basic............  W  192    W  451     W1,428    W1,365     W2,294       $ 1.93
Earnings per share-diluted(9).......      --       354      1,143     1,160         --           --
Cash dividends per common share.....     150       400        750     1,000        600         0.51
Stock dividends per common share....      --        --         --        --         --           --
</Table>

- ---------------

Notes:

(1) Represents the consolidated income statement of Shinhan Bank for the periods
    indicated.

(2) Represents the consolidated income statement of Shinhan Financial Group for
    the year ended December 31, 2002.

(3) Won amounts are expressed in US dollars at the rate of W1,186.30 per
    US$1.00, the noon buying rate in effect on December 31, 2002 as quoted by
    the Federal Reserve Bank of New York in the United States.

(4) The provision for loan losses was included in other operating expense in
    1998. The amount of the provision was W382 billion. The methodology the
    Group uses to calculate the provision for loan losses was revised in 1999 to
    consider not only delinquencies and bankruptcies but also future capacity to
    repay including the borrower's management, current financial position, and
    future cash flows, based on its internally developed credit rating model.

(5) Noninterest revenue includes fees & commissions income, dividends on
    securities, gains on security valuations and disposals, gains on foreign
    currency transaction and gains from derivative transactions.

(6) Noninterest expense is composed of fees & commissions paid or payable,
    general and administrative expenses, losses on securities valuations and
    disposals, losses on foreign currency transactions and losses from
    derivative transactions.

                                       246
<PAGE>

(7) Prior to 1999, there was no requirement to use a deferred method of
    accounting for income taxes. The cumulative effect of adopting the revised
    standards as of January 1, 1999 was to debit opening retained earnings by
    W61 billion, which reflected the deferred tax liabilities that would have
    been recognized as of December 31, 1998. The Group did not restate prior
    periods. The effect of adopting the revised standards for the year ended
    December 31, 1999 was to decrease net income by W15 billion and to recognize
    deferred tax liabilities of W76 billion as of December 31, 1999.

(8) Prior to the year 2000, revenue (loss) from investment used to be presented
    next to minority interest in earnings of consolidated subsidiaries. However,
    according to the amended consolidation accounting principle in 2000, the
    revenue (loss) from investment is reclassified as an item of non-operating
    income (loss). Applying the amendment retroactively, 1999 income statement
    was adjusted reflecting the reclassification of the revenue (loss) from
    investment earned (incurred) in 1999.

(9) Diluted earnings per share measure was only required to be disclosed from
    1999. Prior to this change in requirements, only basic earnings per share
    amount was required to be disclosed.

  CONSOLIDATED BALANCE SHEET DATA

<Table>
<Caption>
                                                      AS OF DECEMBER 31,
                                 -------------------------------------------------------------
                                 1998(1)   1999(1)   2000(1)   2001(1)    2002(2)     2002(3)
                                 -------   -------   -------   -------   ---------   ---------
                                                                          SHINHAN     SHINHAN
                                 SHINHAN   SHINHAN   SHINHAN   SHINHAN   FINANCIAL   FINANCIAL
                                  BANK      BANK      BANK      BANK       GROUP       GROUP
                                 -------   -------   -------   -------   ---------   ---------
                                           (IN BILLIONS OF WON AND MILLIONS OF US$)
<S>                              <C>       <C>       <C>       <C>       <C>         <C>
Cash and due from banks........  W 2,687   W 3,366   W 2,394   W 2,144    W 2,817     $ 2,375
Foreign exchange(4)............    1,302        --        --        --         --          --
Loans(5).......................   17,268    24,398    30,604    35,382     46,030      38,801
Less allowance for doubtful
  accounts(6)..................       --     1,187       709       602        786         662
Call loans(7)..................      271        --        --        --         --          --
Trading securities(8)..........       65     2,464     2,481     2,042      2,076       1,750
Investment securities(8).......   12,173    11,391    12,260    13,403     13,408      11,302
Customers' liabilities on
  guarantees(9)................    3,717        --        --        --         --          --
Premises and equipments(10)....    1,082       199       684       604      1,101         928
Other assets(11)...............    3,995     2,005     1,854     2,590      2,122       1,788
                                 -------   -------   -------   -------    -------     -------
Total assets...................   42,560    42,636    49,568    55,563     66,768      56,282
                                 -------   -------   -------   -------    -------     -------
Deposits.......................   21,985    22,918    29,712    34,217     38,722      32,641
Borrowings(12).................    7,488    11,916    11,812     9,674     11,352       9,569
Call money(13).................      136        --        --        --         --          --
Guarantees outstanding(9)......    3,717        --        --        --         --          --
Allowance for loan
  losses(14)...................    1,368        --        --        --         --          --
Debentures.....................    2,626     2,121     1,722     3,513      8,395       7,077
Other liabilities(15)..........    2,795     2,759     3,233     4,988      4,337       3,656
                                 -------   -------   -------   -------    -------     -------
Total liabilities..............   40,115    39,714    46,479    52,392     62,806      52,943
                                 -------   -------   -------   -------    -------     -------
Minority interests in
  consolidated subsidiaries....       49        68        65        --        321         270
Stockholders' equity...........    2,396     2,854     3,024     3,171      3,641       3,069
                                 -------   -------   -------   -------    -------     -------
Total liabilities, minority
  interest and stockholders'
  Equity.......................  W42,560   W42,636   W49,568   W55,563    W66,768     $56,282
                                 =======   =======   =======   =======    =======     =======
</Table>

                                       247
<PAGE>

- ---------------

Notes:

 (1) Represents the consolidated balance sheet data of Shinhan Bank as of the
     dates indicated.

 (2) Represents the consolidated balance sheet data of Shinhan Financial Group
     as of the dates indicated.

 (3) Won amounts are expressed in US dollars at the rate of W1,186.30 per
     US$1.00, noon buying rate in effect on December 31, 2002 as quoted by the
     Federal Reserve Bank of New York in the United States.

 (4) Foreign exchange represents holdings of foreign currency and bills bought
     in foreign currencies. Beginning in 1999, holdings of foreign currency and
     bills bought in foreign currencies are included in cash and due from banks
     and loans, respectively. As of December 31, 1999, 2000, 2001 and 2002, the
     amounts of foreign currency were W42 billion, W41 billion, W43 billion and
     W56 billion, respectively. As of December 31, 1999, 2000, 2001 and 2002,
     the amounts of bills bought in foreign currencies were W1,894 billion,
     W2,141 billion, W1,877 billion and W2,264 billion, respectively.

 (5) Loans represent the gross amount of loans, before adjustment for the
     allowance for loan losses. Accrued interest income is included within other
     assets.

 (6) The amount of allowance for doubtful accounts as of December 31, 1998 was
     W776 billion. The allowance was disclosed within provisions until 1998. The
     allowance for loan losses prior to December 31, 1999 was provided based on
     credit risk classifications of the loan portfolio in accordance with
     guidelines issued by the Financial Supervisory Commission. Estimated loan
     losses were determined by applying certain percentages to each credit risk
     classification. Under revised Korean GAAP, effective as at December 31,
     1999, the Financial Supervisory Commission requires allowances to fully
     reflect a borrower's future capacity to repay using forward looking
     criteria, rather than solely past performance, by applying the internal
     credit grading system developed by the reporting bank. The forward looking
     criteria are applied only to large-sized commercial loans (total loan
     exposure of W1 billion or more or unsecured loan exposure of W0.1 billion
     or more), while consumer loans and small-sized commercial loans were
     classified by considering number of days delinquent, secured amounts, and
     possibility of collection. Pursuant to the regulations promulgated by the
     Financial Supervisory Commission, loans are classified as normal,
     precautionary, substandard, doubtful or estimated loss, and the allowance
     for loan losses is determined by applying a percentage within a certain
     range to those classifications.

 (7) Call loans are included in Shinhan Bank's loans as of December 31, 1999,
     2000 and 2001. The amount of call loans at those dates was W214 billion,
     W696 billion and W1,846 billion. Call loans are also included in Shinhan
     Financial Group's loans as of December 31, 2001 and 2002. The amount of
     call loans at those dates was W1,898 billion and W610 billion.

 (8) Under Korean GAAP effective in 1998 and until the following revision, debt
     securities denominated in Won were stated at acquisition cost. The Group
     accounted for all other debt and marketable equity securities on a basis
     similar to US GAAP. Under Korean GAAP effective for periods beginning after
     December 12, 1998, all debt securities and marketable debt securities are
     accounted for on a similar basis to U.S. GAAP. However, adjustments for
     impairment can be reversed up to the original cost of the investment.

 (9) Guarantees and acceptances, for which the amounts were determined had been
     recorded as customers' liabilities on guarantees and guarantees outstanding
     on the balance sheets until 1998. From 1999, such amounts do not appear on
     the balance sheet but are recorded as an off-balance item in the notes to
     the Group's financial statements. The amounts of guarantees and acceptances
     at December 31, 1999, 2000, 2001 and 2002 were W2,984 billion, W3,006
     billion, W2,234 billion and W1,344 billion, respectively.

(10) Accumulated depreciation was recorded within provisions until 1998; but
     from 1999 such amounts are recorded as a deduction from premises and
     equipment. The amounts of accumulated depreciation for 1998 was W592
     billion.

(11) Other assets include leasehold deposits, accounts receivables, accrued
     interest income, prepaid expenses and unsettled debit of domestic exchange
     (which represents outstanding balances due from other banks generated in
     the process of fund settlements of domestic exchange, such as checks,
     bills, drafts, remittance exchange, ATM use and credit card network). Until
     1998, leasehold deposits were recorded

                                       248
<PAGE>

as premises and equipment. From 1999, such amounts are recorded as other assets
on the balance sheet. Credit card accounts, payment on guarantees and purchases
of securities under agreements to resell(resale agreements) were included in
     other assets until 1998. The amount of credit card loans was W1,009
     billion, W1,143 billion, W1,586 billion, W2,093 billion and W2,796 billion
     in 1998, 1999, 2000, 2001 and 2002, respectively. The amount of payment in
     guarantees was W132 billion, W105 billion, W50 billion W39 billion and W90
     billion in 1998, 1999, 2000, 2001 and 2002, respectively. The amount of
     resale agreements was W0 billion, W97 billion, W900 billion W7 billion and
     W0 billion in 1998, 1999, 2000, 2001 and 2002, respectively.

(12) Borrowings consist mainly of borrowings from Bank of Korea, the Korean
     government and banking institutions.

(13) Call money is included in Shinhan Bank's borrowings as of December 31,
     1999, 2000 and 2001. The amount of call money at those dates was W1,436
     billion, W151 billion and W248 billion. Call money is also included in
     Shinhan Financial Group's borrowings as of December 31, 2001 and 2002. The
     amount of call money at those dates was W344 billion and W197 billion.

(14) Allowance for loan losses and accumulated depreciation were recorded as
     provisions until 1998. From 1999, however, such amounts are recorded as
     deductions from the loans and premises and equipment balances,
     respectively.

(15) Under Korean GAAP, effective as of December 31, 1999, contingent losses
     with respect to guarantees and acceptances are recognized by applying the
     same classification methods and provision percentages used in determining
     the allowance for loan losses. Provisions are only applied to acceptances
     and guarantees classified as substandard, doubtful and estimated loss. The
     amounts of provisions as of December 31, 1999, 2000, 2001 and 2002 were W51
     billion, W12 billion, W13 billion and W4 billion, respectively. These
     amounts are included in other liabilities.

  PROFITABILITY RATIOS

<Table>
<Caption>
                                                        YEAR ENDED DECEMBER 31,
                                           -------------------------------------------------
                                           1998(1)   1999(1)   2000(1)   2001(1)    2002(2)
                                           -------   -------   -------   -------   ---------
                                                                                    SHINHAN
                                           SHINHAN   SHINHAN   SHINHAN   SHINHAN   FINANCIAL
                                            BANK      BANK      BANK      BANK       GROUP
                                           -------   -------   -------   -------   ---------
                                                             (PERCENTAGES)
<S>                                        <C>       <C>       <C>       <C>       <C>
Net income as a percentage of:
  Average total assets...................    0.08%     0.29%     0.81%     0.67%      0.91%
  Average stockholders' equity...........    1.32      4.34     12.56     11.21      17.12
Dividend payout ratio(3).................   94.40     86.34     51.59     43.45      26.15
Net interest spread(4)...................    1.35      1.17      1.36      1.67       1.63
Net interest margin(5)...................    1.82      2.01      2.06      2.15       2.08
Efficiency ratio(6)......................   91.88     49.14     52.98     57.65      68.38
Cost-to average assets ratio(7)..........   10.49      2.03      2.38      2.50       3.67
Average stockholders' equity as a
  percentage of average total assets.....    6.29      6.76      6.40      5.91       5.27
</Table>

- ---------------

Notes:

(1) Represents the profitability ratios of Shinhan Bank for the periods
    indicated.

(2) Represents the profitability ratios of Shinhan Financial Group for the year
    ended December 31, 2002.

(3) The dividend payout ratio represent the ratio of total dividends paid on
    common stock as a percentage of net income attributable to common stock.

(4) Net interest spread represents the difference between the yield on average
    interest earning assets and cost of average interest bearing liabilities.

(5) Net interest margin represents the ratio of net interest income to average
    interest earning assets.

                                       249
<PAGE>

(6) Efficiency ratio represents the ratio of noninterest expense to the sum of
    net interest income and noninterest income.

(7) Cost-to-average-assets ratio represents the ratio of noninterest expense to
    average total assets.

 CAPITAL RATIOS

<Table>
<Caption>
                                                 AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                               --------------------------------------------
                                                1998     1999     2000     2001      2002
                                               ------   ------   ------   -------   -------
                                                              (PERCENTAGES)
<S>                                            <C>      <C>      <C>      <C>       <C>
Requisite capital ratio(1)...................    N/A      N/A      N/A    134.43%   130.93%
Total capital adequacy (BIS) ratio of Shinhan
  Bank(2)....................................  14.69    13.85    12.30     11.99     10.92
  Tier I(2)..................................   9.77    10.42     9.24      8.24      6.81
  Tier II(2).................................   4.92     3.43     3.06      3.75      4.11
Adjusted equity capital ratio of Shinhan
  Card(3)....................................    N/A      N/A      N/A       N/A     10.86
</Table>

- ---------------

N/A = not applicable.

Notes:

(1) The Group was restructured as a financial holding company on September 1,
    2001 and became subject to minimum capital requirements as reflected in the
    requisite capital ratio. Under the guidelines issued by the Financial
    Supervisory Commission applicable to financial holding companies, the Group,
    at the holding company level, is required to maintain a minimum requisite
    capital ratio of 100%. Requisite capital ratio represents the ratio of net
    aggregate amount of the Group's equity capital to aggregate amounts of
    requisite capital. This computation is based on the Group's consolidated
    financial statement in accordance with Korean GAAP. See "Item 4. Information
    on the Company -- Supervision and Regulation -- Regulations Applicable to
    Financial Holding Companies -- Capital Adequacy".

(2) Shinhan Bank comprises 89.7% of the Group's total assets. Shinhan Bank's
    capital adequacy ratios are computed in accordance with the guidelines
    issued by the Financial Supervisory Commission, which was revised as of
    December 31, 2002 to take into account market risk as well as credit risk.
    The capital ratios as of December 31, 2001 were recalculated using these
    revised guidelines. The capital ratios as of December 31, 1998, 1999 and
    2000 do not reflect the revised guidelines. Under the guidelines of the
    Financial Supervisory Commission, Shinhan Bank is required to maintain a
    minimum capital adequacy ratio of 8%. Applying the previous calculation,
    which only takes into account credit risks, Shinhan Bank's total capital
    adequacy ratio as of December 31, 2001 and 2002 were 12.02% and 10.91%,
    respectively. This computation is based on Shinhan Bank's consolidated
    financial statements prepared in accordance with Korean GAAP. See "Item 4.
    Information on the Company -- Supervision and Regulation -- Regulations
    Applicable to Banks -- Capital Adequacy."

(3) Represents the ratio of total adjusted stockholders' equity to total
    adjusted assets and are computed in accordance with the guidelines issued by
    the Financial Supervisory Service for credit card companies. Under these
    guidelines, Shinhan Card is required to maintain a minimum adjusted equity
    capital ratio of 8%. This computation is based on Shinhan Card's
    nonconsolidated financial statements prepared in accordance with Korean
    GAAP.

                                       250
<PAGE>

 ASSET QUALITY RATIOS

<Table>
<Caption>
                                                      AS OF DECEMBER 31,
                                        -----------------------------------------------
                                        1998(1)   1999(1)   2000(1)   2001(1)   2002(2)
                                        -------   -------   -------   -------   -------
                                           (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                     <C>       <C>       <C>       <C>       <C>
Substandard and below loans(3)........  W  944    W1,901    W1,351    W  540    W  843
Substandard and below loans as a
  percentage of total loans...........    4.51%     7.63%     4.63%     1.52%     1.83%
Substandard and below loans as a
  percentage of total assets..........    2.76      4.46      2.73      0.97      1.26
Precautionary loans as a percentage of
  total loans(4)......................   15.71     11.30      5.23      2.74      1.72
Precautionary and below loans as a
  percentage of total loans(4)........   20.23     18.92      9.86      5.17      3.55
Precautionary and below loans as a
  percentage of total assets(4).......   12.39     11.08      5.80      3.30      2.45
Allowance for loan losses as a
  percentage of substandard and below
  loans...............................   46.23     71.37     52.47     81.01     35.25
Allowance for loan losses as a
  percentage of precautionary and
  below loans(4)......................   15.69     20.50     18.41     22.51     25.38
Allowance for loan losses as a
  percentage of total loans...........    2.09      4.74      2.42      1.74      1.71
Substandard and below credits as a
  percentage of total credits(5)......    4.59      5.05      2.31      1.44      1.00
Loans in Korean Won as a percentage of
  deposits in Korean Won(6)...........   77.82     81.05     74.94     83.36     96.35
</Table>

- ---------------

Notes:

(1) Represents the asset quality ratios of Shinhan Bank as of the dates
    indicated.

(2) Represents the asset quality ratios of Shinhan Financial Group as of
    December 31, 2002.

(3) Substandard and below loans are defined in accordance with regulatory
    guidance in Korea, except excludes loans provided from Shinhan Bank's trust
    accounts and confirmed guarantees and acceptances (including bills purchased
    and privately placed debentures). Until 1998, the Group classified credit
    quality into the following five categories according to standards defined by
    the Office of Bank Supervision, which categories are normal, precautionary,
    substandard, doubtful and estimated loss. In 1999, as well as classifying
    credit quality into the five categories in accordance with standards defined
    by the Financial Supervisory Commission, the Group also took into account
    the repayment capability of borrowers. See "Item 4. Information on the
    Company -- Supervision and Regulation  -- Regulations Applicable to Banks".

(4) As defined by the Financial Supervisory Commission.

(5) Credits include loans provided from the Group's trust accounts (including
    bills purchased and privately placed debentures) and confirmed guarantees
    and acceptances, as well as the total loan portfolio of the banking
    accounts.

(6) Under Korean GAAP, loans in Korean Won do not include bills bought in Won,
    advances for customers, credit card accounts, bonds purchased under resale
    agreements, call loans, private placement corporate bonds and loans in
    restructurings that have been swapped for equity in the restructured
    borrower.

                                       251
<PAGE>

RECENT DEVELOPMENTS

 RECENT ACCOUNTING PRONOUNCEMENTS

     In April 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. The new guidance
amends SFAS No. 133 for decisions made: (a) as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS No.
133, (b) in connection with other FASB projects dealing with financial
instruments and (c) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contains
financing components. SFAS No. 149 is generally effective for contracts entered
into or modified after June 30, 2003, with a few exceptions, and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. Our management is currently assessing the impact of SFAS No. 149
on our financial condition and our results of operations.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, but must now to
be classified as liabilities (or assets in some circumstances) in the statement
of financial position. Further, SFAS No. 150 requires disclosure regarding the
terms of those instruments and settlement alternatives. The guidance in SFAS No.
150 is generally effective for all financial instruments entered into or
modified after May 31, 2003, and is otherwise effective at the beginning of the
first interim period beginning after June 15, 2003. For private companies,
mandatorily redeemable financial instruments are subject to the provisions of
SFAS 150 for the fiscal period beginning after December 15, 2003. Our management
is currently assessing the impact of SFAS No. 150 on our financial condition and
our results of operations.

     In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees. FIN 45
requires a guarantor to recognize a liability at the inception of certain
guarantees for the fair value of the obligation, including the ongoing
obligation to stand ready to perform over the term of the guarantee. Guarantees,
as defined in FIN 45, include contracts that contingently require the Group to
make payments to a guaranteed party based on changes in an underlying that is
related to an asset, liability or equity security of the guaranteed party,
performance guarantees, indemnification agreements or indirect guarantees of
indebtedness of others. This new accounting is effective for certain guarantees
issued or modified after December 31, 2002. In addition, FIN 45 requires certain
additional disclosures that are located in Note 30 to the Group's consolidated
financial statements. The Group's management does not expect that the adoption
of FIN 45 will have a material impact on the Group's financial condition or its
results of operations.

     In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.
FIN 46 provides a new framework for identifying variable interest entities
("VIEs") and determining when a company should include the assets, liabilities,
noncontrolling interests and results of activities of VIEs in its consolidated
financial statements. FIN 46 requires VIEs to be consolidated by a company if
that company is subject to a majority of the risk of loss from the VIEs'
activities or entitled to receive a majority of the entity's residual returns,
or both. FIN 46 is effective immediately for VIEs created after January 31, 2003
and is effective as of January 1, 2004 for VIEs created prior to February 1,
2003. The Group's management is currently assessing the impact of FIN 46 on its
financial condition and our results of operations.

  RECENT EVENTS

  Exposure to SK Global and other SK Group Companies

     In the first quarter of 2003, accounting irregularities were discovered at
SK Global to which most commercial banks in Korea, including the Group, have
substantial exposure. These irregularities had

                                       252
<PAGE>

concealed the weak financial condition of SK Global over a period of several
years. In March 2003, the principal creditor banks of SK Global acknowledged
that SK Global is a troubled company subject to formal workout procedures under
the Corporate Restructuring Promotion Act of Korea and agreed to postpone the
maturity of all domestic credits of SK Global until June 18, 2003.

     In June 2003, the domestic creditors of SK Global agreed to a workout
program under which the creditors participating in this program will buy out the
outstanding credits of the dissenting creditors by providing cash in the amount
of approximately 30% of the outstanding loans. In addition, in July 2003, the
domestic creditor's committee and the steering committee of the overseas
creditors of SK Global agreed to a workout program under which the domestic
creditors will buy out the outstanding credits of the dissenting foreign
creditors by providing cash in the amount of 43% of the outstanding loans as
well as incentives which will be in the form of bonds with warrants. The cash
payment shall be repaid in four installments of 40% on December 31, 2003, 30% on
March 31, 2004, 20% on June 30, 2004 and 10% on September 30, 2004. Depending on
whether the approval rate of all the foreign creditors is 95% or more, between
90 to 95% or between 80 to 90%, the amount of the incentives will be 5%, 4% or
3% of the total outstanding credit as of March 11, 2003. The bonds with
warrants, which warrants can be exercised in 2005, will be due in 2007, without
any interest, and will be repaid in a one-time payment.

     The agreement, which has been endorsed by the steering committee of
overseas creditors, remains subject to each overseas creditors' approval. The
steering committee of overseas creditors was originally required to obtain the
approval from each overseas creditor and present a written statement of consent
to the domestic creditors by mid-August 2003. The domestic creditors have since
extended this deadline to September 17, 2003. At a shareholders' meeting held on
September 9, 2003, SK Global changed its legal name to SK Networks.

     Once finally approved by the overseas creditors, domestic creditors are
expected to finalize the detailed terms of the workout program, which will,
among other things, require SK Corporation, the major shareholder of SK Global
and the creditors of SK Global participating in the workout program to convert
approximately W2.4 trillion in principal amount of total debt into equity
securities, consisting of common shares, redeemable preferred shares and
convertible bonds, of SK Global, after writing off substantially all of
pre-existing equity securities. While the workout program may also call for
additional restructuring of surviving debt, including extension of maturity and
reduction of interest rates, the detailed terms are expected to be finalized by
the end of 2003.

     Both the Group and Chohung Bank have decided to participate in the workout
program. We believe that participation in the workout program will eventually
yield more than the 30% cash buyout proposed for dissenting domestic creditors.
At this time, it is difficult to predict how much of our loans to SK Global will
be converted into what percentage of equity securities of SK Global or whether
our loans to SK Global will be subject to additional restructuring including
extension of maturities and reduction of interest rates. However, we do not
believe that our participation in the workout program will have any material
adverse impact on us or our financial condition. While we believe that the level
of our specific allowance for loan losses in respect of SK Global as of June 30,
2003 are adequate to cover losses currently expected from our participation in,
and implementation of, the workout program of SK Global, no assurance can be
given that our allowance for loan losses with respect to SK Global will be
sufficient to cover actual future losses.

     Since December 31, 2002, the Group has not increased its exposure to SK
Global in any material respects and no significant changes have occurred with
respect to its exposures to other SK Group companies except increases in trade
financing to SK Corporation within its credit limit.

                                       253
<PAGE>

     The following table provides a comparison of the Group's exposures and
related aggregate allowance for loan losses and for guarantees and acceptances
to SK Group Companies on a Korean GAAP basis as of December 31, 2002 and June
30, 2003 in aggregate, and separately for SK Global and SK Corporation. The
Group's exposure to SK Group companies on a U.S. GAAP basis would be different
from these amounts due to differences in consolidation scope and the carrying
amount of loans and securities under both bases of accounting. See
"-- Reconciliation with Korean Generally Accepted Accounting Principles" below
for a specific description of these differences.
<Table>
<Caption>
                                                                   AS OF
                          ----------------------------------------------------------------------------------------
                                              DECEMBER 31, 2002                              JUNE 30, 2003
                          ---------------------------------------------------------   ----------------------------
                                                                    ALLOWANCES FOR
                           LOAN BALANCES                            LOAN LOSSES AND    LOAN BALANCES
                          AND GUARANTEES                  TOTAL     GUARANTEES AND    AND GUARANTEES
                          AND ACCEPTANCES   SECURITIES   EXPOSURE     ACCEPTANCES     AND ACCEPTANCES   SECURITIES
                          ---------------   ----------   --------   ---------------   ---------------   ----------
                                                            (IN BILLIONS OF WON)
<S>                       <C>               <C>          <C>        <C>               <C>               <C>
SK Global(1)............       W500            W 43        W543           W3               W552            W 11
SK Corporation(2).......         49              10          59           --                133              33
Other SK Group
  Companies.............        284              61         345            1                247             132
                               ----            ----        ----           --               ----            ----
    TOTAL...............       W833            W114        W947           W4               W932            W176
                               ====            ====        ====           ==               ====            ====

<Caption>
                                    AS OF
                          --------------------------
                                JUNE 30, 2003
                          --------------------------
                                     ALLOWANCES FOR
                                     LOAN LOSSES AND
                           TOTAL     GUARANTEES AND
                          EXPOSURE     ACCEPTANCES
                          --------   ---------------
                             (IN BILLIONS OF WON)
<S>                       <C>        <C>
SK Global(1)............   W  563         W235(3)
SK Corporation(2).......      166           --
Other SK Group
  Companies.............      379            2
                           ------         ----
    TOTAL...............   W1,108         W237
                           ======         ====
</Table>

- ---------------

Notes:

(1) There was no allowance for guarantees and acceptances as of December 31,
    2002 since SK Global was classified as normal. A provision of W198 billion
    for loan losses and a provision of W34 billion for guarantees and
    acceptances were recorded to increase the allowance for loan losses and
    allowance for guarantees and acceptances, respectively, as the
    classification of SK Global was changed from normal to substandard due to
    the recent discovery of accounting irregularities and subsequent development
    of workout procedures described above.
(2) Represents increases of W49 billion in bills discounted and W35 billion in
    guarantees and acceptances.

(3) The only changes in the allowance for loan losses and guarantees and
    acceptances related to SK Global from January 1, 2003 to June 30, 2003 were
    additional provisions totalling W232 billion.

  Exposure to the former Hyundai Group Companies

     Since December 31, 2002, no significant changes have occurred with respect
to the Group's exposure to the former Hyundai Group companies in any material
respects.

 Credit Quality under Korean GAAP

     The following table shows the asset quality of Shinhan Bank's credit
portfolio by type as of December 31, 2002 and June 30, 2003 calculated on a
non-consolidated basis under Korean GAAP and reported to the Financial
Supervisory Commission.

                                       254
<PAGE>

<Table>
<Caption>
                                                                          AS OF
                                                        -----------------------------------------
                                                         DECEMBER 31, 2002        JUNE 30, 2003
                                                        --------------------     ----------------
                                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                     <C>                      <C>
Substandard and below credits(1)......................        W   616                W 1,254
  Substandard.........................................            487                  1,093
  Doubtful............................................             57                     50
  Estimated loss......................................             72                    111
Substandard and below credits as a percentage of total
  credits.............................................           1.42%                  2.55%
Substandard and below credits as a percentage of total
  assets..............................................           1.05%                  1.89%
Precautionary and below credits(2)....................        W 1,260                W 2,047
Precautionary and below credits as a percentage of
  total credits.......................................           2.91%                  4.15%
Precautionary and below credits as a percentage of
  total assets........................................           2.14%                  3.08%
Allowance for loan losses(3)..........................        W   566                W   872
Allowance for loan losses as a percentage of
  substandard and below credits.......................          91.79%                 69.53%
Allowance for loan losses as a percentage of
  precautionary and below credits.....................          44.90%                 42.60%
Allowance for loan losses as a percentage of total
  loans...............................................           1.31%                  1.77%
Loans in Korean Won as a percentage of deposits in
  Korean Won(4).......................................         102.15%                109.71%
</Table>

- ---------------

Notes:

(1) Substandard and below credits are defined in accordance with regulatory
    guidance in Korea, and includes loans provided from Shinhan Bank's trust
    accounts (including bills discounted and privately placed debentures) and
    confirmed guarantees and acceptances. Until 1998, the Group classified
    credit quality into the following five categories according to standards
    defined by the Office of Bank Supervision, which categories are normal,
    precautionary, substandard, doubtful and estimated loss. In 1999, as well as
    classifying credit quality into the five categories in accordance with
    standards defined by the Financial Supervisory Commission, the Group also
    took into account the repayment capability of borrowers. See "Item 4.
    Information on the Company -- Supervision and Regulation -- Regulations
    Applicable to Banks".

(2) As defined by the Financial Supervisory Commission.

(3) Includes allowance for guarantees and acceptances and allowance for loan
    losses on loans from Shinhan Bank's trust accounts.

(4) Under Korean GAAP, loans in Korean Won do not include bills bought in Won,
    advances for customers, credit card accounts, bonds purchased under resale
    agreements, call loans, private placement corporate bonds and loans in
    restructurings that have been swapped for equity in the restructured
    borrower.

 Allowance for Loan Losses under Korean GAAP

     As a result of impairment in the Group's exposures to SK Global and
increased delinquencies on credit cards, its credit quality, under Korean GAAP,
as of June 30, 2003 deteriorated as compared to that of December 31, 2002. In
the case of Shinhan Bank, loans classified as substandard or below under the
classification of the Financial Supervisory Commission increased by W638 billion
to W1,254 billion, primarily as a result of W473 billion of loans to SK Global
being reclassified as substandard following discovery of accounting
irregularities in March 2003. Under U.S. GAAP, this was reflected in the
consolidated financial statements prepared in accordance with U.S. GAAP as of
December 31, 2002 and earlier years. Loans classified as substandard or below as
a percentage of total loans increased 113 basis points from 1.42% as of December
31, 2002 to 2.55% as of June 30, 2003. In the case of Shinhan Card, delinquent
balances (balances over due for 90 days or more) increased by W46 billion during
the period in comparison and net charge-offs during the first half of 2003
amounted to W80 billion. Delinquency ratios

                                       255
<PAGE>

increased from 2.82% as of December 31, 2002 to 4.64% as of June 30, 2003. As a
result of the foregoing, the Group's allowance for loan losses increased by W340
billion from W786 billion as of December 31, 2002 to W1,126 billion as of June
30, 2003.

 Credit Card Portfolio

     The following table shows the changes in the Group's credit card balances
as of December 31, 2002, and June 30, 2003.

<Table>
<Caption>
                                                     AS OF          AS OF          AS OF
                                                  DECEMBER 31,   DECEMBER 31,    JUNE 30,
                                                      2002           2002          2003
                                                   U.S. GAAP     KOREAN GAAP    KOREAN GAAP
                                                  ------------   ------------   -----------
                                                   (IN BILLIONS OF WON EXCEPT PERCENTAGES)
<S>                                               <C>            <C>            <C>
Outstanding balance.............................     W2,763         W2,796        W2,237
Allowance for loan losses.......................        179            103           154
Delinquent loans................................        358            391           473
Delinquent loans as a percentage of outstanding
  balance.......................................       13.0%          14.0%         21.1%
</Table>

     Under Korean GAAP, delinquencies have increased form W391 billion as of
December 31, 2002 to W473 billion as of June 30, 2003. U.S. GAAP delinquencies
were W358 billion as of December 31, 2002. Additionally, under Korean GAAP,
charge-offs were W60 billion for the year ended December 31, 2002 and W87
billion for the six-month period ended June 30, 2003.

     On the basis of the aforementioned, the Group believes that it will provide
additional loan loss allowances for credit cards under U.S. GAAP as of December
31, 2003.

     The Group believes, based on the aforementioned, it will provide for
additional loan loss allowances for its credit card balances as of December 31,
2003.

  SUMMARY RESULTS OF OPERATIONS OF 1ST HALF 2003 AS COMPARED TO 1ST HALF 2002
  UNDER KOREAN GAAP

     The consolidated income statement and balance sheet data set forth below
have been derived from the Group's consolidated income statement for the six
months ended June 30, 2002 and 2003 and its consolidated balance sheets as of
December 31, 2002 and June 30, 2003, all of which were prepared in accordance
with Korean GAAP and are unaudited. The discussion of average balances, average
yields or rates and net interest margin are all based on financial information
prepared under Korean GAAP for the purpose of reporting to the Financial
Supervisory Commission according to its guidelines. Results for the six-month
period ended June 30, 2003 are not necessarily indicative of the results that
may be expected for the full year.

                                       256
<PAGE>

  Consolidated Income Statement Data

     The presentation of certain line-items contained in the consolidated income
statement data below has been renamed and reclassified from the line-items
reflected in our consolidated income statement for the six months ended June 30,
2002 and 2003 prepared in accordance with Korean GAAP.

<Table>
<Caption>
                                                               FOR THE SIX MONTHS ENDED JUNE 30,
                                                              -----------------------------------
                                                                2002        2003       % CHANGE
                                                              ---------   ---------   -----------
                                                                  (IN BILLIONS OF WON, EXCEPT
                                                                PERCENTAGES AND PER SHARE DATA)
<S>                                                           <C>         <C>         <C>
Interest income(1)..........................................   W1,748      W1,925         10.2%
Interest expense(2).........................................    1,136       1,210          6.6
                                                               ------      ------        -----
Net interest income.........................................      612         715         16.9
Provision for loan losses(3)................................      107         484        351.8
                                                               ------      ------        -----
Net interest income after provision for loan losses.........      505         231        (54.2)
Noninterest income(4).......................................    1,054       1,076          2.1
Noninterest expenses(5).....................................    1,063       1,127          6.0
                                                               ------      ------        -----
Operating income............................................      496         180        (63.7)
Non-operating income (loss), net(6).........................      (34)         26          N/M
                                                               ------      ------        -----
Net income before income tax expense........................      462         206        (55.3)
Income tax expense..........................................     (135)        (92)       (32.2)
                                                               ------      ------        -----
Net income before consolidation adjustment..................      327         114        (64.9)
Minority interest in loss (earnings) of consolidated
  subsidiaries..............................................       (3)        (12)       411.5
Other.......................................................       --          --           --
                                                               ------      ------        -----
Net income..................................................   W  324      W  102        (68.4)%
                                                               ======      ======        =====
Per common share data (in Won):
Earnings per share -- basic.................................   W1,234      W  390
Earnings per share -- diluted...............................       --          --
Cash dividends per common share(7)..........................      600         600
Stock dividends per common share............................       --          --
</Table>

- ---------------

N/M = not meaningful.

Notes:

(1) Under Korean GAAP, all income from credit cards were classified as fees and
    commission and included in noninterest income and included as an item under
    operating revenues in the Group's consolidated income statement for the six
    months ended June 30, 2002 and 2003.

(2) Included as an item under operating expense in the Group's consolidated
    income statement for the six months ended June 30, 2002 and 2003.

(3) Included as a bad debt expense under operating expense in the Group's
    consolidated income statement for the six months ended June 30, 2002 and
    2003.

(4) Represents all items other than interest income under operating revenue in
    Group's consolidated income statement for the six months ended June 30, 2002
    and 2003.

(5) Represents all items other than interest expense and bad debt expense under
    operating expense in the Group's consolidated income statement for the six
    months ended June 30, 2002 and 2003.

(6) Represents the net amount of non-operating income and non-operating expense
    in the Group's consolidated income statement for the six months ended June
    30, 2002 and 2003.

                                       257
<PAGE>

(7) Previously, Korean GAAP required that dividends be recorded in which they
    relate. However, effective 2003, Korean GAAP was revised to require that
    dividends be recorded in the period in which they are declared and paid as
    is the case under U.S. GAAP rather than the period to which they relate.
    Early adoption in 2002 was permitted and, accordingly, the Group has adopted
    this revision beginning with its annual financial statements as of the and
    for the year ended December 31, 2002.

     Net Interest Income.  The 16.9% increase in net interest income was due
primarily to an increase in interest-earning assets, in particular in lending to
small- and medium-sized enterprises and consumer lending, partially offset by a
decrease in average interest rates. The average balance of Shinhan Bank's
interest-earning assets increased by 13.8% to W55,534 billion for the six months
ended June 30, 2003 compared to W48,815 billion for the corresponding period in
2002, which was partially offset by a decline in the annualized average interest
rate on the total interest-earning assets to 6.04% for the six months ended June
30, 2003 from 6.65% for the corresponding period in 2002.

     The 10.2% increase in interest income was due primarily to a 13.9% increase
in interest on loans. Interest on loans increased 13.9% from W1,229 billion in
the first half of 2002 to W1,401 billion in the first half of 2003 due primarily
to a 24.0% increase in average volume of consumer loans from W12,978 billion in
the first half of 2002 to W16,088 billion in the first half of 2003, partially
offset by a decline of 30 basis points in the average yield on such loans from
7.29% in the first half of 2002 to 6.99% in the first half of 2003. Interest and
dividends on securities remained relatively unchanged from W488 billion in the
first half of 2002 to W485 billion in the first half of 2003 due primarily to
the Group's acquisition of Goodmorning Securities which substantially offset the
effect of a general decline in the market interest rates.

     The 6.6% increase in interest expense was primarily attributable to a 58.5%
increase in interest on debentures. Interest on debentures increased 58.5% from
W155 billion in the first half of 2002 to W245 billion in the first half of 2003
due primarily to a 69.8% increase in average volume of Won-denominated
debentures issued by Shinhan Bank to W6,534 billion in the first half of 2003
from W3,847 billion in the first half of 2002, partially offset by a 145 basis
points decline in average rates from 7.21% in the first half of 2002 to 5.76% in
the first half of 2003. The 448.7% increase in average volume of Won-denominated
debentures issued by the Group's holding company to W1,103 billion in the first
half of 2003 from W201 billion in the first half of 2002 also contributed to the
increase in interest on debentures. This increase was due primarily to the
short-term liquidity difficulties at Shinhan Card in the first half of 2003 and
the resulting liquidity support made by the Group. Interest on deposits remained
relatively constant as the increase in deposit volume was substantially offset
by a decline in interest rates.

     Provision for Loan Losses.  The 351.8% increase in provisions for loan
losses to W484 billion in the first half of 2003 was primarily attributable to a
W232 billion of provisions raised in the first half of 2003 in respect of the
Group's exposure to SK Global and a W136 billion of provisions relating to
credit cards in the first half of 2003 as the Group experienced significant
deterioration and increased delinquencies.

     Noninterest Income.  The Group's noninterest income increased 2.1% from
W1,054 billion in the first half of 2002 to W1,076 billion in the first half of
2003 due primarily to a W120 billion increase in fees and commissions from
credit cards which was partially offset by a W98 billion decrease in net gains
on foreign currency and derivative trading, net of the respective losses during
the period under review.
     Noninterest Expenses.  The Group's noninterest expenses increased 6.0% to
W1,127 billion in the first half of 2003 from W1,063 billion in the first half
of 2002 due primarily to a 39.9% increase in general and administrative expenses
and fees paid on credit cards, which more than offset decreases in other
expenses relating to mortgages and home equity lending and loss on derivatives.
General and administrative expenses increased 39.4% from W361 billion in the
first half of 2002 to W503 billion in the first half of 2003 due primarily to a
general increase in the salaries and employee benefits, together with the effect
of the Group's acquisition of Goodmorning Securities.

     Non-operating income (loss), net.  The Group recorded net non-operating
income of W26 billion in the first half of 2003 as compared to a net
non-operating loss of W34 billion in the first half of 2002, due primarily to
decreases in losses from sale of investment securities and impairment losses,
including as a result

                                       258
<PAGE>

of a loss on sale of equity securities of Hynix Semiconductor in the first half
of 2002 which did not occur in the first half of 2003.
     Income taxes.  The Group's income tax expenses decreased from W135 billion
in the first half of 2002 to W91 billion in the first half of 2003, as its net
income before income taxes decreased by 55.3% from W462 billion in the first
half of 2002 to W206 billion in the first half of 2003. The statutory tax rate
was 29.7% during the period under review.
     Net income.  As a result of the foregoing, the Group's net income decreased
68.4% from W324 billion in the first half of 2002 to W102 billion in the first
half of 2003.

 Consolidated Balance Sheet Data

<Table>
<Caption>
                                                              AS OF
                                                ---------------------------------
                                                DECEMBER 31, 2002   JUNE 30, 2003   % CHANGE
                                                -----------------   -------------   --------
                                                  (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                             <C>                 <C>             <C>
ASSETS:
Cash and due from banks.......................       W 2,817           W 3,889       38.0%
Loans (net of allowance for loan losses of
  W786 billion as of December 31, 2002 and
  W1,126 billion as of June 30, 2003).........        45,244            49,667         9.8
Trading securities(1).........................         2,045             2,656        29.9
Available-for-sale securities(1)..............         9,146            10,030         9.7
Held-to-maturity securities(1)................         4,284             4,123        (3.8)
Equity method investments(1)..................            10                 7       (22.0)
Premises and equipments.......................         1,094             1,058        (3.3)
Other assets..................................         2,128             3,272        53.8
                                                     -------           -------       -----
     Total assets.............................       W66,768           W74,702       11.9%
                                                     =======           =======       =====

LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits......................................       W38,722           W42,467        9.7%
Borrowings....................................        11,352            13,925        22.7
Debentures....................................         8,395             9,708        15.6
Other liabilities(2)..........................         4,337             4,688         8.1
                                                     -------           -------       -----
     Total liabilities........................        62,806            70,788        12.7
                                                     -------           -------       -----
Minority interests in consolidated
  subsidiaries................................           321               334         3.9
Stockholders' equity..........................         3,641             3,580        (1.7)
                                                     -------           -------       -----
Total liabilities and stockholders' equity....       W66,768           W74,702       11.9%
                                                     =======           =======       =====
</Table>

- ---------------

Note:

(1) Effective as of March 31, 2003, the Group's classification of securities was
    revised pursuant to the adoption of Statement of Korea Accounting Standard
    No. 8, Securities. As a result, trading securities amounting to
    approximately W32 billion and held-to-maturity securities amounting to
    approximately W8 billion, each as of December 31, 2002, were reclassified as
    available-for-sale securities in this presentation.

(2) Includes retirement and severance benefit of W160 billion as of December 31,
    2002 and W172 billion as of June 30, 2003.

                                       259
<PAGE>


     Assets.  The Group's assets remained increased 11.9% to W74,702 billion as
of June 30, 2003 from W66,768 billion as of December 31, 2002, due primarily to
increases in loans in Korean Won and securities. Loans in Korean Won increased
12.1% from W32,616 billion as of December 31, 2002 to W36,575 billion as of June
30, 2003 as a result of a W2,997 billion increase in corporate loans, primarily
loans to small-and medium-sized enterprises, and a W693 billion increase in
consumer loans. The Group's securities increased by W1,332 billion due primarily
to a W763 billion increase in government bonds and finance debentures and a W263
billion increase in foreign currency denominated securities at Shinhan Bank and
a W497 billion increase in securities volume of Goodmorning Shinhan Securities.

     Liabilities and stockholders' equity.  The Group's total liabilities
increased 12.7% from W62,806 billion as of December 31, 2002 to W70,788 billion
as of June 30, 2003. This increase was due primarily to a 9.7% increase in
deposits from W38,722 billion as of December 31, 2002 to W42,467 billion as of
June 30, 2003 and a 22.7% increase in borrowings from W11,352 billion as of
December 31, 2002 to W13,925 billion as of June 30, 2003. The 9.7% increase in
deposits was due primarily to a W2,616 billion increase in Won-denominated
deposits and a W1,134 billion increase in foreign currency deposits of Shinhan
Bank due primarily to an inflow of short-term liquid funds into the Group's
deposit products for lack of alternative investment opportunities, including a
W870 billion increase in its time deposit products with yields linked to the
stock market performance. The 22.7% increase in borrowings was a result of a
W1,288 billion increase in call money and a W842 billion increase in borrowings
in Korean Won, due primarily to a temporary increase in call money as well as an
increase in borrowings from the Bank of Korea. The W1,313 billion, or 15.6%, of
increase in debentures is due primarily to a W1,718 billion increase resulting
from new issuances of general debentures by Shinhan Bank due primarily to
increased issuances of long-term debt securities in the first half of 2003,
benefiting from the low interest rate environment, as well as to match liquidity
as time deposits with maturities of one year or more decreased, partially offset
by a W130 billion decrease in debt securities of Shinhan Card due to liquidity
difficulties in the first half of 2003. Stockholders' equity decreased 1.7% from
W3,641 billion as of December 31, 2002 to W3,580 billion as of June 30, 2003 due
primarily to a payment of cash dividend in the amount of W157 billion which more
than offset an increase in retained earnings of W102 billion in the first half
of 2003.

RECONCILIATION WITH KOREAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

     The Group's consolidated financial statements and related footnotes
appearing in "Item 18. Financial Statements", which are prepared in accordance
with U.S. GAAP, and other financial data appearing in Items 3, 4 and 5 are
presented on a consolidated basis under U.S. GAAP, unless otherwise specifically
mentioned. The Group's consolidated financial statements prepared in accordance
with U.S. GAAP, differ in certain significant respects from Korean GAAP, the
basis on which the consolidated financial data appearing in "-- Recent
Developments" are presented. Differences between Korean GAAP and U.S. GAAP,
which have significant effects on the consolidated net income and stockholders'
equity of Shinhan Financial Group, are summarized as follows:

<Table>
<Caption>
                                                                       2002
                                                               --------------------
                                                               (IN MILLIONS OF WON)
<S>                                                            <C>
U.S. GAAP NET INCOME........................................        W  589,422
                                                                    ----------
1.  Provision for loan losses...............................            85,515
2.  Sale of loans to the Korea Asset Management
    Corporation.............................................           (25,875)
3.  Deferred loan origination fees and costs................           (30,014)
4.  Write-off of other assets and receivables...............           (19,066)
5.  Securities and derivatives for nontrading purposes
    a. Changes in foreign exchange rates on
       available-for-sale securities........................           (75,095)
    b. Impairment loss and reclassification of securities...           (66,963)
    c. Reversal of hedge accounting treatment for
       derivatives..........................................           (12,094)
6.  Stock based compensation................................             2,889
</Table>

                                       260
<PAGE>

<Table>
<Caption>
                                                                       2002
                                                               --------------------
                                                               (IN MILLIONS OF WON)
<S>                                                            <C>
8.  Lease conversion........................................           (45,855)
9.  Equity method...........................................             2,446
10. Foreign currency translation............................            (2,595)
11. Goodwill impairment.....................................           129,917
12. Sale of Shinhan Securities..............................           (10,642)
14. Amortization of intangible assets.......................            12,942
15. Minority interest.......................................             2,862
16. Reversal of asset revaluation...........................               862
17. Others..................................................             6,768
                                                                    ----------
Total of adjustments........................................           (43,998)
Tax effect of adjustments...................................            56,739
                                                                    ----------
KOREAN GAAP NET INCOME......................................        W  602,163
                                                                    ==========
U.S. GAAP STOCKHOLDERS' EQUITY..............................        W3,262,607
                                                                    ----------
1.  Provision for loan losses...............................           295,140
2.  Sale of loans to the Korea Asset Management
    Corporation.............................................           (21,298)
3.  Deferred loan origination fees and costs................           (82,606)
4.  Write-off of other assets and receivables...............             4,689
5.  Securities and derivatives for nontrading purposes
    b. Impairment loss and reclassification of securities...            37,820
    c. Reversal of hedge accounting treatment for
       derivatives..........................................            (6,582)
6.  Stock based compensation................................            (2,348)
7.  Formation of Shinhan Financial Group....................           (43,058)
8.  Lease conversion........................................            (5,632)
9.  Equity method...........................................            26,875
10. Foreign currency translation............................           (11,238)
11. Goodwill impairment.....................................            26,868
12. Sale of Shinhan Securities..............................           (10,642)
13. Negative goodwill.......................................            73,935
14. Amortization of intangible assets.......................            12,942
15. Minority interest.......................................           324,192
16. Reversal of asset revaluation...........................           132,559
17. Others..................................................            (1,672)
                                                                    ----------
Total of adjustments........................................           749,944
Tax effect of adjustments...................................           (51,184)
                                                                    ----------
KOREAN GAAP STOCKHOLDERS' EQUITY............................        W3,961,367
                                                                    ==========
</Table>

     The following is a summary of the significant adjustments made to
consolidated net income and stockholders' equity to reconcile the U.S. GAAP
results with Korean GAAP. The numbered paragraphs below refer to the
corresponding item numbers set forth above.

          1. Under U.S. GAAP, the allowance for loan losses for specifically
     identified impaired loans is based on (1) the present value of expected
     future cash flows discounted at the loan's effective interest rate or as a
     practical expedient, (2) the loans observable market price or (3) the fair
     value of the collateral if the loan is collateral dependent.

                                       261
<PAGE>

          For homogeneous pools of corporate and consumer loans, allowances are
     based on historical losses using a risk rating migration model adjusted for
     qualitative factors.

          Under Korean GAAP, the allowance for loan losses is generally
     established based on the classification guidelines promulgated by the
     Financial Supervisory Commission, which requires that the minimum allowance
     be established based on loan classification. The Group used these
     guidelines to establish minimum allowances. The Group's reserve is
     established based on the following percentages as of December 31, 2002.

<Table>
<Caption>
                                                              CORPORATE   CONSUMER
                                                              ---------   --------
                                                                  (PERCENTAGE)
<S>                                                           <C>         <C>
Normal......................................................  0.20-2.0      0.75
Precautionary...............................................       4.0       8.0
Substandard.................................................        20        20
Doubtful....................................................        95        55
Estimated Loss..............................................       100       100
</Table>

          This adjustment reflects the differences in the methodologies used to
     determine the allowance for loan losses under U.S. GAAP and Korean GAAP. It
     also includes the offsetting effects of (1) the consolidation of the
     Group's trust accounts, which include loans and related reserves under
     Korean GAAP and (2) the deconsolidation of certain securitized loans and
     related reserves, which it recorded as sales under Korean GAAP.

          Under U.S. GAAP, the methodology used to determine the appropriate
     allowance for 2000 and 2001 took into consideration subsequent information
     indicating that larger losses had been triggered on certain large corporate
     credits than previously recorded under Korean GAAP. This information was
     not available at the time the Korean GAAP financial statements were
     prepared. The most significant credit where more information was available
     was SK Global. The difference due to the SK Global effect in net income was
     W70,086 million from the amount of W85,515 million and the difference in
     stockholders' equity was W194,320 million from the total amount of W295,140
     million.

          2. Prior to fiscal year 2000, the Group sold a number of
     non-performing loans to the Korea Asset Management Corporation. Based on
     the sales agreement, the Korea Asset Management Corporation can return
     certain loans to the Group when the performance requirements of such loans
     are not met. Under U.S. GAAP, the Group has recognized a recourse liability
     for the obligation to repurchase such loans. Under Korean GAAP, the Group
     has not estimated a recourse liability.

          3. Under U.S. GAAP loan origination fees and the related costs are
     deferred and amortized over the life of the loan as an adjustment to the
     yield of the loan. Under Korean GAAP, origination fees are recognized in
     income when received or paid and does not provide for the deferral or
     related costs.

          4. Korean GAAP permits banks to capitalize certain costs related to
     the collection of delinquent loans and reflect losses related to the
     misappropriation of bank assets by employees as receivables. The
     substantial majority of this adjustment relates to these two items. In
     2002, the amounts relating to these items under Korean GAAP were W18,061
     million and W1,005 million, respectively. Under U.S. GAAP, such items must
     be expensed as incurred. This adjustment reflects the recognition of these
     items as expense during 2002.

          5a. Under U.S. GAAP, effects of changes in foreign exchange rates of
     foreign available-for-sale securities are reflected as a component of other
     comprehensive income. Under Korean GAAP, effects of such changes in foreign
     exchange rates are reflected in earnings. This item reflects the adjustment
     of such effects from earnings to other comprehensive income.

          5b. Under U.S. GAAP, declines in the fair value of held-to-maturity
     and available-for-sale securities below their cost that are deemed to be
     other-than-temporary are recorded in earnings. Various quantitative and
     qualitative factors are assessed to determine whether impairment is
     other-than-temporary such as the duration and extent of the decline, the
     current operating and future expected performance,

                                       262
<PAGE>

     market values of comparable companies, changes in industry and market
     prospects, and the intent and ability of the holder to hold the security
     for a sufficient period of time for subsequent expected recovery in market
     value. Under Korean GAAP, declines in the fair value that are deemed to be
     permanent are recorded in earnings. The determination of whether a decline
     in the fair value of a security is permanent is generally based on whether
     the issuer is in bankruptcy or liquidation. This item reflects the
     recognition of additional losses, adjustment of fair value basis and
     reclassification of securities into proper categories under U.S. GAAP.

          5c. Under U.S. GAAP, for a derivative to qualify for hedge accounting,
     it must be highly effective at reducing the risk associated with the
     exposure being hedged. The hedging relationship must be designated and
     formally documented at inception along with the particular risk management
     objective and strategy for the hedge, identification of the derivative used
     as the hedging instrument, the hedged item and the risk exposure being
     hedged, and the method of assessing hedge effectiveness. As the criteria
     for documenting the designation of hedging relationships and hedge
     effectiveness are more rigorous under U.S. GAAP, the majority of the
     derivatives accounted for as hedges under Korean GAAP do not qualify for
     hedge accounting under U.S. GAAP. This item reflects the reversal of the
     hedge accounting treatment applied under Korean GAAP.

          6. Under U.S. GAAP, to apply fair value based method of accounting for
     stock-based compensation, stock options issued are valued based upon
     option-pricing model, which takes into account certain assumptions whereas
     under Korean GAAP, a different set of assumptions are taken into
     consideration. The income statement adjustment represents the difference in
     amortization expense due to the difference in valuation of the stock
     options issued under U.S. and Korean GAAP.

          Under Korean GAAP, stock option compensation costs are recorded as a
     liability whereas under U.S. GAAP, they are recorded as a component of
     equity. The stockholders' equity adjustment reflects the amount of stock
     compensation costs recorded in the liability section under Korean GAAP.

          7. Under Korean GAAP, the formation of a financial holding company
     results in changes in Shinhan Bank's original investment costs basis in its
     investees, whereas under U.S. GAAP, the transaction is accounted for under
     the purchase method with Shinhan Bank being the accounting acquirer,
     resulting in no change to Shinhan Bank's original investment costs in
     Shinhan Capital, Shinhan Securities and Shinhan Investment Trust Management
     Company. In addition, under Korean GAAP, the value of consideration was
     measured based on the stock price on the consummation date of the
     acquisition, whereas under U.S. GAAP, the value of consideration was
     measured based on the Group's average closing price on the Korea Stock
     Exchange two days before and after the date the formation was agreed to and
     announced. Furthermore, costs that were directly related to the formation
     were expensed under Korean GAAP, whereas such costs were included in the
     cost of the formation under the U.S. GAAP. This adjustment reflects
     differences in the accounting related to the formation of the holding
     company under U.S. GAAP.

          8. As lessors, the Group recorded certain equipment financing as
     operating leases under Korean GAAP. Under U.S. GAAP, such leases are
     classified as capital leases. As such, the equipment subject to U.S. GAAP
     capital lease requirements are removed from the balance sheet and replaced
     with the net investment in the respective leases. The difference between
     U.S. and Korean GAAP relates to the difference between the depreciation
     expense and rental income that is recorded under Korean GAAP versus the
     amortization of the unearned income related to the lease receivable that is
     recorded under U.S. GAAP.

          Under U.S. GAAP, on the date the financing lease is cancelled, the net
     investment in the leased is terminated and the leased assets are reinstated
     on the financial statements as fixed assets and depreciated. In practice,
     under Korean GAAP, subsequent to the cancellation of the lease, the
     principal amount is reclassified from lease receivable to other receivable.

                                       263
<PAGE>

          Under Korean GAAP, foreign exchange gains and losses from translating
     from foreign debts incurred for acquisition of operating lease assets are
     deferred and amortized over the related lease assets. Under U.S. GAAP,
     foreign exchange gains are recorded as a period expense in the income
     statement.

          9. The results of each of the Group's subsidiaries have been affected
     by the conversion to U.S. GAAP from Korean GAAP. Consequently, allocation
     to the Group's share of the converted results of the respective
     subsidiaries has been affected.

          10. Under U.S. GAAP and Korean GAAP, assets and liabilities of foreign
     branches and subsidiaries are translated at current exchange rates
     established at balance sheet date from the respective functional currency
     to the reporting currency, the Korean Won. Under U.S. GAAP, income and
     expenses for those foreign entities are translated at the average exchange
     rate for the period. Under Korean GAAP, income and expenses for those
     foreign entities are translated at the current exchange rate at the balance
     sheet date. Under U.S. GAAP and Korean GAAP, the resulting unrealized gains
     and losses arising from the translation of foreign entities are recorded as
     a separate component of stockholders' equity. This reconciliation adjusts
     the different rates used in foreign currency translation of income
     statement items for foreign entities under Korean GAAP to U.S. GAAP.

          11. Under Korean GAAP, goodwill is amortized over the useful life
     during which future economic benefits are expected to flow to the
     enterprise, not exceeding twenty years. The Group amortizes goodwill over
     ten years. Under U.S. GAAP, goodwill is not amortized rather it is tested
     for impairment at least annually. The income statement adjustment reflects
     goodwill impairment charge recorded under U.S. GAAP, net of the goodwill
     amortization that was recorded under Korean GAAP. Under Korean GAAP,
     acquisition of the remaining interest in its consolidated subsidiary is
     accounted for under the book basis with no goodwill recognized. Rather, any
     excess amount paid results in a reduction of capital surplus. Furthermore,
     consolidation is required when the investor owns more than 30% of the
     investee's voting shares and is also the largest shareholder. Under U.S.
     GAAP, acquisition of the remaining interest in its equity investee is
     accounted for under the purchase method with the excess cost over the fair
     value of the net assets acquired recognized as goodwill. The stockholders'
     equity adjustment reflects the additional amount of goodwill recognized
     under U.S. GAAP.

          12. Under Korean GAAP, the merger between Shinhan Securities and Good
     Morning Securities is accounted for as a common control merger with no gain
     or loss recognized on this transaction. Under U.S. GAAP, the merger was
     accounted for in accordance with EITF 90-13 which accounts for the
     transaction as a sale of portion of the Shinhan Financial Group's interest
     in Shinhan Securities to the minority interest holders of the Good Morning
     Securities and acquisition of additional interest in Good Morning
     Securities. A gain is recognized to the extent that Shinhan Securities was
     sold.

          13. Whereas under Korean GAAP we did not allocate negative goodwill to
     non-monetary assets, under U.S. GAAP negative goodwill is allocated to
     non-current assets and the remaining amount is recorded as extraordinary
     gain.

          14. Under U.S. GAAP, intangible assets which meet certain criteria are
     recognized in a business combination transaction and amortized over their
     useful lives. Under Korean GAAP, because the criteria that must be met in
     order to recognize intangible assets is not clearly specified, they are
     included as part of goodwill in practice. The Group did not recognize any
     intangible assets in connection with the formation of the Shinhan Financial
     Group and the acquisitions of Jeju Bank and Good Morning Securities under
     Korean GAAP. However, intangible assets were recognized under the U.S. GAAP
     in connection with the transactions described above. The income statement
     adjustment represents the amortization of the intangible assets under U.S.
     GAAP.

          15. The operating results of each of the Group's subsidiaries have
     been affected by the conversion to U.S. GAAP from Korean GAAP.
     Consequently, the allocation of a minority of their shares of the
     respective subsidiaries has been affected as a result of the conversion.

                                       264
<PAGE>

          Under Korean GAAP, minority interest is treated as a component of
     stockholders' equity. Under U.S. GAAP, minority interest is not considered
     part of stockholders' equity and is disclosed in the consolidated balance
     sheet between the liability section and the stockholders' equity section.

          16. Under Korean GAAP, certain fixed assets were revalued on the
     balance sheets in 1998. As a result, the revaluation surplus reflected in
     equity and depreciation expense for those revalued assets is based on the
     new cost basis. Under U.S. GAAP, upward revaluation for fixed assets is not
     permitted and depreciation expense is based on the historical cost basis
     adjusted for any impairment loss. This adjustment is to reverse the
     revaluation effects on the fixed assets under Korean GAAP and to adjust the
     gain or loss relating to subsequent disposals of those fixed assets under
     the different cost basis.

          17. This adjustment reflects the effect of miscellaneous items that
     are individually immaterial.

                                       265
<PAGE>

                                  CHOHUNG BANK

     You should read the following discussion and analysis of Chohung Bank's
financial condition and results of operations together with Chohung Bank's
consolidated financial statements included in this document. The following
discussion is based on Chohung Bank's consolidated financial statements, which
have been prepared in accordance with U.S. GAAP unless otherwise specified.

CRITICAL ACCOUNTING POLICIES

     Chohung Bank's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States, including
prevailing practices within the financial services industry. The preparation of
consolidated financial statements requires management to make judgments,
involving significant estimates and assumptions, in the application of certain
accounting policies about the effects of matters that are inherently uncertain.
These estimates and assumptions, which may materially affect the reported
amounts of certain assets, liabilities, revenues and expenses, are based on
information available as of the date of the financial statements, and changes in
this information over time could materially impact amounts reported in the
financial statements as a result of the use of different estimates and
assumptions. Certain accounting policies, by their nature, have a greater
reliance on the use of estimates and assumptions, and could produce results
materially different from those originally reported.

     Based on the sensitivity of financial statement amounts to the methods,
estimates and assumptions underlying reported amounts, the relatively more
significant accounting policies followed by Chohung Bank have been identified by
management as the determination of the allowance for loan losses, the valuation
of financial instruments and accounting for income taxes. These policies require
subjective or complex judgments, and as such could be subject to revision as new
information becomes available. The following is a discussion of these
significant accounting policies. These accounting policies are described in more
detail in Note 1 to Chohung Bank's consolidated financial statements.

  ALLOWANCE FOR LOAN LOSSES

     The allowance for loan losses represents the amount available for estimated
probable credit losses existing in Chohung Bank's lending portfolio. The
methodology used to provide the appropriate level of allowance is inherently
subjective and involves many complex estimates and assumptions. Chohung Bank
performs periodic systematic reviews of its credit portfolios to identify
inherent losses and assess the overall probability of collection. Each loan
portfolio is evaluated based on its respective characteristics.

     Chohung Bank evaluates large impaired corporate loans individually as part
of its normal corporate review practice due to the unique characteristics of
such borrowers. As described in more detail in the footnotes to Chohung Bank's
consolidated financial statements, Chohung Bank considers a loan impaired when,
after consideration of risk characteristics and current information and events,
it believes it is probable that Chohung Bank will be unable to collect all
amounts owed under the contractual terms of the agreement, including principal
and interest, according to the contractual terms of the loan. Once Chohung Bank
has identified a loan as impaired, it values that loan either based on the
present value of expected future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable market
price or the fair value of the collateral if the loan is collateral dependent.
Each of these variables involves judgment and the use of estimates. For
instance, discounted cash flows are based on estimates of the amount and timing
of expected future cash flows. Forecasts of expected future cash flows are based
on various data including restructuring plans, due diligence reports, as well as
industry forecasts among other quantitative tools. The fair value of collateral
is determined by using third party valuation reports. Additional consideration
is given to recent auction results and court valuations. If the resulting value
is less than the carrying amount of the loan, Chohung Bank establishes a
specific allowance for the difference.

     Chohung Bank evaluates consumer loans, including mortgages and home equity
loans and credit card balances, as individual pools for credit loss allowance
purposes due to their homogeneous nature based on historical loss experience.
Such allowances have been established using a risk rating migration model when
considering consumer loans and a delinquency roll-rate model when considering
credit cards.
                                       266
<PAGE>

     The adequacy of the allowance requires a great deal of judgment and the use
of estimates as discussed above. As such, Chohung Bank has also considered
changes in underwriting, credit monitoring, the Korean and global economic
environment, industry concentrations, and delinquency among other factors when
concluding on the level of the allowance for loan losses.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     Chohung Bank's securities and trading assets and liabilities include debt
and marketable equity securities, equity securities that do not have readily
determinable fair values and derivatives. Fair value of financial instruments is
the current amount that would be exchanged between willing parties, other than
in a forced sale or liquidation. The fair values of Chohung Bank's securities
and trading assets and liabilities are estimated based on quoted market prices
or internally developed pricing models.

     Fair value is best determined based on quoted market prices, if available.
If quoted market prices are not available, fair value is estimated using the
present value of expected future cash flows calculated by using market interest
rates comparable with the credit rating and maturity of the security. An
alternative to estimating fair value is to use internally developed pricing
models based on external market variables including interest rate yield curves,
option volatilities and foreign exchange rates. The estimation of fair value
involves the assessment of various financial variables, prices of comparable
financial instruments, credit ratings of counterparties, liquidity of the
financial instruments and transaction costs. Chohung Bank's management applies
judgments in assessing the variables used in the fair valuation process and also
if certain external market variables are less readily available. Changes in
model assumptions, market conditions and unexpected circumstances can affect the
fair values of the securities and trading assets and liabilities.

     Securities classified as available-for-sale are carried at fair value with
corresponding changes recognized in other comprehensive income within
stockholders' equity, net of taxes. Equity securities that do not have readily
determinable fair values are carried at cost. Declines in values of
available-for-sale securities, held-to-maturity debt securities and equity
securities that do not have readily determinable fair values that are deemed to
be other-than-temporary are reflected in earnings as realized losses. Chohung
Bank performs regular assessments of various quantitative and qualitative
factors to determine whether impairment is other-than-temporary. Such factors
include the duration and extent of the decline, the current operating and future
expected performance, market values of comparable companies, and changes in
industry and market prospects. These factors can be adversely affected by
changing economic conditions that are global or regional in nature or are issuer
or industry specific.

     Trading assets and liabilities are carried at fair value with the
corresponding changes recognized in earnings. The majority of Chohung Bank's
trading assets and liabilities that are actively traded are valued based on
quoted market prices except for derivatives. Since few derivatives are actively
traded, the majority of Chohung Bank's derivatives are valued using internally
developed models based on external market variables that can be independently
validated by third party sources. However, certain derivatives are valued based
on external market variables that are less readily available and are subject to
management judgment to support or make adjustments to the model valuation.

  INCOME TAXES

     Income taxation charged to income is comprised of current and deferred tax.
Current tax is calculated based on the taxable income at the prevailing
applicable rates of taxation of the year that is payable in tax. Deferred
taxation is provided for under the asset and liability method, at the current
taxation rate, in respect of temporary timing differences between profit as
computed for taxation purposes and profit as stated in the consolidated
financial statements to the extent that a liability or an asset is expected to
be payable or recoverable in the foreseeable future. In forming a conclusion
about whether a tax asset is recoverable in the foreseeable future, Chohung Bank
uses judgment in assessing the potential events and circumstances affecting
future recoverability while at the same time considering past experience. If
Chohung Bank's interpretations or judgments differ from those of tax authorities
with respect to the utilization of tax losses carried forward, the income tax
provision may vary in future periods.

                                       267
<PAGE>

AVERAGE BALANCE SHEET AND VOLUME AND RATE ANALYSIS

  AVERAGE BALANCE SHEET AND RELATED INTEREST

     The following table shows Chohung Bank's average balances and interest
rates, as well as the net interest spread, net interest margin and asset
liability ratio, for the past two years.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                        -------------------------------------------------------------------
                                                      2001                               2002
                                        ---------------------------------   -------------------------------
                                                      INTEREST                           INTEREST
                                         AVERAGE      INCOME/     YIELD /    AVERAGE     INCOME /   YIELD /
                                        BALANCE(1)    EXPENSE      RATE     BALANCE(1)   EXPENSE     RATE
                                        ----------   ----------   -------   ----------   --------   -------
                                                     (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                     <C>          <C>          <C>       <C>          <C>        <C>
ASSETS:
Interest-bearing deposits in banks....   W 1,273       W   54       4.24%    W   642      W   15      2.34%
Call loans and securities purchased
  under resale agreements.............       609           27       4.43         705          23      3.26
Trading assets........................     1,194           72       6.03       1,235          87      7.04
Securities(2).........................    11,633          830       7.13      10,764         683      6.35
Loans:(3)
  Commercial and industrial...........    10,758        1,015       9.43      12,776         950      7.44
  Lease financing.....................       656           36       5.49         493          21      4.26
  Other commercial....................     9,805          656       6.69       9,678         523      5.40
                                         -------       ------      -----     -------      ------     -----
     Total commercial.................    21,219        1,707       8.04      22,947       1,494      6.51
                                         -------       ------      -----     -------      ------     -----
  Mortgages and home equity...........     2,655          210       7.91       5,574         362      6.49
  Credit cards........................     3,965          673      16.97       5,845         840     14.37
  Other consumer......................     4,247          434      10.22       7,240         647      8.94
                                         -------       ------      -----     -------      ------     -----
     Total consumer...................    10,867        1,317      12.12      18,659       1,849      9.91
                                         -------       ------      -----     -------      ------     -----
          Total loans.................    32,086        3,024       9.42      41,606       3,343      8.03
                                         -------       ------      -----     -------      ------     -----
TOTAL INTEREST-EARNING ASSETS.........   W46,795       W4,007       8.56%    W54,952      W4,151      7.55%
                                         =======       ======      =====     =======      ======     =====
Non-interest-earning assets:
  Cash and cash equivalents...........   W 1,544           --                W 1,946          --
  Other assets........................     4,612           --                  4,226          --
                                         -------       ------                -------      ------
  TOTAL ASSETS........................   W52,951       W4,007                W61,124      W4,151
                                         =======       ======                =======      ======
LIABILITIES:
Interest-bearing deposits:
  Interest-bearing demand deposits....   W 3,828       W   75       1.96%    W 4,122      W   80      1.94%
  Savings deposits....................    10,737          274       2.55      12,210         197      1.61
  Certificates of deposit.............     1,495           88       5.89       3,195         161      5.04
  Other time deposits.................    17,048        1,139       6.68      18,870         965      5.11
  Mutual installment deposits.........       477           34       7.13         547          36      6.58
                                         -------       ------      -----     -------      ------     -----
       Total interest-bearing
          deposits....................    33,585        1,610       4.79      38,944       1,439      3.70
                                         -------       ------      -----     -------      ------     -----
Short-term borrowings.................     6,403          311       4.86       6,759         223      3.30
Secured borrowings....................     2,181          132       6.05       2,131          98      4.60
Long-term debt........................     3,597          291       8.09       5,000         345      6.90
                                         -------       ------      -----     -------      ------     -----
TOTAL INTEREST-BEARING LIABILITIES....   W45,766       W2,344       5.12%    W52,834      W2,105      3.98%
                                         =======       ======      =====     =======      ======     =====
</Table>

                                       268
<PAGE>

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                        -------------------------------------------------------------------
                                                      2001                               2002
                                        ---------------------------------   -------------------------------
                                                      INTEREST                           INTEREST
                                         AVERAGE      INCOME/     YIELD /    AVERAGE     INCOME /   YIELD /
                                        BALANCE(1)    EXPENSE      RATE     BALANCE(1)   EXPENSE     RATE
                                        ----------   ----------   -------   ----------   --------   -------
                                                     (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                     <C>          <C>          <C>       <C>          <C>        <C>
Non-interest-bearing liabilities:
  Non-interest-bearing deposits.......   W 1,150           --                W 1,307          --
  Trading liabilities.................     1,055           --                  1,412          --
  Acceptances outstanding.............     1,536           --                  1,382          --
  Accrued expenses and other
     liabilities......................     2,660           --                  2,745          --
  Minority interest...................        20           --                     17          --
  Stockholders' equity................       764           --                  1,427          --
                                         -------       ------                -------      ------
       TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY........   W52,951       W2,344                W61,124      W2,105
                                         =======       ======                =======      ======
Net interest spread(4)................                   3.44%                              3.57%
Net interest margin(5)................                   3.55                               3.72
Average asset liability ratio(6)......                 102.25                             104.01
</Table>

- ---------------

Notes:

(1) Average balances are based on (a) daily balances for Chohung Bank and its
    overseas subsidiaries except for stockholders' equity which is based upon
    quarterly balances and (b) quarterly balances for Chohung Investment Trust
    Management Company and special purpose entities for Chohung Bank's asset
    securitization.

(2) The average balance and yield on securities are based on amortized cost. The
    yield on the available-for-sale portfolio is based on average historical
    cost balances, therefore, the yield information does not give effect to
    changes in fair value that are reflected as a component of stockholders'
    equity.

(3) Non-accruing loans are included in the respective average loan balances.
    Income on such non-performing loans is no longer recognized from the date
    the loan is placed on nonaccrual status. Chohung Bank reclassifies loans as
    accruing when interest and principal payments are current.

(4) The difference between the average rate of interest earned on
    interest-earning assets and the average rate of interest paid on
    interest-bearing liabilities.

(5) The ratio of net interest income to average interest-earning assets.

(6) The ratio of average interest-earning assets to average interest-bearing
    liabilities.

                                       269
<PAGE>

  ANALYSIS OF CHANGES IN NET INTEREST INCOME -- VOLUME AND RATE ANALYSIS

     The following table provides an analysis of changes in interest income,
interest expense and net interest income between changes in volume and changes
in rates for 2002 compared to 2001. Volume and rate variances have been
calculated on the movement in average balances and the change in the interest
rates on average interest-earning assets and average interest-bearing
liabilities in proportion to absolute volume and rate change.

<Table>
<Caption>
                                                                    FROM 2001 TO 2002
                                                              INTEREST INCREASE (DECREASE)
                                                                   DUE TO CHANGE IN(1)
                                                              -----------------------------
                                                               VOLUME     RATE      CHANGE
                                                              --------   -------   --------
                                                                  (IN BILLIONS OF WON)
<S>                                                           <C>        <C>       <C>
INCREASE (DECREASE) IN INTEREST INCOME
Interest-bearing deposits in banks..........................    W(20)     W (19)     W (39)
Call loans and securities purchased under resale
  agreements................................................       4         (8)        (4)
Trading assets..............................................       3         12         15
Securities..................................................     (59)       (88)      (147)
Loans:
  Commercial and industrial.................................     171       (236)       (65)
  Lease financing...........................................      (8)        (7)       (15)
  Other commercial..........................................      (8)      (125)      (133)
                                                                ----      -----      -----
     Total commercial.......................................     155       (368)      (213)
                                                                ----      -----      -----
  Mortgages and home equity.................................     195        (43)       152
  Credit cards..............................................     282       (115)       167
  Other consumer............................................     273        (60)       213
                                                                ----      -----      -----
     Total consumer.........................................     750       (218)       532
                                                                ----      -----      -----
       Total loans..........................................     905       (586)       319
                                                                ----      -----      -----
       TOTAL INCREASE (DECREASE) IN INTEREST INCOME.........    W833      W(689)     W 144
                                                                ====      =====      =====
INCREASE (DECREASE) IN INTEREST EXPENSE
Interest-bearing deposits:
  Demand deposits...........................................    W  6      W  (1)     W   5
  Savings deposits..........................................      34       (111)       (77)
  Certificates of deposit...................................      87        (14)        73
  Other time deposits.......................................     113       (287)      (174)
  Mutual installment deposits...............................       5         (3)         2
                                                                ----      -----      -----
       Total interest-bearing deposits......................     245       (416)      (171)
                                                                ----      -----      -----
  Short-term borrowings.....................................      16       (104)       (88)
  Secured borrowings........................................      (3)       (31)       (34)
  Long-term debt............................................     101        (47)        54
                                                                ----      -----      -----
       TOTAL INCREASE (DECREASE) IN INTEREST EXPENSE........    W359      W(598)     W(239)
                                                                ====      =====      =====
NET INCREASE (DECREASE) IN NET INTEREST INCOME..............    W474      W (91)     W 383
                                                                ====      =====      =====
</Table>

- ---------------

Note:

(1) The changes for each category of interest income and expense are divided
    between the portion of change attributable to the variance in volume or rate
    for that category. The variance caused by the change in both volume and rate
    has been allocated in proportion to the absolute volume and rate change.

                                       270
<PAGE>

OPERATING RESULTS

  2002 COMPARED TO 2001

  Net Interest Income

     The following table shows, for the periods indicated, the principal
components of Chohung Bank's net interest income.

<Table>
<Caption>
                                                                      YEAR ENDED DECEMBER 31,
                                                             ------------------------------------------
                                                               2001        2002           % CHANGE
                                                             ---------   ---------   ------------------
                                                              (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                          <C>         <C>         <C>
Interest and dividend income:
  Interest and fees on loans...............................   W3,024      W3,343                 10.5%
  Interest and dividends on securities.....................      830         683                (17.7)
  Trading assets...........................................       72          87                 20.8
  Other interest income....................................       81          38                (53.1)
                                                              ------      ------      ---------------
     Total interest income.................................   W4,007      W4,151                  3.6%
                                                              ------      ------      ---------------
Interest expense:
  Interest on deposits.....................................   W1,610      W1,439                (10.6)%
  Interest on short-term borrowings........................      311         223                (28.3)
  Interest on secured borrowings...........................      132          98                (25.8)
  Interest on long-term debt...............................      291         345                 18.6
  Other interest expense...................................       --          --                   --
                                                              ------      ------      ---------------
     Total interest expense................................    2,344       2,105                (10.2)
                                                              ------      ------      ---------------
Net interest income........................................   W1,663      W2,046                 23.0%
                                                              ======      ======      ===============
Net interest margin(1).....................................     3.55%       3.72%     17 basis points
</Table>

- ---------------

Note:

(1) The ratio of net interest income to average interest earning assets. See
    "-- Average Balance Sheet and Volume and Rate Analysis -- Average Balance
    Sheet and Related Interest."

     Interest and dividend income.  The 3.6% increase in interest and dividend
income from W4,007 billion in 2001 to W4,151 billion in 2002 is due primarily to
a 10.5% increase in interest and fees on loans which more than offset a 17.7%
decrease in interest and dividends on securities. The average balance of Chohung
Bank's interest earning assets increased 17.4% from W46,795 billion in 2001 to
W54,952 billion in 2002, principally as a result of growth in mortgages and home
equity loans, credit cards and other consumer loans, which more than offset a
101 basis point decline in average yield from 8.56% in 2001 to 7.55% in 2002.

     The 10.5% increase in interest and fees on loans was primarily a result of:

     - a 70.5% increase in average volume of other consumer loans, primarily
       consisting of general unsecured loans to retail customers, from W4,247
       billion in 2001 to W7,240 billion in 2002;

     - a 47.4% increase in average volume of credit cards from W3,965 billion in
       2001 to W5,845 billion in 2002; and

     - a 109.9% increase in average volume of mortgages and home equity loans
       from W2,655 billion in 2001 to W5,574 billion in 2002, and partially
       offset by a decline of 142 basis points in the average yield on such
       loans from 7.91% in 2001 to 6.49% in 2002.

     The average volume of Chohung Bank's loans increased as a result of
increased consumer loan demand in Korea. Chohung Bank's average yield on loans
decreased by 139 basis points from 9.42% to 8.03% as a result of the continued
decline in the general level of interest rates in Korea, including as a result
of increased

                                       271
<PAGE>

competition, during the period under review. Chohung Bank's average volume
growth in consumer loans is due primarily to Chohung Bank's increased efforts to
market these consumer loans taking advantage of increased consumer loan demand
and to shift its focus away from the large corporate sector. The average lending
to large corporate customers remained relatively constant during the periods
under review. The average volume growth in corporate loans primarily reflects
Chohung Bank's efforts to increase lending to small- and medium-sized
enterprises, the effects of which growth on Chohung Bank's interest income were
more than offset by a decline in average yield on such loans.

     The 17.7% decrease in interest and dividends on securities was due
primarily to a decline of 78 basis points in average yield on Chohung Bank's
investment securities from 7.13% in 2001 to 6.35% in 2002, reflecting a decline
in market interest rates, together with a 7.5% decrease in average volume of
securities from W11,633 billion in 2001 to W10,764 billion in 2002.
Approximately 87.7% of Chohung Bank's securities portfolio consists of debt
securities issued or guaranteed by the Korean government or government-
controlled entities and debt securities issued by financial institutions and
other Korean banks as of December 31, 2002.

     The overall increase in interest and dividend income for 2002 is expected
to continue in 2003, benefiting from the increases during the second half of
2002 in average volume of consumer lending, in particular mortgages and home
equity loans and other consumer loans, and lending to small- and medium-sized
enterprises, which growth was partially offset by lower average lending rates
due to the low interest rate environment and intense competition.

     Interest Expense.  Interest expense decreased 10.2% from W2,344 billion in
2001 to W2,105 billion in 2002, due primarily to a 10.6% decrease in interest on
deposits and a 28.3% decrease in interest on short-term borrowings, partially
offset by a 18.6% increase in interest on long-term debt.

     The 10.6% decrease in interest on deposits was primarily the result of a
decline of 109 basis points in the cost of interest-bearing deposits from 4.79%
in 2001 to 3.70% in 2002, partially offset by a 16.0% increase in average volume
of interest-bearing deposits from W33,585 billion in 2001 to W38,944 billion in
2002. The principal reason for the decline in interest rates payable on these
liabilities is the general decline in market interest rates in Korea. The
average interest rate paid on Chohung Bank's time deposits other than
certificates of deposit, which accounted for 35.7% of Chohung Bank's average
interest-bearing liabilities in 2002, decreased by 157 basis points from 6.68%
in 2001 to 5.11% in 2002 due primarily to a general decline in market interest
rates in 2002. The average interest rate paid on Chohung Bank's savings
deposits, which accounted for 23.1% of Chohung Bank's average interest-bearing
liabilities in 2002, decreased from 2.55% in 2001 to 1.61% in 2002 due primarily
to a general decline in market interest rates in 2002. The 16.0% increase in
average volume of interest bearing deposits was due primarily to a 10.7%
increase in average volume of other time deposits from W17,048 billion in 2001
to W18,870 billion in 2002 and a 13.7% increase in average volume of savings
deposits from W10,737 billion in 2001 to W12,210 billion in 2002, reflecting the
inflow of highly liquid funds into short-term deposits for lack of investment
opportunities in light of stock market conditions.

     The 28.3% decrease in interest on short-term borrowings was primarily a
result of a decrease in interest on borrowings from the Bank of Korea reflecting
a decrease in foreign currency borrowings and a decline of 156 basis points in
average interest rates paid on Chohung Bank's short-term borrowings from 4.86%
in 2001 to 3.30% in 2002, reflecting a continued decline in the market interest
rates during the periods under review.

     The 18.6% increase in interest on long-term debt was due to a 39.0%
increase in average long-term debt from W3,597 billion in 2001 to W5,000 billion
in 2002 as a result of the issuance of long-term finance debentures in Korean
Won by Chohung Bank in 2002 in light of favorable primary market conditions
largely to finance the increases in mortgages and home equity lending and other
consumer lending.

     The 25.8% decrease in interest expense on secured borrowings was due
primarily to a decline of 145 basis points in average interest rates paid on
Chohung Bank's secured borrowings from 6.05% in 2001 to 4.60% in 2002 together
with a 2.3% decrease in average volume of secured borrowings from W2,181 billion

                                       272
<PAGE>

in 2001 to W2,131 billion in 2002. The decrease in average secured borrowings
reflect a decrease in volume of securities sold under repurchase agreements.

     Interest expense is expected to increase in line with the portfolio
expansion, in particular as interest on debentures which generally carry higher
rate of interest increase resulting from new issuances of debentures in 2003,
while continuing to benefit from the low interest rate environment.

     Net interest margin.  Net interest margin represents the ratio of net
interest income to average interest-earning assets. As net interest income
increased 23.0% from W1,663 billion in 2001 to W2,046 billion in 2002 and the
average volume of Chohung Bank's interest earning assets increased 17.4% from
W46,795 billion in 2001 to W54,952 billion in 2002, Chohung Bank's overall net
interest margin increased 17 basis points from 3.55% in 2001 to 3.72% in 2002.
This increase was primarily attributable to the decrease in Chohung Bank's
interest expenses resulting from Chohung Bank's low cost funding structure and a
decline in average interest rates which more than offset an increase in average
volume of interest bearing liabilities during the period under review, together
with an increase in interest income resulting from increase average volume of
interest earning assets which more than offset a decline in average yield.
Chohung Bank expects to experience pressure on its margins during 2003 due to
the low level of economic growth and intense competition in consumer lending and
lending to small- and medium-sized enterprises.

  Provision for Loan Losses

     Chohung Bank's provision for loan losses increased 150.5% from W553 billion
in 2001 to W1,385 billion in 2002 due primarily to larger corporate and consumer
portfolios and higher allowance levels for credit card and consumer loans
reflecting increased delinquencies in the second half of 2002. The increase was
partially offset by an overall improvement in the quality of the corporate loan
portfolio including the effects from sales of impaired loans to third parties
and conversions of impaired loans to convertible debt and marketable equity
securities.

     The following table sets forth for the periods indicated the components of
provision for loan losses by product type.

<Table>
<Caption>
                                                                 AS OF DECEMBER 31,
                                                              ------------------------
                                                              2001    2002    % CHANGE
                                                              ----   ------   --------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>    <C>      <C>
Corporate...................................................  W223   W   (9)   (104.0)%
Mortgages and home equity...................................     4        7      75.0
Other consumer..............................................    24      161     570.8
Credit cards................................................   302    1,226     306.0
                                                              ----   ------    ------
  Total provision for loan losses...........................  W553   W1,385    150.5%
                                                              ====   ======    ======
</Table>

     Chohung Bank's provision for loan losses against corporate loans decreased
104.0% from W223 billion in 2001 to W(9) billion in 2002 primarily due to an
overall improvement in the quality of the corporate loan portfolio in 2002. The
provision for 2001 reflects additional allowances established for new loans
granted to impaired borrowers such as SK Global and Hynix Semiconductor. Chohung
Bank's loan loss allowance against corporate loans decreased 13.4% from W1,658
billion as of December 31, 2001 to W1,435 billion as of December 31, 2002.
Despite an increase of 15.4% in the overall size of the portfolio from W21,535
billion in 2001 to W24,854 billion in 2002, non-performing corporate loans
decreased from W938 billion as of December 31, 2001 to W727 billion as of
December 31, 2002, representing 4.4% and 2.9% of the total corporate loan
portfolio, respectively. Impaired loans also fell from W3,216 billion as of
December 31, 2001 to W2,403 billion as of December 31, 2002 representing 14.9%
and 9.7% of the total corporate loan portfolio, respectively. Total net
charge-offs decreased 63.0% from W1,617 billion in 2001 to W599 billion in 2002
due to a small number of large exposures, including Daewoo Corporation, also
being deemed uncollectible in 2001, based on events occurring during that year,
and due to sales of impaired loans to third parties.

                                       273
<PAGE>

     The provision for loan losses against SK Global increased from W38 billion
in 2001 to W54 billion in 2002 reflecting the increased loans provided to the
company from 2000 until 2002. Chohung Bank's loans to SK Global were
reclassified from normal to substandard following discovery of accounting
irregularities in March 2003 where management of the company had been concealing
liabilities of the company for several years. Chohung Bank has classified loans
to SK Global as substandard and therefore impaired as of December 31, 2002 and
earlier years since the nature of these accounting irregularities would have
caused Chohung Bank to classify the loans to SK Global as substandard in those
earlier periods had information as to the true financial condition of the
company been known at that time. The allowance for loan losses against SK Global
increased 33.1% from W163 billion as of December 31, 2001 to W217 billion as of
December 31, 2002 reflecting the increase in Chohung Bank's loans to the company
from W370 billion to W415 billion, respectively, and the continual decline in
financial condition of the company over that period.

     The additional provision for loan losses against former Hyundai Group
companies was W75 billion in 2001 primarily due to increased provisions against
Inchon Oil Refinery and Hyundai Merchant Marine. The additional provision for
loan losses was W133 billion in 2002 primarily due to increased provisions
against Hynix Semiconductor, and to a lesser extent, against Hyundai
Corporation. The allowance for loan losses against former Hyundai Group
Companies increased from W349 billion as of December 31, 2001 to W435 billion as
of December 31, 2002 primarily due to increased allowances against Hynix
Semiconductor, and to a lesser extent, higher allowances against Hyundai
Corporation.

     Chohung Bank's provision for loan losses against mortgages and home equity
loans increased 75.0% from W4 billion to W7 billion due to an increase in the
size of the portfolio. Chohung Bank's loan loss allowance against mortgages and
home equity loans increased 85.7% from W7 billion in 2001 to W13 billion in 2002
for the same reason. Chohung Bank's mortgages and home equity loans increased
79.5% from W3,993 billion as of December 31, 2001 to W7,167 billion as of
December 31, 2002 reflecting increased loan demand in this area due primarily to
a rise in real estate prices in a low interest rate environment. The ratio of
non-performing loans to total loans within this portfolio remained constant at
0.2% in 2001 and 2002. Net-charge offs remained constant at W1 billion for both
years.

     Chohung Bank's provision for loan losses against credit cards increased
306.0% from W302 billion in 2001 to W1,226 billion in 2002 reflecting increased
delinquencies within 2002 and an increase in the size of the portfolio. The
level of net charge-offs within the credit card portfolio also increased from
W137 billion in 2001 to W465 billion to 2002 reflecting the higher delinquency
problems. Chohung Bank continued to focus on expanding its credit card business
in 2002 resulting in an increase of 18.5% in the portfolio from W4,869 billion
as of December 31, 2001 to W5,770 billion as of December 31, 2002. Chohung
Bank's allowance has increased 253.7% from W300 billion as of December 31, 2001
to W1,061 billion as of December 31, 2002 due to growth in the portfolio but
also due primarily to the significantly higher level of delinquencies within the
portfolio, consistent with the experiences of other credit card providers within
the industry. The ratio of non-performing loans to total loans within this
portfolio increased from 1.6% as of December 31, 2001 to 4.7% as of December 31,
2002.

     The provision for loan losses against other consumer loans increased 570.8%
from W24 billion in 2001 to W161 billion in 2002 primarily reflecting increased
delinquencies within 2002 and the size of the portfolio. Other consumer loans
have increased 62.7% from W5,065 billion as of December 31, 2001 to W8,239
billion as of December 31, 2002 due primarily to Chohung Bank's strategy to
expand this activity. The allowance has increased 152.2% from W67 billion to
W169 billion reflecting increased levels of delinquency within the portfolio.
The ratio of non-performing loans to total loans within this portfolio increased
from 0.5% in 2001 to 1.2% in 2002.

  Provision for Guarantees and Acceptances

     Chohung Bank's provision for guarantees and acceptances reflects the
continual reduction in the allowance for guarantees and acceptances from 2000 to
2002. Chohung Bank's allowance against guarantees and acceptances decreased
27.6% from W199 billion as of December 31, 2001 to W144 billion as of December
31, 2002.

                                       274
<PAGE>

     The reversal of provision of W55 billion in 2002 reflects the overall
improvement in the quality of the corporate loan portfolio and lower allowances
being made against guarantees and acceptances. The reversal of provision of W134
billion in 2001 was due primarily to a reduction in the amount of guarantees and
acceptances provided to impaired borrowers.

  Noninterest Income

     The following table sets forth for the periods indicated the components of
Chohung Bank's noninterest income.

<Table>
<Caption>
                                                                AS OF DECEMBER 31,
                                                              ----------------------
                                                              2001   2002   % CHANGE
                                                              ----   ----   --------
                                                               (IN BILLIONS OF WON,
                                                               EXCEPT PERCENTAGES)
<S>                                                           <C>    <C>    <C>
Commissions and fees(1).....................................  W415   W485      16.9%
Net trust management fees(2)................................    43     (9)   (120.9)
Net trading profits.........................................    76     90      18.4
Other(3)....................................................   309    206     (33.3)
                                                              ----   ----    ------
  Total noninterest income..................................  W843   W772      (8.4)%
                                                              ====   ====    ======
</Table>

- ---------------

Notes:

(1) Includes credit card fees (which include merchant fees, fees from
    international usage, fees from affiliate cards and annual membership fees),
    commissions received on remittance, commissions received on imports and
    export letters of credit and commissions received on tele-banking services
    and financial guarantee fees.

(2) Consists principally of fees from management of trust accounts in Chohung
    Bank's banking operations net of any payments made by Chohung Bank's bank
    accounts to cover shortfalls in the trust accounts.

(3) Includes net gain on foreign currency translation, gain on disposal of
    premises and equipment and rental income.

     The 8.4% decrease in noninterest income was attributable primarily to:

     - a 33.3% decrease in other noninterest income, consisting principally of a
       one-time miscellaneous income of W49 billion resulting from Chohung
       Bank's winning a lawsuit in 2001; and
     - a 120.9% decrease in net trust management fees, due primarily to a W58
       billion in loss from the charge-off of loans to Hanbo Steel in Chohung
       Bank's trust accounts which were repurchased from Korea Asset Management
       Corporation pursuant to Chohung Bank's recourse obligation;

     - partially offset by a 16.9% increase in commissions and fees, primarily
       reflecting an increase in credit card fees.

                                       275
<PAGE>

  Noninterest Expenses

     The following table shows, for the periods indicated, the components of
Chohung Bank's noninterest expense.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                              2001    2002    % CHANGE
                                                              ----   ------   --------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>    <C>      <C>
Employee compensation and severance benefits................  W251   W  333    32.7%
Depreciation and amortization...............................    69       75      8.7
General and administrative expenses.........................   269      304     13.0
Net losses on securities....................................    42       51     21.4
Write-down of other investments.............................    44       70     59.1
Credit card fees(1).........................................    68      104     52.9
Other(2)....................................................   243      319     31.3
                                                              ----   ------     ----
  Total noninterest expenses................................  W986   W1,256    27.4%
                                                              ====   ======     ====
</Table>

- ---------------

Notes:

(1) Includes credit card fees, which consist principally of expenses related to
    awarding mileages and bonus points to credit card customers and fees and
    commissions paid to Chohung Bank's member merchants.

(2) Includes other fees and commissions, miscellaneous taxes and losses on
    disposal of tangible assets.

     The 27.4% increase in noninterest expenses was due primarily to:

     - a 33.7% increase in employee compensation and benefits due primarily to
       increased employee compensation and bonus payments, resulting from a
       change in compensation levels and a one-time special bonus payment to
       commemorate Chohung Bank's centennial anniversary;

     - a 31.3% increase in other noninterest expenses, which mainly reflects a
       W68 billion increase in other fees and commissions, including
       contribution to the Credit Guarantee Fund and insurance premium on
       deposits to Korea Deposit Insurance Corporation;

     - a 52.9% increase in fees and commissions paid on credit card sales, which
       represent fees and commissions paid for the use of BC Card's merchant
       network, due primarily to the increase in credit card charge volume; and

     - a 59.1% increase in write-down of other investments as Chohung Bank
       experienced a higher level of impairment in 2002 on securities acquired
       from trouble debt restructuring as compared to 2001.

  Income Tax Expense

     Income tax expense decreased from W362 billion in 2001 to W75 billion in
2002 as a result of Chohung Bank's decreased income. The statutory tax rate was
30.8% in 2001 and 29.7% in 2002. Chohung Bank's effective rate of income tax
remained relatively constant at 32.1% in 2002 as compared to 32.9% in 2001.

  Net Income

     The 79.2% decrease in net income from W735 billion in 2001 to W153 billion
in 2002 was due primarily to higher provisions. During 2002, Chohung Bank
recorded higher provisions for credit card delinquencies reflecting increased
lending and a decline in credit quality. Aside from provisions, increased
noninterest expense for employee compensation and increase in write-down of
other investments contributed to the decrease in net income. This decrease was
partially offset by the significant growth in mortgages and home equity loans
contributed to the increase in net income.

                                       276
<PAGE>

BUSINESS OUTLOOK

     As a result of reduced domestic consumption, increase in credit card and
other consumer lending delinquencies, lower levels of investments by
corporations, increase in unemployment, together with the on-going tensions
between the United States and North Korea and the impact of SARS on global
exports or GDP growth rates, Chohung Bank expects the Korean economy to continue
to experience difficulties, with prospects of recovery remaining uncertain.
These weak economic conditions in Korea, coupled with intense competition in the
banking sector, will have an adverse impact on Chohung Bank in the near future.

     In retail banking, over the past two years Chohung Bank has experienced a
significant growth in home mortgage-based secured consumer lending, both for
home purchases as well as for general purpose borrowing through home equity
loans. Chohung Bank's mortgages and home equity lending portfolio increased from
an average balance of W2,655 billion during 2001 to W5,574 billion during 2002.
The volume of such lending by Chohung Bank is significantly dependent on
competitive conditions, real estate prices, interest rate levels and government
policies affecting these markets, and the trends indicated by prior periods will
be altered accordingly. As a result of recent policy announcements by the Korean
government to stabilize the Korean real estate market, Chohung Bank expects the
rate of growth in mortgages and home equity lending volume to decrease in 2003.
Chohung Bank also experienced a significant growth in other consumer loans from
an average balance of W4,247 billion during 2001 to W7,240 billion during 2002
due primarily to increased general unsecured lending to retail customers. This
increase in lending has brought with it increasing delinquencies in this portion
of Chohung Bank's portfolio. In the near future, Chohung Bank expects to focus
on credit quality and this will moderate volume growth in this sector.

     In the credit card business, Chohung Bank has witnessed its customers
become more active borrowers over the past two years and has sought to add
significant numbers of new credit card customers as the credit card markets
expanded rapidly. Chohung Bank's credit card lending portfolio increased from an
average balance of W3,965 billion during 2001 to W5,845 billion during 2002.
This increase in credit card lending, however, has resulted in higher
delinquencies and default rates further resulting in higher provisioning.
Chohung Bank intends to place stronger emphasis on credit quality and to set
more rigorous standards for establishing credit limits rather than on volume
growth in this sector. As a result, Chohung Bank expects its interest and fee
income from its credit card operations to decrease.

     In corporate banking, Chohung Bank's small- and medium-sized enterprises
lending portfolio has grown from W10,592 billion as of December 31, 2001 to
W15,084 billion as of December 31, 2002 as its loans to large corporate
borrowers remained relatively low and constant. During this period, most of the
nationwide banks have shifted their focus to, or increased their emphasis on,
this type of lending, as opportunities in the large corporate sector diminish.
As Chohung Bank expects that competition in this sector will continue to
intensify, its focus on maintaining credit quality will moderate its growth in
this sector.

     Chohung Bank believes that its greater focus on credit quality and moderate
asset growth in the small-and medium-sized enterprises, mortgages and home
equity lending and general unsecured consumer lending will have a positive
impact on its future results of operations.

RESULTS BY PRINCIPAL BUSINESS SEGMENT UNDER KOREAN GAAP

     Chohung Bank is organized into seven major business segments: retail
banking, corporate banking, treasury and international business, credit card,
merchant banking, other banking services and other. The following discussion of
Chohung Bank's results by principal business segment is provided on a Korean
GAAP basis since this is the basis of accounting that Chohung Bank currently
uses to manage its business. Chohung Bank's chief operating decision maker
regularly makes decisions about resources to be allocated to these activities
and assesses performance of the activities using this information, and
consequently this forms the basis of Chohung Bank's segment reporting included
in Note 30 to its consolidated financial statements.

                                       277
<PAGE>

<Table>
<Caption>
                                                                    YEAR ENDED DECEMBER 31,
                                                           -----------------------------------------
                                                             2001       2002        2001      2002
                                                           --------   ---------   --------   -------
                                                            SEGMENT RESULTS(1)    TOTAL REVENUES(2)
                                                           --------------------   ------------------
                                                                      (IN BILLIONS OF WON)
<S>                                                        <C>        <C>         <C>        <C>
Retail banking...........................................   W 484       W 516      W1,096    W1,391
Corporate banking........................................    (416)       (947)        539       491
Treasury and international business......................     261         152         583       597
Credit card..............................................     318           5         662       800
Merchant banking.........................................     (25)         (1)        102        85
Other banking services...................................    (285)       (336)          4        13
Others...................................................      25          92          94       122
                                                            -----       -----      ------    ------
  Total(3)...............................................   W 362       W(519)     W3,080    W3,499
                                                            =====       =====      ======    ======
</Table>

- ---------------

Notes:

(1) Represents net income per segment before income taxes.

(2) Represents net interest income plus noninterest income.

(3) Before elimination or adjustments.

  RETAIL BANKING

     Chohung Bank's retail banking segment products include mortgages and home
equity loans and other consumer loans (not including credit cards), deposits and
other savings products. Chohung Bank's retail banking segment also represents
fees from trust account management that were earned through Chohung Bank's
retail banking channels.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                              2001    2002    % CHANGE
                                                              ----   ------   --------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>    <C>      <C>
INCOME STATEMENT DATA
Net interest income.........................................  W900   W1,166     29.6%
Noninterest income..........................................   196      225     14.8
                                                              ----   ------    -----
  Total revenues............................................  1,096   1,391     26.9
Provision for loan losses...................................   (99)    (277)   179.8
Noninterest expense including depreciation and
  amortization..............................................  (513)    (598)    16.6
                                                              ----   ------    -----
Segment result(1)...........................................  W484   W  516      6.6%
                                                              ====   ======    =====
</Table>

- ---------------

Note:

(1) Net income per segment before income taxes.

     Chohung Bank's overall segment result increased by 6.6% from W484 billion
in 2001 to W516 billion in 2002.

     The 29.6% increase in net interest income from retail banking activities
was due primarily to an increase in average lending volume to individuals and
households, particularly mortgages and home equity loans and other consumer
loans.

     The increase in average lending volume to individuals, mortgages and home
equity loans in particular, is due primarily to the recent trend and preference
by commercial banks, including Chohung Bank, to lend to consumers on a secured
basis. Average funding costs declined as market interest rates continued to
decline from 2001 to 2002.

                                       278
<PAGE>

     Noninterest income increased 14.8% due primarily to increase in fees from
the usage of Chohung Bank's fee-based services including online banking
services.

     Provision for loan losses on consumer loans increased by 179.8% due
primarily to volume growth and the effects of strengthened provisioning
requirements in respect of consumer loans under the guidelines issued by the
Financial Supervisory Commission as well as a deterioration in credit quality.

     Noninterest expense including depreciation and amortization increased 16.6%
from W513 billion in 2001 to W598 billion in 2002, due primarily to increased
salaries and wages and an increase in fee expenses for secured lending.

  CORPORATE BANKING

     Chohung Bank's corporate banking segment handles its transactions with
Chohung Bank's corporate customers, including small- and medium-sized
enterprises, chaebols and public enterprises. Activities within the segment
include loans, overdrafts and other credit facilities and gathering deposits.
Chohung Bank's corporate banking segment also represents fees from trust account
management that were earned through Chohung Bank's corporate banking channels.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                              2001    2002    % CHANGE
                                                              -----   -----   --------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.........................................  W 357   W 308    (13.7)%
Noninterest income..........................................    182     183      0.5
                                                              -----   -----    -----
  Total revenues............................................    539     491     (8.9)
Provision for loan losses(1)................................   (378)   (659)    74.3
Noninterest expense including depreciation and
  amortization..............................................   (577)   (779)    35.0
                                                              -----   -----    -----
Segment result(2)...........................................  W(416)  W(947)   127.6%
                                                              =====   =====    =====
</Table>

- ---------------

Notes:

(1) Includes provision for guarantees and acceptances of W(19.4) billion and
    W74.8 billion in 2001 and 2002, respectively.

(2) Net income per segment before income taxes.

     Chohung Bank's overall loss from this segment increased 127.6% from W416
billion in 2001 to W947 billion in 2002.

     Net interest income decreased 13.7% as a result of a decrease in margins
due primarily to intense competition which was partially offset by an increase
in average lending volume. The increase in the average volume of lending to
small- and medium-sized enterprises is the result of the continued growth in the
small-and medium-sized lending market, together with Chohung Bank's continued
efforts to focus Chohung Bank's marketing on this customer sector.

     The higher level of provision for loan losses in 2002 is due primarily to
increased provisioning for Chohung Bank's exposure to Hynix Semiconductor,
Ssangyong Co. and Ssangyong Cement Industrial.

     Noninterest expense including depreciation and amortization increased
35.0%, due primarily to increased impairment losses realized in respect of
investment securities acquired through troubled debt restructuring, including
equity securities of Hyundai Engineering & Construction, Ssangyong Engineering &
Construction, Hynix Semiconductor, Anam Semiconductor and Daewoo Securities,
following a decline in market value of such equity securities in the Korean
stock market, partially offset by a decrease in losses on sale of loans in 2002.

                                       279
<PAGE>

  TREASURY AND INTERNATIONAL BUSINESS

     Chohung Bank's treasury and international business segment primarily
handles the trading of and investment in debt securities and, to a lesser
extent, in equity securities for Chohung Bank's own accounts, Chohung Bank's
treasury activities such as correspondent banking, Chohung Bank's overseas
branch operations and derivatives transactions.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                              2001    2002    % CHANGE
                                                              -----   -----   --------
                                                                (IN BILLIONS OF WON,
                                                                EXCEPT PERCENTAGES)
<S>                                                           <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.........................................  W  (9)  W (53)   488.9%
Noninterest income..........................................    592     650      9.8
                                                              -----   -----    -----
  Total revenues............................................    583     597      2.4
Provision for loan losses(1)................................    (25)     (6)   (76.0)
Noninterest expense including depreciation and
  amortization..............................................   (297)   (439)    47.8
                                                              -----   -----    -----
Segment result(2)...........................................  W 261   W 152    (41.8)%
                                                              =====   =====    =====
</Table>

- ---------------

Notes:

(1) Includes provision for guarantees and acceptances of W(1) billion in 2001.

(2) Net income per segment before income taxes.

     Chohung Bank's overall segment result decreased 41.8% from W261 billion in
2001 to W152 billion in 2002.

     Net interest loss increased 488.9% due primarily to greater interest
expenses in 2002 resulting from increased levels of new issuance of subordinated
debt. Chohung Bank issued subordinated debt securities to improve its capital
adequacy in 2002, which carry interest rates that are higher than unsubordinated
debt market interest rates.

     Noninterest income increased 9.8% from W592 billion in 2001 to W650 billion
in 2002 due primarily to increased gains on derivatives reflecting a volume
increase in 2002, which was partially offset by a decrease in gain on sales of
trading securities in 2002.

     Noninterest expense including depreciation and amortization increased 47.8%
due primarily to an increase in losses relating to derivatives resulting from
volume growth.

                                       280
<PAGE>

  CREDIT CARD

     Chohung Bank's credit card segment handles its credit card activities.

<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                            ------------------------
                                                            2001    2002    % CHANGE
                                                            -----   -----   --------
                                                              (IN BILLIONS OF WON,
                                                              EXCEPT PERCENTAGES)
<S>                                                         <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.......................................  W 451   W 543     20.4%
Noninterest income........................................    211     257     21.8
                                                            -----   -----    -----
     Total revenues.......................................    662     800     20.8
Provision for loan losses.................................   (175)   (659)   276.6
Noninterest expense including depreciation and
  amortization............................................   (169)   (136)   (19.5)
                                                            -----   -----    -----
Segment result(1).........................................  W 318   W   5    (98.4)%
                                                            =====   =====    =====
</Table>

- ---------------

Note:

(1) Net income per segment before income taxes.

     Chohung Bank's overall segment result decreased 98.4% from W318 billion in
2001 to W5 billion in 2002, due primarily to a W484 billion increase in
provision for loan losses which more than offset a W92 billion increase in net
interest income and a W46 billion increase in noninterest income.

     The 20.4% increase in net interest income and the 21.8% increase in
noninterest income were due primarily to the increase in average volume of
credit card accounts.

     The 276.6% increase in provision for loan losses on credit cards was due
primarily to a significant increase in credit card delinquencies, charge-off
expenses and the effect of strengthened provisioning requirements in respect of
consumer loans under the guidelines issued by the Financial Supervisory
Commission. As of December 31, 2001 and 2002, Chohung Bank's delinquency ratios
(defined as the ratio of balances past due for one month or more over total
balance outstanding as of period-end) on credit card accounts prior to
write-offs, as reported to the Financial Supervisory Commission, were 6.9% and
15.8%, respectively.

  MERCHANT BANKING

     Chohung Bank's merchant banking segment products include short-term
financing for both deposit and lending sides, including cash management
accounts, factoring financing and bill discounting, leasing, investment banking
activities, mergers and acquisitions advice and project financing services.

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                              2001    2002    % CHANGE
                                                              -----   -----   ---------
                                                                (IN BILLIONS OF WON,
                                                                 EXCEPT PERCENTAGES)
<S>                                                           <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income.........................................  W 44    W 40       (9.1)%
Noninterest income..........................................    58      45      (22.4)
                                                              ----    ----      -----
     Total revenues.........................................   102      85      (16.7)
Provision for loan losses...................................   (29)    (30)       3.4
Noninterest expense including depreciation and
  amortization..............................................   (98)    (56)     (42.9)
                                                              ----    ----      -----
Segment result(1)...........................................  W(25)   W (1)     (96.0)%
                                                              ====    ====      =====
</Table>

- ---------------

Note:


(1) Net income per segment before income taxes.

                                       281
<PAGE>

     Chohung Bank's overall segment result improved from a loss of W25 billion
in 2001 to a loss of W1 billion in 2002, due primarily to a 42.9% decrease in
noninterest expense (including depreciation and amortization) which more than
offset a 22.4% decrease in noninterest income and a 9.1% decrease in net
interest income.

     The 9.1% decrease in net interest income primarily reflects a decline in
market interest rates. The 22.4% decrease in noninterest income was due
primarily to a decrease in average lease fees together with a decrease in leased
assets. The 42.9% decrease in noninterest expense including depreciation and
amortization was due primarily to a decrease in lease related expenses.

  OTHER BANKING SERVICES

     This segment reflects the expenses incurred by Chohung Bank's support and
management functions performed at the headquarters level, including Chohung
Bank's risk management and information technology systems.

<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                            ------------------------
                                                            2001    2002    % CHANGE
                                                            -----   -----   --------
                                                              (IN BILLIONS OF WON,
                                                              EXCEPT PERCENTAGES)
<S>                                                         <C>     <C>     <C>
INCOME STATEMENT DATA
Noninterest income........................................  W   4   W  13    225.0%
                                                            -----   -----    -----
  Total revenues..........................................      4      13    225.0
Noninterest expense including depreciation and
  amortization............................................   (289)   (349)    20.8
                                                            -----   -----    -----
Segment result(1).........................................  W(285)  W(336)    17.9%
                                                            =====   =====    =====
</Table>

- ---------------

Note:


(1) Net income per segment before income taxes.

     Chohung Bank's overall segment result increased 17.9% from a loss of W285
billion in 2001 to a loss of W336 billion in 2002.

     The increase in noninterest income reflects an increase in rental income
from buildings owned by Chohung Bank in 2002. Noninterest expense including
depreciation and amortization increased 20.8% due primarily to an increase in
salaries and employee compensation as well as general and administration
expenses, which are not allocated to any of Chohung Bank's other business
segments.

                                       282
<PAGE>

  OTHER SUBSIDIARIES

     "Other subsidiaries" includes all other activities of Chohung Bank's
subsidiaries, including the results of operations of Chohung Investment Trust
Management Co., Ltd. and any gains and losses recorded at Chohung Bank's
overseas subsidiaries as well as gains and losses from Chohung Bank's management
of assets transferred to special purpose entities in asset securitization
transactions.

<Table>
<Caption>
                                                      YEAR ENDED DECEMBER 31,
                                                     -------------------------
                                                     2001    2002    % CHANGE
                                                     -----   -----   ---------
                                                       (IN BILLIONS OF WON,
                                                        EXCEPT PERCENTAGES)
<S>                                                  <C>     <C>     <C>
INCOME STATEMENT DATA
Net interest income................................  W 38    W 14      (63.2)%
Noninterest income.................................    56     108       92.9
                                                     ----    ----     ------
     Total revenues................................    94     122       29.8
Provision for loan losses..........................   (31)     21     (167.7)
Noninterest expense including depreciation and
  amortization.....................................   (38)    (51)      34.2
                                                     ----    ----     ------
Segment result(1)..................................  W 25    W 92      268.0%
                                                     ====    ====     ======
</Table>

- ---------------

Note:

(1) Net income per segment before income taxes.

     The overall segment result increased 268.0% from W25 billion in 2001 to W92
billion in 2002.

     The 63.2% decrease in net interest income from W38 billion in 2001 to W14
billion in 2002 was due primarily to a W33 billion increase in interest expenses
relating to asset securitization partially offset by a W12 billion decrease in
interest expense on deposits at Chohung Bank's overseas subsidiaries. The 92.9%
increase in noninterest income from W56 billion in 2001 to W108 billion in 2002
was due primarily to a W62 billion gain from debt-to-equity swaps by Chohung
Bank's special purpose entities.

     Chohung Bank recorded a reversal of provision for loan losses of W21
billion in 2002 as compared to a W31 billion in provision for loan losses in
2001 due primarily to a recovery of impaired loans, including a W15 billion
recovery by Chohung Bank's special purpose entities in asset securitizations of
loans to Dongah Construction & Industrial in 2002.

     Noninterest expense including depreciation and amortization increased 34.2%
due primarily to an increase in other fees and commission expenses relating to
the maintenance and management of special purpose entities in asset
securitizations.

                                       283
<PAGE>

FINANCIAL CONDITION

  ASSETS

     The following table sets forth, as of the dates indicated, the principal
components of Chohung Bank's assets.

<Table>
<Caption>
                                                                   AS OF DECEMBER 31,
                                                        ----------------------------------------
                                                           2001          2002         % CHANGE
                                                        -----------   -----------   ------------
                                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                     <C>           <C>           <C>
Cash and cash equivalents.............................    W 1,678       W 1,863          11.0%
Restricted cash.......................................        176         1,245         607.4
Interest-bearing deposits in banks....................        196           177          (9.7)
Call loans and securities purchased under resale
  agreements..........................................         96           466         385.4
Trading assets:
  Trading securities..................................      1,413         1,054         (25.4)
  Derivatives assets..................................         69           140         102.9
Securities:
  Available-for-sale securities.......................     12,347         9,624         (22.1)
Loans:
  Corporate...........................................     21,535        24,854          15.4
  Consumer............................................     13,927        21,176          52.0
                                                          -------       -------         -----
     Total loans, gross...............................     35,462        46,030          29.8
     Deferred origination costs.......................         44            85          93.2
     Less: allowance for loan losses..................     (2,032)       (2,678)         31.8
                                                          -------       -------         -----
          Total loans, net............................     33,474        43,437          29.8
                                                          -------       -------         -----
Customers' liability on acceptances...................      1,380         1,384           0.3
Premises and equipment, net...........................        722           693          (4.0)
Security deposits.....................................        426           460           8.0
Other assets..........................................      2,922         3,459          18.4
                                                          -------       -------         -----
          Total assets................................    W54,899       W64,002          16.6%
                                                          =======       =======         =====
</Table>

     Chohung Bank's assets increased 16.6% from W54,899 billion as of December
31, 2001 to W64,002 billion as of December 31, 2002 principally due to increased
lending. Chohung Bank's loans increased 29.8% from W33,474 billion as of
December 31, 2001 to W43,437 billion as of December 31, 2002. This increase was
due largely to increases in consumer loans, consisting of mortgages and home
equity loans and other consumer loans. Mortgages and home equity lending
increased 79.5% from W3,993 billion as of December 31, 2001 to W7,167 billion as
of December 31, 2002. Credit cards increased 18.5% from W4,869 billion as of
December 31, 2001 to W5,770 billion as of December 31, 2002. Commercial and
industrial lending increased 20.9% from W13,902 billion as of December 31, 2001
to W16,814 billion as of December 31, 2002, which included a 53.2% increase in
commercial and industrial loans to small- and medium-sized enterprises from
W6,768 billion as of December 31, 2001 to W10,371 billion as of December 31,
2002. Other commercial lending, consisting primarily of bills discounted,
increased by 7.5% from W7,080 billion as of December 31, 2001 to W7,611 billion
as of December 31, 2002. All of these increases in lending were due mainly to
increased loan demand in the low interest rate environment. Chohung Bank's
available-for-sale securities decreased 22.1% from W12,347 billion as of
December 31, 2001 to W9,624 billion as of December 31, 2002 as Chohung Bank
increased its focus on its lending activities, which produced higher yields and
reduced its securities investment portfolio.

     For further information on Chohung Bank's assets, see information relating
to Chohung Bank in "Item 4. Information on the Company -- Description of Assets
and Liabilities".

                                       284
<PAGE>

  LIABILITIES AND STOCKHOLDERS' EQUITY

     The following table sets forth, as of the dates indicated, the principal
components of Chohung Bank's liabilities.

<Table>
<Caption>
                                                                   AS OF DECEMBER 31,
                                                        ----------------------------------------
                                                           2001          2002         % CHANGE
                                                        -----------   -----------   ------------
                                                        (IN BILLIONS OF ON, EXCEPT PERCENTAGES)
<S>                                                     <C>           <C>           <C>
Deposits:
  Interest-bearing....................................    W36,274       W42,371          16.8%
  Noninterest-bearing.................................      1,648         1,903          15.5
Trading liabilities...................................         26            83         219.2
Acceptances outstanding...............................      1,380         1,384           0.3
Short-term borrowings.................................      5,539         5,525          (0.3)
Secured borrowings....................................      2,268         1,351         (40.4)
Long-term debt........................................      3,281         6,461          96.9
Accrued expenses and other liabilities................      3,315         3,534           6.6
                                                          -------       -------         -----
  Total liabilities...................................     53,731        62,612          16.5
                                                          -------       -------         -----
Minority interest.....................................         17            16          (5.9)
Stockholders' equity..................................      1,151         1,374          19.4
                                                          -------       -------         -----
     Total liabilities, minority interest and
       stockholders' equity...........................    W54,899       W64,002          16.6%
                                                          =======       =======         =====
</Table>

     Chohung Bank's total liabilities increased 16.5% from W53,731 billion as of
December 31, 2001 to W62,612 billion as of December 31, 2002. The increase was
due primarily to increases in interest bearing deposits and long-term debt.

     Chohung Bank's interest-bearing deposits increased 16.8% from W36,274
billion as of December 31, 2001 to W42,371 billion as of December 31, 2002 due
primarily to the inflow of highly liquid funds into short-term deposits for lack
of alternative investment opportunities in light of poor stock market
performance.

     The 96.9% increase in long-term debt from W3,281 billion as of December 31,
2001 to W6,461 billion as of December 31, 2002 reflects new issuances of
long-term debt securities by Chohung Bank in light of the favorable primary
market conditions.
     Short-term borrowings remained relatively stable at W5,525 billion as of
December 31, 2002 as compared to W5,539 billion as of December 31, 2001.

     Chohung Bank's stockholders' equity increased 19.4% from W1,151 billion as
of December 31, 2001 to W1,374 billion as of December 31, 2002. This increase
was due principally to Chohung Bank's disposition in 2002 of treasury stock
amounting to W(127) billion as of December 31, 2001 and a decrease in
accumulated deficit from W4,069 billion as of December 31, 2001 to W3,925
billion as of December 31, 2002.


     For further information on Chohung Bank's sources of funding, see "Item 4.
Information on the Company -- Description of Assets and Liabilities -- Funding".

LIQUIDITY AND CAPITAL RESOURCES

     Chohung Bank is exposed to liquidity risk arising from the funding of its
lending, trading and investment activities and in the management of trading
positions. The goal of liquidity management is for Chohung Bank to be able, even
under adverse conditions, to meet all of Chohung Bank's liability repayments on
time and fund all investment opportunities. For an explanation of how Chohung
Bank manages Chohung Bank's liquidity risk, see "Item 4. Information on the
Company -- Description of Assets and Liabilities -- Risk Management of Chohung
Bank -- Liquidity Risk Management".

                                       285
<PAGE>

     The following table sets forth Chohung Bank's capital resources as of
December 31, 2002.

<Table>
<Caption>
                                                              AS OF DECEMBER 31, 2002
                                                              -----------------------
                                                               (IN BILLIONS OF WON)
<S>                                                           <C>
Deposits....................................................          W44,274
Long-term debt..............................................            6,461
Call money..................................................               79
Borrowings from the Bank of Korea...........................              481
Other short-term borrowings.................................            4,965
Asset securitizations.......................................            1,351
Shareholders' equity........................................            1,373
                                                                      -------
     Total..................................................          W58,984
                                                                      =======
</Table>

     Due to Chohung Bank's history as a traditional commercial bank, Chohung
Bank's primary source of funding has historically been and continues to be
customer deposits. Deposits amounted to W37,922 billion and W44,274 billion as
of December 31, 2001 and 2002, which represented approximately 77.4% and 76.9%,
respectively, of Chohung Bank's total funding as of such dates.


     As Chohung Bank offers competitive interest rates on its deposits, Chohung
Bank does not anticipate any material losses in deposit customers to other banks
and financial institutions. Chohung Bank believes that it holds the largest
amount of deposits made by litigants in connection with legal proceedings in
Korean courts or by persons involved in disputes as of December 31, 2002.
Chohung Bank has been performing such court deposit services since 1958, and has
acquired certain competitive advantages, such as infrastructure of equipment,
software and personnel for such business. Such deposits in the past have carried
interest rates, which were generally lower than market rates (on average
approximately 2% per annum). Such deposits totaled W3,887 billion or 10.7% and
W3,872 billion or 9.2% of Chohung Bank's total deposits in Korean Won as of
December 31, 2001 and December 31, 2002, respectively. In 1994, the Supreme
Court of Korea opened to other banks the opportunity to establish new branches
in newly opened court houses. The Supreme Court of Korea may open up competitive
bidding to other commercial banks and their established branch networks to take
court deposits. If the Supreme Court of Korea decides to introduce competitive
bidding to all existing court deposits, Chohung Bank may experience attrition of
its court deposits.


     As of December 31, 2002, approximately 92.6% of our total deposits had
current maturities of one year or less or were payable on demand. However, in
the past, a substantial portion of such customer deposits has been rolled over
upon maturity or otherwise maintained with us, and such short-term deposits have
been a stable source of funding over time. For example, of our total deposits
maturing during the six months ended June 30, 2003, approximately 49% were
rolled over or otherwise maintained with us.

     During June 2003, Chohung Bank estimates that wary customers withdrew
approximately W5 trillion of deposits, resulting in a short-term liquidity and
funding shortage. Pursuant to regulations applicable to financial holding
companies and banks as promulgated by Korean Financial Supervisory Commission,
Chohung Bank is required to keep specific Won and foreign currency liquidity
ratios. These ratios require Chohung Bank to keep the ratio of liquid assets to
liquid liabilities above certain minimum levels. In order to comply with these
regulations in light of substantial deposit withdrawals, Chohung Bank obtained a
total of approximately W5 trillion in emergency funds from the Bank of Korea,
consisting of W2 trillion in the form of secured borrowings and W3 trillion in
the form of short-term borrowings, all of which were repaid as of June 27, 2003.
In late June and early July 2003, Chohung Bank offered competitive rates on its
short-term deposits to improve liquidity and was able to attract deposits in
excess of the outstanding balance prior to the labor union strike. As of June
30, 2003, Chohung Bank was in compliance with the minimum levels of Korean Won
and foreign currency liquidity ratios required by the Financial Supervisory
Commission.


     Chohung Bank may use secondary and other funding sources to complement, or,
if necessary, replace funding through customer deposits. Chohung Bank may obtain
replacement funding through the issuance of long-term debt securities in the
domestic fixed income market. In 2002, Chohung Bank's average interest

                                       286
<PAGE>

rates on long-term debt securities were 179 basis points higher than the average
interest rates offered on its other time deposits.


     Chohung Bank depends on long-term debt as a significant source of funding,
principally in the form of corporate debt securities. Since 2002, Chohung Bank
has actively issued and continue to issue long-term debt securities with
maturities of over one year in the Korean fixed-income market. The cost and
availability of unsecured financing are influenced by credit ratings. Chohung
Bank expects its domestic credit ratings to remain at AA+, the second highest
level for Korean issuers and, accordingly, does not anticipate any material
increase in funding cost. In addition, Chohung Bank may also issue long-term
debt securities denominated in foreign currencies in the overseas market.
Chohung Bank's overseas credit ratings have continued to improve since the
financial crisis of late 1997 until 2002. Following our acquisition of Chohung
Bank, Chohung Bank's credit rating assigned by S&P increased by one notch from
BB+ to BBB-. As of July 31, 2003, the credit ratings by S&P and Moody's assigned
to Chohung Bank were BBB- and Baa2, respectively.

     As of December 31, 2001 and 2002, Chohung Bank's long-term debt amounted to
W3,281 billion and W6,461 billion, respectively.


     Secondary funding sources include short-term borrowings, such as call money
and borrowings from the Bank of Korea, which amounted to W5,539 billion and
W5,525 billion as of December 31, 2001 and 2002 and represented 11.3% and 9.6%,
respectively, of Chohung Bank's total funding as of such dates. These types of
borrowings have maturities of less than one year.

     Additional funding flexibility is provided by Chohung Bank's ability to
access the repurchase and asset securitization markets. These alternatives are
evaluated on an ongoing basis to achieve the appropriate balance of secured and
unsecured funding. The ability to securitize loans, and the associated gains on
those securitizations, are principally dependent on the credit quality and
yields on the assets securitized and are generally not dependent on the ratings
of the issuing entity. Transactions between Chohung Bank and its securitization
structures are reflected in our financial statements. See Note 12 to Chohung
Bank's consolidated financial statements.

     Chohung Bank's policy is to encourage its subsidiaries to secure their own
liquidity sources. With respect to overseas subsidiaries, Chohung Bank has, in
certain cases, provided funding to take advantage of lower cost of funding
within regulatory limitations. Pursuant to Chohung Bank's liquidity risk
management policies designed to ensure compliance with required capital adequacy
and liquidity ratios, Chohung Bank set limits to the amount of liquidity support
based on the credit of each individual overseas subsidiary, in the case of
Chohung Bank's overseas subsidiaries, and based on the credit line established
for each subsidiary, in the case of Chohung Bank's other subsidiaries.

     In light of the financial market instability in Korea resulting from the
liquidity problems faced by credit card companies during the first quarter of
2003, the Korean government announced temporary measures in April 2003 intended
to provide liquidity support to credit card companies. These measures included,
among other things:

     - a request by the government for credit card companies to effect capital
       increase in the aggregate amount of W4.6 trillion, as part of their
       self-rescue efforts;

     - banks and other financial institutions agreeing with each other to extend
       the maturity of all debt securities of credit card companies that they
       hold;

     - investment trust companies agreeing with each other to extend the
       maturity of 50% of the aggregate amount of the debt securities of credit
       card companies that they hold which are schedule to mature by June 2003;
       and

     - with respect to the remaining 50% of such credit card company debt
       securities, banks and other financial institutions agreeing with each
       other to contribute an aggregate amount of W5.6 trillion to purchase such
       debt securities from investment trust companies.

                                       287
<PAGE>

     Pursuant to the above measures, Chohung Bank agreed to extend the
maturities of the W177 billion of loans and debt securities of credit card
companies that Chohung Bank held in April 2003 or that have become due in June
2003. Of the W5.6 trillion aggregate contribution made by Korean financial
institutions to purchase credit card company debt securities held by investment
trust companies, the portion allocated for Chohung Bank to purchase was
approximately W183 billion, all of which were repaid as of July 31, 2003.
Chohung Bank does not believe that its obligation under these measures has had
or will have a significant impact on its short-term or long-term liquidity,
business, financial condition or results of operations.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     In the ordinary course of its business, Chohung Bank has certain
contractual cash obligations and commitments which extend for several years. As
Chohung Bank is able to obtain liquidity and funding through various sources as
described in "-- Liquidity and Capital Resources" above, Chohung Bank does not
believe that these contractual cash obligations and commitments will have a
material effect on its liquidity or capital resources.

  CONTRACTUAL CASH OBLIGATIONS

     The following table sets forth Chohung Bank's contractual cash obligations
as of December 31, 2002. Operating lease obligations are not included within
Chohung Bank's consolidated balance sheet.

<Table>
<Caption>
                                                               DECEMBER 31, 2002
                                                             PAYMENTS DUE BY PERIOD
                                                              (IN BILLIONS OF WON)
                                                         ------------------------------
                                                         UP TO     BETWEEN 1    BEYOND
                                                         1 YEAR   AND 5 YEARS   5 YEARS   TOTAL
                                                         ------   -----------   -------   ------
<S>                                                      <C>      <C>           <C>       <C>
Long-term debt.........................................  W2,057     W3,570       W913     W6,540
Operating lease obligations............................       3          5         --          8
                                                         ------     ------       ----     ------
  Total................................................  W2,060     W3,575       W913     W6,548
                                                         ======     ======       ====     ======
</Table>

     Long-term debt includes senior and subordinated debt as shown in Note 13 to
Chohung Bank's consolidated financial statements and "-- Liquidity and Capital
Resources" above.

     The above table excludes short-term borrowings, secured borrowings and
deposits since these are generally short-term in nature. The contractual
maturity of deposits is given in Note 10 to Chohung Bank's consolidated
financial statements.

                                       288
<PAGE>

  COMMITMENTS

     The following table sets forth Chohung Bank's commitments as of December
31, 2002. These commitments, apart from acceptances, are not reflected on
Chohung Bank's consolidated balance sheet.

<Table>
<Caption>
                                                            DECEMBER 31, 2002
                                                     COMMITMENT EXPIRATION BY PERIOD
                                                          (IN BILLIONS OF WON)
                                                     -------------------------------
                                                      UP TO     BETWEEN 1    BEYOND
                                                     1 YEAR    AND 5 YEARS   5 YEARS    TOTAL
                                                     -------   -----------   -------   -------
<S>                                                  <C>       <C>           <C>       <C>
Commitments to extend credit:
  Commercial.......................................  W 9,345     W2,102      W    2    W11,449
  Credit card lines................................   17,859         15           1     17,875
  Consumer.........................................    1,762        127          --      1,889
Commercial letters of credit.......................    1,492         --          --      1,492
Standby letters of credit..........................       61         15          13         89
Financial guarantees...............................      184         79          12        275
Performance guarantees.............................      307        253           2        562
Acceptances........................................    1,384         --          --      1,384
Loans sold with recourse...........................       --         --         138        138
Market value guarantees on trust accounts..........       22        233         891      1,146
                                                     -------     ------      ------    -------
Total..............................................  W32,416     W2,824      W1,059    W36,299
                                                     =======     ======      ======    =======
</Table>

     Commitments to extend credit represent unfunded portions of authorizations
to extend credit in the form of loans. The commitments expire on fixed dates and
a customer is required to comply with predetermined conditions to draw funds
under the commitments. Commitments to extend credit, including credit lines, are
in general subject to provisions that allow Chohung Bank to withdraw such
commitments in the event there are material adverse changes affecting an
obligor.

     Commercial letters of credit are undertakings on behalf of customers
authorizing third parties to draw drafts on Chohung Bank up to a stipulated
amount under specific terms and conditions. They are generally short-term and
collateralized by the underlying shipments of goods to which they relate and
therefore have significantly less risk.

     Standby letters of credit are irrevocable obligations to pay third party
beneficiaries when its customers fail to repay loans or debt instruments, which
are generally in foreign currencies. A substantial portion of these standby
letters of credit are secured by underlying assets, including trade-related
documents.

     Financial guarantees are used in various transactions to enhance the credit
standing of Chohung Bank's customers. They represent irrevocable assurance,
subject to satisfaction of certain conditions, that we will make payment in the
event that Chohung Bank's customers fail to fulfill their obligations to third
parties. Such financial obligations include a return of security deposits and
the payment of service fees.

     Performance guarantees are issued to guarantee customers' tender bids on
construction or similar projects or to guarantee completion of such projects in
accordance with contractual terms. They are also issued to support a customer's
obligation to supply specified products, commodities, maintenance or other
services to third parties.

     Acceptances are a guarantee by Chohung Bank to pay a bill of exchange drawn
on a customer. Chohung Bank expects most acceptances to be presented, but
reimbursement by the customer is normally immediate.

     Loans sold with recourse represent certain non-performing loans Chohung
Bank sold to Korea Asset Management Corporation prior to 1999. The sales
agreements contain a recourse obligation under which Korea Asset Management
Corporation can obligate Chohung Bank to repurchase the related loans. The
recourse obligation has no expiration date.

                                       289
<PAGE>

     Market value guarantees on trust accounts represent guarantee of principal
or fixed rate of return issued to trust fund investors.

     Details of Chohung Bank's credit commitments and obligations under
guarantees are provided in Note 26 to Chohung Bank's consolidated financial
statements.

  OFF-BALANCE SHEET ARRANGEMENTS

     Chohung Bank is involved in several types of off-balance sheet
arrangements, including guarantees for loans, debentures, trade financing
arrangements, guarantees for other financings, credit lines, letters of credit
and credit commitments. See "Item 4. Information on the Company -- Description
of Assets and Liabilities -- Credit Related Commitments".

SELECTED FINANCIAL INFORMATION UNDER KOREAN GAAP

     The selected consolidated financial and other data shown below have been
derived from Chohung Bank's consolidated financial statements, prepared in
accordance with Korean GAAP.

     Under Korean GAAP, consolidated financial statements include the accounts
of wholly or majority owned subsidiaries and substantially controlled affiliates
that have assets in the amount equal to or more than 7 billion as of the end of
the previous fiscal year. Substantial control is deemed to exist when the
investor is the largest shareholder and owns more than 30% of the investee's
voting shares. Korean GAAP does not require the consolidation of subsidiaries,
or substantially controlled affiliates, where activities are dissimilar from
Chohung Bank's.

     Under Korean GAAP effective since 1994, financial statements of Chohung
Bank's trust accounts, on which Chohung Bank guarantees a fixed rate of return
and/or the repayment of principal, are consolidated, whereby assets and
liabilities of third parties held by such trusts are reflected as assets and
liabilities, and revenues and expenses generated from such third party assets
are reflected in the statement of operations. Activities between trust accounts
and Chohung Bank are eliminated.

     Until December 31, 1998, Chohung Bank's financial statements were prepared
in accordance with the financial accounting standards generally accepted in the
Republic of Korea, as modified by the accounting and reporting guidelines
prescribed by the Office of Banking Supervision. Beginning January 1, 1999, the
financial statements are prepared in accordance with financial accounting
standards generally accepted for banking institutions issued by the Korean
Securities and Futures Commission.

     Capital adequacy ratios have been calculated from the financial statements
prepared in accordance with Korean GAAP and using the guidelines issued by the
Financial Supervisory Commission.

     Because of significant changes in Korean GAAP which were applied by Chohung
Bank in 1998 and 1999, the financial information included herein for those years
is not directly comparable with previous periods. Chohung Bank has included
narrative disclosure in the footnotes to more clearly identify where significant
accounting policy changes have taken place, which line items would be affected
and how the balances would be affected. The areas where such significant changes
have occurred are as follows:

     - Trading and investment securities;

     - Deferred taxation;

     - Guarantees and acceptances (including allowances for losses); and

     - Provision for loan loss allowances.

                                       290
<PAGE>

  CONSOLIDATED INCOME STATEMENT DATA

<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                     --------------------------------------------------------------------
                                        1998        1999        2000       2001       2002       2002(1)
                                     ----------   ---------   --------   --------   ---------   ---------
                                       (IN BILLIONS OF WON AND MILLIONS OF US$, EXCEPT PER SHARE DATA)
<S>                                  <C>          <C>         <C>        <C>        <C>         <C>
Interest income....................   W  4,923     W 3,729     W4,270     W4,137     W 3,994     $ 3,367
Interest expense...................      4,029       2,601      2,853      2,426       2,163       1,823
                                      --------     -------     ------     ------     -------     -------
Net interest income................        894       1,128      1,417      1,711       1,831       1,544
Provision for loan losses(2).......        860       1,937        960        765       1,618       1,364
                                      --------     -------     ------     ------     -------     -------
Net interest income (loss) after
  provision for loan losses........         34        (809)       457        946         213         180
Noninterest income(3)..............      2,333       2,074      1,514      1,482       1,594       1,343
Noninterest expenses(4)............      4,511       1,974      1,889      2,076       2,408       2,030
                                      --------     -------     ------     ------     -------     -------
Ordinary income (loss).............     (2,144)       (709)        82        352        (601)       (507)
Extraordinary gain.................         --          --         17         --          --          --
                                      --------     -------     ------     ------     -------     -------
Income (loss) before income tax
  expense..........................     (2,144)       (709)        99        352        (601)       (507)
Income taxes(5)....................        (10)        (32)        (2)       176          17          14
                                      --------     -------     ------     ------     -------     -------
Net income (loss) before
  consolidation adjustment.........     (2,154)       (741)        97        528        (584)       (493)
Minority interest in loss
  (earnings) of consolidated
  subsidiaries(6)..................         71          (6)         2         (3)         (2)         (2)
                                      --------     -------     ------     ------     -------     -------
Net income (loss)..................   W (2,083)    W  (747)    W   99     W  525     W  (586)    $  (495)
                                      ========     =======     ======     ======     =======     =======
Per common share data (in currency
  unit):
Earnings per share-basic...........   W(11,193)    W(1,609)    W  146     W  804     W  (871)    $ (0.73)
Earnings per share-diluted(7)......    (11,193)     (1,609)       146        804        (871)      (0.73)
Cash dividends per common share....         --          --         --         --          --          --
Stock dividends per common share...         --          --         --         --          --          --
</Table>

- ---------------

Notes:
(1) Won amounts are expressed in U.S. Dollars at the rate of W1,186.30 per
    US$1.00, noon buying rate in effect on December 31, 2002 as quoted by the
    Federal Reserve Bank of New York in the United States.

(2) The methodology Chohung Bank uses to calculate the provision for loan losses
    was revised in 1999 to consider not only delinquencies and bankruptcies but
    also future capacity to repay including the borrower's management, current
    financial position, and future cash flows, based on its internally developed
    credit rating model.

(3) Noninterest income includes fees and commissions income, gains on security
    valuations and disposals, gains on foreign currency transaction and gains
    from derivative transactions.

(4) Noninterest expense is composed of fees and commissions paid or payable,
    general and administrative expenses, losses on securities valuations and
    disposals, losses on foreign currency transactions and losses from
    derivative transactions.

(5) Prior to 1999, there was no requirement to use a deferred method of
    accounting for income taxes. The cumulative effect of adopting the revised
    standards as of January 1, 1999 was to credit opening retained earnings by
    W38 billion, which reflected the deferred tax assets that would have been
    recognized as of December 31, 1998. Chohung Bank did not restate prior
    periods. The effect of adopting the revised standards for the year ended
    December 31, 1999 was to decrease net income by W18 billion and to recognize
    deferred tax assets of W18 billion as of December 31, 1999.

                                       291
<PAGE>

(6) Prior to 2000, gain (loss) from investment used to be presented next to
    minority interest in earnings of consolidated subsidiaries. However,
    according to the amended consolidation accounting principle in 2000, the
    gain (loss) from investment is reclassified as an item of non-operating
    income (loss). Applying the amendment retroactively, the 1999 income
    statement was adjusted reflecting the reclassification of the gain (loss)
    from investment earned (incurred) in 1999.

(7) Diluted earnings per share measure was only required to be disclosed from
    1999. Prior to this change in requirements, only basic earnings per share
    amount was required to be disclosed.

  CONSOLIDATED BALANCE SHEET DATA

<Table>
<Caption>
                                                    AS OF DECEMBER 31,
                                 ---------------------------------------------------------
                                  1998      1999      2000      2001      2002     2002(1)
                                 -------   -------   -------   -------   -------   -------
                                         (IN BILLIONS OF WON AND MILLIONS OF US$)
<S>                              <C>       <C>       <C>       <C>       <C>       <C>
ASSETS:
Cash and due from banks........  W 2,558   W 3,143   W 2,308   W 2,054   W 2,729   $ 2,300
Trading securities(2)..........    4,658     3,694     2,530     2,302     2,037     1,717
Investment securities(2).......    5,380    10,351    11,229    12,699     9,913     8,356
Loans(3).......................   24,193    25,808    30,550    33,915    45,610    38,447
Fixed assets...................    1,539     1,811     1,712     1,578     1,426     1,202
Other assets(4)................    2,360     2,132     2,810     4,062     5,555     4,684
                                 -------   -------   -------   -------   -------   -------
Total assets...................  W40,688   W46,939   W51,139   W56,610   W67,270   $56,706
                                 =======   =======   =======   =======   =======   =======
LIABILITIES AND STOCKHOLDERS'
  EQUITY:
Liabilities:
Deposits.......................  W24,406   W30,334   W35,426   W40,601   W46,530   $39,222
Borrowings(5)..................   11,409     9,285     7,337     6,468     6,647     5,603
Debentures.....................    1,703     2,393     3,033     2,416     5,672     4,782
Other liabilities(6)...........    3,026     2,734     3,241     4,561     6,101     5,143
                                 -------   -------   -------   -------   -------   -------
Total liabilities..............   40,544    44,746    49,037    54,046    64,950    54,750
                                 -------   -------   -------   -------   -------   -------
Stockholders' equity:
Common stock...................      930     3,395     3,395     3,395     3,395     2,862
Capital surplus................        6        --        --        --        --        --
Accumulated deficit............     (835)   (1,029)     (814)     (342)     (884)     (745)
Capital adjustments............      (10)     (230)     (490)     (502)     (205)     (173)
Minority interest in
  consolidated subsidiaries....       53        57        11        13        14        12
                                 -------   -------   -------   -------   -------   -------
Total minority interest and
  stockholders' equity.........      144     2,193     2,102     2,564     2,320     1,956
                                 -------   -------   -------   -------   -------   -------
Total liabilities, minority
  interest and stockholders'
  equity.......................  W40,688   W46,939   W51,139   W56,610   W67,270   $56,706
                                 =======   =======   =======   =======   =======   =======
</Table>

- ---------------

Notes:
(1) Won amounts are expressed in U.S. Dollars at the rate of W1,186.30 per
    US$1.00, noon buying rate in effect on December 31, 2002 as quoted by the
    Federal Reserve Bank of New York in the United States.

(2) Under Korean GAAP effective in 1998 and until the following revision, debt
    securities denominated in Won were stated at acquisition cost. Chohung Bank
    accounted for all other debt and marketable equity securities on a basis
    similar to U.S. GAAP. Under Korean GAAP effective for periods beginning
    after

                                       292
<PAGE>

    December 12, 1998, all debt securities and marketable debt securities are
    accounted for on a similar basis to U.S. GAAP. However, adjustments for
    impairment can be reversed up to the original cost of the investment.

(3) Loans represent the net amount of loans, after adjustment for the allowance
    for loan losses. Accrued interest income is included within other assets.
    The allowance was disclosed within provisions until 1998. The amount of
    allowance for loan losses prior to December 31, 1999 was provided based on
    credit risk classifications of the loan portfolio in accordance with
    guidelines issued by the Financial Supervisory Commission. Estimated loan
    losses were determined by applying certain percentages to each credit risk
    classification. Under revised Korean GAAP, effective as at December 31,
    1999, the Financial Supervisory Commission requires allowances to fully
    reflect a borrower's future capacity to repay using forward looking
    criteria, rather than solely past performance, by applying the internal
    credit grading system developed by the reporting bank. The forward looking
    criteria are applied to large-sized commercial loans (total loan exposure of
    W1 billion until September 2002 and total loan exposure of W2 billion after
    September 2002), while consumer loans and small-sized commercial loans were
    classified by considering number of days delinquent, secured amounts, and
    possibility of collection. Pursuant to the regulations promulgated by the
    Financial Supervisory Commission, loans are classified as normal,
    precautionary, substandard, doubtful or estimated loss, and the allowance
    for loan losses is determined by applying a percentage within a certain
    range to those classifications.

(4) Other assets include guarantee deposits, operating lease properties,
    accounts receivable, accrued interest income, prepaid expenses and unsettled
    debit of domestic exchange (which represents outstanding balances due from
    other banks generated in the process of fund settlements of domestic
    exchange, such as checks, bills, drafts, remittance exchange, ATM use and
    credit card network).

(5) Borrowings consist mainly of borrowings from The Bank of Korea, the Korean
    government and banking institutions, call money, cover bills sold and bonds
    sold under repurchase agreements.

(6) Under Korean GAAP, effective as of December 31, 1999, contingent losses with
    respect to guarantees and acceptances are recognized by applying the same
    classification methods and provision percentages used in determining the
    allowance for loan losses. Allowance for losses are only applied to
    acceptances and guarantees classified as substandard, doubtful and estimated
    loss. The amounts of such allowance for losses as of December 31, 1999,
    2000, 2001 and 2002 were W190 billion, W64 billion, W52 billion and W126
    billion, respectively. These amounts are included in other liabilities.

  PROFITABILITY RATIOS

<Table>
<Caption>
                                                       YEAR ENDED DECEMBER 31,
                                               ----------------------------------------
                                                1998     1999    2000    2001     2002
                                               ------   ------   -----   -----   ------
                                                            (PERCENTAGES)
<S>                                            <C>      <C>      <C>     <C>     <C>
Net income as a percentage of:
  Average total assets(1)....................   (4.91)%  (1.75)%  0.20%   0.98%   (0.96)%
  Average stockholders' equity...............  (83.72)  (23.95)   3.24   22.59   (22.21)
Dividend payout ratio(2).....................      --       --      --      --       --
Net interest spread(3).......................    2.65     3.16    3.29    3.92     3.59
Net interest margin(4).......................    2.41     3.05    3.28    3.76     3.51
Efficiency ratio(5)..........................  139.79    61.64   64.45   65.03    70.32
Cost-to-average assets ratio(6)..............   10.63     4.62    3.80    3.89     3.94
Average stockholders' equity as a percentage
  of average total assets....................    5.86     7.29    6.16    4.36     4.32
</Table>

- ---------------

Notes:

(1) Average balances are based upon (i) daily balances for Chohung Bank and its
    overseas subsidiaries except for stockholders' equity which is based upon
    quarterly balances and (ii) quarterly balances of Chohung

                                       293
<PAGE>

    Bank's domestic subsidiaries including Chohung Investment Trust Management
    Company and special purpose entities for Chohung Bank's asset
    securitization.

(2) The dividend payout ratio represents the ratio of total dividends paid on
    common stock as a percentage of net income attributable to common stock.

(3) Net interest spread represents the difference between the yield on average
    interest earning assets and cost of average interest bearing liabilities.

(4) Net interest margin represents the ratio of net interest income to average
    interest earning assets.

(5) Efficiency ratio represents the ratio of noninterest expense to the sum of
    net interest income and noninterest income.

(6) Cost-to-average-assets ratio represents the ratio of noninterest expense to
    average total assets.

  CAPITAL RATIOS

<Table>
<Caption>
                                                            AS OF DECEMBER 31,
                                                     ---------------------------------
                                                     1998   1999   2000   2001    2002
                                                     ----   ----   ----   -----   ----
                                                               (PERCENTAGES)
<S>                                                  <C>    <C>    <C>    <C>     <C>
  Total capital adequacy (BIS) ratio of Chohung
     Bank(1).......................................  0.93%  9.80%  9.78%  10.43%  8.66%
  Tier I...........................................  0.47   5.66   5.24    5.91   4.61
  Tier II..........................................  0.46   4.14   4.54    4.52   4.05
</Table>

- ---------------

Note:

(1) Chohung Bank's capital adequacy ratios are computed in accordance with the
    guidelines issued by the Financial Supervisory Commission, which was revised
    in 2002 to take into account market risk as well as credit risk. The capital
    ratios as of December 31, 2002 were calculated using these revised
    guidelines. The capital ratios as of December 31, 1998, 1999, 2000 and 2001
    do not reflect the revised guidelines. Under the guidelines of the Financial
    Supervisory Commission, Chohung Bank is required to maintain a minimum
    capital adequacy ratio of 8%. Applying the previous calculation, which only
    takes into account credit risks, Chohung Bank's total capital adequacy ratio
    as of December 31, 2002 was 8.64%. This computation is based on Chohung
    Bank's consolidated financial statements prepared in accordance with Korean
    GAAP. See "Item 4. Information on the Company -- Supervision and
    Regulation -- Regulations Applicable to Banks -- Capital Adequacy."

                                       294
<PAGE>

  ASSET QUALITY RATIOS

<Table>
<Caption>
                                                   AS OF DECEMBER 31,
                                       -------------------------------------------
                                        1998     1999     2000     2001     2002
                                       ------   ------   ------   ------   -------
                                        (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                    <C>      <C>      <C>      <C>      <C>
Substandard and below loans(1).......  W1,523   W3,680   W2,502   W1,440   W 1,848
Substandard and below loans as a
  percentage of total loans..........    5.25%   12.00%    7.56%    3.39%     3.80%
Substandard and below loans as a
  percentage of total assets.........    3.39    13.17     5.59     2.80      3.38
Precautionary loans as a percentage
  of total loans(2)..................   16.86     8.32     4.92     5.73      3.64
Precautionary and below loans as a
  percentage of total loans(2).......   22.15    24.46    15.42     8.99      7.16
Precautionary and below loans as a
  percentage of total assets(2)......   14.31    26.83    11.40     6.30      6.37
Allowance for loan losses as a
  percentage of substandard and below
  loans..............................   43.73    40.63    57.52    42.89     60.01
Allowance for loan losses as a
  percentage of precautionary and
  below loans(2).....................   12.03    25.59    27.57    27.33     37.86
Allowance for loan losses as a
  percentage of total loans..........    3.02     5.96     5.10     2.91      3.33
Substandard and below credits as a
  percentage of total credits(3).....    4.84    10.75     7.15     3.89      3.99
Loans in Korean Won as a percentage
  of deposits in Korean Won(4).......   69.95    76.03    87.66    88.47    105.33
</Table>

- ---------------

Notes:

(1) Substandard and below loans are defined in accordance with regulatory
    guidance in Korea, except for loans provided from Chohung Bank's trust
    accounts (including bills discounted and privately placed debentures) and
    confirmed guarantees and acceptances. Until 1998, Chohung Bank classified
    credit quality into the following five categories according to standards
    defined by the Office of Bank Supervision: normal, precautionary,
    substandard, doubtful and estimated loss. In 1999, as well as classifying
    credit quality into the five categories in accordance with standards defined
    by the Financial Supervisory Commission, Chohung Bank also took into account
    the repayment capability of borrowers. See "Item 4. Information on the
    Company -- Supervision and Regulation -- Regulations Applicable to Banks".

(2) As defined by the Financial Supervisory Commission.

(3) Pursuant to reporting guidelines issued by the Financial Supervisory
    Commission, credits include loans provided from Chohung Bank's trust
    accounts (including bills discounted and privately placed debentures) and
    confirmed guarantees and acceptances as well as the total loan portfolio of
    the banking accounts.

(4) Under Korean GAAP, loans in Korean Won do not include bills bought in Won,
    advances for customers, credit card accounts, bonds purchased under resale
    agreements, call loans, private placement corporate bonds and loans in
    restructurings that have been swapped for equity in the restructured
    borrower.

                                       295
<PAGE>

RECENT DEVELOPMENTS

  RECENT ACCOUNTING PRONOUNCEMENTS

     In April 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. The new guidance
amends SFAS No. 133 for decisions made: (a) as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS No.
133, (b) in connection with other FASB projects dealing with financial
instruments and (c) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contains
financing components. SFAS No. 149 is generally effective for contracts entered
into or modified after June 30, 2003, with a few exceptions, and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. Chohung Bank's management is currently assessing the impact of
SFAS No. 149 on the financial condition and results of operations of Chohung
Bank.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, but must now to
be classified as liabilities (or assets in some circumstances) in the statement
of financial position. Furthermore, SFAS No. 150 requires disclosure regarding
the terms of those instruments and settlement alternatives. The guidance in SFAS
No. 150 is generally effective for all financial instruments entered into or
modified after May 31, 2003, and is otherwise effective at the beginning of the
first interim period beginning after June 15, 2003. Chohung Bank's management is
currently assessing the impact of SFAS No. 150 on the financial condition and
results of operations of Chohung Bank.

     In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees. FIN 45
requires a guarantor to recognize a liability at the inception of certain
guarantees for the fair value of the obligation, including the ongoing
obligation to stand ready to perform over the term of the guarantee. Guarantees,
as defined in FIN 45, include contracts that contingently require Chohung Bank
to make payments to a guaranteed party based on changes in an underlying that is
related to an asset, liability or equity security of the guaranteed party,
performance guarantees, indemnification agreements or indirect guarantees of
indebtedness of others. This new accounting is effective for certain guarantees
issued or modified after December 31, 2002. In addition, FIN 45 requires certain
additional disclosures that are located in Note 26 to our consolidated financial
statements. Chohung Bank's management does not expect that the adoption of FIN
45 will have a material impact on the financial condition or results of
operations of Chohung Bank.

     In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.
FIN 46 provides a new framework for identifying variable interest entities
("VIEs") and determining when a company should include the assets, liabilities,
noncontrolling interests and results of activities of VIEs in its consolidated
financial statements. FIN 46 requires VIEs to be consolidated by a company if
that company is subject to a majority of the expected losses from the VIEs'
activities or entitled to receive a majority of the entity's expected residual
returns, or both. FIN 46 is effective immediately for VIEs created after January
31, 2003 and is effective as of January 1, 2004 for VIEs created prior to
February 1, 2003. Chohung Bank's management is currently assessing the impact of
FIN 46 on the financial condition and results of operations of Chohung Bank.

  RECENT EVENTS

  Exposure to SK Global and other SK Group Companies

     Since December 31, 2002, Chohung Bank has not increased its exposure to SK
Global in any material respects and no significant changes have occurred with
respect to its exposures to other SK Group companies except increases in trade
financing to SK Group companies within its credit limit.

                                       296
<PAGE>

     The following table provides a comparison of Chohung Bank's exposures and
related aggregate allowance for loan losses and for guarantees and acceptances
to SK Group Companies on a Korean GAAP basis as of December 31, 2002 and June
30, 2003 in aggregate, and separately for SK Global and SK Corporation. Chohung
Bank's exposure to SK Group companies on a U.S. GAAP basis would be different
from these amounts due to differences in consolidation scope and the carrying
amount of loans and securities under both bases of accounting. See
"-- Reconciliation with Korean Generally Accepted Accounting Principles" below
for a specific description of these differences.
<Table>
<Caption>
                                                                          AS OF
                               --------------------------------------------------------------------------------------------
                                                    DECEMBER 31, 2002                                JUNE 30, 2003
                               -----------------------------------------------------------   ------------------------------
                                                                           ALLOWANCES FOR
                               LOAN BALANCES AND                           LOAN LOSSES AND   LOAN BALANCES AND
                                GUARANTEES AND                   TOTAL     GUARANTEES AND     GUARANTEES AND
                                  ACCEPTANCES      SECURITIES   EXPOSURE     ACCEPTANCES        ACCEPTANCES      SECURITIES
                               -----------------   ----------   --------   ---------------   -----------------   ----------
                                                                   (IN BILLIONS OF WON)
<S>                            <C>                 <C>          <C>        <C>               <C>                 <C>
SK Global(1).................        W496             W 4         W500           W3                W441             W 3
SK Corporation...............          83              10           93           --                  99              --
Other SK Group Companies.....         114              27          141           --                 173              16
                                     ----             ---         ----           --                ----             ---
   TOTAL.....................        W693             W41         W734           W3                W713             W19
                                     ====             ===         ====           ==                ====             ===

<Caption>
                                         AS OF
                               --------------------------
                                     JUNE 30, 2003
                               --------------------------
                                          ALLOWANCES FOR
                                          LOAN LOSSES AND
                                TOTAL     GUARANTEES AND
                               EXPOSURE     ACCEPTANCES
                               --------   ---------------
                                  (IN BILLIONS OF WON)
<S>                            <C>        <C>
SK Global(1).................    W444          W150(2)
SK Corporation...............      99            --
Other SK Group Companies.....     189             1
                                 ----          ----
   TOTAL.....................    W732          W151
                                 ====          ====
</Table>

- ---------------
Notes:

(1) There was no allowance for guarantees and acceptances as of December 31,
    2002 since SK Global was classified as normal. A provision of W131 billion
    for loan losses and a provision of W16 billion for guarantees and
    acceptances were recorded to increase the allowance for loan losses and
    allowance for guarantees and acceptances, respectively, as the
    classification of SK Global was changed from normal to substandard due to
    the recent discovery of accounting irregularities and subsequent development
    of workout procedures described in "-- Shinhan Financial Group -- Recent
    Developments -- Recent Events -- Exposure to SK Global and other SK Group
    Companies".

(2) The only changes in the allowance for loan losses and guarantees and
    acceptances related to SK Global from January 1, 2003 to June 30, 2003 were
    additional provisions totalling W147 billion.

  Exposure to the former Hyundai Group Companies

     Since December 31, 2002, no significant changes have occurred with respect
to Chohung Bank's exposures to the former Hyundai Group companies in any
material respects.

  Exposure to the former Ssangyong Group Companies

     As it holds the largest exposure to Ssangyong Corporation, Chohung Bank
currently serves as the principal creditor bank leading the workout program for
member companies of the former Ssangyong Group. The largest exposures to
Ssangyong Cement Industrial and Ssangyong Engineering & Construction, however,
are held by Korea Development Bank and Korea Asset Management Corporation,
respectively. Each of Ssangyong Corporation, Ssangyong Cement Industrial and
Ssangyong Engineering & Construction are currently under a workout program.

     In July 2003, a committee of its creditors participating in the workout
program of Ssangyong Cement Industrial approved a plan to (i) extend new credits
of W150 billion to provide additional liquidity, of which Chohung Bank's portion
is W50 billion, all of which are entitled to priority in repayment as agreed by
the creditors' committee, (ii) debt-to-equity swap of W573 billion, in which
Chohung Bank did not participate, and (iii) extend the maturity for repayment of
principal from December 2003 to December 2005.

     As of June 30, 2003, Ssangyong Engineering & Construction's backlog of
construction orders is reported to amount to approximately W2.5 trillion. Due to
improved operations, the creditors' committee is seeking to terminate the
workout program and sell equity securities of Ssangyong Engineering &
Construction obtained through previous debt-to-equity swaps.

                                       297
<PAGE>

     Except as described above, no significant changes have occurred with
respect to Chohung Bank's exposures to the former Ssangyong Group companies in
any material respects since December 31, 2002.

  Asset Quality

     The following table shows the asset quality of Chohung Bank's credit
portfolio by type as of December 31, 2002 and June 30, 2003 calculated on a
non-consolidated basis under Korean GAAP and reported to the Financial
Supervisory Commission.

<Table>
<Caption>
                                                                         AS OF
                                                              ---------------------------
                                                               DECEMBER 31,     JUNE 30,
                                                                   2002           2003
                                                              --------------   ----------
                                                              (IN BILLIONS OF WON, EXCEPT
                                                                     PERCENTAGES)
<S>                                                           <C>              <C>
Substandard and below credits(1)............................       W1,849         W2,157
  Substandard...............................................          477            823
  Doubtful..................................................        1,151          1,021
  Estimated loss............................................          221            313
Substandard and below credits as a percentage of total
  credits...................................................         3.75%          4.41%
Substandard and below credits as a percentage of total
  assets....................................................         2.79%          3.25%
Precautionary and below credits(2)..........................       W3,740         W4,180
Precautionary and below credits as a percentage of total
  credits...................................................         7.59%          8.55%
Precautionary and below credits as a percentage of total
  assets....................................................         5.65%          6.31%
Allowance for loan losses(3)................................       W1,755         W1,841
Allowance for loan losses as a percentage of substandard and
  below credits.............................................        94.95%         85.35%
Allowance for loan losses as a percentage of precautionary
  and below credits.........................................        46.93%         44.04%
Allowance for loan losses as a percentage of total
  credits...................................................         3.56%          3.77%
Loans in Korean Won as a percentage of deposits in Korean
  Won(4)....................................................        80.24%         92.48%
</Table>

- ---------------

Notes:

(1) Substandard and below credits are defined in accordance with regulatory
    guidance in Korea, and includes loans provided from Chohung Bank's trust
    accounts (including bills discounted and privately placed debentures) and
    confirmed guarantees and acceptances. Until 1998, Chohung Bank classified
    credit quality into the following five categories according to standards
    defined by the Office of Bank Supervision, which categories are normal,
    precautionary, substandard, doubtful and estimated loss. In 1999, as well as
    classifying credit quality into the five categories in accordance with
    standards defined by the Financial Supervisory Commission, Chohung Bank also
    took into account the repayment capability of borrowers. See "Item 4.
    Information on the Company -- Supervision and Regulation -- Regulations
    Applicable to Banks".

(2) As defined by the Financial Supervisory Commission.

(3) Includes allowance for guarantees and acceptances and allowance for loan
    losses on loans from the trust accounts.

(4) Under Korean GAAP, loans in Korean Won do not include bills bought in Won,
    advances for customers, credit card accounts, bonds purchased under resale
    agreements, call loans, private placement corporate bonds and loans in
    restructurings that have been swapped for equity in the restructured
    borrower.

  Allowance for Loan Losses under Korean GAAP

     As a result of impairment in Chohung Bank's exposures to SK Global and
increased delinquencies on credit cards, its credit quality, under Korean GAAP,
as of June 30, 2003 deteriorated as compared to that of December 31, 2002. Loans
classified as substandard or below under the classification of the Financial
Supervisory Commission increased by W309 billion to W2,157 billion, primarily as
a result of W304 billion

                                       298
<PAGE>

of loans to SK Global being reclassified as substandard following the discovery
of accounting irregularities in March 2003. Under U.S. GAAP, this was reflected
in the consolidated financial statements prepared in accordance with U.S. GAAP
as of December 31, 2002 and earlier years since the nature of these accounting
irregularities would have caused Chohung Bank's loans to SK Global to have been
classified as substandard in those earlier periods had information as to the
true financial condition of the company been available as of that time. Loans
classified as substandard or below as a percentage of total loans increased by
66 basis points from 3.75% as of December 31, 2002 to 4.41% as of June 30, 2003.
Delinquent credit card balances (balances over due for 90 days or more)
increased by W48 billion during the period in comparison and net charge-offs
during the first half of 2003 amounted to W710 billion. Delinquency ratios
increased from 5.75% as of December 31, 2002 to 8.34% as of June 30, 2003. As a
result of the foregoing, Chohung Bank's allowance for loan losses increased by
W58 billion from W1,755 billion as of December 31, 2002 to W1,813 billion as of
June 30, 2003.

  Credit Card Portfolio

     The following table shows the changes in Chohung Bank's credit card
balances as of December 31, 2002, and June 30, 2003.

<Table>
<Caption>
                                                   AS OF          AS OF          AS OF
                                                DECEMBER 31,   DECEMBER 31,    JUNE 30,
                                                    2002           2002          2003
                                                 U.S. GAAP     KOREAN GAAP    KOREAN GAAP
                                                ------------   ------------   -----------
                                                 (IN BILLIONS OF WON EXCEPT PERCENTAGES)
<S>                                             <C>            <C>            <C>
Outstanding balance...........................     W5,770         W5,898        W4,648
Allowance for loan losses.....................      1,061            466           478
Delinquent loans..............................      1,414          1,542         1,307
Delinquent loans as a percentage of
  outstanding balance.........................       24.5%          26.1%         28.1%
</Table>

     Under Korean GAAP, delinquencies have decreased from W1,542 billion as of
December 31, 2002 to W1,307 billion as of June 30, 2003. U.S. GAAP delinquencies
were W1,414 billion as of December 31, 2002. Additionally, under Korean GAAP,
charge-offs were W430 billion for the year, ended December 31, 2002 and W771
billion for the six-month period ended June 30, 2003.

     Chohung Bank believes, based on the aforementioned, it will provide
additional loan loss allowances for its credit card balances as of December 31,
2003.

  Capital Adequacy Ratio

     As of June 30, 2003, Chohung Bank's Tier I and Tier II capital adequacy
ratios aggregated 9.18%, showing an increase compared to 8.66% as of December
31, 2002. The improvement of Chohung Bank's capital adequacy ratio was mainly
due to an increase in Tier I capital through the issuance of hybrid Tier I debt
securities and subordinated debentures, which partially offset the net loss of
W417 billion as of June 30, 2003.

  SUMMARY RESULTS OF OPERATIONS OF 1ST HALF 2003 AS COMPARED TO 1ST HALF 2002
  UNDER KOREAN GAAP

     The non-consolidated income statement and balance sheet data set forth
below have been derived from Chohung Bank's non-consolidated income statement
for the six months ended June 30, 2002 and 2003 and Chohung Bank's consolidated
balance sheets as of December 31, 2002 and June 30, 2003, all of which were
prepared in accordance with Korean GAAP and are unaudited. The discussion of
average balances, average yields or rates and net interest margin are all based
on financial information prepared under Korean GAAP for the purpose of reporting
to the Financial Supervisory Commission according to its guidelines. Results for
the six-month period ended June 30, 2003 are not necessarily indicative of the
results that may be expected for the full year.

                                       299
<PAGE>

  NON-CONSOLIDATED INCOME STATEMENT DATA

<Table>
<Caption>
                                                           FOR THE SIX MONTHS ENDED JUNE 30,
                                                          -----------------------------------
                                                            2002        2003       % CHANGE
                                                          ---------   ---------   -----------
                                                              (IN BILLIONS OF WON, EXCEPT
                                                            PERCENTAGES AND PER SHARE DATA)
<S>                                                       <C>         <C>         <C>
Interest income and dividends(1)........................   W1,853      W1,963          5.9%
Interest expense........................................    1,013       1,067          5.3
                                                           ------      ------       ------
Net interest income.....................................      840         896          6.7
Provision for loan losses...............................      642       1,183         84.3
                                                           ------      ------       ------
Net interest income (loss) after provision for loan
  losses................................................      198        (287)      (244.9)
Noninterest income(1)...................................      814       1,052         29.2
Noninterest expenses....................................      946       1,159         22.5
                                                           ------      ------       ------
Income (loss) before income tax expense.................       66        (394)      (697.0)
Income tax expense......................................       12          25        108.3
                                                           ------      ------       ------
Net income (loss).......................................   W   54      W (419)      (875.9)%
                                                           ======      ======       ======
Per common share data (in Won):
Earnings per share-basic................................   W   81      W (617)
Earnings per share-diluted..............................       81        (617)
Cash dividends per common share.........................       --          --
Stock dividends per common share........................       --          --
</Table>

- ---------------

Note:

(1) Under Korean GAAP, income from credit card cash advances and card loans were
    classified as interest on loans. Income from credit card purchases and
    installment payments were classified as fees and commission and included in
    noninterest income.

     Net Interest Income.  The 6.7% increase in net interest income is due
primarily to an increase in interest-earning assets, in particular in consumer
lending, partially offset by a decrease in securities volume and a decline in
average yields. The average balance of Chohung Bank's interest-earning assets
increased by 16.6% to W53,210 billion for the six months ended June 30, 2003
compared to W45,649 billion for the corresponding period in 2002, which was
partially offset by a decline in the annualized average interest rate on the
total interest-earning assets to 7.06% for the six months ended June 30, 2003
from 7.77% for the corresponding period in 2002.

     The 5.9% increase in interest income and dividends was due primarily to a
18.2% increase in interest on loans partially offset by a 29.4% decrease in
interest and dividends on securities. Interest on loans increased 18.2% from
W1,398 billion in the first half of 2002 to W1,652 billion in the first half of
2003 due primarily to a 38.9% increase in average volume of consumer loans from
W13,748 billion in the first half of 2002 to W19,093 billion in the first half
of 2003, partially offset by a decline of 145 basis points in the average yield
on such loans from 10.55% in the first half of 2002 to 9.10% in the first half
of 2003. Interest and dividends on securities decreased 29.4% from W415 billion
in the first half of 2002 to W293 billion in the first half of 2003 due
primarily to the general decline in the market interest rates coupled with a
decrease in average volume of Chohung Bank's securities from W11,414 billion in
the first half of 2002 to W9,312 billion in the first half of 2003.

     The 5.2% increase in interest expense was primarily attributable to a 74.3%
increase in interest on debentures, partially offset by a 29.9% decrease in
interest on borrowings. Interest on debentures increased 74.3% from W105 billion
in the first half of 2002 to W183 billion in the first half of 2003 due
primarily to a 98.6% increase in average volume of debentures to W6,264 billion
in the first half of 2003 from W3,154 billion in the first half of 2002.
Interest on borrowings decreased 29.8% from W141 billion in the first half of

                                       300
<PAGE>

2002 to W99 billion in the first half of 2003. This decrease was due primarily
to the general decline in the interest rates as well as a slight decrease in
average volume of Chohung Bank's borrowings from W7,722 billion in the first
half of 2002 to W7,633 billion in the first half of 2003. The average interest
rate paid on borrowings improved from 3.7% in the first half of 2002 to 2.6% in
the first half of 2003.
     Provision for Loan Losses.  The W541 billion of increase in Chohung Bank's
provision for loan losses during the period under review was primarily
attributable to a W147 billion of provisions raised in the first half of 2003 in
respect of Chohung Bank's exposure to SK Global which was classified as
substandard after the discovery of accounting irregularities during the period
and increased provisions relating to consumer loans as Chohung Bank experienced
significant deterioration and increased delinquencies particularly in credit
cards. Chohung Bank made provisions for consumer loans of W1,019 billion in the
first half of 2003 as compared to W358 billion in the first half of 2002,
including provisions for credit cards of W796 billion in the first half of 2003
as compared to W281 billion in the first half of 2002.
     Noninterest Income.  Chohung Bank's noninterest income increased 29.2% from
W814 billion in the first half of 2002 to W1,052 billion in the first half of
2003 due primarily to an increase in gain on sale of available-for-sale
securities, which was partially offset by a decrease in fees and commissions.
Gain on sale of available-for-sale securities increased from W16 billion in the
first half of 2002 to W141 billion in the first half of 2003. Fees and
commission decreased 5.9% from W371 billion in the first half of 2002 to W349
billion in the first half of 2003 due primarily to a 14.5% decline in fees and
commissions on credit card business from W220 billion in the first half of 2002
to W188 billion in the first half of 2003, reflecting a drop in purchase charge
volume. Net gains on foreign currency and derivative trading, net of the
respective losses, decreased from W36 billion in the first half of 2002 to W33
billion in the first half of 2003.
     Noninterest Expenses.  Chohung Bank's noninterest expenses increased 22.4%
to W1,159 billion in the first half of 2003 from W946 billion in the first half
of 2002 due primarily to an increase in impairment loss on available-for sale
securities as well as increase in general and administrative expenses, which was
partially offset by decrease in loss on sale of available-for-sale securities.
General and administrative expenses increased 3.4% from W408 billion in the
first half of 2002 to W422 billion in the first half of 2003 due primarily to an
increase in salaries and employee benefits. Impairment loss on available-for
sale securities also increased from W48 billion in the first half of 2002 to
W179 billion in the first half of 2003. This increase was mainly due to an
impairment loss recognized in relation to securities of Ssangyong Cement
Industrial of W156 billion.
     Income taxes.  Despite the fact that Chohung Bank recorded a loss before
income taxes of W394 billion in the first half of 2003 as compared to an income
before income taxes of W66 billion in the first half of 2002, Chohung Bank's
income tax expenses increased from W12 billion in the first half of 2002 to W25
billion in the first half of 2003 due primarily to a decrease in deferred tax
assets which was charged to income in 2002. The statutory tax rate was 29.7%
during the period under review.
     Net income (loss).  As a result of the foregoing, Chohung Bank recorded a
net loss of W419 billion in the first half of 2003 as compared to a net income
of W54 billion in the first half of 2002.

                                       301
<PAGE>

  NON-CONSOLIDATED BALANCE SHEET DATA

<Table>
<Caption>
                                                                 AS OF
                                                      ---------------------------
                                                       DECEMBER 31,     JUNE 30,
                                                           2002           2003       % CHANGE
                                                      --------------   ----------   ----------
                                                      (IN BILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                                   <C>              <C>          <C>
ASSETS:
Cash and due from banks.............................      W 2,698        W 3,014        11.7%
Loans (net of allowance for loan losses of W1,605
  billion as of December 31, 2002 and W1,698 billion
  as of June 30, 2003)..............................       45,329         46,390         2.3
Trading securities(1)...............................          990          1,470        48.5
Available-for-sale securities(1)....................        2,685          7,760       189.0
Held-to-maturity securities(1)......................        7,166             --      (100.0)
Equity method investments(1)........................          232            229        (1.3)
Fixed assets........................................        1,415          1,333        (5.8)
Other assets........................................        5,681          6,088         7.2
                                                          -------        -------      ------
  Total assets......................................      W66,196        W66,284         0.1%
                                                          =======        =======      ======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits............................................      W45,126        W43,191        (4.3)%
Borrowings..........................................        6,844          6,816        (0.4)
Debentures..........................................        5,672          7,380        30.1
Other liabilities...................................        6,262          6,645         6.1
                                                          -------        -------      ------
  Total liabilities.................................       63,904         64,032         0.2
                                                          -------        -------      ------
Stockholders' equity................................        2,292          2,252        (1.7)
                                                          -------        -------      ------
Total liabilities and stockholders' equity..........      W66,196        W66,284         0.1%
                                                          =======        =======      ======
</Table>

- ---------------

Note:

(1) Effective as of January 1, 2003, Chohung Bank's classification of securities
    was revised pursuant to the adoption of Statement of Korea Accounting
    Standard No. 8, Securities. In addition, Chohung Bank reclassified
    held-to-maturity securities amounting to W7,119 billion as
    available-for-sale securities following a shift in Chohung Bank's securities
    investment strategy.

     Assets.  Chohung Bank's assets remained relatively unchanged at W66,284
billion as of June 30, 2003 as compared to W66,196 billion as of December 31,
2002, reflecting an increase in loans substantially offset by a decrease in
securities. Loans increased 2.3% from W45,329 billion as of December 31, 2002 to
W46,390 billion as of June 30, 2003 as a result of a 9.0% increase in loans to
small-and medium-sized enterprises from W13,213 billion as of December 31, 2002
to W14,523 billion as of June 30, 2003. Chohung Bank's allowance for loan losses
increased 5.8% from W1,605 billion as of December 31, 2002 to W1,698 billion as
of June 30, 2003. This increase was primarily as a result of the increase in
provisioning for consumer loans and SK Global. The outstanding balance of
securities decreased 14.6% from W11,073 billion as of December 31, 2002 to
W9,459 billion as of June 30, 2003.

     Liabilities and stockholders' equity.  Chohung Bank's total liabilities
increased 0.2% from W63,904 billion as of December 31, 2002 to W64,032 billion
as of June 30, 2003. This increase was due primarily to a 30.1% increase in
debentures which more than offset a 4.3% decrease in deposits. In the first half
of 2003, deposits decreased by W1,935 billion, or 4.3%, due primarily to
withdrawals by wary customers during the labor union strike in the middle of
June 2003 opposing the acquisition of Chohung Bank by Shinhan Financial Group.
The W1,708 billion, or 30.1%, of increase in debentures is due primarily to new
issuances

                                       302
<PAGE>

of general debentures to cover the shortage of funds and liquidity caused by
customers' withdrawals as described above. In addition, Chohung Bank issued W150
billion of Won-denominated subordinated debentures and W273 billion of hybrid
Tier I debt securities to improve its capital adequacy ratio.

RECONCILIATION WITH KOREAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

     Chohung Bank's consolidated financial statements and related footnotes
appearing in "Item 18. Financial Statements", are prepared in accordance with
U.S. GAAP, the most significant of which are summarized in Note 1 to Chohung
Bank's consolidated financial statements. These principles and policies differ
in certain respects from Korean GAAP. The following are reconciliations of net
income and stockholders' equity of Chohung Bank's consolidated financial
statements with Korean GAAP.

<Table>
<Caption>
                                                                       2002
                                                               --------------------
                                                               (IN MILLIONS OF WON)
<S>                                                            <C>
U.S. GAAP NET INCOME........................................        W  153,572
                                                                    ----------
1.  Provision for loan losses, guarantees and acceptances...            65,915
2.  Sale of loans to the Korea Asset Management
    Corporation.............................................          (220,368)
3.  Deferred loan costs.....................................           (40,990)
4.  Write-off of other assets and receivables...............            (3,247)
5.  Securities and derivatives for nontrading purposes
    a. Changes in foreign exchange rates on
       available-for-sale securities........................           (82,617)
    b. Impairment loss and reclassification of securities...          (283,053)
    c. Reversal of hedge accounting treatment for
       derivatives..........................................           (29,430)
6.  Lease conversion........................................            (1,491)
7.  Foreign currency translation............................           (12,275)
8.  Goodwill and related impairment.........................          (112,020)
9.  Minority interest.......................................             2,979
10. Reversal of asset revaluation...........................           (10,396)
11. Contingent losses.......................................            17,946
12. Effect of deconsolidation of SPEs.......................          (119,536)
14. Others..................................................            (1,923)
                                                                    ----------
Total of adjustments........................................          (830,506)
Tax effect of adjustments...................................            90,466
                                                                    ----------
KOREAN GAAP NET LOSS........................................        W (586,468)
                                                                    ==========
</Table>

                                       303
<PAGE>

<Table>
<Caption>
                                                                       2002
                                                               --------------------
                                                               (IN MILLIONS OF WON)
<S>                                                            <C>
U.S. GAAP STOCKHOLDERS' EQUITY..............................        W1,372,750
                                                                    ----------
1.  Provision for loan losses, guarantees and acceptances...         1,480,923
2.  Sale of loans to the Korea Asset Management
  Corporation...............................................            36,120
3.  Deferred loan costs.....................................           (84,399)
4.  Write-off of other assets and receivables...............             9,284
5.  Securities and derivatives for nontrading purposes
 b. Impairment loss and reclassification of securities......          (120,657)
 c. Reversal of hedge accounting treatment for
    derivatives.............................................           (59,587)
6.  Lease conversion........................................           (31,878)
7.  Foreign currency translation............................            (4,523)
8.  Goodwill and related impairment.........................           (55,455)
9.  Minority interest.......................................            16,191
10. Reversal of asset revaluation...........................           616,617
11. Contingent losses.......................................            17,908
12. Effect of deconsolidation of SPEs.......................          (421,314)
13. Effect of consolidation of trust accounts...............            20,135
14. Others..................................................           (17,223)
                                                                    ----------
Total of adjustments........................................         1,402,142
Tax effect of adjustments...................................          (454,311)
                                                                    ----------
KOREAN GAAP STOCKHOLDERS' EQUITY............................        W2,320,581
                                                                    ==========
</Table>

     The following is a summary of the significant adjustments made to
consolidated net income and stockholders' equity to reconcile the U.S. GAAP
results with Korean GAAP. The numbered paragraphs below refer to the
corresponding item numbers set forth above.

          1. Under U.S. GAAP, the allowance for loan losses for specifically
     identified impaired loans is based on (1) the present value of expected
     future cash flows discounted at the loan's effective interest rate or as a
     practical expedient, (2) the loans observable market price or (3) the fair
     value of the collateral if the loan is collateral dependent.

          For homogeneous pools of corporate and consumer loans, allowances are
     based on historical losses using a risk rating migration model adjusted for
     qualitative factors.

          Under Korean GAAP, the allowance for loan losses is generally
     established based on the classification guidelines promulgated by the
     Financial Supervisory Commission, which requires that the minimum allowance
     be established based on loan classification. Chohung Bank used these
     guidelines to establish minimum allowances. Chohung Bank's reserve is
     established based on the following percentages as of December 31, 2002.

<Table>
<Caption>
                                                       CORPORATE   CONSUMER   CREDIT CARD
                                                       ---------   --------   -----------
                                                                  (PERCENTAGE)
<S>                                                    <C>         <C>        <C>
Normal...............................................     0.5%       0.75%          1%
Precautionary........................................       2           8          12
Substandard..........................................      20          20          20
Doubtful.............................................      50          55          60
Estimated Loss.......................................     100         100         100
</Table>

          This adjustment reflects the differences in the methodologies used to
     determine the allowance for loan losses under U.S. GAAP and Korean GAAP.

                                       304
<PAGE>

          Under U.S. GAAP, the methodology used to determine the appropriate
     allowance for 2000 and 2001 took into consideration subsequent information
     indicating that larger losses had been triggered on certain large corporate
     credits than previously recorded under Korean GAAP. This information was
     not available at the time the Korean GAAP financial statements were
     prepared. The most significant credit where more information was available
     was SK Global.

          The difference due to the SK Global effect in net income was W38,936
     million from the amount of W65,915 million and the difference in
     stockholders' equity was W239,220 million from the total amount of
     W1,480,923 million.

          2. Prior to fiscal year 2002, Chohung Bank sold a number of
     non-performing loans to the Korea Asset Management Corporation. Based on
     the sales agreement, the Korea Asset Management Corporation can return
     certain loans to Chohung Bank when the performance requirements of such
     loans are not met. Under U.S. GAAP, Chohung Bank recognized a recourse
     liability for the obligation to repurchase such loans. Under Korean GAAP,
     Chohung Bank has not estimated a recourse liability.

          3. Under U.S. GAAP loan origination fees and the related costs are
     deferred and amortized over the life of the loan as an adjustment to the
     yield of the loan. Under Korean GAAP, origination fees are recognized in
     income when received or paid and does not provide for the deferral or
     related costs.

          4. Korean GAAP permits banks to capitalize certain costs related to
     the collection of delinquent loans and reflect losses related to the
     misappropriation of bank assets by employees as receivables. The
     substantial majority of this adjustment relates to these two items. In
     2002, the amounts relating to these items under Korean GAAP were W6,515
     million and W1,606 million, respectively. Under U.S. GAAP, such items must
     be expensed as incurred. This adjustment reflects the recognition of these
     items as expense during 2002.

          Under Korean GAAP, leasehold deposits are written off when the legal
     proceedings to collect such deposits reach an adverse final settlement.
     Under U.S. GAAP, leasehold deposits are analyzed for impairment and written
     off when amounts are deemed uncollectible. The remaining portion of this
     adjustment reflects the effects of these write-offs.

          5a. Under U.S. GAAP, effects of changes in foreign exchange rates of
     foreign currency denominated available-for-sale securities are reflected as
     a component of other comprehensive income. Under Korean GAAP, effects of
     such changes in foreign exchange rates are reflected in earnings. This item
     reflects the adjustment of such effects from other comprehensive income to
     earnings. Under U.S. GAAP, certain securities classified as
     held-to-maturity securities under Korean GAAP were reclassified as
     available-for-sale securities.

          5b. Under U.S. GAAP, declines in the fair value of held-to-maturity
     and available-for-sale securities below their cost that are deemed to be
     other-than-temporary are recorded in earnings. Various quantitative and
     qualitative factors are assessed to determine whether impairment is
     other-than-temporary such as the duration and extent of the decline, the
     current operating and future expected performance, market values of
     comparable companies, changes in industry and market prospects, and the
     intent and ability of the holder to hold the security for a sufficient
     period of time for subsequent expected recovery in market value. Under
     Korean GAAP, declines in the fair value that are deemed to be permanent are
     recorded in earnings. The determination of whether a decline in the fair
     value of a security is permanent is generally based on whether the issuer
     is in bankruptcy or liquidation. This item reflects the recognition of
     additional losses for the available-for-sale securities, adjustment of fair
     value basis and reclassification of securities into proper categories under
     U.S. GAAP.

          5c. Under U.S. GAAP, for a derivative to qualify for hedge accounting,
     it must be highly effective at reducing the risk associated with the
     exposure being hedged. The hedging relationship must be designated and
     formally documented at inception along with the particular risk management
     objective and strategy for the hedge, identification of the derivative used
     as the hedging instrument, the hedged item and the risk exposure being
     hedged, and the method of assessing hedge effectiveness. As the criteria
     for documenting the designation of hedging relationships and hedge
     effectiveness are more
                                       305
<PAGE>

     rigorous under U.S. GAAP, the derivatives accounted for as hedges under
     Korean GAAP might not qualify for hedge accounting under U.S. GAAP Chohung
     Bank has decided not to apply hedge accounting under U.S. GAAP. This item
     reflects the reversal of the hedge accounting treatment applied under
     Korean GAAP.

          6. As lessors, Chohung Bank recorded certain equipment financing as
     operating leases under Korean GAAP. Under U.S. GAAP, such leases are
     classified as capital leases. As such, the equipment subject to U.S. GAAP
     capital lease requirements are removed from the balance sheet and replaced
     with the net investment in the respective leases. The difference between
     U.S. and Korean GAAP relates to the difference between the depreciation
     expense and rental income that is recorded under Korean GAAP versus the
     amortization of the unearned income related to the lease receivable that is
     recorded under U.S. GAAP.

          Under U.S. GAAP, on the date the financing lease is cancelled, the net
     investment in the lease is terminated and the leased assets are reinstated
     on the financial statements as fixed assets and depreciated. In practice,
     under Korean GAAP, subsequent to the cancellation of the lease, the
     principal amount is reclassified from lease receivable to other receivable.

          Under Korean GAAP, foreign exchange gains and losses from translating
     from foreign debts incurred for acquisition of operating lease assets are
     deferred and amortized over the related lease assets. Under U.S. GAAP, such
     foreign exchange gains and losses are recorded as a period income or
     expense in the income statement.

          7. Under U.S. GAAP and Korean GAAP, assets and liabilities of foreign
     branches and subsidiaries are translated at current exchange rates
     established at balance sheet date from the respective functional currency
     to the reporting currency, the Korean Won. Under U.S. GAAP, income and
     expenses for those foreign entities are translated at the average exchange
     rate for the period. Under Korean GAAP, income and expenses for those
     foreign entities are translated at the current exchange rate at the balance
     sheet date. Under U.S. GAAP and Korean GAAP, the resulting unrealized gains
     and losses arising from the translation of foreign entities are recorded as
     a separate component of stockholders' equity. This reconciliation adjusts
     the different rates used in foreign currency translation of income
     statement items for foreign entities under U.S. GAAP to Korean GAAP.

          8. In accordance with Korean GAAP, the value of consideration in the
     form of common stock given in a business combination consummated prior to
     January 1, 2000 is based on par value of the common stock. In addition, the
     assets and liabilities acquired are recorded at their carrying values. The
     application of U.S. GAAP to prior business combinations resulted in
     additional goodwill compared to Korean GAAP due to a difference in
     measurement date of the purchase price and recording the assets and
     liabilities acquired at fair value.

          Under U.S. GAAP, prior to the adoption of SFAS No. 142 in 2002,
     goodwill is tested for impairment whenever changes in events or
     circumstances indicate that the carrying value of the goodwill may not be
     recoverable. If an impairment indicator exists, then an impairment analysis
     is performed using a market value approach, if available, or a discounted
     cash flows approach. This requirement under U.S. GAAP for evaluating
     goodwill for impairment is more rigorous than under Korean GAAP.

          As a result, the stockholders' equity adjustment reflects the
     difference between goodwill impaired and written off under U.S. GAAP and
     the net unamortized goodwill maintained under Korean GAAP. The income
     statement adjustment reflects the amortization of goodwill under Korean
     GAAP.

          9. Under Korean GAAP, minority interest is treated as a component of
     stockholders' equity. Under U.S. GAAP, minority interest is not considered
     part of stockholders' equity and is disclosed in the consolidated balance
     sheet between the liability section and the stockholders' equity section.

          10. Under Korean GAAP, certain fixed assets were revalued in 1998. As
     a result, the revaluation surplus reflected in equity and depreciation
     expense for those revalued assets is based on the new cost basis. Under
     U.S. GAAP, upward revaluation for fixed assets is not permitted and
     depreciation expense

                                       306
<PAGE>

     is based on the historical cost basis adjusted for any impairment loss.
     This adjustment is to reverse the revaluation effects on the fixed assets
     under Korean GAAP and to adjust the gain or loss relating to subsequent
     disposals of those fixed assets under the different cost basis.

          11. Under Korean GAAP, contingent losses are not recognized until the
     final outcome has been determined. Under U.S. GAAP, such contingencies are
     accounted for in accordance with SFAS No. 5, whereby a contingent loss is
     recognized when it is probable and the amount of the loss can be reasonably
     estimated. This adjustment reflects the reversal of such contingent losses
     under U.S. GAAP.

          12. Under Korean GAAP, the transfers of certain loans to SPEs are
     accounted for as sales in accordance with the Korea Asset Backed Securities
     Law. Under U.S. GAAP, transfers of loans are accounted for in accordance
     with SFAS No. 140 and its related guidance, whereby a transfer is accounted
     for as a sale only if the criteria relating to the surrender of control
     over the transferred loans are met, otherwise the transfers are accounted
     for as secured borrowings.

          Under Korean GAAP, we have not consolidated any SPEs since certain
     criteria relating to control were not met. Under U.S. GAAP, we consolidate
     certain SPEs meeting the criteria for consolidation under EITF Topic D-14
     and Issue 90-15 as we are the sponsor of these SPEs and retain substantial
     risks and rewards related to the transferred loans.

          This adjustment reflects the reversal of gains and losses on the
     transfer of such loans accounted for as sales under Korean GAAP, as well as
     the deconsolidation of certain SPEs that are not consolidated under Korean
     GAAP.

          13. Under Korean GAAP, certain trust accounts are consolidated in
     accordance with the Korea Trust Law and Korea Trust Business Act. Under
     U.S. GAAP these trust accounts are not consolidated due to the fact these
     are not Chohung Bank's assets but customer assets. This adjustment reflects
     the consolidation of such trust accounts under Korean GAAP.

          14. This adjustment reflects the effect of miscellaneous items that
     are individually immaterial.

                                       307
<PAGE>

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

                        DIRECTORS AND SENIOR MANAGEMENT

EXECUTIVE DIRECTORS

     Our executive directors are as follows.

<Table>
<Caption>
NAME                      AGE               POSITION                DIRECTOR SINCE    DATE TERM ENDS
- ----                      ---               --------                --------------    --------------
<S>                       <C>   <C>                                <C>                <C>
Eung Chan Ra............  64    Chairman of the Board of           September 1, 2001  August 31, 2004
                                Directors
Young Hwi Choi..........  57    President & Chief Executive        September 1, 2001  August 31, 2004
                                Officer
</Table>

     Eung Chan Ra is the Chairman of our board of directors. Prior to being
elected to his current position in 2001, he was the Vice-Chairman of Shinhan
Bank and also served as President and Chief Executive Officer of Shinhan Bank.
Mr. Ra also currently serves as a non-standing director of Good Morning Shinhan
Securities, Vice-Chairman of Korea-Japan Economy Association and the chief of
committee in the Economy and Science Division of the Advisory Council on
Democratic and Peaceful Unification. Mr. Ra was a director of Cheil Investment
Finance from 1977 until 1982, when he first jointed us as an executive vice
president of Shinhan Bank. Mr. Ra graduated from Seonrin Commercial High School.

     Young Hwi Choi is our President and Chief Executive Officer. Prior to being
elected to his current position in 2003, he served as Director and Deputy
President of Shinhan Financial Group and Deputy President of Shinhan Bank. Mr.
Choi also currently serves an outside director of Shinhan Bank. Mr. Choi began
his banking career by joining the Bank of Korea in 1969. He served as a deputy
director of the Ministry of Finance and Economy from 1978 until 1982, when he
first joined us as one of the incorporators of Shinhan Bank. Mr. Choi received a
B.A. in economics from Sungkyunkwan University.

NON-EXECUTIVE DIRECTORS

     Our non-executive directors are selected based on the candidates' talents
and skills in diverse areas, such as law, finance, economy, management and
accounting. Currently, 13 non-executive directors are in office, all of whom
were nominated by our board of directors.

     Our non-executive directors are as follows.

<Table>
<Caption>
NAME                             AGE   POSITION                     DIRECTOR SINCE     DATE TERM ENDS(1)
- ----                             ---   --------                     --------------     -----------------
<S>                              <C>   <C>                         <C>                 <C>
In Ho Lee......................  59    Non-Executive Director      September 1, 2001   August 31, 2004
Young Seok Choi................  74    Non-Executive Director      March 31, 2003      March 30, 2004
Jae Kun Yoo....................  62    Non-Executive Director      March 31, 2003      March 30, 2004
Young Soo Lee..................  69    Non-Executive Director      March 31, 2003      March 30, 2004
Myung Ho Kim...................  68    Outside Director            September 1, 2001   March 30, 2004
Pyung Joo Kim..................  64    Outside Director            September 1, 2001   March 30, 2004
Il Sup Kim.....................  57    Outside Director            March 31, 2003      March 30, 2004
Byung Hun Park.................  75    Outside Director            September 1, 2001   March 30, 2004
Moon Pil Oh....................  72    Outside Director            September 1, 2001   March 30, 2004
Kun Chi Kim....................  58    Outside Director            March 31, 2003      March 30, 2004
Pyung Jo Park..................  60    Outside Director            March 31, 2003      March 30, 2004
Young Chul Kwon................  57    Outside Director            March 31, 2003      March 30, 2004
Alain Penicaut.................  61    Outside Director            March 20, 2002      March 20, 2004
</Table>

- ---------------

Note:

(1) The date on which each term will end will be the date of the general
    stockholders' meeting in the relevant year.

                                       308
<PAGE>

     In Ho Lee has been a non-executive director since the date of our
inception. Mr. Lee is currently the Vice Chairman of Shinhan Bank. Mr. Lee
previously served as President and Chief Executive Officer of Shinhan Bank. Mr.
Lee first joined us as one of Shinhan Bank's incorporators in 1982. Mr. Lee
received a B.A. in economics from Yonsei University.

     Young Seok Choi has been a non-executive director since March 31, 2003. Mr.
Choi is the founding member and current Chief Executive Officer of AERTH 21. Mr.
Choi received a B.A. in business from Meiji University of Japan. Mr. Choi
previously served as a non-executive director of Shinhan Bank.

     Jae Kun Yoo has been a non-executive director since March 31, 2003. Mr. Yoo
is currently the Chairman of Sam-Gyung Corporation. Mr. Yoo is currently the
Chairman of Korean-Japanese Chamber of Commerce in Tokyo. Mr. Yoo previously
served as a non-executive director of Shinhan Bank.

     Young Soo Lee has been a non-executive director since March 31, 2003. Mr.
Lee is the founding member and the current President and Chief Executive Officer
of Teni Corporation. Mr. Lee is the founding member and current Chief Director
of Baekdoo Academy.

     Myung Ho Kim has been an outside director since the date of our inception.
Mr. Kim previously served as Governor of Office of Bank Supervision and Governor
of the Bank of Korea. Mr. Kim began his banking career in 1957 when he joined
the Bank of Korea. Mr. Kim received a B.A. in economics from Seoul National
University.

     Pyung Joo Kim has been an outside director since the date of our inception.
Mr. Kim currently serves as Dean of the Graduate School of International Studies
at Sogang University and as President of Korean Economic Association. Mr. Kim
previously served as an outside director of Shinhan Bank and chairman of the
Merger Committee for the merger of Kookmin Bank and H&CB. Mr. Kim received a
B.A. in economics from Seoul National University, an MBA from Seoul National
University and a Ph.D in economics from Princeton University in the United
States.

     Il Sup Kim has been an outside director since March 31, 2003. Mr. Kim
currently serves as a committee chairman of Korea Venture Business Association.
Mr. Kim is a professor of Business Administration and currently serves as
Vice-President for Planning & Finance at Ewha Womans University. Mr. Kim
previously served as Vice Chairman of Samil Accounting Corporation and as
chairman of Korea Accounting Institute and Korea Accounting Standard Board. Mr.
Kim received a B.A., MBA and Ph.D in business administration from Seoul National
University.

     Byung Hun Park has been an outside director since the date of our
inception. Mr. Park currently serves as a member of the Advisory Council on
Democratic and Peaceful Unification Advisory Committee and the chairman of
Daesung Electric Industries Co., Ltd. Mr. Park received a B.A. in economics and
an LL.B. from Meiji University. Mr. Park also received an honorary Ph.D. in
political science from Chung Ang University.

     Moon Pil Oh has been an outside director since the date of our inception.
Mr. Oh is currently President of Hwanhwa Corporation. Mr. Oh previously served
as a non-executive director of Shinhan Bank. Mr. Oh received an LL.B. from Osaka
University of Japan.

     Kun Chi Kim has been an outside director since March 31, 2003. Mr. Kim is
currently the Chairman of Japanese-Korean Chamber of Commerce and President of
Columbia Corporation.

     Pyung Jo Park has been an outside director since March 31, 2003. Mr. Park
is the President and Chief Executive Officer of Misong Corporation. Mr. Park
received a B.A. in architecture from Waseda University in Japan.

     Young Chul Kwon has been an outside director since March 31, 2003. Mr. Kwon
previously served as President of Fukuyama Terminal Hotel Corporation. Mr. Kwon
received a B.A. in economics from Momoyama Gakuin University in Japan.

     Alain Penicaut has been an outside director since March 20, 2002. Mr.
Penicaut was nominated by BNP Paribas and elected to our board of directors
pursuant to the alliance agreement, dated December 2001, which we entered into
with BNP Paribas. See "Item 7. Major Shareholders and Related Party
Transactions --
                                       309
<PAGE>

Related Party Transactions". Mr. Penicaut is also an outside director of Good
Morning Shinhan Securities. Mr. Penicaut previously served as the general
manager & CEO of BNP Paribas Seoul branch and as director of Dongwon BNP Asset
Management. Mr. Penicaut received a B.A. in finance from Politechnic University
in Paris and an LL.B from Paris University.

EXECUTIVE OFFICERS

     In addition to the executive directors who are also our executive officers,
we currently have the following executive officers.

<Table>
<Caption>
NAME                             AGE                         POSITION
- ----                             ---                         --------
<S>                              <C>   <C>
Bhang Gil Choi.................  51    Senior Executive Vice President of Management
                                       Support Team and Treasury & Risk Management Team
Min Ky Han.....................  51    Senior Executive Vice President of General Services
                                       Team, Investor Relations Team and Public Relations
                                       Team
Youn Soo Song..................  51    Senior Executive Vice President of Strategy &
                                       Planning Team, Information & Technology Planning
                                       Team and Audit & Compliance Team
Chil Sun Hong..................  57    Senior Executive Vice President
Byung Jae Cho..................  52    Senior Executive Vice President
</Table>

     None of the executive officers have any significant activities outside
Shinhan Financial Group.

     Bhang Gil Choi has been a Senior Executive Vice President since the date of
our inception. Mr. Choi previously served in various positions with Shinhan Bank
and was a non-executive director at Shinhan Securities. Mr. Choi currently
serves as an outside director of Jeju Bank and Shinhan Bank and a non-executive
director of Good Morning Shinhan Securities. Mr. Choi received a B.A. in law
from Kyunghee University and an MBA from Yonsei University.

     Min Ky Han has been a Senior Executive Vice President since March 31, 2003.
Mr. Han previously served as General Manager of Shinhan Bank's Osaka branch. Mr.
Han is currently a non-executive director of Shinhan Card. Mr. Han received an
LL.B from Konkuk University.

     Youn Soo Song has been a Senior Executive Vice President since March 31,
2003. Mr. Song also currently serves as a non-executive director of Shinhan
Capital. Mr. Song previously served as General Manager of the Credit Policy &
Risk Management Department of Shinhan Bank. Mr. Song received a B.A. in law from
Seoul National University and an MBA from Hansung University.

     Chil Sun Hong has been a Senior Executive Vice President since September 5,
2003. Mr. Hong previously served as Deputy President of Chohung Bank. Mr. Hong
received a B.A. in business administration from Sungkyunkwan University.

     Byung Jae Cho has been a Senior Executive Vice President since September 5,
2003. Mr. Cho previously served in various positions with Chohung Bank,
including as a branch manager. Mr. Cho received a B.A. in business
administration from Seoul National University.

     Any director wishing to enter into a transaction with Shinhan Financial
Group including the subsidiaries in his or her personal capacity is required to
obtain the prior approval of the Board of Directors. The director having an
interest in the transaction may not vote at the meeting of the Board of
Directors to approve the transaction.

                                       310
<PAGE>

                                  COMPENSATION

     The aggregate remuneration paid and benefits-in-kind paid by us to our
president and chief executive officer, our other executive directors, our
non-executive directors and our executive officers for the year ended December
31, 2002 was W2,380 million, consisting of W1,588 million in salaries and wages
and W792 million in bonus payments.

     We do not have service contracts with any of our directors or officers
providing for benefits upon termination of their employment with us.

     We have granted stock options to our chairman, our president and chief
executive officer and other directors and executive officers as described below.
For all of the options granted, we may elect either to issue common shares or
pay in cash the difference between the exercise and the market price at the date
of exercise. Restrictions on the grants, including continued employment for a
specified period, lapse after two years of vesting. Upon vesting, options may be
exercised between two to six years from the grant date.

     In 2002, we recognized W4,625 million as compensation expense for the stock
options granted under our incentive stock option plan.

     Beginning on April 1, 1999, as a result of an amendment of the Korean
National Pension Law, we contribute an amount equal to 4.5% of employee wages
and contribute 4.5% of employees' wages which are deducted from such wages to
the National Pension Management Corporation. In accordance with our policy and
the Korean Labor Standard Law, employees with one year or more of service are
entitled, upon termination of employment, to receive a lump sum severance
payment based upon the length of their service and the average of the last three
months' wages. We make provisions for accrued severance indemnities based upon
the assumption that all employees terminate their employment with us at the same
time. As of December 31, 2002 the provisions for accrued severance benefits were
W225 billion (US$190 million), which represents 132.46% of the amount required
under the Korean Labor Standard Law. By the end of 2002, we plan to deposit
64.65% of such provisions for accrued severance indemnities with insurance
companies and other banks. Under Korean law, we may not terminate full time
employees except under certain circumstances.

                                BOARD PRACTICES

BOARD OF DIRECTORS

     Our board of directors, which currently consists of two executive directors
and 13 non-executive directors, has the ultimate responsibility for the
management of our affairs.

     Our articles of incorporation provide for no less than three but no more
than 15 directors and the number of executive directors must be less than 50% of
the total number of directors. Each director has been elected for a three-year
term of office, and each non-executive director appointed as a specialist has
been elected for a one-year term. Terms are renewable and are subject to the
Korean Commercial Code, the Financial Holding Company Act and related
regulations.

     Our board of directors meets on a regular basis to discuss and resolve
material corporate matters. Additional extraordinary meetings may also be
convened at the request of the president and chief executive officer or a
director designated by the board.

COMMITTEES OF THE BOARD OF DIRECTORS

     We currently have three management committees that serve under the board:

     - the Executive Committee;

     - the Risk Management Committee; and

     - the Audit Committee.

                                       311
<PAGE>

     Each committee member is appointed by the board of directors, except for
members of the Audit Committee, who are elected at the general meeting of
stockholders.

EXECUTIVE COMMITTEE

     The Executive Committee consists of seven directors, consisting of Young
Seok Choi, Myung Ho Kim, Pyung Joo Kim, Byung Hun Park, Moon Pil Oh, together
with the chairman and the president and chief executive officer. The committee
is responsible for ensuring the efficient operations of the board and the
facilitation of the board's functions. The committee is responsible for both
recommending and reviewing candidates for director and recommending candidates
for the committee. The committee also reviews and assesses the director
compensation programs and retainer arrangements to attract qualified directors.
The committee's responsibilities also include reviewing and assessing the
board's structure and the effectiveness of that structure in fulfilling the
board's fiduciary responsibilities. The committee holds regular meetings every
quarter.

RISK MANAGEMENT COMMITTEE

     The Risk Management Committee consists of three outside directors,
consisting of Pyung Joo Kim, Moon Pil Oh and Alain Penicaut. The committee
oversees and makes determinations on all issues relating to our comprehensive
risk management function. In order to ensure our stable financial condition and
to maximize our profits, the committee monitors our overall risk exposure and
reviews our compliance with risk policies and risk limits. In addition, the
committee reviews risk and control strategies and policies, evaluates whether
each risk is at an adequate level, establishes or abolishes risk management
divisions, reviews risk-based capital allocations, and reviews the plans and
evaluation of internal control. The committee holds regular meetings every
quarter.

AUDIT COMMITTEE

     The Audit Committee consists of three non-executive directors, consisting
of Il Sup Kim, Young Seok Choi and Pyung Jo Park. The committee oversees our
financial reporting, approves the appointment of and interaction with our
independent auditors and our internal audit-related officers. The committee also
reviews our financial information, audit examinations, key financial statement
issues and the administration of our financial affairs by the board of
directors. In connection with the general meetings of stockholders, the
committee examines the agenda for, and financial statements and other reports to
be submitted by, the board of directors to each general meeting of stockholders.
The committee holds regular meetings every quarter.

                                   EMPLOYEES

     As of December 31, 2002, at the holding company level, we had approximately
58 regular employees employed, almost all of whom are employed within Korea. As
of December 31, 2002, our subsidiaries had approximately 7,211 regular
employees, almost all of whom are employed within Korea. In addition, as of
December 31, 2002, we had one non-regular employee at the holding company level
and approximately 2,190 non-regular employees at the subsidiary level. Of the
total number of regular and non-regular employees at both the holding company
and subsidiaries, 38.5% were managerial or executive employees. Approximately
3,613 employees at Shinhan Bank and 210 employees at Jeju Bank were members of
Korea Financial Industry Union and 1,444 employees at Good Morning Shinhan
Securities were members of Korea Securities Trade Union as of December 31, 2002.
We have not experienced any general employee work stoppages and consider our
employee relations to be good.

                                SHARE OWNERSHIP

     As of May 20, 2003, the persons who are currently our directors or
executive officers, as a group, held an aggregate of 4,345,329 shares of our
common stock representing approximately 1.49% of our outstanding

                                       312
<PAGE>

common stock as of such date. None of these persons individually held more than
1% of our outstanding common stock as of such date.

STOCK OPTIONS

     The following table is the breakdown of stock options with respect to our
common stock that we have granted to our directors and officers, describing the
grant dates, positions held by such directors and officers, exercise period,
price and the number of options as of June 30, 2003.

<Table>
<Caption>
                                                           EXERCISE PERIOD                 NUMBER OF    PERCENTAGE    NUMBER OF
                                                        ---------------------   EXERCISE    GRANTED     OF SHARES     EXERCISED
GRANT DATE                        POSITION                FROM         TO        PRICE      OPTIONS    OUTSTANDING     OPTIONS
- ----------                        --------              ---------   ---------   --------   ---------   ------------   ---------
                                                                                (IN WON)               (PERCENTAGE)
<S>                    <C>                              <C>         <C>         <C>        <C>         <C>            <C>
5/22/2002              Chairman of Board of Directors
                       (Eung Chan Ra)................   5/23/2004   5/22/2008    18,910     100,000        0.03            0
5/22/2002              President & CEO
                       (Young Hwi Choi)..............   5/23/2004   5/22/2008    18,910      50,000        0.02            0
5/22/2002              Non-Executive Director
                       (In Ho Lee)...................   5/23/2004   5/22/2008    18,910      80,000        0.03            0
5/22/2002              Senior Executive Vice
                       President
                       (Bhang Gil Choi)..............   5/23/2004   5/22/2008    18,910      20,000        0.01            0
5/22/2002              Senior Executive Vice
                       President
                       (Min Ky Han)..................   5/23/2004   5/22/2008    18,910       1,000        0.00            0
5/22/2002              Senior Executive Vice
                       President
                       (Youn Soo Song)...............   5/23/2004   5/22/2008    18,910       2,500        0.00            0
5/15/2003              Chairman of Board of Directors
                       (Eung Chan Ra)................   5/16/2005   5/15/2009    11,800     100,000        0.03            0
5/15/2003              President & CEO
                       (Young Hwi Choi)..............   5/16/2005   5/15/2009    11,800      90,000        0.03            0
5/15/2003              Senior Executive Vice
                       President
                       (Bhang Gil Choi)..............   5/16/2005   5/15/2009    11,800      20,000        0.01            0
5/15/2003              Senior Executive Vice
                       President
                       (Min Ky Han)..................   5/16/2005   5/15/2009    11,800      20,000        0.01            0
5/15/2003              Senior Executive Vice
                       President
                       (Youn Soo Song)...............   5/16/2005   5/15/2009    11,800      20,000        0.01            0
                                                                                            -------        ----          ---
                       Total.........................                                       503,500        0.18%           0
                                                                                            =======        ====          ===
</Table>

     During 2000 and 2001, a number of our directors have received options to
purchase common stock of Shinhan Bank. However, these options were not converted
into options to purchase common stock of our holding company following our
holding company restructuring in September 2001. The following table is the
breakdown of these stock options, describing the grant dates, position held by
such director, exercise period, price and the number of options as of June 30,
2003.

                                       313
<PAGE>

<Table>
<Caption>
                                                           EXERCISE PERIOD                 NUMBER OF    PERCENTAGE    NUMBER OF
                                                        ---------------------   EXERCISE    GRANTED     OF SHARES     EXERCISED
GRANT DATE                        POSITION                FROM         TO        PRICE      OPTIONS    OUTSTANDING     OPTIONS
- ----------                        --------              ---------   ---------   --------   ---------   ------------   ---------
                                                                                (IN WON)               (PERCENTAGE)
<S>                    <C>                              <C>         <C>         <C>        <C>         <C>            <C>
3/27/2000(1)           Chairman of Board of Directors
                       (Eung Chan Ra)................   3/28/2003   3/27/2006   W11,700      50,000        0.02%           0
3/27/2000(1)           President & CEO
                       (Young Hwi Choi)..............   3/28/2003   3/27/2006    11,700      25,000        0.01            0
3/27/2000(1)           Non-Executive Director
                       (In Ho Lee)...................   3/28/2003   3/27/2006    11,700      50,000        0.02            0
3/5/2001(1)            President & CEO
                       (Young Hwi Choi)..............    3/6/2004    3/5/2007    13,900      25,000        0.01            0
3/5/2001(1)            Non-Executive Director
                       (In Ho Lee)...................    3/6/2004    3/5/2007    13,900      50,000        0.02            0
                                                                                            -------        ----          ---
                       Total.........................                                       200,000        0.08%           0
                                                                                            =======        ====          ===
</Table>

- ---------------

Note:

(1) The option-granting entity was Shinhan Bank, prior to the formation of the
    holding company.

     Shinhan Bank was delisted from the Korea Stock Exchange and is currently
not listed elsewhere. We have no plans to convert these stock options into
options to purchase common stock of our holding company. We are currently
contemplating a plan to settle these stock options for cash.

     In addition, members of the employee stock ownership association have
certain pre-emptive rights in relation to our shares that are publicly offered
under the Korea Securities and Exchange Act. However, as of the date hereof, our
employee stock ownership association does not own any shares of our common
stock.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

                               MAJOR SHAREHOLDERS

     The following table sets forth certain information relating to the
ownership of our common shares of our shareholders as of December 31, 2002.

<Table>
<Caption>
                                                     NUMBER OF COMMON   PERCENTAGE OF TOTAL
NAME OF SHAREHOLDER                                    SHARES HELD         COMMON SHARES
- -------------------                                  ----------------   -------------------
<S>                                                  <C>                <C>
Shinhan Bank.......................................     29,873,674              10.22%
BNP Paribas........................................     11,693,767               4.00
National Pension Fund..............................      7,302,985               2.50
Daekyo Co., Ltd....................................      4,594,549               1.57
Government of Singapore............................      3,572,244               1.22
Public.............................................    235,323,906              80.49
                                                       -----------            -------
Total..............................................    292,361,125             100.00%
                                                       ===========            =======
</Table>

     Other than those listed above, no other shareholders owned more than 1% of
our issued and outstanding shares. None of our shareholders have different
voting rights.
     Currently, our total authorized share capital is 1,000,000,000 common
stock, par value W5,000 per share. As of December 31, 2002, 292,361,125 common
shares were issued.

     As of December 31, 2002, the latest date available on which we closed our
shareholders' registry, 288 shareholders of record were in the United States,
holding in the aggregate 19.61% of our then total outstanding shares (including
Citibank, as the depositary for our global depositary shares, each representing
two shares of our common stock).

                                       314
<PAGE>

     Pursuant to a resolution of our board of directors on September 5, 2003, we
authorized the issuance of 1,864,064 shares of our common stock to BNP Paribas,
which is scheduled to occur in late September 2003. See "-- Related Party
Transactions" below. Following this new share issuance, BNP Paribas is expected
to own 4.608% of our common shares.

                           RELATED PARTY TRANSACTIONS

     None of our directors or officers have or had any interest in any
transactions effected by us that are or were unusual in their nature or
conditions or significant to our business which were effected during the current
or immediately preceding year or were effected during an earlier year and remain
in any respect outstanding or unperformed.

     In December 2001, BNP Paribas acquired 4.00% of our common stock in return
for an investment of approximately W155 billion in cash pursuant to an alliance
agreement. As of December 31, 2002, BNP Paribas owned 4.00% of our common stock.
Under the terms of the alliance agreement, for so long as BNP Paribas does not
sell or otherwise transfer (except to any of its wholly-owned subsidiaries) any
portion of its ownership interest in our common stock and maintains, after any
issuances of new shares by us from time to time, its shareholding percentage of
not less than 3.5% of our issued common stock, we are required to call a meeting
of our shareholders to recommend that one nominee of BNP Paribas be elected to
our board of directors. In addition, under the alliance agreement, BNP Paribas
has the right to subscribe for new issuances of our common shares in the event
that such new issuances would result in the dilution of the shareholding
percentage of BNP Paribas below 3.5%. Although BNP Paribas still owns 4.00% of
our common stock, the shareholding percentage (on a diluted basis taking into
account the Redeemable Convertible Preferred Stock) of BNP Paribas fell to
3.469% following our acquisition of Chohung Bank and as a result of our issuance
of Redeemable Convertible Preferred Stock to Korea Deposit Insurance Corporation
as part of the purchase price. BNP Paribas exercised its right to subscribe for
new issuances of our common shares under the alliance agreement. Pursuant to a
resolution of our board of directors on September 5, 2003, we authorized the
issuance of 1,864,064 shares of our common stock to BNP Paribas, which is
scheduled to occur in late September 2003. The alliance agreement further sets
forth the parties' intention to enter into a number joint ventures, in
particular in the business areas relating to investment trust management and
bancassurance, pursuant to which we have formed Shinhan BNP Paribas Investment
Trust Management and SH&C Insurance.

     In 2002, Shinhan Bank transferred a portion of securities held in its
investment portfolio to Shinhan BNP Paribas Investment Trust Management, an
affiliate of ours not subject to consolidation, in return for beneficiary
certificates which are reflected in our consolidated financial statements. As of
December 31, 2002, the outstanding balance of such beneficiary certificates were
W2,273 billion.

     As of April 30, 2003, we had principal loans outstanding to our directors,
executive officers and their affiliates in the principal amount of W63 billion,
which were made in the ordinary course of business on substantially the same
terms, including interest rate and collateral, as those prevailing at the time
for comparable transactions with other persons, and did not involve more than
the normal risk of collectibility or present other unfavorable features.

ITEM 8.  FINANCIAL INFORMATION

       CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION

     Our consolidated financial statements are set forth under "Item 18.
Financial Statements".

DIVIDEND POLICY

     See "Item 10. Additional Information -- Articles of
Incorporation -- Dividends". For a description of tax consequences of dividends
paid to our shareholders, see "Item 10. Additional Information -- Taxation --
Korean Taxation -- Dividends on Shares of Common Stock or American Depositary
Shares" and "Item 10.

                                       315
<PAGE>

Additional Information -- Taxation -- United States Taxation -- Distributions on
Shares or American depositary receipts".

LEGAL PROCEEDINGS

     As of May 27, 2003, Shinhan Bank, one of our subsidiaries, is a defendant
in three different court proceedings. While we are unable to predict the
ultimate disposition of these claims, the ultimate disposition of these claims
will not, in the opinion of management, have a material adverse effect on us.
Neither we nor any of our subsidiaries is involved in any material litigation,
arbitration or administrative proceedings relating to claims which may have a
significant effect on our financial condition or results of operations,
including the financial condition or results of operations of Shinhan Bank or
our other consolidated subsidiaries, and we are not aware of any such
litigation, arbitration or administrative proceeding that is pending or
threatened except as described below.

     On October 29, 2001, the trustees of the TRA Rights Trust (as sole
successor in interest to Seagate) instituted litigation against several
defendants, including Shinhan Bank. The plaintiff argued that Shinhan Bank is
jointly and severally liable for damages as it had actively participated in
certain financing activities that contributed to the fraudulent inflation of the
revenues, income and assets as reflected in the financial statements of L&H
Korea, a principal subsidiary of Lernout & Hauspie ("L&H"). The plaintiff seeks
damages for the impact of the fraud on the price of L&H shares and, in
particular, treble damages in the amount of approximately US$167 million under
Racketeer Influenced and Corrupt Organizations, one of its alleged causes of
claim. On April 16, 2002, the motions to dismiss plaintiff's complaint by the
defendants (including Shinhan Bank) were granted by the court. The Order,
however, allowed the plaintiff to file an amended complaint within 30 days and
the plaintiffs filed an amended complaint on May 16, 2002. On June 12, 2002, the
defendants filed motions to dismiss plaintiff's amended complaint, and the
hearing was held on July 22, 2002. On February 26, 2003 the court held for the
defendants and ordered to amend plaintiff's complaint by March 31, 2003. On May
19, 2003, the defendants filed the defense against the amended complaint. In
April 2001, L&H also lodged a criminal complaint with the prosecutor's office in
Korea against one of Shinhan Bank's branch managers, along with branch managers
of other Korean banks, alleging aiding and abetting a criminal act of fraud in
connection with this matter. The branch managers were subsequently found not
guilty and the criminal complaint was dismissed on February 20, 2002. In
addition, on November 13, 2001, Stonington Partners Inc., Stonington Capital
Appreciation 1994 Fund L.P. and Stonington Holdings, L.L.C., the former
shareholders of L&H, instituted litigation against several defendants, including
Shinhan Bank, alleging the same causes of action against Shinhan Bank under the
same operative facts as the above-described litigation. ("Stonington Case")
These plaintiffs seek compensatory damages for the impact of the fraud on the
price of L&H shares, and punitive damages to be determined at trial. Alleging
the same cause of action, Janet Baker, James Baker, JKBaker LLC and JMBaker LLC
also instituted litigation against several defendants, including Shinhan Bank,
on March 4, 2002. ("Baker Case") However, the plaintiffs of the latter two cases
withdrew their claims filed in the State of Massachusetts, and instead intend to
bring the same claims in the State of New York due to jurisdiction issues. On
October 16, 2002, the plaintiffs in the Stonington Case brought their complaints
to the State of New York, and next day the plaintiffs in the Baker Case moved
their claim to the State of New York. As of now, the court has not rendered any
decisions. We believe that the transactions with L&H Korea were conducted in the
ordinary course of its banking practices in compliance with Korean banking
regulations and internal guidelines. The transaction involved a customary
secured lending without any financing for receivables. We intend to vigorously
defend against such claims but it is impossible to predict the outcome of this
litigation at this time.

                                       316
<PAGE>

ITEM 9.  THE OFFER AND LISTING

                  MARKET PRICE INFORMATION AND TRADING MARKET

     Our shares of common stock were listed on the Korea Stock Exchange, Korea
on September 10, 2001. The Korea Stock Exchange is the principal trading market
for our shares of common stock. The table below shows the high and low closing
prices and the average daily volume of trading activity on the Korea Stock
Exchange for our shares of common stock since September 10, 2001.

<Table>
<Caption>
                                                                        AVERAGE DAILY
                                                    HIGH        LOW     TRADING VOLUME
                                                   -------    -------   --------------
                                                                           (SHARES)
<S>                                                <C>        <C>       <C>
2001 (from September 10).........................  W17,550    W 9,400     1,654,506
  Third Quarter (from September 10)..............   11,650      9,400     1,180,076
  Fourth Quarter.................................   17,550     10,100     1,771,170
2002.............................................   20,600     11,450     1,639,306
  First Quarter..................................   20,450     16,300     2,050,143
  Second Quarter.................................   20,600     16,150     1,745,556
  Third Quarter..................................   18,150     13,850     1,152,088
  Fourth Quarter.................................   14,650     11,450     1,631,030
2003 (through September 9).......................   17,700      9,500     1,495,978
  First Quarter..................................   13,650      9,500     1,504,051
     January.....................................   13,650     12,300     1,226,649
     February....................................   13,450     12,550       916,267
     March.......................................   12,750      9,500     2,341,248
  Second Quarter.................................   13,900     10,100     1,592,993
     April.......................................   12,400     10,100     1,457,376
     May.........................................   12,550     10,750     1,463,743
     June........................................   13,900     12,150     1,864,958
  Third Quarter (through September 9)............   17,700     12,500     1,363,476
     July........................................   16,000     12,500     1,364,990
     August......................................   16,000     14,350     1,076,775
     September (through September 9).............   17,700     16,500     1,577,709
</Table>

                                       317
<PAGE>

                                    MARKETS

THE KOREAN SECURITIES MARKET

  THE KOREA STOCK EXCHANGE

     The Korea Stock Exchange began its operations in 1956. Currently it is the
only stock exchange in Korea. It has a single trading floor located in Seoul.
The Korea Stock Exchange is a membership organization consisting of mostly
Korean securities companies and some Korean branches of foreign securities
companies.

     As of June 2, 2003, the aggregate market value of equity securities listed
on the Korea Stock Exchange was approximately W268 trillion. The average daily
trading volume of equity securities for 2002 was approximately 1,923 million
shares with an average transaction value of W1,608 billion.

     The Korea Stock Exchange has the power in some circumstances to suspend
trading in the shares of a given company or to de-list a security. The Korea
Stock Exchange also restricts share price movements. All listed companies are
required to file accounting reports annually, semiannually and quarterly and to
release immediately all information that may affect trading in a security.

     The Government has in the past exerted, and continues to exert, substantial
influence over many aspects of the private sector business community which can
have the intention or effect of depressing or boosting the market. In the past,
the Government has informally both encouraged and restricted the declaration and
payment of dividends, induced mergers to reduce what it considers excess
capacity in a particular industry and induced private companies to offer
publicly their securities.

     The Korea Stock Exchange publishes the Korea Composite Stock Price Index
("KOSPI") every thirty seconds, which is an index of all equity securities
listed on the Korea Stock Exchange. On January 4, 1983, the method of computing
KOSPI was changed from the Dow Jones method to the aggregate value method. In
the new method, 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.

                                       318
<PAGE>

     Historical movements in KOSPI are set out in the following.

<Table>
<Caption>
                                               OPENING      HIGH       LOW      CLOSING
                                               --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>
1980.........................................    100.00     119.36     100.00     106.87
1981.........................................     97.95     165.95      93.14     131.37
1982.........................................    123.60     134.49     106.00     127.31
1983.........................................    122.52     134.46     115.59     121.21
1984.........................................    116.73     142.46     114.37     142.46
1985.........................................    139.53     163.37     131.40     163.37
1986.........................................    161.40     279.67     153.85     272.61
1987.........................................    264.82     525.11     264.82     525.11
1988.........................................    532.04     922.56     527.89     907.20
1989.........................................    919.61   1,007.77     844.75     909.72
1990.........................................    908.59     928.82     566.27     696.11
1991.........................................    679.75     763.10     586.51     610.92
1992.........................................    624.23     691.48     459.07     678.44
1993.........................................    697.41     874.10     605.93     866.18
1994.........................................    879.32   1,138.75     855.37   1,027.37
1995.........................................  1,013.57   1,016.77     847.09     882.94
1996.........................................    888.85     986.84     651.22     651.22
1997.........................................    653.79     792.29     350.68     376.31
1998.........................................    385.49     579.86     280.00     562.46
1999.........................................    587.57   1,028.07     498.42   1,028.07
2000.........................................  1,059.04   1,059.04     500.60     504.62
2001.........................................    520.95     704.50     468.76     693.70
2002.........................................    724.95     937.61     584.04     627.55
2003 (through August 31).....................    635.17     759.47     515.24     759.47
</Table>

- ---------------

Source: The Korea Stock Exchange

     Shares are quoted "ex-dividend" on the first trading day of the relevant
company's accounting period. "Ex-dividend" refers to a share no longer carrying
the right to receive the following dividend payment because the settlement date
occurs after the record date for determining which shareholders are entitled to
receive dividends. "Ex-rights" refers to shares no longer carrying the right to
participate in the following rights offering or bonus issuance because the
settlement date occurs after the record date for determining which shareholders
are entitled to new shares. The calendar year is the accounting period for the
majority of listed companies, this may account for the drop in KOSPI between its
closing level at the end of one calendar year and its opening level at the
beginning of the following calendar year.

     With certain exceptions, principally to take account of a share being
quoted "ex-dividend" and "ex-rights", permitted upward and downward movements in
share prices of any category of shares on any day are

                                       319
<PAGE>

limited under the rules of the Korea Stock Exchange to 15% of the previous day's
closing price of the shares, rounded down as set out below:

<Table>
<Caption>
PREVIOUS DAY'S CLOSING PRICE                                   ROUNDED DOWN TO WON
- ----------------------------                                   -------------------
<S>                                                            <C>
Less than 5,000.............................................              5
5,000 to less than 10,000...................................             10
10,000 to less than 50,000..................................             50
50,000 to less than 100,000.................................            100
100,000 to less than 500,000................................            500
500,000 or more.............................................          1,000
</Table>

     As a consequence, if a particular closing price is the same as the price
set by the fluctuation limit, the closing price may not reflect the price at
which persons would have been prepared, or would be prepared to continue, if so
permitted, to buy and sell shares. Orders are executed on an auction system with
priority rules to deal with competing bids and offers.

     Due to deregulation of restrictions on brokerage commission rates, the
brokerage commission rate on equity securities transactions may be determined by
the parties, subject to commission schedules being filed with the Korea Stock
Exchange by the securities companies. In addition, a securities transaction tax
will generally be imposed on the transfer of shares or certain securities
representing rights to subscribe for shares. A special agricultural and fishery
tax of 0.15% of the sales prices will also be imposed on transfer of these
shares and securities on the Korea Stock Exchange. See "Item 10. Additional
Information -- Taxation -- Korean Taxation".

                                       320
<PAGE>

     The number of companies listed on the Korea Stock Exchange, the
corresponding total market capitalization at the end of the periods indicated
and the average daily trading volume for those periods are set forth in the
following table:

<Table>
<Caption>
                                     TOTAL MARKET CAPITALIZATION      AVERAGE DAILY TRADING VOLUME, VALUE
                         NUMBER OF   ----------------------------   ----------------------------------------
                          LISTED     (MILLIONS OF   (THOUSANDS OF   THOUSANDS   (MILLIONS OF   (THOUSANDS OF
YEAR                     COMPANIES       WON)        DOLLARS)(1)    OF SHARES       WON)        DOLLARS)(1)
- ----                     ---------   ------------   -------------   ---------   ------------   -------------
<S>                      <C>         <C>            <C>             <C>         <C>            <C>
1979...................     355        2,609,414       5,391,351       5,382         4,579           4,641
1980...................     352        2,526,553       3,828,691       5,654         3,897           5,905
1981...................     343        2,959,057       4,224,207      10,565         8,708          12,433
1982...................     334        3,000,494       4,407,711       9,704         6,667           8,904
1983...................     328        3,489,654       4,386,743       9,325         5,941           7,468
1984...................     336        5,148,460       6,222,456      14,847        10,642          12,862
1985...................     342        6,570,404       7,380,818      18,925        12,315          13,834
1986...................     355       11,994,233      13,924,115      31,755        32,870          38,159
1987...................     389       26,172,174      33,033,162      20,353        70,185          88,584
1988...................     502       64,543,685      94,348,318      10,367       198,364         289,963
1989...................     626       95,476,774     140,489,660      11,757       280,967         414,431
1990...................     669       79,019,676     110,301,055      10,866       183,692         256,500
1991...................     686       73,117,833      96,182,364      14,022       214,263         281,850
1992...................     688       84,711,982     107,502,515      24,028       308,246         391,175
1993...................     693      112,665,260     139,419,948      35,130       574,048         676,954
1994...................     699      151,217,231     191,729,721      36,862       776,257         984,223
1995...................     721      141,151,399     182,201,367      26,130       487,762         629,614
1996...................     760      117,369,988     139,031,021      26,571       486,834         575,733
1997...................     776       70,988,897      50,161,742      41,525       555,759         392,707
1998...................     748      137,798,451     114,090,455      97,716       660,429         471,432
1999...................     725      349,503,966     305,137,040     278,551     3,481,620       3,039,654
2000...................     704      188,041,490     148,393,204     306,154     2,602,159       2,053,796
2001...................     589      255,850,070     192,934,221     473,241     1,947,420       1,506,236
2002...................     683      258,680,756     215,445,465     857,245     3,041,598       2,533,820
2003 (through August
  31)..................     686      316,394,185     268,153,390     574,821     2,096,709       1,777,022
</Table>

- ---------------

Source: The Korea Stock Exchange

Note:

(1) Converted at the Market Average Exchange Rate at the end of the periods
    indicated.

     The Korean securities markets are principally regulated by the Financial
Supervisory Commission and the Securities and Exchange Act. The Securities and
Exchange Act was amended fundamentally numerous times in recent years to broaden
the scope and improve the effectiveness of official supervision of the
securities markets. As amended, the law imposes restrictions on insider trading
and price manipulation, requires specified information to be made available by
listed companies to investors and establishes rules regarding margin trading,
proxy solicitation, takeover bids, acquisition of treasury shares and reporting
requirements for shareholders holding substantial interests.

 FURTHER OPENING OF THE KOREAN SECURITIES MARKET

     A stock index futures market was opened on May 3, 1996, and a stock index
option market was opened on July 7, 1997, in each case at the Korea Stock
Exchange. Remittance and repatriation of funds in

                                       321
<PAGE>

connection with investment in stock index futures and options are subject to
regulations similar to those that govern remittance and repatriation in the
context of foreign portfolio investment in Korean stocks.

     In addition, the Korea Stock Exchange opened new option markets for seven
individual stocks (Samsung Electronics, SK Telecom, KT, KEPCO, POSCO, Kookmin
Bank and Hyundai Motor Company) in January 2002. Non-Koreans are permitted to
invest in such options for individual stocks subject to certain procedural
requirements.

     Starting from May 1, 1996, foreign investors were permitted to invest in
warrants representing the right to subscribe for shares of a company listed on
the Korea Stock Exchange or registered on the Korea Securities Dealers'
Automated Quotation, or KOSDAQ, subject to certain investment limitations. A
foreign investor may not acquire such warrants with respect to shares of a class
of a company for which the ceiling on aggregate investment by foreigners has
been reached or exceeded.

     As of December 30, 1997, foreign investors were permitted to invest in all
types of corporate bonds, bonds issued by national or local governments and
bonds issued in accordance with certain special laws without being subject to
any aggregate or individual investment ceiling. The Financial Supervisory
Commission sets forth procedural requirements for such investments. The
Government announced on February 8, 1998, its plans for the liberalization of
the money market with respect to investment in money market instruments by
foreigners in 1998. According to the plan, foreigners have been permitted to
invest in money market instruments issued by corporations, including commercial
paper, starting February 16, 1998, with no restrictions as to the amount.
Starting May 25, 1998, foreigners have been permitted to invest in certificates
of deposit and repurchase agreements.

     Currently, foreigners are permitted to invest in securities including
shares of all Korean companies which are not listed on the Korea Stock Exchange
nor registered on the KOSDAQ and in bonds which are not listed.

 PROTECTION OF CUSTOMER'S INTEREST IN CASE OF INSOLVENCY OF SECURITIES COMPANIES

     Under Korean law, the relationship between a customer and a securities
company in connection with a securities sell or buy order is deemed to be
consignment and the securities acquired by a consignment agent (i.e., the
securities company) through such sell or buy order are regarded as belonging to
the customer in so far as the customer and the consignment agent's creditors are
concerned. Therefore, in the event of a bankruptcy or reorganization procedure
involving a securities company, the customer of the securities company is
entitled to the proceeds of the securities sold by the securities company. In
addition, the Securities and Exchange Act recognizes the ownership of a customer
in securities held by a securities company in such customer's account.

     When a customer places a sell order with a securities company which is not
a member of the Korea Stock Exchange and this securities company places a sell
order with another securities company which is a member of the Korea Stock
Exchange, the customer is still entitled to the proceeds of the securities sold
received by the non-member company from the member company regardless of the
bankruptcy or reorganization of the non-member company.

     Likewise, when a customer places a buy order with a non-member company and
the non-member company places a buy order with a member company, the customer
has the legal right to the securities received by the non-member company from
the member company because the purchased securities are regarded as belonging to
the customer in so far as the customer and the non-member company's creditors
are concerned.

     In addition, under the Securities and Exchange Act, the Korea Stock
Exchange is obliged to indemnify any loss or damage incurred by a counterparty
as a result of a breach by its members. If a securities company which is a
member of the Korea Stock Exchange breaches its obligation in connection with a
buy order, the Korea Stock Exchange is obliged to pay the purchase price on
behalf of the breaching member. Therefore, the customer can acquire the
securities that have been ordered to be purchased by the breaching member.

                                       322
<PAGE>

     As the cash deposited with a securities company is regarded as belonging to
the securities company, which is liable to return the same at the request of its
customer, the customer cannot take back deposited cash from the securities
company if a bankruptcy or reorganization procedure is instituted against the
securities company and, therefore, can suffer from loss or damage as a result.
However, the Depositor Protection Act provides that KDIC will, upon the request
of the investors, pay investors up to W50 million per depositor per financial
institution in case of the securities company's bankruptcy, liquidation,
cancellation of securities business license or other insolvency events. The
premiums related to this insurance are paid by securities companies. Pursuant to
the Securities and Exchange Act, as amended, securities companies are required
to deposit the cash received from its customers with the Korea Securities
Finance Corporation, a special entity established pursuant to the Securities and
Exchange Act. Set-off or attachment of cash deposits by securities companies
with the Korea Securities Finance Corporation is prohibited. In addition, in the
event of bankruptcy or dissolution of the securities company, the cash so
deposited shall be withdrawn and paid to the customer senior to other creditors
of the securities company.

                                       323
<PAGE>

ITEM 10.  ADDITIONAL INFORMATION

                           ARTICLES OF INCORPORATION

DESCRIPTION OF CAPITAL STOCK

     This section provides information relating to our capital stock, including
brief summaries of material provisions of our articles of incorporation, the
Korean Commercial Code of 1962, as amended (the "Commercial Code"), the
Securities and Exchange Act of 1976, as amended (the "Securities and Exchange
Act"), the Financial Holding Company Act and certain related laws of Korea, all
as currently in effect. The following summaries are subject to the articles of
incorporation and the applicable provisions of the Securities and Exchange Act,
the Commercial Code, and certain other related laws of Korea.

 GENERAL

     As of December 31, 2002, our authorized share capital is 1,000,000,000
shares. Our articles of incorporation provide that we are authorized to issue
shares of preferred stock up to one-half of all of the issued and outstanding
shares of common stock. Furthermore, through an amendment of the articles of
incorporation, we have created new classes of shares, in addition to the common
shares and the preferred shares. See "-- Description of Redeemable Preferred
Stock". As of December 31, 2001 and 2002, 292,344,192 shares and 292,361,125
shares, respectively, of common stock were issued. Of these amounts, as of
December 31, 2001 and 2002, we held 29,873,683 shares and 29,874,062 shares,
respectively, of common stock as treasury shares. No shares of preferred stock
were issued and outstanding as of December 31, 2002. All of the issued and
outstanding shares are fully-paid and non-assessable, and are in registered
form. Our authorized but unissued share capital consists of 707,638,875 shares.
We may issue the unissued shares without further shareholder approval but
subject to a board resolution as provided in the articles of incorporation. See
"-- Preemptive Rights and Issuance of Additional Shares" and "-- Distribution of
Free Shares". Share certificates are issued in denominations of one, five, ten,
50, 100, 500, 1,000 and 10,000 shares.

 DIVIDENDS

     Dividends are distributed to shareholders in proportion to the number of
shares of the relevant class of capital stock owned by each shareholder
following approval by the shareholders at an annual general meeting of
shareholders. We pay full annual dividends on newly issued shares (such as the
shares representing the American depositary shares) for the year in which the
new shares are issued. We declare our dividend annually at the annual general
meeting of shareholders which is held within three months after the end of the
fiscal year. The annual dividend must be paid to the shareholders of record as
of the end of the preceding fiscal year within one month after the annual
general meeting. Annual dividends may be distributed either in cash or in shares
provided that shares must be distributed at par value and, if the market price
of the shares is less than their par value, dividends in shares may not exceed
one-half of the annual dividend. Under the Commercial Code we do not have an
obligation to pay any annual dividend unclaimed for five years from the payment
date.

     In addition, the Commercial Code of Korea and our Articles of Incorporation
provide that we may pay interim dividends once during each fiscal year (in
addition to the annual dividends). Unlike annual dividends, interim dividends
may be paid upon the resolution of the board of directors and are not subject to
shareholder approval. The interim dividends, if any, will be paid to the
shareholders of record at 12:00 a.m. midnight, July 1 of the relevant fiscal
year in cash.

     Under the Commercial Code of Korea, an interim dividend shall not be more
than the net assets on the balance sheet of the immediately preceding fiscal
period, after deducting (i) the capital of the immediately preceding fiscal
period, (ii) the sum of the capital reserve and legal reserve accumulated up to
the immediately preceding fiscal period, (iii) the amount of earnings for
dividend payment confirmed at the general shareholders' meeting of the
immediately preceding fiscal period, (iv) other special reserves accumulated up
to the immediately preceding fiscal period, either pursuant to the provisions of
the Articles of

                                       324
<PAGE>

Incorporation or to the decision of the general meeting of shareholders, and (v)
amount of legal reserve that should be set aside for the current fiscal period
following the interim dividend payment.

     The Financial Holding Company Act and the regulations thereunder provide
that a financial holding company shall not pay an annual dividend unless it has
set aside in its legal reserve an amount equal to at least one-tenth of its net
income after tax and shall set aside such amount in its legal reserve until its
legal reserve reaches at least the aggregate amount of its stated capital. Under
the Bank Act and the regulations thereunder, we shall set aside allowances for
loan losses and reserves for retirement allowances in addition to the above
legal reserve.

     For information regarding Korean taxes on dividends, see "Item 10.
Additional Information -- Taxation -- Korean Taxation".

 DISTRIBUTION OF FREE SHARES

     In addition to permitting dividends in the form of shares to be paid out of
retained or current earnings, the Commercial Code permits a company to
distribute to its shareholders, in the form of free shares, an amount
transferred from the capital surplus or legal reserve to stated capital. These
free shares must be distributed to all of the shareholders pro rata. Our
articles of incorporation provide that the same types of preferred shares to be
distributed to the holders of preferred shares in case of distribution of free
shares. For information regarding the treatment under Korean tax laws of free
share distributions, see "Item 10. Additional Information -- Taxation -- Korean
Taxation -- Dividends on Shares of Common Stock or American Depositary Shares".
Holders of American depositary receipts will be able to participate in
distributions of free shares to the extent described in "Item 12. Description of
Securities other than Equity Securities -- Description of the American
Depositary Receipts -- American Depositary Shares -- Dividends and
Distributions".

 PREEMPTIVE RIGHTS AND ISSUANCE OF ADDITIONAL SHARES

     Unless otherwise provided in the Commercial Code of Korea, a company may
issue authorized but unissued shares at such times and upon such terms as the
board of directors of the company may determine. The company must offer the new
shares on uniform terms to all shareholders who have preemptive rights and who
are listed on the shareholders' register as of the record date. Our shareholders
are entitled to subscribe for any newly issued shares in proportion to their
existing shareholdings. However, as provided in the articles of incorporation,
we may issue new shares by resolution of board of directors to persons other
than existing shareholders if those shares are (1) publicly offered pursuant to
relevant provisions of the Korean Securities and Exchange Act (where the number
of such shares so offered may not exceed 50% of our total number of issued
shares); (2) preferentially allocated to the members of our employee stock
ownership association pursuant to relevant provisions of the Korean Securities
and Exchange Act; (3) issued for the purpose of issuing depositary receipts
pursuant to relevant provisions of the Korean Securities and Exchange Act (where
the number of such shares so issued may not exceed 50% of our total number of
issued shares); (4) issued to directors or employees as a result of exercise of
stock options we granted to them pursuant to the Korean Securities and Exchange
Act; (5) issued to a securities investment company authorized to exclusively
engage in the financial business pursuant to the Financial Holding Company Act;
or (6) issued to any specified foreign investors, foreign or domestic financial
institutions or alliance companies for managerial needs such as introduction of
advanced financial technology, improvement of its or subsidiaries' financial
structure and funding or strategic alliance (where such number of shares so
issued may not exceed 50% of our total number of issued shares). Under the
Commercial Code, a company may vary, without stockholders' approval, the terms
of such preemptive rights for different classes of shares. Public notice of the
preemptive rights to new shares and the transferability thereof must be given
not less than two weeks (excluding the period during which the shareholders'
register is closed) prior to the record date. We will notify the shareholders
who are entitled to subscribe for newly issued shares of the deadline for
subscription at least two weeks prior to the deadline. If a shareholder fails to
subscribe on or before such deadline, the shareholder's preemptive rights will
lapse. Our board of directors may determine how to distribute shares in respect
of which preemptive rights have not been exercised or where fractions of shares
occur.
                                       325
<PAGE>

     Under the Securities and Exchange Act, members of a company's employee
stock ownership association, whether or not they are shareholders, have a
preemptive right, subject to certain exceptions, to subscribe for up to 20% of
the shares publicly offered pursuant to the Securities and Exchange Act.
Furthermore, this right is exercisable only to the extent that the total number
of shares so acquired and held by such members does not exceed 20% of the total
number of shares then outstanding. As of the date hereof, our employee stock
ownership association does not own any shares of our common stock.

 GENERAL MEETING OF SHAREHOLDERS

     There are two types of general meetings of shareholders: annual general
meetings and extraordinary general meetings. We are required to convene our
annual general meeting within three months after the end of each fiscal year.
Subject to a board resolution or court approval, an extraordinary general
meeting of shareholders may be held when necessary or at the request of the
holders of an aggregate of 3% or more of our outstanding common shares or at the
request of our audit committee. In addition, under the Securities and Exchange
Act of Korea, an extraordinary general meeting of shareholders may be held at
the request of the shareholders holding shares for at least 6 months of an
aggregate of 3% (1.5% in case of a listed company whose capital at the end of
the latest business year is KRW 100 billion or more) or more of the outstanding
shares of the company, subject to a board resolution or court approval.
Furthermore, under the Financial Holding Company Act of Korea, an extraordinary
general meeting of shareholders may be held at the request of the shareholders
holding shares for at least 6 months of an aggregate of 1.5% (0.75% in the case
of a financial holding company (i) whose total assets at the end of the latest
financial year is W5 trillion or more and (ii) who is in control of two or more
subsidiaries, each with total assets of W2 trillion or more) or more of the
outstanding shares of the company, subject to a board resolution or court
approval. Holders of non-voting shares may be entitled to request a general
meeting of shareholders only to the extent the non-voting shares have become
enfranchised as described under "-- Voting Rights" below (hereinafter referred
to as "enfranchised non-voting shares"). Meeting agendas are determined by the
board of directors or proposed by holders of an aggregate of 3% or more of the
outstanding shares with voting rights by way of a written proposal to the board
of directors at least six weeks prior to the meeting. In addition, under the
Securities and Exchange Act of Korea, the meeting agenda may be proposed by the
shareholders holding shares for at least 6 months of an aggregate of 1% (0.5% in
the case of a listed company whose capital at the end of the latest business
year is W100 billion or more) or more of the outstanding shares of the company.
Furthermore, under the Financial Holding Company Act of Korea, the meeting
agenda may be proposed by the shareholders holding shares for at least 6 months
of an aggregate of 0.5% (0.25% in the case of a financial holding company (i)
whose total assets at the end of the latest financial year is W5 trillion or
more and (ii) who is in control of two or more subsidiaries, each with total
assets of W2 trillion or more) or more of the outstanding shares of the company.
Written notices stating the date, place and agenda of the meeting must be given
to the shareholders at least two weeks prior to the date of the general meeting
of shareholders; provided, that, notice may be given to holders of one per cent
or less of the total number of issued and outstanding shares which are entitled
to vote, by placing at least two public notices at least two weeks in advance of
the meeting in at least two daily newspapers. Currently, we use The Korea
Economic Daily and Maeil Business Newspaper for the publication of such notices.
Shareholders who are not on the shareholders' register as of the record date are
not entitled to receive notice of the general meeting of shareholders, and they
are not entitled to attend or vote at such meeting. Holders of enfranchised
non-voting shares who are on the shareholders' register as of the record date
are entitled to receive notice of the general meeting of shareholders and they
are entitled to attend and vote at such meeting. Otherwise, holders of
non-voting shares are not entitled to receive notice of or vote at general
meetings of shareholders.

     The general meeting of shareholders is held at our head office (which is
our registered head office) or, if necessary, may be held anywhere in the
vicinity of our head office.

 VOTING RIGHTS

     Holders of common shares are entitled to one vote for each share. However,
voting rights with respect to common shares that we hold and common shares that
are held by a corporate shareholder, where more than

                                       326
<PAGE>

one-tenth of the outstanding capital stock is directly or indirectly owned by
us, may not be exercised. Unless stated otherwise in a company's articles of
incorporation, the Commercial Code permits holders of an aggregate of 3% (under
the Securities and Exchange Act, 1% in case of a company which total capital as
at the end of the latest fiscal year is W2 trillion or more) or more of the
outstanding shares with voting rights to request cumulative voting when electing
two or more directors. Our articles of incorporation currently do not prohibit
cumulative voting. The Commercial Code and the articles of incorporation provide
that an ordinary resolution may be adopted if approval is obtained from the
holders of at least a majority of those common shares present or represented at
such meeting and such majority also represents at least one-fourth of the total
of our issued and outstanding common shares. Holders of non-voting shares (other
than enfranchised non-voting shares) are not entitled to vote on any resolution
or to receive notice of any general meeting of shareholders unless the agenda of
the meeting includes consideration of a resolution on which such holders are
entitled to vote. If our general shareholders' meeting resolves not to pay to
holders of preferred shares the annual dividend as determined by the board of
directors at the time of issuance of such shares, the holders of preferred
shares will be entitled to exercise voting rights from the general shareholders'
meeting following the meeting adopting such resolution to the end of a meeting
to declare to pay such dividend with respect to the preferred shares. Holders of
enfranchised preferred shares have the same rights as holders of common shares
to request, receive notice of, attend and vote at a general meeting of
shareholders.

     The Commercial Code provides that to amend the articles of incorporation
(which is also required for any change to the authorized share capital of the
company) and in certain other instances, including removal of a director of a
company, dissolution, merger or consolidation of a company, transfer of the
whole or a significant part of the business of a company, acquisition of all of
the business of any other company or issuance of new shares at a price lower
than their par value, a special resolution must be adopted by the approval of
the holders of at least two-thirds of those shares present or represented at
such meeting and such special majority also represents at least one-third of the
total issued and outstanding shares with voting rights of the company.

     In addition, in the case of amendments to the articles of incorporation or
any merger or consolidation of a company or in certain other cases which affect
the rights or interest of the shareholders of the preferred shares, a resolution
must be adopted by a separate meeting of shareholders of the preferred shares.
Such a resolution may be adopted if the approval is obtained from shareholders
of at least two-thirds of the preferred shares present or represented at such
meeting and such preferred shares also represent at least one-third of the total
issued and outstanding preferred shares of the company.

     A shareholder may exercise his voting rights by proxy given to another
shareholder. The proxy must present the power of attorney prior to the start of
the general meeting of shareholders.

 RIGHTS OF DISSENTING SHAREHOLDERS

     Pursuant to the Securities and Exchange Act, in certain limited
circumstances (including, without limitation, if we transfer all or any
significant part of our business or if we merge or consolidate with another
company), dissenting holders of shares have the right to require us to purchase
their shares. Pursuant to the Financial Holding Company Act and the Commercial
Code of Korea, if a financial holding company acquires a new direct or indirect
subsidiary through the exchange or transfer of shares, the dissenting holders of
such shares have the right to require us to purchase their shares. To exercise
such a right, shareholders must submit to us a written notice of their intention
to dissent prior to the general meeting of shareholders. Within 20 days (or 10
days under certain circumstances according to the Financial Holding Company Act)
after the date on which the relevant resolution is passed at such meeting, such
dissenting shareholders must request in writing that we purchase their shares.
We are obligated to purchase the shares of dissenting shareholders within one
month after the end of such request period at a price to be determined by
negotiation between the shareholder and us. If we cannot agree on a price with
the shareholder through such negotiations, the purchase price will be the
arithmetic mean of (1) the weighted average of the daily share prices on the
Korea Stock Exchange for the 60 day period prior to the date of the adoption of
the relevant board of directors' resolution, (2) the weighted average of the
daily share prices on the Korea Stock Exchange for one month prior to the date
of the adoption of the relevant board of directors' resolution and (3) the
weighted average of
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the daily share prices on the Korea Stock Exchange for one week prior to the
date of the adoption of the relevant board of directors' resolution. However,
the Financial Supervisory Commission may adjust such price if we or at least 30%
of the dissenting shareholders do not accept such purchase price.

 REGISTER OF SHAREHOLDERS AND RECORD DATES

     We maintain the register of our shareholders at our transfer agent's in
Seoul, Korea. Korea Securities Depository, as our transfer agent, registers
transfers of shares on the register of shareholders upon presentation of the
share certificates.

     The record date for annual dividends is December 31. For the purpose of
determining the holders of shares entitled to annual dividends, the register of
shareholders may be closed for the period from January 1 of each year up to the
date of the annual shareholders' meeting for the immediately preceding financial
year. Further, the Commercial Code and the articles of incorporation permit us
upon at least two weeks' public notice to set a record date and/or close the
register of shareholders for not more than three months for the purpose of
determining the shareholders entitled to certain rights pertaining to the
shares. The trading of shares and the delivery of certificates in respect
thereof may continue while the register of shareholders is closed.

  DESCRIPTION OF REDEEMABLE PREFERRED STOCK

  Description of Series 1/2/3/4/5 Redeemable Preferred Shares

     On July 9, 2003, our board of directors authorized the issuance of
46,583,961 redeemable preferred shares of non-voting stock ("Redeemable
Preferred Shares"). The Redeemable Preferred Shares consist of 9,316,792 shares
of Series 1 Redeemable Preferred Shares, 9,316,792 shares of Series 2 Redeemable
Preferred Shares, 9,316,792 shares of Series 3 Redeemable Preferred Shares,
9,316,792 shares of Series 4 Redeemable Preferred Shares and 9,316,793 shares of
Series 5 Redeemable Preferred Shares. All of the Redeemable Preferred Shares are
issued in registered form and subscribed for by KDIC.

     The dividends on each share of the Redeemable Preferred Shares are (i) for
the fiscal year 2003, an amount equal to 4.04% of the subscription price per
share multiplied by the number of days elapsed from the date of issuance to
December 31, 2003 and divided by 365 and (ii) thereafter, an amount equal to
4.04% of the subscription price per share. The dividends on such Redeemable
Preferred Shares rank senior to the dividends on the Common Shares. If in any
fiscal year we do not pay any dividend as provided above, the holders of the
Redeemable Preferred Shares are entitled to receive such accumulated unpaid
dividend in priority over the holders of our Common Shares from the dividends
payable in respect of the next fiscal year. If dividends are not paid to the
holders of Redeemable Preferred Shares, the Redeemable Preferred Shares become
enfranchised. See "-- Voting Rights".

     The Redeemable Preferred Shares are subject to redemption as set forth
below. The redemption periods for each class of the Redeemable Preferred Shares
are (i) for Series 1 Redeemable Preferred Shares, from the first year
anniversary of the issuance date until the third year anniversary of the
issuance date; (ii) for Series 2 Redeemable Preferred Shares, from the second
year anniversary of the issuance date until the fourth year anniversary of the
issuance date; (iii) for Series 3 Redeemable Preferred Shares, from the third
year anniversary of the issuance date until the fifth year anniversary of the
issuance date; (iv) for Series 4 Redeemable Preferred Shares, from the fourth
year anniversary of the issuance date until the sixth year anniversary of the
issuance date; and (v) for Series 5 Redeemable Preferred Shares, from the fifth
year anniversary of the issuance date until the seventh year anniversary of the
issuance date; provided that, if the Redeemable Preferred Shares are not
redeemed in full within the redemption period or the dividends to the Redeemable
Preferred Shares are not paid in full, the redemption period shall be extended
until the Redeemable Preferred Shares are redeemed in full.

     We are obligated to redeem any outstanding Redeemable Preferred Shares at
the end of the relevant redemption period to the extent that distributable
profits are available for such redemption. Further, we may,

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at our option, elect to redeem all or part of any outstanding Redeemable
Preferred Shares at any time during the redemption period to the extent that
distributable profits are available for such redemption.

  Description of Redeemable Convertible Preferred Shares

     On July 9, 2003, our board of directors authorized the issuance of
44,720,603 redeemable convertible preferred shares of non-voting stock
("Redeemable Convertible Preferred Shares"). All of the Redeemable Convertible
Preferred Shares are issued in registered form and subscribed for by KDIC.

     The dividends on each share of the Redeemable Convertible Preferred Shares
are (i) for the fiscal year 2003, an amount equal to 2.02% of the subscription
price per share multiplied by the number of days elapsed from the date of
issuance to December 31, 2003 and divided by 365 and (ii) thereafter, an amount
equal to 2.02% of the subscription price per share. The dividends on such
Redeemable Convertible Preferred Shares rank senior to the dividends on the
Common Shares. If in any fiscal year we do not pay any dividend as provided
above, the holders of the Redeemable Convertible Preferred Shares are entitled
to receive such accumulated unpaid dividend in priority over the holders of our
Common Shares from the dividends payable in respect of the next fiscal year. If
dividends are not paid to the holders of Redeemable Convertible Preferred
Shares, the Redeemable Convertible Preferred Shares become enfranchised. See
"-- Voting Rights".

     The Redeemable Convertible Preferred Shares are subject to redemption and
conversion as set forth below. The redemption period for the Redeemable
Convertible Preferred Shares is from the third year anniversary of the issuance
date until the fifth year anniversary of the issuance date; provided that, if
the Redeemable Preferred Shares are not redeemed in full within the redemption
period or the dividends to the Redeemable Convertible Preferred Shares are not
paid in full, the redemption period shall be extended until the Redeemable
Convertible Preferred Shares are redeemed in full.

     We are obligated to redeem any outstanding Redeemable Convertible Preferred
Shares at the end of the redemption period to the extent that distributable
profits are available for such redemption. Further, we may, at our option, elect
to redeem all or part of any outstanding Redeemable Convertible Preferred Shares
at any time during the redemption period to the extent that distributable
profits are available for such redemption.

     The holders of the Redeemable Convertible Preferred Shares may, at their
option, convert all of part of any outstanding Redeemable Convertible Preferred
Shares into Common Shares at any time during the conversion period. The
conversion period for the Redeemable Convertible Preferred Shares is from the
first year anniversary of the issuance date until the fourth year anniversary of
the issuance date. The number of Common Shares to be issued conversion shall be
the same as the number of Redeemable Convertible Preferred Shares subject to
conversion.

  Description of Series 6/7/8 Redeemable Preferred Shares

     On July 29, 2003, our board of directors authorized issuance of 6,000,000
redeemable preferred shares of non-voting stock ("Second Issue of Redeemable
Preferred Shares"). The Second Issue of Redeemable Preferred Shares consist of
3,500,000 shares of Series 6 Redeemable Preferred Shares, 2,433,334 shares of
Series 7 Redeemable Preferred Shares and 66,666 shares of Series 8 Redeemable
Preferred Shares. All of the Second Issue of Redeemable Preferred Shares are
issued through public offering.

     The dividends on each share of the Second Issue of Redeemable Preferred
Shares are (i) for the Series 6 Redeemable Preferred Shares, an amount equal to
7.00% of the subscription price per share, (ii) for the Series 7 Redeemable
Preferred Shares, an amount equal to 7.46% of the subscription price per share
and (iii) for the Series 8 Redeemable Preferred Shares, an amount equal to 7.86%
of the subscription price per share. The dividends on such Second Issue of
Redeemable Preferred Shares rank senior to the dividends on the Common Shares.
If we in any fiscal year do not pay any dividend as provided above, the holders
of the Second Issue of Redeemable Preferred Shares are entitled to receive such
accumulated unpaid dividend in priority to the holders of our Common Shares from
the dividends payable in respect of the next fiscal year. If dividends are not
paid to the holders of Second Issue of Redeemable Preferred Shares, the Second
Issue of Redeemable Preferred Shares become enfranchised. See "-- Voting
Rights".

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     The Second Issue of Redeemable Preferred Shares are subject to redemption
as set forth below. The redemption periods for each class of the Second Issue of
Redeemable Preferred Shares are (i) for Series 6 Redeemable Preferred Shares,
from one (1) month immediately preceding the third anniversary date of the
issuance date until the third anniversary date of the issuance date; (ii) for
Series 7 Redeemable Preferred Shares, from one (1) month immediately preceding
the fifth anniversary date of the issuance date until the fifth anniversary date
of the issuance date; and (iii) for Series 8 Redeemable Preferred Shares, from
one (1) month immediately preceding the seventh anniversary date of the issuance
date until the seventh anniversary date of the issuance date; provided that, if
the Second Issue of Redeemable Preferred Shares are not redeemed in full within
the redemption period or the dividends to the Second Issue of Redeemable
Preferred Shares are not paid in full, the redemption period shall be extended
until the Second Issue of Redeemable Preferred Shares are redeemed in full.

     We are obligated to redeem any outstanding Second Issue of Redeemable
Preferred Shares at the end of the relevant redemption period to the extent that
distributable profits are available for such redemption. Further, we may, at our
option, elect to redeem all or part of any outstanding Second Issue of
Redeemable Preferred Shares at any time during the redemption period to the
extent that distributable profits are available for such redemption.

 ANNUAL REPORT

     At least one week before the annual general meeting of shareholders, we
must make our annual report written in the Korean language and audited
nonconsolidated financial statements prepared under Korean GAAP available for
inspection at our principal office and at all of our branch offices. Copies of
annual reports, the audited nonconsolidated financial statements and any
resolutions adopted at the general meeting of shareholders will be available to
our shareholders.

     Under the Securities and Exchange Act, we must file with the Financial
Supervisory Commission and the Korea Stock Exchange an annual report within 90
days after the end of our fiscal year, a half-year report within 45 days after
the end of the first six months of our fiscal year and quarterly reports within
45 days after the end of the first three months and nine months of our fiscal
year, respectively. Copies of such reports are available for public inspection
at the Financial Supervisory Commission and the Korea Stock Exchange.

 TRANSFER OF SHARES

     Under the Commercial Code, the transfer of shares is effected by the
delivery of share certificates. In order to assert shareholders' rights against
us, the transferee must have his name and address registered on the register of
shareholders. For this purpose, shareholders are required to file with us their
name, address and seal. Nonresident shareholders must notify us of the name of
their proxy in Korea to which our notice can be sent. Under the Financial
Supervisory Commission regulations, nonresident shareholders may appoint a
standing proxy and may not allow any person other than the standing proxy to
exercise rights regarding the acquired share or perform any task related thereto
on his behalf, subject to certain exceptions. Under current Korean regulations,
certain qualified securities companies and banks in Korea (including licensed
branches of non-Korean securities companies and banks) and the Korea Securities
Depository are authorized to act as agents and provide related services. Certain
foreign exchange controls and securities regulations apply to the transfer of
shares by nonresidents or non-Koreans. See "Item 10. Additional
Information -- Exchange Controls". As to the ceiling on the aggregate
shareholdings of a single shareholder and persons who stand in a special
relationship with such shareholder, please see "Item 4. Information on the
Company -- Supervision and Regulation -- Regulations applicable to Financial
Holding Companies -- Restriction on Financial Holding Company Ownership".

 ACQUISITION OF OUR SHARES

     We generally may not acquire our own shares except in certain limited
circumstances, including, without limitation, a reduction in capital.

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     Notwithstanding the foregoing restrictions, pursuant to the Securities and
Exchange Act and regulations under the Financial Holding Company Act, we may
purchase our own shares on the Korea Stock Exchange or through a tender offer,
subject to the restrictions that (1) the aggregate purchase price of such shares
may not exceed the total amount available for distribution of dividends at the
end of the preceding fiscal year less the amounts of dividends and reserves for
such fiscal year, and (2) the purchase of such shares shall meet the requisite
capital ratio under the Financial Holding Company Act and the guidelines issued
by the Financial Supervisory Commission.

     In general, under the Financial Holding Company Act, subsidiaries of which
we own 50% or more are not permitted to acquire our shares.

 LIQUIDATION RIGHTS

     In the event we are liquidated, the assets remaining after the payment of
all debts, liquidation expenses and taxes will be distributed to shareholders in
proportion to the number of shares held. Holders of preferred shares may have
preferences in liquidation.

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                               EXCHANGE CONTROLS

GENERAL

     The Foreign Exchange Transaction Act of Korea and the Presidential Decree
and regulations under that Act and Decree, which we refer to collectively as the
"Foreign Exchange Transaction Laws" herein, regulate investment in Korean
securities by nonresidents and issuance of securities outside Korea by Korean
companies. Under the Foreign Exchange Transaction Laws, nonresidents may invest
in Korean securities only to the extent specifically allowed by these laws or
otherwise permitted by the Ministry of Finance and Economy of Korea. The
Financial Supervisory Commission has also adopted, pursuant to its authority
under the Korean Securities and Exchange Act, regulations that restrict
investment by foreigners in Korean securities and regulate issuance of
securities outside Korea by Korean companies.

     Under the Foreign Exchange Transaction Laws, (1) if the Korean government
deems that it is inevitable due to the outbreak of natural calamities, wars,
conflict of arms or grave and sudden changes in domestic or foreign economic
circumstances or other situations equivalent thereto, the Ministry of Finance
and Economy may temporarily suspend payment, receipt or the whole or part of
transactions to which the Foreign Exchange Transaction Laws apply, or impose an
obligation to safekeep, deposit or sell means of payment in or to certain Korean
governmental agencies or financial institutions; and (2) if the Korean
government deems that international balance of payments and international
finance are confronted or are likely to be confronted with serious difficulty or
the movement of capital between Korea and abroad brings or is likely to bring
about serious obstacles in carrying out its currency policies, exchange rate
policies and other macroeconomic policies, the Ministry of Finance and Economy
may take measures to require any person who intends to perform capital
transactions to obtain permission or to require any person who performs capital
transactions to deposit part of the payments received in such transactions at
certain Korean governmental agencies or financial institutions, in each case
subject to certain limitations.

REPORTING REQUIREMENTS FOR HOLDERS OF SUBSTANTIAL INTERESTS

     Any person whose direct or beneficial ownership of our common stock with
voting rights, whether in the form of shares of common stock or American
depositary shares, certificates representing the rights to subscribe for shares
and equity-related debt securities including convertible bonds and bonds with
warrants (which we refer to collectively as "Equity Securities"), together with
the Equity Securities beneficially owned by certain related persons or by any
person acting in concert with the person, accounts for 5% or more of the total
outstanding shares (plus Equity Securities of us held by such persons) is
required to report the status of the holdings to the Financial Supervisory
Commission and the Korea Stock Exchange within five business days after reaching
the 5% ownership interest. In addition, any change in the ownership interest
subsequent to the report that equals or exceeds 1% of the total outstanding
Equity Securities of us is required to be reported to the Financial Supervisory
Commission and the Korea Stock Exchange within five business days from the date
of the change.

     Violation of these reporting requirements may subject a person to criminal
sanctions such as fines or imprisonment and/or a loss of voting rights with
respect to the ownership of Equity Securities exceeding 5%. Furthermore, the
Financial Supervisory Commission may order the disposal of the unreported Equity
Securities.

     In addition to the reporting requirements described above, any person whose
direct or beneficial ownership of our stock accounts for 10% or more of the
total issued and outstanding stock (which we refer to as a "major stockholder")
must report the status of his/her shareholding to the Korea Securities Futures
Commission and the Korea Stock Exchange within ten days after he/she becomes a
major stockholder. In addition, any change in the ownership interest subsequent
to the report must be reported to the Korea Securities Futures Commission and
the Korea Stock Exchange within the 10th day of the month following the month in
which the change occurred. Violation of these reporting requirements may subject
a person to criminal sanctions such as fines or imprisonment. Any single
stockholder or persons who stand in a special relationship with such stockholder
that acquire more than 10% (4% in case of non-financial business group

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companies) of the voting stock of a Korean bank pursuant to the Bank Act will be
subject to reporting or approval requirements. See "Item 4. Information on the
Company -- Supervision and Regulation -- Principal Regulations Applicable to
Financial Holding Companies -- Restrictions on Financial Holding Company
Ownership."

RESTRICTIONS APPLICABLE TO SHARES

     As a result of amendments to the Foreign Exchange Transaction Laws and
Financial Supervisory Commission regulations (which we refer to collectively as
the "Investment Rules") adopted in connection with the stock market opening from
January 1992 and after that date, foreigners may invest, with limited exceptions
and subject to procedural requirements, in all shares of Korean companies,
whether listed on the Korea Stock Exchange or registered on the KOSDAQ, unless
prohibited by specific laws. Foreign investors may trade shares listed on the
Korea Stock Exchange or registered on the KOSDAQ only through the Korea Stock
Exchange or the KOSDAQ, except in limited circumstances, including:

     - odd-lot trading of shares;

     - acquisition of shares (which we refer to as "Converted Shares") by
       exercise of warrants, conversion rights or exchange rights under bonds
       with warrants, convertible bonds or exchangeable bonds or withdrawal
       rights under depositary receipts issued outside of Korea by a Korean
       company;

     - acquisition of shares as a result of inheritance, donation, bequest or
       exercise of stockholders' rights, including preemptive rights or rights
       to participate in free distributions and receive dividends; and

     - over-the-counter transactions between foreigners of a class of shares for
       which the ceiling on aggregate acquisition by foreigners, as explained
       below, has been reached or exceeded subject to certain exceptions.

     For over-the-counter transactions of shares between foreigners outside the
Korea Stock Exchange or the KOSDAQ for shares with respect to which the limit on
aggregate foreign ownership has been reached or exceeded, a securities company
licensed in Korea must act as an intermediary. Odd-lot trading of shares outside
the Korea Stock Exchange or the KOSDAQ must involve a licensed securities
company in Korea as the other party. Foreign investors are prohibited from
engaging in margin transactions with respect to shares which are subject to a
foreign ownership limit.

     The Investment Rules require a foreign investor who wishes to invest in
shares on the Korea Stock Exchange or the KOSDAQ (including Converted Shares and
shares being issued for initial listing on the Korean Stock Exchange or
registration on KOSDAQ) to register its identity with the Financial Supervisory
Service prior to making any such investment; however, the registration
requirement does not apply to foreign investors who acquire Converted Shares
with the intention of selling such Converted Shares within three months from the
date of acquisition of the Converted Shares. Upon registration, the Financial
Supervisory Service will issue to the foreign investor an investment
registration card, which must be presented each time the foreign investor opens
a brokerage account with a securities company. Foreigners eligible to obtain an
investment registration card include foreign nationals who have not been
residing in Korea for a consecutive period of six months or more, foreign
governments, foreign municipal authorities, foreign public institutions,
international financial institutions or similar international organizations,
corporations incorporated under foreign laws and any person in any additional
category designated by decree of the Ministry of Finance and Economy under the
Korean Securities and Exchange Act. All Korean offices of a foreign corporation
as a group are treated as a separate foreigner from the offices of the
corporation outside Korea for the purpose of investment registration. However, a
foreign corporation or depositary issuing depositary receipts may obtain one or
more investment registration cards in its name in certain circumstances as
described in the relevant regulations.

     Upon a foreign investor's purchase of shares through the Korea Stock
Exchange or the KOSDAQ, no separate report by the investor is required because
the investment registration card system is designed to control and oversee
foreign investment through a computer system. However, a foreign investor's
acquisition or sale of shares outside the Korea Stock Exchange or the KOSDAQ (as
discussed above) must be reported
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by the foreign investor or his standing proxy to the governor of the Financial
Supervisory Service at the time of each such acquisition or sale; provided,
however, that a foreign investor must ensure that any acquisition or sale by it
of shares outside the Korea Stock Exchange or the KOSDAQ in the case of trades
in connection with a tender offer, odd-lot trading of shares or trades of a
class of shares for which the aggregate foreign ownership limit has been reached
or exceeded, is reported to the governor of the Financial Supervisory Service by
the securities company engaged to facilitate such transaction. A foreign
investor may appoint a standing proxy from among the Korea Securities
Depository, foreign exchange banks (including domestic branches of foreign
banks), securities companies (including domestic branches of foreign securities
companies), investment trust companies, futures trading companies and
internationally recognized custodians which will act as a standing proxy to
exercise stockholders' rights or perform any matters related to the foregoing
activities if the foreign investor does not perform these activities himself.
Generally, a foreign investor may not permit any person, other than its standing
proxy, to exercise rights relating to his shares or perform any tasks related
thereto on his behalf. However, a foreign investor may be exempted from
complying with these standing proxy rules with the approval of the governor of
the Financial Supervisory Service in cases deemed inevitable by reason of
conflict between laws of Korea and the home country of the foreign investor.

     Certificates evidencing shares of Korean companies must be kept in custody
with an eligible custodian in Korea. Only foreign exchange banks (including
domestic branches of foreign banks), securities companies (including domestic
branches of foreign securities companies), the Korea Securities Depository,
investment trust companies, futures trading companies and internationally
recognized custodians are eligible to act as a custodian of shares for a
nonresident or foreign investor. A foreign investor must ensure that his
custodian deposits his shares with the Korea Securities Depository. However, a
foreign investor may be exempted from complying with this deposit requirement
with the approval of the governor of the Financial Supervisory Service in
circumstances where compliance with that requirement is made impracticable,
including cases where compliance would contravene the laws of the home country
of such foreign investor.

     Under the Investment Rules, with certain exceptions, foreign investors may
acquire shares of a Korean company without being subject to any foreign
investment ceiling. As one such exception, designated public corporations are
subject to a 40% ceiling on the acquisition of shares by foreigners in the
aggregate. Designated public corporations may set a ceiling on the acquisition
of shares by a single person within 3% of the total number of shares. Currently,
Korea Electric Power Corporation is the only designated public corporation which
has set such a ceiling. Furthermore, an investment by a foreign investor in 10%
or more of the outstanding shares with voting rights of a Korean company is
defined as a foreign direct investment under the Foreign Investment Promotion
Act of Korea. Generally, a foreign direct investment must be reported to the
Ministry of Commerce, Industry and Energy of Korea. The acquisition of shares of
a Korean company by a foreign investor may also be subject to certain foreign or
other shareholding restrictions in the event that the restrictions are
prescribed in a specific law that regulates the business of the Korean company.
For a description of such restrictions applicable to Korean banks, see "Item 4.
Information on the Company -- Supervision and Regulation -- Principal
Regulations Applicable to Banks -- Restrictions on Bank Ownership."

     Under the Foreign Exchange Transaction Laws, a foreign investor who intends
to acquire shares must designate a foreign exchange bank at which he must open a
foreign currency account and a Won account exclusively for stock investments. No
approval is required for remittance into Korea and deposit of foreign currency
funds in the foreign currency account. Foreign currency funds may be transferred
from the foreign currency account at the time required to place a deposit for,
or settle the purchase price of, a stock purchase transaction to a Won account
opened at a securities company. Funds in the foreign currency account may be
remitted abroad without any Korean governmental approval.

     Dividends on shares of Korean companies are paid in Won. No Korean
governmental approval is required for foreign investors to receive dividends on,
or the Won proceeds of the sale of, any shares to be paid, received and retained
in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares
held by a nonresident of Korea must be deposited either in a Won account with
the investor's securities company or in his Won account. Funds in the investor's
Won account may be transferred to his foreign currency
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account or withdrawn for local living expenses up to certain limitations. Funds
in the Won account may also be used for future investment in shares or for
payment of the subscription price of new shares obtained through the exercise of
preemptive rights.

     Securities companies and investment trust companies are allowed to open
foreign currency accounts with foreign exchange banks exclusively for
accommodating foreign investors' stock investments in Korea. Through these
accounts, securities companies and investment trust companies may enter into
foreign exchange transactions on a limited basis, such as conversion of foreign
currency funds and Won funds, either as a counterparty to or on behalf of
foreign investors, without the investors having to open their own accounts with
foreign exchange banks.

                                    TAXATION

     The following summary is based upon tax laws of the United States and the
Republic of Korea as in effect on the date of this Annual Report on Form 20-F,
and is subject to any change in United States or Korean law that may come into
effect after such date. Investors in shares of common stock or American
depositary shares are advised to consult their own tax advisers as to the United
States, Korean or other tax consequences of the purchase, ownership and
disposition of such securities, including the effect of any national, state or
local tax laws.

KOREAN TAXATION

     The following summary of Korean tax considerations applies to you so long
as you are not:

     - a resident of Korea;

     - a corporation organized under Korean law; or

     - engaged in a trade or business in Korea through a permanent establishment
       or a fixed base.

 DIVIDENDS ON SHARES OF COMMON STOCK OR AMERICAN DEPOSITARY SHARES

     We will deduct Korean withholding tax from dividends paid to you at a rate
of 27.5%. If you are a resident of a country that has entered into a tax treaty
with Korea, you may qualify for a reduced rate of Korean withholding tax. For
example, if you are a qualified resident of the United States for purposes of
the income tax treaty currently in effect between Korea and the United States
and you are the "beneficial owner" of a dividend, a reduced withholding tax rate
of 16.5% will generally apply. You will not be entitled to claim treaty benefits
if you are not the beneficial owner of a dividend.

     In order to obtain the benefits of a reduced withholding tax rate under a
tax treaty, you must submit to us, prior to the dividend payment date, such
evidence of tax residence as may be required by the Korean tax authorities.
Evidence of tax residence may be submitted to us through the depositary bank.
Excess taxes withheld may not be recoverable even if you subsequently produce
evidence that you were entitled to have tax withheld at a lower rate.

     If we distribute to you free shares representing a transfer of certain
capital reserves or asset revaluation reserves into paid-in-capital, that
distribution may be deemed a dividend which is subject to Korean tax.

 TAXATION OF CAPITAL GAINS

     You may be exempt from Korean taxation on capital gains recognized from the
sale of our shares effected through the Korea Stock Exchange, if you have owned,
together with certain related parties, less than 25% of our total issued and
outstanding shares during the year of sale and the five calendar years before
the year of sale. According to a ruling issued by the Korean taxation
authorities, capital gains earned by a nonresident without any Korean permanent
establishment from the transfer of American depository shares to other
nonresidents (other than to such transferees' permanent establishment in Korea)
are not subject to Korean taxation. In addition, capital gains earned by a
nonresident from the transfer of American depositary

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shares outside of Korea are exempt from Korean taxation by virtue of the Tax
Exemption and Limitation Law, provided that the issuance of American depositary
shares is deemed to be an overseas issuance under the Tax Exemption and
Limitation Law.

     If you are subject to tax on capital gains with respect to a sale of
American depositary shares, or of shares of common stock which you acquired as a
result of a withdrawal, your gain will be calculated based on your cost of
acquiring the American depositary shares although there are no specific Korean
tax provisions or rulings on this issue. In the absence of the application of a
tax treaty which exempts or reduces the rate of tax on capital gains, the amount
of Korean tax imposed on your capital gains will be the lesser of 11.0% of the
gross realization proceeds or, subject to the production of satisfactory
evidence of the acquisition cost of the American depositary shares, 27.5% of the
net capital gain.

     If you sell your shares of common stock or American depositary shares, the
purchaser or, in the case of the sale of shares of common stock on the Korea
Stock Exchange or through a licensed securities company in Korea, the licensed
securities company is required to withhold Korean tax from the sales price in an
amount equal to 11.0% of the gross realization proceeds and to make payment of
this amount to the Korean tax authorities, unless you establish your entitlement
to an exemption or lower rate of taxation under an applicable tax treaty or
produce satisfactory evidence of your acquisition cost for the shares of common
stock or the American depositary shares. To obtain the benefit of an exemption
or reduced rate of tax pursuant to a tax treaty, you must submit to the
purchaser or the securities company, or through the depositary bank, as the case
may be, prior to or at the time of payment, such evidence of your tax residence
as the Korean tax authorities may require in support of your claim for treaty
protection. Effective July 1, 2002, in order to qualify for the exemption under
a tax treaty, a nonresident seller must submit an application for exemption
together with a certificate of residence issued by a competent tax authority of
the seller's country of tax residence prior to making the tax payment. Excess
taxes withheld may not be recoverable even if you subsequently produce evidence
that you were entitled to have taxes withheld at a lower rate.

 INHERITANCE TAX AND GIFT TAX

     If you die while holding an American depositary share or donate an American
depositary share, it is unclear whether, for Korean inheritance and gift tax
purposes, you will be treated as the owner of the shares of common stock
underlying the American depositary shares. If you are treated as the owner of
the shares of common stock, your heir or the donee (or in certain circumstances,
you as the donor) will be subject to Korean inheritance or gift tax presently at
the rate of 10.0% to 50.0%.

     If you die while holding a share of common stock or donate a share of
common stock, your heir or donee (or in certain circumstances, you as the donor)
will be subject to Korean inheritance or gift tax at the same rate as indicated
above.

 SECURITIES TRANSACTION TAX

     You will not pay a securities transaction tax on your transfer of American
depositary shares. If you transfer shares of common stock, you will be subject
to a securities transaction tax at the rate of 0.15% and an agriculture and
fishery special tax at the rate of 0.15% of the sale price of the shares of
common stock when traded on the Korea Stock Exchange. If your transfer is not
made on the Korea Stock Exchange, subject to certain exceptions, you will be
subject to a securities transaction tax at the rate of 0.5% and will not be
subject to an agriculture and fishery special tax.

     According to a tax ruling issued by the Korean tax authorities, foreign
shareholders are not subject to a securities transaction tax upon the deposit of
underlying common shares and receipt of depositary shares or upon the surrender
of depositary shares and withdrawal of originally deposited underlying common
shares. However, questions have been raised as to whether this ruling also
applies to the surrender of depositary shares and withdrawal of underlying
common shares by holders other than the initial holders of depositary shares.
Although the tax authorities recently issued another tax ruling, it is not clear
as to whether, on whom, when and in what amount the securities transaction tax
will be imposed in the case of withdrawals of underlying common shares by
holders of depositary shares other than initial holders. Accordingly, there can
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be no assurance that holders of American depositary shares other than initial
holders will not be subject to the securities transaction tax when they withdraw
common shares upon surrendering the American depositary shares.

UNITED STATES TAXATION

     The following summary describes the material United States federal income
tax considerations for beneficial owners of our shares or American depositary
receipts that hold the shares or American depositary receipts as capital assets
and are United States Holders. You are a United States holder if you are:

          (i) a citizen or resident of the United States;

          (ii) a corporation or partnership created or organized in or under the
     laws of the United States or any political subdivision thereof;

          (iii) an estate the income of which is subject to United States
     federal income taxation regardless of its source;

          (iv) a trust that is subject to the primary supervision of a court
     within the United States and one or more United States persons has
     authority to control all substantial decisions of the trust; or

          (v) a trust that has a valid election in effect under applicable
     United States Treasury regulations to be treated as a United States person.

     In addition, this summary only applies to you if you are a United States
holder that is a resident of the United States for purposes of the current tax
treaty between the United States and Korea, your shares or American depositary
receipts are not, for purposes of the treaty, effectively connected with a
permanent establishment in Korea and you otherwise qualify for the full benefits
of the treaty.

     This summary is based on current law, which is subject to change, perhaps
retroactively. It is for general purposes only and you should not consider it to
be tax advice. In addition, it is based in part on representations by the
depositary and assumes that each obligation under the Deposit Agreement will be
performed in accordance with its terms. This summary does not represent a
detailed description of all the federal income tax consequences to you in light
of your particular circumstances. In addition, it does not represent a detailed
description of the U.S. federal income tax consequences applicable to you if you
are subject to special treatment under the U.S. federal income tax laws
including if you are:

     - a bank;

     - a dealer in securities or currencies;

     - a financial institution or an insurance company

     - a regulated investment company;

     - a real estate investment trust;

     - a tax-exempt entity;

     - a trader in securities that elect to use a mark-to-market method of
       accounting for your securities holdings;

     - a person holding shares or American depositary receipts as part of a
       hedging, conversion, constructive sale or integrated transaction or a
       straddle;

     - a person liable for the alternative minimum tax;

     - a person who owns more than 10% of our voting stock; or

     - a person whose functional currency is not the United States dollar.

     We cannot assure you that a later change in law will not alter
significantly the tax considerations that we describe in this summary.
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     You should consult your own tax advisor concerning the particular U.S.
federal income tax consequences to you of the ownership and disposition of
shares or American depositary receipts as well as any consequences arising under
the laws of any other taxing jurisdiction.

     If a partnership holds our shares or American depositary receipts, the tax
treatment of a partner will generally depend upon the status of the partner and
the activities of the partnership. If you are a partner of a partnership holding
our shares or American depositary receipts, you are urged to consult you tax
advisor.

 AMERICAN DEPOSITARY RECEIPTS

     In general for United States federal income tax purposes, a holder of
American depositary receipts will be treated as the owner of the underlying
shares that are represented by such American depositary receipts. However, the
United States Treasury has expressed concerns that parties to whom depositary
shares are pre-released may be taking actions that are inconsistent with the
claiming of foreign tax credits by the holders of American depositary receipts.
Accordingly, the analysis of the creditability of Korean taxes described herein
could be affected by future actions that may be taken by the United States
Treasury. Deposits or withdrawal of shares for American depositary receipts
generally will not be subject to United States federal income tax.

 DISTRIBUTIONS ON SHARES OR AMERICAN DEPOSITARY RECEIPTS

     Distributions on our shares or American depositary receipts will be taxable
as dividends to the extent of our current and accumulated earnings and profits
(as determined under United States federal income tax principles). Such income
will be includable in your gross income as ordinary income on the day you
receive it, in the case of our shares, or the day received by the depositary, in
the case of American depositary receipts. Such dividends will not be eligible
for the dividends-received deduction.

     With respect to United States holders who are individuals, certain
dividends paid by a qualified foreign corporation and received by such holders
before January 1, 2009 may be subject to reduced rates of taxation. A qualified
foreign corporation includes a foreign corporation that is eligible for the
benefits of an income tax treaty with the United States, if such treaty contains
an exchange of information provision and the United States Treasury Department
had determined that the treaty is satisfactory for purposes of the legislation.
Legislative history indicates that the current income tax treaty between the
United States and Korea, which contains an exchange of information provision, is
(in the absence of additional guidance) satisfactory for these purposes. In
addition, we believe that we are eligible for the benefits of the United
States-Korea income tax treaty. However, individuals that do not meet a minimum
holding period requirement during which they are not protected from a risk of
loss or that elect to treat the dividend income as "investment income" pursuant
to section 163(d)(4) of the Code will not be eligible for the reduced rates of
taxation. You should consult your own tax advisor regarding the application of
the foregoing rules to your particular circumstances.

     The amount of any dividend paid in Korean Won will equal the United States
dollar value of the Korean Won received calculated by reference to the exchange
rate in effect on the date you actually or constructively receive the dividend,
in the case of our shares, or the date actually or constructively received by
the depositary, in the case of American depositary receipts, regardless of
whether the Korean Won are converted into United States dollars. If the Korean
Won received are not converted into United States dollars on the day of receipt,
you will have a basis in the Korean Won equal to their United States dollar
value on the date of receipt. Any gain or loss realized on a subsequent
conversion or other disposition of the Korean Won will be treated as United
States source ordinary income or loss.

     Subject to certain significant conditions and limitations, Korean taxes
withheld from dividends (at the rate provided in the treaty) may be treated as
foreign income tax eligible for credit against your U.S. federal income tax
liability. See "-- Korean Taxation -- Dividends on Shares of Common Stock or
American Depositary Shares" for discussion of the treaty rate. Korean taxes
withheld in excess of the rate provided in the treaty will not be eligible for
credit against your federal income tax until you exhausts all effective and
practical remedies to recover such excess withholding, including the seeking of
competent authority assistance from the United States Internal Revenue Service.
For purposes of the foreign tax credit, dividends paid on our

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shares or American depositary receipts will be treated as income from sources
without the United States and will generally constitute "passive income" or, in
the case of certain holders, "financial services income."

 DISPOSITION OF SHARES OR AMERICAN DEPOSITARY RECEIPTS

     Upon the sale, exchange or other disposition of our shares or American
depositary receipts, you generally will recognize capital gain or loss equal to
the difference between the amount realized upon the sale, exchange or other
disposition and your adjusted tax basis in our shares or American depositary
receipts as the case may be. The capital gain or loss will be long-term capital
gain or loss if at the time of sale, exchange or other disposition our shares or
American depositary receipts have been held for more than one year. Capital
gains of individuals derived with respect to capital assets held for more than
one year are eligible for reduced rates of taxation depending upon the holding
period of such capital assets. The deductibility of capital losses is subject to
limitations. Any gain or loss you recognize on the sale, exchange or other
disposition of our shares or American depositary receipts will generally be
treated as United States source gain or loss.

     You should note that any Korean securities transaction tax generally will
not be treated as a creditable foreign tax for United States federal income tax
purposes, although you may be entitled to deduct such taxes, subject to
applicable limitations under the Code.

 PASSIVE FOREIGN INVESTMENT COMPANY RULES

     Based on the projected composition of our income and valuation of our
assets, including goodwill, we do not believe that we will be a passive foreign
investment company for the current taxable year and do not expect to become one
in the future, although there can be no assurance in this regard. However,
passive foreign investment company status is a factual determination that is
made annually. Accordingly, it is possible that we may become a passive foreign
investment company in the current or any future taxable year due to changes in
valuation or composition of our income or assets. In addition, this
determination is based in part upon certain proposed United States Treasury
regulations that are not yet in effect and are subject to change in the future.
Those regulations and other administrative pronouncements from the Internal
Revenue Service provide special rules for determining the character of income
and assets derived in the banking business for purposes of the passive foreign
investment company rules. Although we believe we have adopted a reasonable
interpretation of the regulations and administrative pronouncements, there can
be no assurance that the Internal Revenue Service will follow the same
interpretation.

     In general, we will be considered a passive foreign investment company for
any taxable year if either:

     - at least 75% of our gross income is passive income, or

     - at least 50% of the value of our assets is attributable to assets that
       produce or are held for the production of passive income.

     The 50% of value test is based on the average of the value of our assets
for each quarter during the taxable year. If we own at least 25% by value of
another company's stock, we will be treated, for purposes of the passive foreign
investment rules, as owning our proportionate share of the assets and receiving
our proportionate share of the income of that company.

     If we are a passive foreign investment company for any taxable year during
which you hold our shares or American depositary receipts, you will be subject
to special tax rules with respect to any "excess distribution" that you receive
and any gain you realize from the sale or other disposition (including a pledge)
of our shares or American depositary receipts. These special tax rules generally
will apply even if we cease to be a passive foreign investment company in future
years. Distributions you receive in a taxable year that are greater than 125% of
the average annual distributions you received during the shorter of the three

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preceding taxable years or your holding period for our shares or American
depositary receipts will be treated as excess distributions. Under these special
tax rules:

     - the excess distribution or gain will be allocated ratably over your
       holding period for the preferred share units,

     - the amount allocated to the current taxable year, and any taxable year
       prior to the first taxable year in which we are a passive foreign
       investment company, will be treated as ordinary income, and

     - the amount allocated to each other year will be subject to tax at the
       highest tax rate in effect for that year, and the interest charge
       generally applicable to underpayments of tax will be imposed on the
       resulting tax attributable to each such year.

     Alternatively, you could make a mark-to-market election provided that our
shares or American depositary receipts are regularly traded on a qualified
exchange or other market. In is intended that our American depositary receipts
will be listed on the New York Stock Exchange. You should consult your tax
advisor as to whether the mark-to-market election is available if we are treated
as a passive foreign investment company in any year. In addition, a holder of
shares in a passive foreign investment company can sometimes avoid the rules
described above by electing to treat the company as a "qualified electing fund"
under section 1295 of the Code. This option is not available to you because we
do not intend to comply with the requirements necessary to permit holders to
make this election.

     If you hold our shares or American depositary receipts in any year in which
we are classified as a passive foreign investment company, you would be required
to file Internal Revenue Service Form 8621.

     United States holders who are individuals will not be eligible for reduced
rates of taxation on any dividends paid by us prior to January 1, 2009, if we
are a passive foreign investment company in the taxable year in which such
dividends are paid or in the preceding taxable year. You should consult your tax
advisor concerning the determination of our passive foreign investment company
status and the United States federal income tax consequences of holding our
shares or American depositary receipts if we are considered a passive foreign
investment company in any taxable year.

 ESTATE AND GIFT TAXATION

     Korea may impose an inheritance tax on a decedent who owns our shares (and
possibly American depositary receipts), even if the decedent was not a citizen
or resident of Korea. See "-- Korean Taxation -- Inheritance Tax and Gift Tax".
The amount of any inheritance tax paid to Korea may be eligible for credit
against the amount of United States federal estate tax imposed on the estate of
a United States Holder. Korea may also impose a gift tax. The Korean gift tax
generally will not be treated as a creditable foreign tax for United States tax
purposes. You should consult your tax advisor regarding the consequences of the
imposition of the Korean inheritance of gift tax.

 INFORMATION REPORTING AND BACKUP WITHHOLDING

     In general, information reporting requirements will apply to certain
distributions on our shares or American depositary receipts and to the proceeds
of the sale of our shares or American depositary receipts made to you unless you
are an exempt recipient (such as a corporation). A backup withholding tax may
apply to such payments if you fail to provide a correct taxpayer identification
number or certification of foreign or other exempt status or fail to report in
full dividend income.

     Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against your United States federal income tax liability
provided you furnish the required information to the Internal Revenue Service.

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                              STATEMENT BY EXPERTS

     The financial statements as of December 31, 2002 and 2001 and for years
then ended included in this registration statement have been so included in
reliance on the report of PricewaterhouseCoopers, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
PricewaterhouseCoopers are members of the Korean Institution of Certified Public
Accountants.

                              DOCUMENTS ON DISPLAY

     We are subject to the information requirements of the U.S. Securities
Exchange Act of 1934, as amended, and, in accordance therewith, are required to
file reports, including annual reports on Form 20-F, and other information with
the U.S. Securities and Exchange Commission. You may inspect and copy these
materials, including this registration statement on Form 20-F and the exhibits
thereto, at the Commission's public reference rooms at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. Any
filings we make electronically will be available to the public over the Internet
at the Commission's web site at http://www.sec.gov.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See "Item 4. Information on the Company -- Description of Assets and
Liabilities -- Risk Management of Shinhan Financial Group" and "-- Risk
Management of Chohung Bank" for quantitative and qualitative disclosures about
market risk.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS

  AMERICAN DEPOSITARY SHARES

     Citibank, N.A. has agreed to act as the depositary bank for the American
Depositary Shares. Citibank's depositary offices are located at 111 Wall Street,
New York, New York 10005. American Depositary Shares are frequently referred to
as "ADSs" and represent ownership interests in securities that are on deposit
with the depositary bank. ADSs are normally represented by certificates that are
commonly known as "American Depositary Receipts" or "ADRs." The depositary bank
typically appoints a custodian to safekeep the securities on deposit. In this
case, the custodian is Korea Securities Depository, located at 33, Yoido-dong,
Youngdeungpo-gu, Seoul, Korea.

     We appoint Citibank as depositary bank pursuant to a deposit agreement. A
copy of the deposit agreement is on file with the SEC under cover of a
Registration Statement on Form F-6. You may obtain a copy of the deposit
agreement from the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549.

     We are providing you with a summary description of the material terms of
the ADSs and of your material rights as an owner of ADSs. Please remember that
summaries by their nature lack the precision of the information summarized and
that a holder's rights and obligations as an owner of ADSs will be determined by
reference to the terms of the deposit agreement and not by this summary. We urge
you to review the deposit agreement in its entirety.

     Each ADS represents the right to receive two (2) shares of common stock,
par value 5,000 won per share, on deposit with the custodian. An ADS will also
represent the right to receive any other property received by the depositary
bank or the custodian on behalf of the owner of the ADS but that has not been
distributed to the owners of ADSs because of legal restrictions or practical
considerations.

     If you become an owner of ADSs, you will become a party to the deposit
agreement and therefore will be bound to its terms and to the terms of the ADR
that represents your ADSs. The deposit agreement and the

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ADR specify our rights and obligations as well as your rights and obligations as
owner of ADSs and those of the depositary bank. As an ADS holder you appoint the
depositary bank to act on your behalf in certain circumstances. The deposit
agreement and the ADRs are governed by New York law. However, our obligations to
the holders of Shares will continue to be governed by the laws of The Republic
of Korea, which may be different from the laws in the United States.

     As an owner of ADSs, you may hold your ADSs either by means of an ADR
registered in your name or through a brokerage or safekeeping account. If you
decide to hold your ADSs through your brokerage or safekeeping account, you must
rely on the procedures of your broker or bank to assert your rights as ADS
owner. Please consult with your broker or bank to determine what those
procedures are. This summary description assumes you have opted to own the ADSs
directly by means of an ADR registered in your name and, as such, we will refer
to you as the "holder." When we refer to "you," we assume the reader owns ADSs
and will own ADSs at the relevant time.

  Dividends and Distributions

     As a holder, you generally have the right to receive the distributions we
make on the securities deposited with the custodian bank. Your receipt of these
distributions may be limited, however, by practical considerations and legal
limitations. Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of ADSs held as of a specified
record date.

  -- Distributions of Cash

     Whenever we make a cash distribution for the securities on deposit with the
custodian, we will notify the depositary bank and deposit the funds with the
Custodian. Upon receipt of such notice and of confirmation of the deposit of the
requisite funds, the depositary bank will arrange for the funds to be converted
into U.S. dollars and for the distribution of the U.S. dollars to the holders,
subject to Korean laws and regulations.

     The conversion into U.S. dollars will take place only if practicable and if
the U.S. dollars are transferable to the United States. The amounts distributed
to holders will be net of the fees, expenses, taxes and governmental charges
payable by holders under the terms of the deposit agreement. The depositary will
apply the same method for distributing the proceeds of the sale of any property
(such as undistributed rights) held by the custodian in respect of securities on
deposit.

     The distribution of cash will be made net of the fees, expenses, taxes and
governmental charges payable by holders under the terms of the deposit
agreement.

  -- Distributions of Shares

     Whenever we make a free distribution of Shares for the securities on
deposit with the custodian, we will notify the depositary bank and deposit the
applicable number of Shares with the custodian. Upon receipt of notice of such
deposit, the depositary bank will either distribute to holders new ADSs
representing the Shares deposited or modify the ADS-to-Shares ratio, in which
case each ADS you hold will represent rights and interests in the additional
Shares so deposited. Only whole new ADSs will be distributed. Fractional
entitlements will be sold and the proceeds of such sale will be distributed as
in the case of a cash distribution.

     The distribution of new ADSs or the modification of the ADS-to-Shares ratio
upon a distribution of Shares will be made net of the fees, expenses, taxes and
governmental charges payable by holders under the terms of the deposit
agreement. In order to pay such taxes or governmental charges, the depositary
bank may sell all or a portion of the new Shares so distributed.

     No such distribution of new ADSs will be made if it would violate a law
(i.e., the U.S. securities laws) or if it is not operationally practicable. If
the depositary bank does not distribute new ADSs as described above, it may sell
the Shares received upon the terms described in the deposit agreement and will
distribute the proceeds of the sale as in the case of a distribution of cash.
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  -- Distributions of Rights

     Whenever we intend to distribute rights to purchase additional Shares, we
will give prior notice to the depositary bank and we will assist the depositary
bank in determining whether it is lawful and reasonably practicable to
distribute rights to purchase additional ADSs to holders.

     The depositary bank will establish procedures to distribute rights to
purchase additional ADSs to holders and to enable such holders to exercise such
rights if it is lawful and reasonably practicable to make the rights available
to holders of ADSs, and if we provide all of the documentation contemplated in
the deposit agreement (such as opinions to address the lawfulness of the
transaction). You may have to pay fees, expenses, taxes and other governmental
charges to subscribe for the new ADSs upon the exercise of your rights. The
depositary bank is not obligated to establish procedures to facilitate the
distribution and exercise by holders of rights to purchase new Shares other than
in the form of ADSs.

     The depositary bank will not distribute the rights to you if:

     - We do not timely request that the rights be distributed to you or we
       request that the rights not be distributed to you; or

     - We fail to deliver satisfactory documents to the depositary bank; or

     - It is not reasonably practicable to distribute the rights.

     The depositary bank will sell the rights that are not exercised or not
distributed if such sale is lawful and reasonably practicable. The proceeds of
such sale will be distributed to holders as in the case of a cash distribution.
If the depositary bank is unable to sell the rights, it will allow the rights to
lapse.

  -- Elective Distributions

     Whenever we intend to distribute a dividend payable at the election of
shareholders either in cash or in additional shares, we will give prior notice
thereof to the depositary bank and will indicate whether we wish the elective
distribution to be made available to you. In such case, we will assist the
depositary bank in determining whether such distribution is lawful and
reasonably practicable.

     The depositary bank will make the election available to you only if it is
reasonably practical and if we have provided all of the documentation
contemplated in the deposit agreement. In such case, the depositary bank will
establish procedures to enable you to elect to receive either cash or additional
ADSs, in each case as described in the deposit agreement.

     If the election is not made available to you, you will receive either cash
or additional ADSs, depending on what a shareholder in Korea would receive upon
failing to make an election, as more fully described in the deposit agreement.

  -- Other Distributions

     Whenever we intend to distribute property other than cash, Shares or rights
to purchase additional Shares, we will notify the depositary bank in advance and
will indicate whether we wish such distribution to be made to you. If so, we
will assist the depositary bank in determining whether such distribution to
holders is lawful and reasonably practicable.

     If it is reasonably practicable to distribute such property to you and if
we provide all of the documentation contemplated in the deposit agreement, the
depositary bank will distribute the property to the holders in a manner it deems
practicable.

     The distribution will be made net of fees, expenses, taxes and governmental
charges payable by holders under the terms of the deposit agreement. In order to
pay such taxes and governmental charges, the depositary bank may sell all or a
portion of the property received.

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     The depositary bank will not distribute the property to you and will sell
the property if:

     - We do not request that the property be distributed to you or if we ask
       that the property not be distributed to you; or

     - We do not deliver satisfactory documents to the depositary bank; or

     - The depositary bank determines that all or a portion of the distribution
       to you is not reasonably practicable.

     The proceeds of such a sale will be distributed to holders as in the case
of a cash distribution.

  CHANGES AFFECTING SHARES

     The Shares held on deposit for your ADSs may change from time to time. For
example, there may be a change in nominal or par value, a split-up,
cancellation, consolidation or reclassification of such Shares or a
recapitalization, reorganization, merger, consolidation or sale of assets.

     If any such change were to occur, your ADSs would, to the extent permitted
by law, represent the right to receive the property received or exchanged in
respect of the Shares held on deposit. The depositary bank may in such
circumstances deliver new ADSs to you or call for the exchange of your existing
ADSs for new ADSs. If the depositary bank may not lawfully distribute such
property to you, the depositary bank may sell such property and distribute the
net proceeds to you as in the case of a cash distribution.

  ISSUANCE OF ADSS UPON DEPOSIT OF SHARES

     The depositary bank may create ADSs on your behalf if you or your broker
deposit Shares with the custodian. The depositary bank will deliver these ADSs
to the person you indicate only after you pay any applicable issuance fees and
any charges and taxes payable for the transfer of the Shares to the custodian.
Your ability to deposit Shares and receive ADSs may be limited by U.S. and
Korean legal considerations applicable at the time of deposit.

     To the extent the laws or regulations of Korea require the Company to give
its consent for subsequent deposits of Shares under the deposit agreement, the
depositary bank will not accept Shares for deposit without receiving the consent
of the Company. The Company and the Depositary have agreed that consent will be
deemed given as long as the number of Shares proposed for deposit does not
exceed the difference between the aggregate number of Shares deposited with the
custodian with the consent of the Company (including any Shares deposited by the
Company as a distribution of stock dividends or any exercise of rights) and the
number of Shares on deposit with the custodian at the time of the proposed
deposit.

     The issuance of ADSs may be delayed until the depositary bank or the
custodian receives confirmation that all required approvals have been given and
that the Shares have been duly transferred to the custodian. The depositary bank
will only issue ADSs in whole numbers.

     When you make a deposit of Shares, you will be responsible for transferring
good and valid title to the depositary bank. As such, you will be deemed to
represent and warrant that:

     - The Shares are duly authorized, validly issued, fully paid,
       non-assessable and legally obtained.

     - All preemptive (and similar) rights, if any, with respect to such Shares
       have been validly waived or exercised.

     - You are duly authorized to deposit the Shares.

     - The Shares presented for deposit are free and clear of any lien,
       encumbrance, security interest, charge, mortgage or adverse claim, and
       are not, and the ADSs issuable upon such deposit will not be, "restricted
       securities" (as defined in the deposit agreement).

     - The Shares presented for deposit have not been stripped of any rights or
       entitlements.

                                       344
<PAGE>

     If any of the representations or warranties are incorrect in any way, we
and the depositary bank may, at your cost and expense, take any and all actions
necessary to correct the consequences of the misrepresentations.

  TRANSFER, COMBINATION AND SPLIT UP OF ADRS

     As an ADR holder, you will be entitled to transfer, combine or split up
your ADRs and the ADSs evidenced thereby. For transfers of ADRs, you will have
to surrender the ADRs to be transferred to the depositary bank and also must:

     - ensure that the surrendered ADR certificate is properly endorsed or
       otherwise in proper form for transfer;

     - provide such proof of identity and genuineness of signatures as the
       depositary bank deems appropriate;

     - provide any transfer stamps required by the State of New York or the
       United States; and

     - pay all applicable fees, charges, expenses, taxes and other government
       charges payable by ADR holders pursuant to the terms of the deposit
       agreement, upon the transfer of ADRs.

     To have your ADRs either combined or split up, you must surrender the ADRs
in question to the depositary bank with your request to have them combined or
split up, and you must pay all applicable fees, charges and expenses payable by
ADR holders, pursuant to the terms of the deposit agreement, upon a combination
or split up of ADRs.

  WITHDRAWAL OF SHARES UPON CANCELLATION OF ADSS

     As a holder, you will be entitled to present your ADSs to the depositary
bank for cancellation and then receive the corresponding number of underlying
Shares at the custodian's offices. Your ability to withdraw the Shares may be
limited by U.S. and Korea legal considerations applicable at the time of
withdrawal. In order to withdraw the Shares represented by your ADSs, you will
be required to pay to the depositary the fees for cancellation of ADSs and any
charges and taxes payable upon the transfer of the Shares being withdrawn. You
assume the risk for delivery of all funds and securities upon withdrawal. Once
canceled, the ADSs will not have any rights under the deposit agreement.

     If you hold an ADR registered in your name, the depositary bank may ask you
to provide proof of identity and genuineness of any signature and such other
documents as the depositary bank may deem appropriate before it will cancel your
ADSs. The withdrawal of the Shares represented by your ADSs may be delayed until
the depositary bank receives satisfactory evidence of compliance with all
applicable laws and regulations. Please keep in mind that the depositary bank
will only accept ADSs for cancellation that represent a whole number of
securities on deposit.

     You will have the right to withdraw the securities represented by your ADSs
at any time except for:

     - Temporary delays that may arise because (i) the transfer books for the
       Shares or ADSs are closed, or (ii) Shares are immobilized on account of a
       shareholders' meeting or a payment of dividends.

     - Obligations to pay fees, taxes and similar charges.

     - Restrictions imposed because of laws or regulations applicable to ADSs or
       the withdrawal of securities on deposit.

     The deposit agreement may not be modified to impair your right to withdraw
the securities represented by your ADSs except to comply with mandatory
provisions of law.

  VOTING RIGHTS

     As a holder, you generally have the right under the deposit agreement to
instruct the depositary bank to exercise the voting rights for the Shares
represented by your ADSs. The voting rights of holders of Shares are

                                       345
<PAGE>

described in "Item 10. Additional Information -- Articles of
Incorporation -- Description of Capital Stock -- Voting Rights".

     At our request, the depositary bank will distribute to you any notice of
shareholders' meeting received from us together with information explaining how
to instruct the depositary bank to exercise the voting rights of the securities
represented by ADSs.

     If the depositary bank timely receives voting instructions from a holder of
ADSs, it will endeavor to vote the securities represented by the holder's ADSs
in accordance with such voting instructions.

     Please note that the ability of the depositary bank to carry out voting
instructions may be limited by practical and legal limitations and the terms of
the securities on deposit. We cannot assure you that you will receive voting
materials in time to enable you to return voting instructions to the depositary
bank in a timely manner. Securities for which no voting instructions have been
received will not be voted.

  FEES AND CHARGES

     As an ADS holder, you will be required to pay the following service fees to
the depositary bank:

<Table>
<Caption>
SERVICE                                                             FEES
- -------                                         ---------------------------------------------
<S>                                             <C>
- - ISSUANCE OF ADSS...........................   UP TO U.S. 5C PER ADS ISSUED
- - CANCELLATION OF ADSS.......................   UP TO U.S. 5C PER ADS CANCELED
- - EXERCISE OF RIGHTS TO PURCHASE ADDITIONAL
  ADSS.......................................   UP TO U.S. 2C PER ADS HELD
- - DISTRIBUTION OF CASH DIVIDENDS.............   NO FEE (SO LONG AS PROHIBITED BY NYSE)
- - DISTRIBUTION OF ADSS PURSUANT TO STOCK
  DIVIDEND OR OTHER FREE STOCK
  DISTRIBUTIONS..............................   NO FEE (SO LONG AS PROHIBITED BY NYSE)
- - DISTRIBUTIONS OF CASH PROCEEDS (I.E., UPON
  SALE OF RIGHTS OR OTHER ENTITLEMENTS)......   UP TO U.S. 2C PER ADS HELD
- - DISTRIBUTION OF SECURITIES OTHER THAN ADSS
  OR RIGHTS TO PURCHASE ADDITIONAL ADSS......   UP TO U.S. 5C PER SHARE (OR SHARE EQUIVALENT)
                                                DISTRIBUTED
- - ANNUAL DEPOSITARY SERVICES FEE.............   ANNUALLY UP TO U.S. 2C PER ADS HELD AT THE
                                                END OF EACH CALENDAR YEAR, EXCEPT TO THE
                                                EXTENT OF ANY CASH DIVIDEND FEE(S) CHARGED
                                                DURING SUCH CALENDAR YEAR OR UNLESS
                                                PROHIBITED BY NYSE
</Table>

     As an ADS holder you will also be responsible to pay certain fees and
expenses incurred by the depositary bank and certain taxes and governmental
charges such as:

     - Fees for the transfer and registration of Shares charged by the registrar
       and transfer agent for the Shares in Korea (i.e., upon deposit and
       withdrawal of Shares).

     - Expenses incurred for converting foreign currency into U.S. dollars.

     - Expenses for cable, telex and fax transmissions and for delivery of
       securities.

     - Taxes and duties upon the transfer of securities (i.e., when Shares are
       deposited or withdrawn from deposit).

     - Fees and expenses incurred in connection with the delivery or servicing
       of Shares on deposit.

     We have agreed to pay certain other charges and expenses of the depositary
bank. Note that the fees and charges you may be required to pay may vary over
time and may be changed by us and by the depositary bank. You will receive prior
notice of such changes.

     We have agreed to pay certain other charges and expenses of the depositary
bank. Note that the fees and charges you may be required to pay may vary over
time and may be changed by us and by the depositary bank. You will receive prior
notice of such changes.

                                       346
<PAGE>

  AMENDMENTS AND TERMINATION

     We may agree with the depositary bank to modify the deposit agreement at
any time without your consent. We undertake to give holders 30 days' prior
notice of any modifications that would materially prejudice any of their
substantial rights under the deposit agreement. We will not consider to be
materially prejudicial to your substantial rights any modifications or
supplements that are reasonably necessary for the ADSs to be registered under
the Securities Act or to be eligible for book-entry settlement, in each case
without imposing or increasing the fees and charges you are required to pay. In
addition, we may not be able to provide you with prior notice of any
modifications or supplements that are required to accommodate compliance with
applicable provisions of law.

     You will be bound by the modifications to the deposit agreement if you
continue to hold your ADSs after the modifications to the deposit agreement
become effective. The deposit agreement cannot be amended to prevent you from
withdrawing the Shares represented by your ADSs (except as permitted by law).

     We have the right to direct the depositary bank to terminate the deposit
agreement. Similarly, the depositary bank may in certain circumstances on its
own initiative terminate the deposit agreement. In either case, the depositary
bank must give notice to the holders at least 30 days before termination.

     Upon termination, the following will occur under the deposit agreement:

     - for a period of six months after termination, you will be able to request
       the cancellation of your ADSs and the withdrawal of the Shares
       represented by your ADSs and the delivery of all other property held by
       the depositary bank in respect of those Shares on the same terms as prior
       to the termination. During such six months' period the depositary bank
       will continue to collect all distributions received on the Shares on
       deposit (i.e., dividends) but will not distribute any such property to
       you until you request the cancellation of your ADSs.

     - After the expiration of such six months' period, the depositary bank may
       sell the securities held on deposit. The depositary bank will hold the
       proceeds from such sale and any other funds then held for the holders of
       ADSs in a non-interest bearing account. At that point, the depositary
       bank will have no further obligations to holders other than to account
       for the funds then held for the holders of ADSs still outstanding.

  BOOKS OF DEPOSITARY

     The depositary bank will maintain ADS holder records at its depositary
office. You may inspect such records at such office during regular business
hours but solely for the purpose of communicating with other holders in the
interest of business matters relating to the ADSs and the deposit agreement.

     The depositary bank will maintain in New York facilities to record and
process the issuance, cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed from time to time, to the extent not prohibited
by law.

  LIMITATIONS ON OBLIGATIONS AND LIABILITIES

     The deposit agreement limits our obligations and the depositary bank's
obligations to you. Please note the following:

     - We and the depositary bank are obligated only to take the actions
       specifically stated in the deposit agreement without negligence or bad
       faith.

     - The depositary bank disclaims any liability for any failure to carry out
       voting instructions, for any manner in which a vote is cast or for the
       effect of any vote, provided it acts in good faith and in accordance with
       the terms of the deposit agreement.

     - The depositary bank disclaims any liability for any failure to determine
       the lawfulness or practicality of any action, for the content of any
       document forwarded to you on our behalf or for the accuracy of any
       translation of such a document, for the investment risks associated with
       investing in Shares, for
                                       347
<PAGE>

       the validity or worth of the Shares, for any tax consequences that result
       from the ownership of ADSs, for the credit-worthiness of any third party,
       for allowing any rights to lapse under the terms of the deposit
       agreement, for the timeliness of any of our notices or for our failure to
       give notice.

     - We and the depositary bank will not be obligated to perform any act that
       is inconsistent with the terms of the deposit agreement.

     - We and the depositary bank disclaim any liability if we are prevented or
       forbidden from acting on account of any law or regulation, any provision
       of our Articles of Incorporation, any provision of any securities on
       deposit or by reason of any act of God or war or other circumstances
       beyond our control.

     - We and the depositary bank disclaim any liability by reason of any
       exercise of, or failure to exercise, any discretion provided for the
       deposit agreement or in our Articles of Incorporation or in any
       provisions of securities on deposit.

     - We and the depositary bank further disclaim any liability for any action
       or inaction in reliance on the advice or information received from legal
       counsel, accountants, any person presenting Shares for deposit, any
       holder of ADSs or authorized representatives thereof, or any other person
       believed by either of us in good faith to be competent to give such
       advice or information.

     - We and the depositary bank also disclaim liability for the inability by a
       holder to benefit from any distribution, offering, right or other benefit
       which is made available to holders of Shares but is not, under the terms
       of the deposit agreement, made available to you.

     - We and the depositary bank may rely without any liability upon any
       written notice, request or other document believed to be genuine and to
       have been signed or presented by the proper parties.

     - We and the depositary bank also disclaim liability for any consequential
       or punitive damages for any breach of the terms of the deposit agreement.

  PRE-RELEASE TRANSACTIONS

     The depositary bank may, in certain circumstances, issue ADSs before
receiving a deposit of Shares or release Shares before receiving ADSs for
cancellation. These transactions are commonly referred to as "pre-release
transactions." The deposit agreement limits the aggregate size of pre-release
transactions and imposes a number of conditions on such transactions (i.e., the
need to receive collateral, the type of collateral required, the representations
required from brokers, etc.). The depositary bank may retain the compensation
received from the pre-release transactions.

  TAXES

     You will be responsible for the taxes and other governmental charges
payable on the ADSs and the securities represented by the ADSs. We, the
depositary bank and the custodian may deduct from any distribution the taxes and
governmental charges payable by holders and may sell any and all property on
deposit to pay the taxes and governmental charges payable by holders. You will
be liable for any deficiency if the sale proceeds do not cover the taxes that
are due.

     The depositary bank may refuse to issue ADSs, to deliver, transfer, split
and combine ADRs or to release securities on deposit until all taxes and charges
are paid by the applicable holder. The depositary bank and the custodian may
take reasonable administrative actions to obtain tax refunds and reduced tax
withholding for any distributions on your behalf. However, you may be required
to provide to the depositary bank and to the custodian proof of taxpayer status
and residence and such other information as the depositary bank and the
custodian may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian for any claims with respect
to taxes based on any tax benefit obtained for you.

                                       348
<PAGE>

  FOREIGN CURRENCY CONVERSION

     The depositary bank will arrange for the conversion of all foreign currency
received into U.S. dollars if such conversion is practical, and it will
distribute the U.S. dollars in accordance with the terms of the deposit
agreement. You may have to pay fees and expenses incurred in converting foreign
currency, such as fees and expenses incurred in complying with currency exchange
controls and other governmental requirements.

     If the conversion of foreign currency is not practical or lawful, or if any
required approvals are denied or not obtainable at a reasonable cost or within a
reasonable period, the depositary bank may take the following actions in its
discretion:

     - Convert the foreign currency to the extent practical and lawful and
       distribute the U.S. dollars to the holders for whom the conversion and
       distribution is lawful and practical.

     - Distribute the foreign currency to holders for whom the distribution is
       lawful and practical.

     - Hold the foreign currency (without liability for interest) for the
       applicable holders.

DESCRIPTION OF BONDS WITH WARRANTS

     On December 2, 1998, Shinhan Bank issued W299 billion in aggregate
principal amount of unsecured bonds due December 2, 2048, with detachable
warrants to purchase common stock of Shinhan Bank. Each warrant entitles the
holder thereof to purchase two shares of common stock of Shinhan Bank,
exercisable starting from March 3, 1999 to December 2, 2003 at a price of W5,000
per share. As permitted under the Financial Holding Company Act and the
Commercial Code of Korea, the holders of warrants who have received shares of
common stock of Shinhan Bank upon exercise thereof have received proportional
number of shares of common stock of Shinhan Financial Group in exchange for
those shares of common stock of Shinhan Bank. We plan to continue to make such
exchange as permitted under Korean law.

     As of July 12, 2003, 170,681 bonds with warrants to purchase 341,362 shares
of common stock of Shinhan Bank remained outstanding. Shinhan Bank has a call
option to purchase all outstanding bonds with warrants on December 3, 2003, and
Shinhan Bank intends to exercise such call option on such date.

                                       349
<PAGE>

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Not applicable.

ITEM 14.  MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
          PROCEEDS

     Not applicable.

ITEM 15.  CONTROLS AND PROCEDURES

     Not applicable.

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT

     Not applicable.

ITEM 16B.  CODE OF ETHICS

     Not applicable.

ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Not applicable.

ITEM 17.  FINANCIAL STATEMENTS

     We have responded to Item 18 in lieu of responding to this item.

ITEM 18.  FINANCIAL STATEMENTS

     Reference is made to Item 19(a) for a list of all financial statements
filed as part of this registration statement.

                                       350
<PAGE>

ITEM 19.  EXHIBITS

     (a) List of Financial Statements:

     The following financial statements and related notes, together with the
report of independent accountants thereon, are filed as part of this
registration statement.

<Table>
<Caption>
                                                               PAGE
                                                               -----
<S>                                                            <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SHINHAN
  FINANCIAL GROUP PREPARED IN ACCORDANCE WITH U.S. GAAP
Report of Independent Auditors on the consolidated financial
  statements of Shinhan Financial Group.....................     F-1
Consolidated balance sheets as of December 31, 2001 and 2002
  of Shinhan Financial Group................................     F-2
Consolidated statements of income for the years ended
  December 31, 2001 and 2002 of Shinhan Financial Group.....     F-3
Consolidated statements of stockholders' equity for the
  years ended December 31, 2001 and 2002 of Shinhan
  Financial Group...........................................     F-5
Consolidated statements of cash flows for the years ended
  December 31, 2001 and 2002................................     F-7
Notes to the consolidated financial statements of Shinhan
  Financial Group...........................................     F-9
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SHINHAN
  FINANCIAL GROUP PREPARED IN ACCORDANCE WITH KOREAN GAAP
Unaudited consolidated balance sheets as of June 30, 2003
  and December 31, 2002.....................................    F-62
Unaudited consolidated statements of earnings for the
  quarter and six-months ended June 30, 2003 and 2002.......    F-63
Unaudited consolidated statements of cash flows for the
  quarter and six-months ended June 30, 2003................    F-65
Notes to unaudited consolidated financial statements of
  Shinhan Financial Group...................................    F-67
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF CHOHUNG BANK
  PREPARED IN ACCORDANCE WITH U.S. GAAP
Report of Independent Auditors on the consolidated financial
  statements of Chohung Bank................................   F-125
Consolidated balance sheets as of December 31, 2001 and 2002
  of Chohung Bank...........................................   F-126
Consolidated statements of income for the years ended
  December 31, 2001 and 2002 of Chohung Bank................   F-127
Consolidated statements of stockholders' equity for the
  years ended December 31, 2001 and 2002 of Chohung Bank....   F-129
Consolidated statements of cash flows for the years ended
  December 31, 2001 and 2002 of Chohung Bank................   F-131
Notes to consolidated financial statements of Chohung
  Bank......................................................   F-133
UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS OF CHOHUNG
  BANK PREPARED IN ACCORDANCE WITH KOREAN GAAP
Unaudited non-consolidated balance sheets as of December 31,
  2002 and June 30, 2003 of Chohung Bank....................   F-177
Unaudited non-consolidated statements of operations for the
  six-month periods ended June 31, 2002 and 2003 of Chohung
  Bank......................................................   F-178
Unaudited statements of cash flows for the six-month period
  ended June 30, 2003 of Chohung Bank.......................   F-179
Notes to unaudited non-consolidated semi-annual financial
  statements of Chohung Bank................................   F-180
</Table>

                                       351
<PAGE>

     (b) Exhibits

<Table>
<C>        <S>
     1.1   Articles of Incorporation (in English and Korean)

     2.1   Form of Common Stock Certificate (in English and Korean)

     2.2   Form of Deposit Agreement to be entered into among Shinhan
           Financial Group, Citibank, N.A., as depositary, and all
           owners and holders from time to time of American depositary
           receipts issued thereunder, including the form of American
           depositary receipt.

     2.3   Long-term debt instruments of Shinhan Financial Group,
           Shinhan Bank and other consolidated subsidiaries for which
           financial statements are required to be filed are omitted
           pursuant to Item 601(b)(4)(iii) of Regulation S-K. Shinhan
           Financial Group agrees to furnish the Commission on request
           a copy of any instrument defining the rights of holders of
           its long-term debt and that of any subsidiary for which
           consolidated or unconsolidated financial statements are
           required to be filed.

    *4.1   Stock Purchase Agreement by and between Korea Deposit
           Insurance Corporation and Shinhan Financial Group dated July
           9, 2003.

     4.2   Investment Agreement by and between Shinhan Financial Group
           and Korea Deposit Insurance Corporation dated July 9, 2003.

     4.3   Agreed Terms, dated June 22, 2003, by and among the
           President of Korea Deposit Insurance Corporation, CEO of
           Shinhan Financial Group, CEO of Chohung Bank, Chairman of
           the National Financial Industry Labor Union of Korea and the
           Head of the Chohung Bank Chapter of the National Financial
           Industry Labor Union.

     8.1   List of all Subsidiaries of Shinhan Financial Group

 12.1(a)   Consent of PricewaterhouseCoopers (Shinhan Financial Group)

     (b)   Consent of PricewaterhouseCoopers (Chohung Bank)

    12.2   Korean Financial Holding Company Act (in English and Korean)

    12.3   Korean Bank Act (in English and Korean)

    12.4   Korean Commercial Code (in English and Korean)

    12.5   Korean Securities and Exchange Act (in English and Korean)

    12.6   Korean Trust Business Act (in English and Korean)

    12.7   Korean Specialized Credit Financial Business Act (in English
           and Korean)
</Table>

- ---------------

* Confidential treatment has been requested for certain portions of the Stock
  Purchase Agreement.

                                       352
<PAGE>

                                   SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this registration statement on its behalf.

<Table>
<S>                                            <C>   <C>
                                               SHINHAN FINANCIAL GROUP Co., Ltd.

                                               By:   /s/ Young Hwi Choi
                                                     ------------------------------------------
                                                     NAME: YOUNG HWI CHOI
                                                     TITLE: PRESIDENT & CEO
</Table>

Date: September 15, 2003
<PAGE>

PRICEWATERHOUSECOOPERS LOGO

<Table>
<S>                                                               <C>
- -------------------------------------------------------------------------------------------------------
                                                                  SAMIL ACCOUNTING CORPORATION
                                                                  Kukje Center Building 15th Flr.
                                                                  191 Hankangro 2ga, Yongsanku
                                                                  Seoul 140-702, KOREA
                                                                  (Yongsan P.O. Box 266, 140-600)
                                                                  Tel +82 (2) 709 0800
                                                                  Fax +82 (2) 792 7001
</Table>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Shinhan Financial Group Co., Ltd.

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Shinhan
Financial Group Co., Ltd. and its subsidiaries (the "Group") at December 31,
2001 and 2002, and the results of their operations and their cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Group's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     As more fully discussed in Note 1 to the consolidated financial statements,
the Group adopted, on January 1, 2002, the Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets.

     As more fully discussed in Note 1 to the consolidated financial statements,
the Group has been significantly affected, and may continue to be affected in
the foreseeable future, by the general adverse economic conditions in the
Republic of Korea and in the Asia Pacific region.

Seoul, Korea
May 23, 2003, except for Note 38
as to which the date is September 9, 2003

                                       F-1
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                  2001           2002           2002
                                                              ------------   ------------   -------------
                                                              (IN MILLIONS OF KOREAN WON,    (UNAUDITED)
                                                                  EXCEPT SHARE DATA)        (IN THOUSANDS
                                                                                               OF US$,
                                                                                             EXCEPT PER
                                                                                             SHARE DATA)
<S>                                                           <C>            <C>            <C>
ASSETS
Cash and cash equivalents...................................  W   580,167    W   282,324     $   237,987
Restricted cash.............................................      677,832      1,365,358       1,150,938
Interest-bearing deposits in banks..........................      254,735        124,764         105,171
Call loans and securities purchased under resale
  agreements................................................    1,816,038        575,533         485,150
Trading assets..............................................      955,788      1,064,931         897,691
Securities
  Available-for-sale securities.............................    7,087,308      8,736,708       7,364,670
  Held-to-maturity securities...............................    6,037,792      4,407,677       3,715,483
Loans (net of allowance for loan losses of W720,318 in 2001
  and W995,725 in 2002).....................................   32,997,134     44,139,270      37,207,511
Customers' liability on acceptances.........................    1,565,508        927,933         782,208
Premises and equipment, net.................................      529,909        828,438         698,338
Goodwill and intangible assets..............................        4,048        219,471         185,005
Security deposits...........................................      389,725        466,129         392,927
Other assets................................................    2,205,568      1,647,594       1,388,850
                                                              -----------    -----------     -----------
    Total assets............................................  W55,101,552    W64,786,130     $54,611,929
                                                              ===========    ===========     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits
  Interest-bearing..........................................  W31,035,710    W35,886,059     $30,250,408
  Noninterest-bearing.......................................    1,183,651      1,162,528         979,961
Trading liabilities.........................................      118,834        131,012         110,437
Acceptances outstanding.....................................    1,565,508        927,933         782,208
Short-term borrowings.......................................    5,759,008      6,994,596       5,896,144
Secured borrowings..........................................    4,088,362      4,705,899       3,966,871
Long-term debt..............................................    4,876,447      8,234,652       6,941,458
Accrued expenses and other liabilities......................    3,562,679      3,192,965       2,691,534
                                                              -----------    -----------     -----------
    Total liabilities.......................................   52,190,199     61,235,644      51,619,021
Commitments and contingencies...............................           --             --              --
Minority interest...........................................        1,670        287,879         242,670
STOCKHOLDERS' EQUITY:
Common stock, 5,000 Won par value, authorized 1,000,000,000
  shares, 292,344,192 shares issued and 262,470,509 shares
  outstanding in 2001, and 292,361,125 shares issued and
  262,487,063 shares outstanding in 2002....................    1,461,721      1,461,806       1,232,240
Additional paid-in capital..................................    1,040,777      1,048,085         883,491
Retained earnings...........................................      638,296      1,076,906         907,786
Accumulated other comprehensive income, net of taxes........      163,434         70,361          59,311
Treasury stock, at cost, 29,873,683 shares in 2001 and
  29,874,062 shares in 2002.................................     (394,545)      (394,551)       (332,590)
                                                              -----------    -----------     -----------
    Total stockholders' equity..............................    2,909,683      3,262,607       2,750,238
                                                              -----------    -----------     -----------
    Total liabilities, minority interest and stockholders'
      equity................................................  W55,101,552    W64,786,130     $54,611,929
                                                              ===========    ===========     ===========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-2
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                 2001         2002           2002
                                                              ----------   ----------   ---------------
                                                                                          (UNAUDITED)
                                                                  (IN MILLIONS OF        (IN THOUSANDS
                                                              KOREAN WON, EXCEPT PER    OF US$, EXCEPT
                                                                    SHARE DATA)         PER SHARE DATA)
<S>                                                           <C>          <C>          <C>
INTEREST AND DIVIDEND INCOME
  Interest and fees on loans................................  W2,521,354   W2,832,910     $2,388,022
  Interest and dividends on securities......................     964,927      749,111        631,468
  Trading assets............................................      56,256       52,376         44,151
  Other interest income.....................................     152,169      100,903         85,057
                                                              ----------   ----------     ----------
    Total interest income...................................   3,694,706    3,735,300      3,148,698
INTEREST EXPENSE
  Interest on deposits......................................   1,561,519    1,401,348      1,181,276
  Interest on short-term borrowings.........................     338,504      252,912        213,194
  Interest on secured borrowings............................     247,679      242,663        204,554
  Interest on long-term debt................................     255,492      390,760        329,394
  Other interest expense....................................      36,034       17,445         14,705
                                                              ----------   ----------     ----------
    Total interest expense..................................   2,439,228    2,305,128      1,943,123
NET INTEREST INCOME.........................................   1,255,478    1,430,172      1,205,575
PROVISION FOR LOAN LOSSES...................................     411,487      236,219        199,122
PROVISION FOR GUARANTEES AND ACCEPTANCES....................      (6,684)       9,841          8,296
                                                              ----------   ----------     ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES AND
  GUARANTEES AND ACCEPTANCES................................     850,675    1,184,112        998,157
NONINTEREST INCOME
  Commissions and fees......................................     269,857      473,895        399,473
  Trust management fees.....................................     134,559      128,918        108,672
  Net trading profits.......................................       7,066       88,027         74,203
  Net gains on securities...................................      97,279      143,347        120,835
  Other.....................................................     123,068      203,118        171,220
                                                              ----------   ----------     ----------
    Total noninterest income................................     631,829    1,037,305        874,403
NONINTEREST EXPENSES
  Employee compensation and severance benefits..............     238,529      357,149        301,061
  Depreciation and amortization.............................      68,314      104,238         87,868
  General and administrative expenses.......................     279,173      409,531        345,217
  Impairment loss on goodwill...............................          --      137,002        115,487
  Write-down of other investments...........................      46,487       31,133         26,244
  Other.....................................................     195,080      262,471        221,252
                                                              ----------   ----------     ----------
    Total noninterest expenses..............................  W  827,583   W1,301,524     $1,097,129
INCOME BEFORE INCOME TAX EXPENSE, MINORITY INTEREST,
  EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGES IN
  ACCOUNTING PRINCIPLE......................................  W  654,921   W  919,893     $  775,431
Income tax expense..........................................     223,340      320,316        270,013
Minority interest...........................................        (859)      10,155          8,560
                                                              ----------   ----------     ----------
NET INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT
  OF CHANGES IN ACCOUNTING PRINCIPLE........................     432,440      589,422        496,858
Extraordinary gain on excess unallocated negative
  goodwill..................................................      63,811           --             --
Cumulative effect of changes in accounting principle........        (196)          --             --
                                                              ----------   ----------     ----------
NET INCOME..................................................  W  496,055   W  589,422     $  496,858
                                                              ==========   ==========     ==========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-3
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                2001       2002          2002
                                                              --------   --------   ---------------
                                                                (IN MILLIONS OF       (UNAUDITED)
                                                              KOREAN WON, EXCEPT     (IN THOUSANDS
                                                                PER SHARE DATA)     OF US$, EXCEPT
                                                                                    PER SHARE DATA)
<S>                                                           <C>        <C>        <C>
NET INCOME PER SHARE OF COMMON STOCK
Basic
  Income before extraordinary gain and the cumulative effect
     of changes in accounting principle.....................   W1,698     W2,246         $1.89
  Extraordinary gain........................................      251         --            --
  Cumulative effect of changes in accounting principle......       (1)        --            --
                                                               ------     ------         -----
  Net income................................................   W1,948     W2,246         $1.89
                                                               ======     ======         =====
Diluted
  Income before extraordinary gain and the cumulative effect
     of changes in accounting principle.....................    1,451      2,243          1.89
  Extraordinary gain........................................      213         --            --
  Cumulative effect of changes in accounting principle......       (1)        --            --
                                                               ------     ------         -----
  Net income................................................   W1,663     W2,243         $1.89
                                                               ======     ======         =====
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-4
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2001 AND 2002
<Table>
<Caption>

                                             PREFERRED STOCK                         COMMON STOCK         ADDITIONAL
                                         -----------------------     KDIC      ------------------------    PAID-IN
                                           SHARES       AMOUNT       BONDS       SHARES        AMOUNT      CAPITAL
                                         -----------   ---------   ---------   -----------   ----------   ----------
                                                     (IN MILLIONS OF KOREAN WON, EXCEPT PER SHARE DATA)
<S>                                      <C>           <C>         <C>         <C>           <C>          <C>
BALANCE AT JANUARY 1, 2001.............   58,500,000   W 292,500   W(292,500)  261,306,242   W1,306,531   W  871,652
Comprehensive income:
  Net income...........................           --          --          --            --           --           --
  Foreign currency translation
    adjustments........................           --          --          --            --           --           --
  Net unrealized gains on
    available-for-sale securities......           --          --          --            --           --           --
      Total comprehensive income.......           --          --          --            --           --           --
Issuance of common stock...............           --          --          --    13,876,572       69,383           --
Cash dividends declared (W750 per
  share)...............................           --          --          --            --           --           --
Redemption of preferred stock..........  (58,500,000)   (292,500)         --            --           --           --
Repayment of KDIC bonds................           --          --     292,500            --           --           --
Issuance of common stock upon formation
  of the Group.........................           --          --          --    17,161,378       85,807      150,673
Acquisition of treasury stock..........           --          --          --            --           --           --
Reissuance of treasury stock...........           --          --          --            --           --       16,431
Grant of stock options.................           --          --          --            --           --        1,982
Other..................................           --          --          --            --           --           39
                                         -----------   ---------   ---------   -----------   ----------   ----------
BALANCE AT DECEMBER 31, 2001...........           --          --          --   292,344,192    1,461,721    1,040,777
                                         -----------   ---------   ---------   -----------   ----------   ----------
Comprehensive income:
  Net income...........................           --          --          --            --           --           --
  Foreign currency translation
    adjustments........................           --          --          --            --           --           --
  Net unrealized losses on
    available-for-sale securities......           --          --          --            --           --           --
      Total comprehensive income.......           --          --          --            --           --           --
Cash dividends declared (W600 per
  share)...............................           --          --          --            --           --           --
Issuance of common stock...............           --          --          --        16,933           85          (25)
Grant of stock options.................           --          --          --            --           --        6,779
Acquisition of treasury stock..........           --          --          --            --           --           --
Other..................................           --          --          --            --           --          554
                                         -----------   ---------   ---------   -----------   ----------   ----------
BALANCE AT DECEMBER 31, 2002...........           --   W      --   W      --   292,361,125   W1,461,806   W1,048,085
                                         ===========   =========   =========   ===========   ==========   ==========

<Caption>
                                                       ACCUMULATED
                                                          OTHER
                                                      COMPREHENSIVE                   TOTAL
                                          RETAINED       INCOME,      TREASURY    STOCKHOLDERS'
                                          EARNINGS     NET OF TAX       STOCK        EQUITY
                                         ----------   -------------   ---------   -------------
                                           (IN MILLIONS OF KOREAN WON, EXCEPT PER SHARE DATA)
<S>                                      <C>          <C>             <C>         <C>
BALANCE AT JANUARY 1, 2001.............  W  335,563     W129,791      W (78,870)   W2,564,667
Comprehensive income:
  Net income...........................     496,055           --             --       496,055
  Foreign currency translation
    adjustments........................          --        6,479             --         6,479
  Net unrealized gains on
    available-for-sale securities......          --       27,164             --        27,164
      Total comprehensive income.......     496,055       33,643             --       529,698
Issuance of common stock...............          --           --             --        69,383
Cash dividends declared (W750 per
  share)...............................    (193,322)          --             --      (193,322)
Redemption of preferred stock..........          --           --             --      (292,500)
Repayment of KDIC bonds................          --           --             --       292,500
Issuance of common stock upon formation
  of the Group.........................          --           --             --       236,480
Acquisition of treasury stock..........          --           --       (565,698)     (565,698)
Reissuance of treasury stock...........          --           --        250,023       266,454
Grant of stock options.................          --           --             --         1,982
Other..................................          --           --             --            39
                                         ----------     --------      ---------    ----------
BALANCE AT DECEMBER 31, 2001...........     638,296      163,434       (394,545)    2,909,683
                                         ----------     --------      ---------    ----------
Comprehensive income:
  Net income...........................     589,422           --             --       589,422
  Foreign currency translation
    adjustments........................          --       (6,199)            --        (6,199)
  Net unrealized losses on
    available-for-sale securities......          --      (86,874)            --       (86,874)
      Total comprehensive income.......     589,422      (93,073)            --       496,349
Cash dividends declared (W600 per
  share)...............................    (150,812)          --             --      (150,812)
Issuance of common stock...............          --           --             --            60
Grant of stock options.................          --           --             --         6,779
Acquisition of treasury stock..........          --           --             (6)           (6)
Other..................................          --           --             --           554
                                         ----------     --------      ---------    ----------
BALANCE AT DECEMBER 31, 2002...........  W1,076,906     W 70,361      W(394,551)   W3,262,607
                                         ==========     ========      =========    ==========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-5
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2001 AND 2002
                                  (UNAUDITED)
<Table>
<Caption>

                                        PREFERRED STOCK                         COMMON STOCK         ADDITIONAL
                                    -----------------------     KDIC      ------------------------    PAID-IN
                                      SHARES       AMOUNT       BONDS       SHARES        AMOUNT      CAPITAL
                                    -----------   ---------   ---------   -----------   ----------   ----------
                                                    (IN MILLIONS OF US$, EXCEPT PER SHARE DATA)
<S>                                 <C>           <C>         <C>         <C>           <C>          <C>
BALANCE AT JANUARY 1, 2001........   58,500,000   $ 246,565   $(246,565)  261,306,242   $1,101,349    $734,765
Comprehensive income:
  Net income......................           --          --          --            --           --          --
  Foreign currency translation
    adjustments...................           --          --          --            --           --          --
  Net unrealized gains on
    available-for-sale
    securities....................           --          --          --            --           --          --
      Total comprehensive
        income....................           --          --          --            --           --          --
Issuance of common stock..........           --          --          --    13,876,572       58,487          --
Cash dividends declared ($0.63 per
  share)..........................           --          --          --            --           --          --
Redemption of preferred stock.....  (58,500,000)   (246,565)         --            --           --          --
Repayment of KDIC bonds...........           --          --     246,565            --           --          --
Issuance of common stock upon
  formation of the Group..........           --          --          --    17,161,378       72,332     127,011
Acquisition of treasury stock.....           --          --          --            --           --          --
Reissuance of treasury stock......           --          --          --            --           --      13,851
Grant of stock options............           --          --          --            --           --       1,671
Other.............................           --          --          --            --           --          33
                                    -----------   ---------   ---------   -----------   ----------    --------
BALANCE AT DECEMBER 31, 2001......           --          --          --   292,344,192    1,232,168     877,331
                                    -----------   ---------   ---------   -----------   ----------    --------
Comprehensive income:
  Net income......................           --          --          --            --           --          --
  Foreign currency translation
    adjustments...................           --          --          --            --           --          --
  Net unrealized losses on
    available-for-sale
    securities....................           --          --          --            --           --          --
      Total comprehensive
        income....................           --          --          --            --           --          --
Cash dividends declared ($0.51 per
  share)..........................           --          --          --            --           --          --
Issuance of common stock..........           --          --          --        16,933           72         (21)
Grant of stock options............           --          --          --            --           --       5,714
Acquisition of treasury stock.....           --          --          --            --           --          --
Other.............................           --          --          --            --           --         467
                                    -----------   ---------   ---------   -----------   ----------    --------
BALANCE AT DECEMBER 31, 2002......           --   $      --   $      --   292,361,125   $1,232,240    $883,491
                                    ===========   =========   =========   ===========   ==========    ========

<Caption>
                                                 ACCUMULATED
                                                    OTHER
                                                COMPREHENSIVE                   TOTAL
                                    RETAINED       INCOME,      TREASURY    STOCKHOLDERS'
                                    EARNINGS     NET OF TAX       STOCK        EQUITY
                                    ---------   -------------   ---------   -------------
                                         (IN MILLIONS OF US$, EXCEPT PER SHARE DATA)
<S>                                 <C>         <C>             <C>         <C>
BALANCE AT JANUARY 1, 2001........  $ 282,865     $109,407      $ (66,485)   $2,161,901
Comprehensive income:
  Net income......................    418,153           --             --       418,153
  Foreign currency translation
    adjustments...................         --        5,462             --         5,462
  Net unrealized gains on
    available-for-sale
    securities....................         --       22,898             --        22,898
      Total comprehensive
        income....................    418,153       28,360             --       446,513
Issuance of common stock..........         --           --             --        58,487
Cash dividends declared ($0.63 per
  share)..........................   (162,962)          --             --      (162,962)
Redemption of preferred stock.....         --           --             --      (246,565)
Repayment of KDIC bonds...........         --           --             --       246,565
Issuance of common stock upon
  formation of the Group..........         --           --             --       199,343
Acquisition of treasury stock.....         --           --       (476,859)     (476,859)
Reissuance of treasury stock......         --           --        210,759       224,610
Grant of stock options............         --           --             --         1,671
Other.............................         --           --             --            33
                                    ---------     --------      ---------    ----------
BALANCE AT DECEMBER 31, 2001......    538,056      137,767       (332,585)    2,452,737
                                    ---------     --------      ---------    ----------
Comprehensive income:
  Net income......................    496,858           --             --       496,858
  Foreign currency translation
    adjustments...................         --       (5,225)            --        (5,225)
  Net unrealized losses on
    available-for-sale
    securities....................         --      (73,231)            --       (73,231)
      Total comprehensive
        income....................    496,858      (78,456)            --       418,402
Cash dividends declared ($0.51 per
  share)..........................   (127,128)          --             --      (127,128)
Issuance of common stock..........         --           --             --            51
Grant of stock options............         --           --             --         5,714
Acquisition of treasury stock.....         --           --             (5)           (5)
Other.............................         --           --             --           467
                                    ---------     --------      ---------    ----------
BALANCE AT DECEMBER 31, 2002......  $ 907,786     $ 59,311      $(332,590)   $2,750,238
                                    =========     ========      =========    ==========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-6
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                  2001           2002           2002
                                                              ------------   ------------   -------------
                                                                                             (UNAUDITED)
                                                                    (IN MILLIONS OF         (IN THOUSANDS
                                                                      KOREAN WON)              OF US$)
<S>                                                           <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................  W    496,055   W    589,422   $    496,858
Adjustments to reconcile net income to net cash provided by
  operating activities:
    Provision for loan losses...............................       411,487        236,219        199,122
    Provision for guarantees and acceptances................        (6,684)         9,841          8,296
    Depreciation and amortization...........................        68,314        104,238         87,868
    Accretion of discounts on long-term debt................        36,910            593            500
    Amortization on deferred loan fees and origination
      costs.................................................        22,641         52,941         44,627
    Amortization on investment debt securities..............        (3,501)        20,338         17,144
    Net (gain) loss on equity investments...................        (6,726)         8,683          7,319
    Net loss on valuation of trading assets.................         3,696         18,888         15,922
    Net gain on sales of available-for-sale securities......      (115,785)     (185,914)       (156,718)
    Impairment loss on investment securities................        18,506         42,567         35,881
    Net loss (gain) on disposal of premises and equipment...         4,474       (39,716)        (33,479)
    Net gain on sales of subsidiaries.......................            --       (20,760)        (17,500)
    Unrealized foreign exchange (gain) loss.................        (1,469)        47,888         40,368
    Minority interest in net (loss) income of
      subsidiaries..........................................          (859)        10,155          8,560
    Grant of stock option...................................         1,982          7,715          6,503
    Extraordinary gain on excess unallocated negative
      goodwill..............................................       (63,811)            --             --
    Impairment loss on goodwill.............................            --        137,002        115,487
    Write-down of other investments.........................        46,487         31,133         26,244
    Cumulative effect of changes in accounting principle....           196             --             --
    Net changes in:
      Restricted cash.......................................      (153,480)     (271,930)       (229,225)
      Trading assets........................................       681,537         28,167         23,744
      Other assets..........................................      (158,898)       731,655        616,754
      Trading liabilities...................................         1,876         12,257         10,332
      Accrued expenses and other liabilities................       666,042      (550,318)       (463,893)
                                                              ------------   ------------   ------------
        Net cash provided by operating activities...........     1,948,990      1,021,064        860,714
                                                              ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Net change in interest-bearing deposits in banks........       180,010        214,284        180,632
    Net change in call loans and securities purchased under
      resale agreements.....................................      (397,576)     1,309,410      1,103,776
    Proceeds from sales of available-for-sale securities....     6,627,718     10,554,089      8,896,644
    Purchases of available-for-sale securities..............    (7,023,724)  (11,985,755)    (10,103,477)
    Proceeds from maturities, prepayments and calls of
      held-to-maturity securities...........................     2,464,178      2,819,108      2,376,387
    Purchases of held-to-maturity securities................    (2,365,421)   (1,179,957)       (994,653)
    Loan originations and principal collections, net........    (5,809,696)  (10,260,858)     (8,649,463)
    Payments for repurchase of loans from Korea Asset
      Management Corporation................................       (49,348)      (51,769)        (43,639)
    Proceeds from sales of premises and equipment...........         7,571         71,327         60,126
    Payments for purchase of premises and equipment.........      (153,650)     (204,229)       (172,156)
    Net change in security deposits.........................        (3,096)      (20,622)        (17,383)
    Cash acquired from acquisition..........................       104,627         35,278         29,738
    Investments in affiliates...............................       (12,586)      (14,516)        (12,236)
    Disposal of equity interest in subsidiaries.............            --         30,795         25,959
    Acquisition of equity interest in subsidiaries..........        (2,688)     (431,535)       (363,766)
                                                              ------------   ------------   ------------
        Net cash used in investing activities...............  W (6,433,681)  W(9,114,950)   $ (7,683,511)
                                                              ------------   ------------   ------------
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-7
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                          2001          2002           2002
                                                       -----------   -----------   -------------
                                                                                    (UNAUDITED)
                                                            (IN MILLIONS OF        (IN THOUSANDS
                                                              KOREAN WON)             OF US$)
<S>                                                    <C>           <C>           <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in interest-bearing deposits.......  W 3,781,813   W 3,205,377    $ 2,701,995
     Net decrease in noninterest-bearing deposits....     (215,688)     (69,376)        (58,481)
     Net increase in secured borrowings..............      110,606       574,064        483,911
     Net (decrease) increase in short-term
       borrowing.....................................   (1,084,596)    1,043,586        879,698
     Proceeds from issuance of long-term debt........    2,968,866     7,740,273      6,524,718
     Repayment of long-term debt.....................   (1,210,095)  (4,546,953)     (3,832,886)
     Proceeds from issuance of common stock..........       64,220         2,124          1,791
     Purchases of treasury stock.....................     (476,642)          (6)             (5)
     Reissuance of treasury stock....................      271,622            --             --
     Cash dividends paid on common stock.............     (193,322)    (150,812)       (127,128)
     Redemption of preferred stock...................     (292,500)           --             --
     Retirement of common stock of subsidiaries......           --         (937)           (791)
                                                       -----------   -----------    -----------
       Net cash provided by financing activities.....    3,724,284     7,797,340      6,572,822
                                                       -----------   -----------    -----------
       Effect of exchange rate changes on cash.......          145       (1,297)         (1,094)
       Net decrease in cash and cash equivalents.....     (760,262)    (297,843)       (251,069)
CASH AND CASH EQUIVALENTS
Beginning of year....................................    1,340,429       580,167        489,056
                                                       -----------   -----------    -----------
End of year..........................................  W   580,167   W   282,324    $   237,987
                                                       ===========   ===========    ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Acquisitions
  Fair value of net assets acquired..................  W   276,443   W   298,169    $   251,344
  Cash acquired......................................      104,626        35,278         29,738
Cash paid for interest...............................    2,501,518     2,384,377      2,009,928
Cash paid for income taxes...........................      185,062       329,420        277,687
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES
Loans repurchased from Korea Asset Management
  Corporation in exchange for available-for-sale
  securities.........................................       39,914        75,288         63,465
Securities and other investments received in
  connection with loan restructuring.................      141,123        25,866         21,804
Change in cumulative translation adjustments, net of
  tax................................................        6,479       (6,199)         (5,225)
Change in unrealized gains on available-for-sale
  securities, net of tax.............................       27,164      (86,874)        (73,231)
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-8
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2002

1.  GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 BUSINESS

     Shinhan Financial Group Co., Ltd. is a financial holding company
incorporated in the Republic of Korea ("Korea") under the Financial Holding
Company Act of Korea. Shinhan Financial Group Co., Ltd. and its subsidiaries
(collectively the "Group") engage in banking and a variety of related businesses
to provide a wide range of financial services to corporations, governments,
institutions and individuals.

     On September 1, 2001, the Group was formed through a business combination
involving an exchange of the Group's common stock with the former stockholders
of Shinhan Bank (the "Bank"), Shinhan Capital Co., Ltd. ("Shinhan Capital"),
Shinhan Securities Co., Ltd. ("Shinhan Securities") and Shinhan Investment Trust
Management Co., Ltd. ("Shinhan ITM"). The respective ratios of exchange for one
share of the Bank, Shinhan Capital, Shinhan Securities and Shinhan ITM's common
stock into the Group's common stock and the related number of shares of the
Group's common stock issued to the respective former stockholders are as follow:

<Table>
<Caption>
                                                                             NUMBER OF
                                                                           SHARES OF THE
                                                                              GROUP'S
                                                                           COMMON STOCK
                                                      EXCHANGE RATIO          ISSUED
                                                      --------------   ---------------------
<S>                                                   <C>              <C>
The Bank............................................           1            275,182,814
Shinhan Capital.....................................      0.3048              4,877,424
Shinhan Securities..................................      0.3594              8,570,322
Shinhan ITM.........................................      0.4642              3,713,632
</Table>

     Upon formation of the Group, the Bank, Shinhan Capital, Shinhan Securities
and Shinhan ITM became wholly-owned subsidiaries of the Group, and the former
stockholders of the Bank, Shinhan Capital, Shinhan Securities and Shinhan ITM
owned 94.13 percent, 1.67 percent, 2.93 percent and 1.27 percent of the Group,
respectively, on September 1, 2001. The formation of the Group has been
accounted for using the purchase method, with the Bank being the accounting
acquirer. The consolidated financial statements of the Group prior to September
1, 2001 reflect the historical financial results of operations and financial
position of the Bank as the predecessor entity.

     The Group is subject to the provisions of the Financial Holding Company Act
of Korea and the Bank Act of Korea. The Bank also engages in the trust business
subject to the Trust Business Act and other relevant laws.

 RISK AND UNCERTAINTIES

     The Asian financial crisis that began in 1997 has adversely affected the
Korean economy, as well as those of other countries in the Asia Pacific region.
Among other effects, the Asian financial crisis precipitated economic
contractions, a reduction in the availability of credit, increased interest
rates and inflation, adverse fluctuations in currency exchange rates, growth in
the level of bankruptcies, increased unemployment and labor unrest. Such
conditions have had an adverse impact on the operations of the Group. Further,
these effects may be exacerbated as a result of current political tensions with
the Democratic People's Republic of Korea ("North Korea"). Similarly, the Korean
government has commenced an initiative to sponsor or broker the restructuring of
large financially-troubled companies.

     Although economic conditions in Korea may have improved and some of the
trends and conditions noted above may have reversed, the Group and its customers
may continue to be affected for the foreseeable future by certain adverse
economic conditions in Korea and in the Asia Pacific region. If these conditions
have an

                                       F-9
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

adverse effect on the Group, adjustments to the carrying amount of its loans and
investments in amounts could be required, and such adjustments could be material
to the consolidated financial statements.

 USE OF ESTIMATES

     The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America ("US
GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities as of the date of the balance sheet and
reported amounts of revenues and expenses during the reporting period. Material
estimates that are particularly susceptible to significant change in the near
term relate to the determination of the fair values of financial instruments the
allowance for loan losses, impairment of securities and deferred tax assets.
Actual results could differ significantly from these estimates.

 BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements, which have been prepared in
conformity with US GAAP, include the accounts of the Group and its
majority-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. Operating results of companies
purchased are included from the dates of the acquisition. Assets held in an
agency or trust management capacities are not included in the consolidated
financial statements. The Group accounts for investments in companies in which
it owns voting or economic interest of 20 percent to 50 percent and for which it
has significant influence over operating and financing decisions using the
equity method of accounting. Investments in joint ventures, where the Group does
not have unilateral control, are accounted for using the equity method of
accounting. Investments in companies where the Group owns less than 20 percent
and does not have the ability to exercise significant influence over operating
and financing decisions are accounted for using the cost method of accounting.
These investments are included in other assets and the Group's share of income
or loss is included in other noninterest income or other noninterest expenses.

 FOREIGN CURRENCY TRANSLATION

     Assets, liabilities and operations of foreign branches and subsidiaries are
recorded based on the functional currency of each entity. For certain foreign
operations, the functional currency is the local currency, in which case assets
and liabilities are translated, for consolidation purposes, at current exchange
rates from the local currency to the reporting currency, the Korean Won. Income
and expenses are translated at the weighted-average exchange rate for the
period. The resulting translation adjustments are reported as a component of
accumulated other comprehensive income within stockholders' equity on an
after-tax basis.

     Foreign currency transactions executed by domestic Korean entities are
accounted for at the exchange rates prevailing on the related transaction dates.
Assets and liabilities denominated in foreign currencies are translated to
Korean Won using period-end exchange rates, and income and expense items are
translated using average rates for the relevant period. Gains and losses
resulting from the settlement of foreign currency transactions and from the
translation of assets and liabilities denominated in foreign currencies are
recognized in the consolidated statements of income except for gains and losses
arising from the translation of available-for-sale securities which are recorded
as a component of accumulated other comprehensive income within stockholders'
equity on an after-tax basis.

 CASH AND CASH EQUIVALENTS

     For purposes of statements of cash flows, cash and cash equivalents include
cash on hand, cash items in the process of collection and amounts due from
banks, other financial institutions and the Bank of Korea ("BOK"), all of which
have original maturities within 90 days.

                                       F-10
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

 SECURITIES PURCHASED UNDER RESALE AGREEMENTS AND SECURITIES SOLD UNDER
 REPURCHASE AGREEMENTS

     Securities purchased under resale agreements and securities sold under
repurchase agreements are treated as collateralized financing transactions and
are carried in the consolidated balance sheets at the amount for which the
securities will be subsequently resold or repurchased, plus accrued interest.
Interest earned on resale agreements and interest incurred on repurchase
agreements are reported as interest income and interest expense, respectively.
The Group's policy is to take possession of securities under agreements to
resell. The fair value of the securities is monitored, and additional collateral
may be obtained when considered appropriate to protect the Group against credit
exposure.

 TRADING ASSETS AND LIABILITIES

     The Group engages in trading activities for both its own account and on
behalf of its customers. Trading assets and liabilities include securities and
derivatives, and are carried at fair value, which is determined based upon
quoted market prices, when available. When quoted market prices are not
available, other pricing methods, such as pricing models, quoted prices of
instruments with similar characteristics, discounted cash flows or the net asset
value of the investee are used. Securities that are held principally for resale
in the near term are recorded in the trading assets with changes in fair value
recorded in earnings. Interest and dividends are included in net interest
income. Trading instruments are carried at fair value on the trade date with
changes in the fair value of trading positions recorded in earnings.

     Derivatives used for trading purposes include interest rate and foreign
currency swaps, credit indexed contracts, options, caps and floors, warrants,
futures and forwards. Also included are derivatives intended to serve as
economic hedges of risk that do not qualify for hedge accounting. The Group
recognizes changes in the fair value of trading derivatives as they occur in net
trading profits. Derivatives executed on behalf of customers are carried at fair
value with changes in fair value recorded in earnings, and are classified as
trading assets when there is a positive fair value and trading liabilities when
there is a negative fair value.

 DERIVATIVES AND HEDGING ACTIVITIES

     As part of its asset and liability management process, the Group uses
various derivative instruments including interest rate and currency swaps,
credit indexed contracts, options, futures and forward contracts, to manage
various interest rate and foreign exchange exposures or modify interest rate
characteristics of various balance sheet accounts.

     On January 1, 2001, the Group adopted the Statement of Financial Accounting
Standards ("SFAS") No. 133 ("SFAS No. 133"), Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, as well as certain derivative instruments
embedded in other contracts, that are employed to manage risk outside of the
Group's trading activities.

     For a derivative to qualify for hedge accounting, the hedging relationship
must be designated and formally documented at inception along with the
particular risk management objective and strategy for the hedge, identification
of the derivative used as the hedging instrument, the hedged item, the risk
exposure being hedged, and the method of assessing hedge effectiveness.
Derivatives used as hedges must be highly effective at reducing the risk
associated with the exposure being hedged. The effectiveness of these hedging
relationships is evaluated both prospectively and retrospectively at inception
and on an on-going basis using quantitative measures of correlation.

     The short-cut method of hedge accounting assumes no ineffectiveness in a
hedging relationship involving an interest rate swap and an interest-bearing
asset or liability. The changes in the fair value or cash flows that are
attributable to the risk being hedged will be completely offset at the hedge's
inception and on an ongoing basis. Determination of hedge effectiveness involves
documenting the critical terms of the hedging instrument and the hedged item to
support the continual application of hedge accounting.
                                       F-11
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     All derivatives, whether designated for hedging relationships or not, are
required to be recorded on the balance sheets at fair value. If the derivative
qualifies as a fair value hedge, in which derivatives hedge the fair value of
assets, liabilities or firm commitments, changes in the fair value of the
derivative and changes in the fair value of the hedged item attributable to the
hedged risk are recognized together in earnings. The net amount, representing
hedge ineffectiveness, is reflected in current earnings. The Group's fair value
hedges are mainly the hedges of available-for-sale securities, loans and fixed
rate debt. If the derivative is designated as a cash flow hedge, in which
derivatives hedge the variability of cash flows related to floating rate assets,
liabilities or forecasted transactions, the effective portion of the change in
the fair value of the derivative is recorded in other comprehensive income and
recognized in the income statement when the hedged item affects earnings. The
ineffective portion of cash flow hedges is immediately recognized in earnings.
If hedge relationships are terminated, hedge designations are removed or
forecasted transactions are no longer expected to occur, hedge accounting
treatment will not be applied prospectively. The related hedging derivative is
either terminated or transferred to the trading account.

     Derivatives entered into for nontrading purposes that do not qualify for
hedge accounting treatment are classified as trading assets and liabilities.
Such nontrading derivatives include interest rate swaps and cross currency swaps
that are entered to hedge interest rate and foreign exchange risks. Certain of
these derivatives are intended to be effective as economic hedges, but do not
qualify for hedge accounting, mainly attributed to not meeting hedge
documentation requirements.

 SECURITIES

     Debt securities that management has the positive intent and ability to hold
to maturity are classified as held-to-maturity and recorded at amortized cost.
Trading securities are bought and held principally for the purpose of selling
them in the near term. Securities not classified as held-to-maturity or trading,
including equity securities with readily determinable fair values, are
classified as available-for-sale securities and recorded at fair value, with
unrealized gains and losses excluded from earnings and reported in other
comprehensive income.

     Purchase premiums and discounts are recognized in interest income and
expense using the effective interest method over the terms of the securities.
Declines in the fair value of held-to-maturity and available-for-sale securities
below their cost that are deemed to be other-than-temporary are reflected in
earnings as realized losses and are not permitted to be subsequently reversed.
Gains and losses on the sale of debt securities and equity securities are
recorded on the trade date and are determined using the specific identification
method and moving average method, respectively.

 OTHER INVESTMENTS

     The Group holds certain investments that are not within the scope of SFAS
No. 115, Accounting for Certain Investments in Debt and Equity Securities. Those
investments are recorded as other assets in the balance sheets and are accounted
for at cost unless there is persuasive evidence of a decrease in value which is
recorded as noninterest expense.

 INTEREST-BEARING DEPOSITS IN BANKS

     Interest-bearing deposits in banks maturing within one year are carried at
cost.

 LOANS

     Loans are reported at the principal amount outstanding adjusted for the
allowance for loan losses and deferred loan fees and origination costs. Interest
on loans is accrued at the effective interest rate and credited to income based
on the principal amount outstanding.

                                       F-12
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Group generally ceases the accrual of interest when principal or
interest payments become one day past due. Any unpaid interest previously
accrued on such loans is reversed from income, and thereafter interest is
recognized only to the extent payments are received. In applying payments on
delinquent loans, payments are applied first to delinquent interest, normal
interest, and then to the loan balance until it is paid in full. Loans are
returned to accrual status when all the principal and interest amounts
contractually due are brought current.

     Interest accruals are continued for past-due loans collateralized by
customer deposits. Securities received by the Group involving loans that are
restructured or settled are recorded at the fair value of the security at the
date of restructuring or settlement. Any difference between the security's fair
value and the net carrying amount of the loan is recorded as a charge-off or
recovery, as appropriate, on the loan through the allowance for loan losses.

     The Group provides equipment financing to its customers through a variety
of lease arrangements. Direct financing leases are carried at the aggregate of
lease payments receivable plus estimated residual value of the leased property,
less unearned income. Unearned income is recognized using the effective interest
method.

     Transfers of loans to third parties are accounted for as sales when control
is surrendered to the transferee. The Group derecognizes the loans from the
balance sheet including any related allowance as of the date of sale, and
recognizes all assets obtained, and liabilities incurred, including any recourse
obligations to the transferee, at fair value. Any resulting gain or loss on the
sales is recognized in earnings.

     Conversely, the Group only recognizes loans acquired from third parties on
the balance sheet when the Group obtains control of the loans. Loans reacquired
from third parties are also only recognized on the balance sheet when this
criterion is met. Any outstanding recourse obligations are reversed to the
extent that the liability is settled, and any resulting gain or loss on the
reacquisition is recognized in earnings.

 ALLOWANCE FOR LOAN LOSSES

     The Group's allowance for loan losses is based upon management's continuing
review and evaluation of the loan portfolio and is management's best estimate of
probable losses that have been incurred as of the balance sheet date. The level
of the allowance is based on an evaluation of the risk characteristics of the
loan portfolio and considers factors such as past loss experience and the
financial condition of the borrower. The allowance is increased by the provision
for loan losses, which is charged against current period operating results and
decreased by the amount of charge-offs, net of recoveries. The Group's
methodology for assessing the level of the allowance consists of two key
elements, the specific allowance and the formula allowance.

     A specific allowance is calculated when a corporate loan is specifically
identified as impaired. A corporate loan is considered impaired when, after
consideration of current information and events, it is probable that the Group
will be unable to collect all amounts, including principal and interest,
according to the contractual terms of the loan. The Group considers the
following types of loans to be impaired:

     - Loans classified as "substandard" or below according to asset
       classification guidelines of the Financial Supervisory Commission
       ("FSC");

     - Loans that are 90 days or more past due;

     - Loans which are "troubled debt restructurings" under US GAAP.

     Once a loan is identified as impaired, management measures the impairment
based on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. If the resulting value is less than the book value of the
loan, a specific allowance is established for an amount equal to the difference.
Any amounts deemed uncollectible are charged against the allowance for loan
losses.

                                       F-13
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Recoveries of previously charged-off amounts are credited to the allowance for
loan losses. Impairment criteria are applied to the entire loan portfolio,
exclusive of leases and smaller balance homogeneous loans such as residential
mortgage, consumer loans and credit cards, which are evaluated collectively for
impairment. Smaller balance corporate loans, managed on a portfolio basis, are
also evaluated collectively for impairment.

     The allowance for smaller-balance loans is determined using several
modeling tools, including a delinquency roll-rate model for credit cards, as
well as a risk rating migration model for homogeneous pools of consumer and
corporate loans. The loss factors developed through the use of such models are
based on the Group's historical loss experiences and may be adjusted for
significant factors that, in management's judgment, affect the collectibility of
the portfolio as of the evaluation date.

     The Group charges off unsecured consumer loan amounts past due greater than
180 days and the amount deemed uncollectible on financing leases is charged off
when past due greater than one year.

     The related specific allowance for loan losses is transferred as cost of
the net book value of the loan as of the date of sale when non-performing loans
are sold and derecognized from the balance sheet. The allowance for loan losses
is re-established if loans are reacquired, at an amount measured at the date of
reacquisition. Any movement in the allowance in relation to these loans after
reacquisition is included within the overall provision for loan losses during
the year.

 ALLOWANCE FOR GUARANTEES AND ACCEPTANCES

     The Group analyzes its legally binding off-balance sheet commitments for
possible losses associated with such commitments. The Group reviews the ability
of the counterparty of the underlying credit commitment to perform under the
proposed commitment. If it is determined that a loss is probable and estimable,
the Group will record a liability in a similar manner as if a loan was granted
under the terms of the commitment. The allowance for guarantees and acceptances
is reflected in other liabilities.

 DEFERRED LOAN FEES AND ORIGINATION COSTS

     The Group recognizes certain employee and other costs associated with
originating loans as a yield adjustment over the life of the loan, net of any
related fees received. These costs relate to direct loan origination activities
performed by the Group which include evaluating the prospective borrower's
financial condition, recording guarantees, collateral and other security
arrangements, negotiating loan terms, preparing and processing loan documents,
and closing the transaction. All other lending related costs, including costs
related to activities performed by the Group for advertising, soliciting
potential borrowers, servicing existing loans, and other ancillary activities
related to establishing and monitoring credit policies, supervision and
administration, are expensed as incurred.

 FORECLOSED ASSETS

     Assets acquired through, or in lieu of, loan foreclosures are held for sale
and are initially recorded at fair value at the date of foreclosure,
establishing a new cost basis. Subsequent to foreclosure, the assets are carried
at the lower of their carrying amounts or fair values, less cost to sell, based
on periodic valuation reviews performed by management. Revenues and expenses
from operations and changes in the valuation allowance are included in net
expenses from foreclosed assets.

 SECURITIZATIONS

     The Group transfers loans to special purpose entities ("SPEs"), which in
turn issue beneficial interests collateralized by such loans. These transactions
have been accounted for as secured borrowings because the control over these
loans has not been surrendered. As a result, the loans collateralizing these
borrowings are
                                       F-14
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

included as loans in the balance sheet accounts, and related beneficial
interests issued, which pay interest at rates of 6.54 percent to 25 percent per
annum, are included in secured borrowings.

 PREMISES AND EQUIPMENT

     Buildings, equipment and furniture, leasehold improvements and operating
lease assets are stated at cost less accumulated depreciation and amortization.
Depreciation of buildings is computed on a straight-line basis over the
estimated useful lives of the assets, or the term of the lease, if shorter, in
the case of leasehold improvements. Depreciation of equipment, furniture and
operating lease assets is computed on a declining balance basis over the useful
lives of the assets. Gains or losses on disposals of premises and equipment are
determined by reference to their carrying amounts. Maintenance and repairs are
charged to expense as incurred.

     The Group capitalizes certain direct costs related to developing software
for internal use, and amortizes such costs on a straight-line basis once the
software is available for use.

     The estimated useful lives of premises and equipment are as follow:

<Table>
<S>                                                           <C> <C> <C>   <C>
Buildings...................................................   40   -  50   years
Equipment and furniture.....................................    2   -   5   years
Leasehold improvements......................................    4   -  10   years
Operating lease assets......................................    3   -   5   years
Capitalized software costs..................................    4   -   5   years
</Table>

 GOODWILL AND OTHER INTANGIBLE ASSETS

     Goodwill represents the excess of the cost of an acquired business in
excess of the fair value of the net assets acquired. Other intangible assets
represent purchased assets that also lack physical substance but can be
distinguished from goodwill because of contractual or other legal rights, or
because the asset is capable of being sold or exchanged either on its own or in
connection with a related contract, asset, or liability. The Group adopted SFAS
No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142") effective January
1, 2002. Prior to the effective date of SFAS No. 142, goodwill was amortized
ratably into income over the estimated economic life. SFAS No. 142 does not
permit the amortization of goodwill, rather it is tested at least annually for
impairment. All other intangible assets, which have finite useful lives, are
amortized over these periods, which range from 3 to 10 years on a straight-line
basis. The Group did not have any goodwill or identifiable intangible assets
prior to July 1, 2001.

     The Group's finite-lived intangible assets are comprised of core deposit,
brokerage customer relationship and Korea Securities Finance Corporation
("KSFC") deposit intangibles. Core deposit intangibles represent the value of
the funding provided by a base of acquired demand and savings accounts, which
the Group can expect to maintain for an extended period of time because of
generally stable customer relationships. Brokerage customer relationship
intangibles reflect the value of revenue to be derived from a base of acquired
customer brokerage accounts' trading activities, which the Group can expect to
maintain for an extended period of time. KSFC deposit intangibles represent the
positive spread realized on the differences between the interest rate paid to
the customers and the interest rate earned on the deposit with KSFC, which the
Group can expect to maintain for an extended period of time.

     The finite-lived intangibles are amortized using straight-line method over
their estimated useful lives. The estimated weighted-average life of the core
deposit intangibles, brokerage relationship intangibles and KSFC deposit
intangibles are approximately 9, 3 and 3 years, respectively on a straight-line
basis, reflecting the run-off of economic value.

                                       F-15
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

 IMPAIRMENT

     Annual impairment test for goodwill is carried out in two steps. The first
step is to compare the fair value of the reporting unit with its carrying
amount, including goodwill. If the fair value of the reporting unit exceeds its
carrying amount, goodwill of the reporting unit is considered to be not
impaired; however, if the carrying amount of a reporting unit exceeds its fair
value, an additional second procedure is performed. The additional procedure
requires that the implied fair value of the reporting unit's goodwill be
compared with the carrying amount of the related goodwill. An impairment loss is
recorded to the extent that the carrying amount of goodwill exceeds its implied
fair value. Goodwill must be tested for impairment at least annually, or more
frequently if warranted.

     Long-lived assets, including certain identifiable intangibles with
finite-lives, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An estimate of undiscounted future cash flows produced by the
asset, or the group of assets, is compared to the carrying value to determine
whether impairment exists. If an asset is determined to be impaired, the loss is
measured based on differences between the carrying value and quoted market
prices in active markets, if available. If quoted market prices are not
available, the estimate of fair value is based on various valuation techniques,
including a discounted value of estimated future cash flows and fundamental
analysis. The Group reports an asset to be disposed of at the lower of its
carrying value or fair value less cost to sell.

 INTEREST EXPENSE

     Interest expense is recognized on an accrual basis.

 STOCK-BASED COMPENSATION

     The Group uses a fair value method of accounting for stock-based
compensation provided to its employees and key executives. The Group values
stock options issued based upon an option-pricing model and recognizes this
value as an expense, adjusted for forfeitures, over the period in which the
options vest.

 COMMISSIONS AND FEES

     Commissions and fees from nontrust management include brokerage fees and
commissions, and other fees and commissions. These fees are recognized over the
period during which the related services are rendered.

 TRUST MANAGEMENT FEES

     The Group receives fees for its management of trust assets, which are
recognized when earned. The Group is also entitled to receive performance-based
fees for certain trust accounts. These fees, if earned, are recognized at the
end of the performance period.

     In addition, the Group is liable to compensate trust account holders for
losses incurred in certain trust accounts, subject to minimum return and
principal guarantees. Such losses arising from the trusts underperforming the
guaranteed level are accrued at the end of each applicable year when they are
considered probable and reasonably estimable.

 INCOME TAXES

     There are two components of income tax expense, current and deferred.
Current income tax expense approximates cash to be paid or refunded for taxes
for the applicable period. Deferred tax assets and liabilities are recognized
due to differences in the basis of assets and liabilities as measured by tax
laws and

                                       F-16
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

their basis as reported in the financial statements. Deferred tax expense or
benefit is then recognized for the change in deferred tax liabilities or assets
between periods.

     Recognition of deferred tax assets is based on management's belief that it
is more likely than not that the tax benefit associated with certain temporary
differences, tax operating loss carry forwards and tax credits will be realized.
A valuation allowance is recorded for the amount of the deferred tax items for
which it is more likely than not that realization will not occur.

 OTHER COMPREHENSIVE INCOME

     The Group records unrealized gains and losses related to securities
classified as available-for-sale and foreign currency translation adjustments in
other comprehensive income ("OCI") within stockholders' equity. Unrealized gains
and losses on securities classified as available-for-sale securities are
reclassified into net income as the gains or losses are realized upon sale of
the securities, or when unrealized losses are deemed to be other-than-temporary.
Translation gains or losses on foreign currency translation adjustments are
reclassified to net income upon sale or liquidation of investments in foreign
operations.

 CONVENIENCE TRANSLATION

     The Group operates primarily in Korea and its official accounting records
are maintained in Korean Won. The US dollar amounts are provided herein as
supplementary information solely for the convenience of the reader. Korean Won
amounts are expressed in US dollars at the rate of W1,186.30: US$1, the US
Federal Reserve Bank of New York noon buying exchange rate in effect on December
31, 2002. The US dollar amounts are unaudited and are not presented in
accordance with US GAAP, and should not be construed as the Korean Won amounts
represent, or have been, or could be converted into US dollars at that or any
other rate.

2.  RECENT ACCOUNTING PRONOUNCEMENTS

     Effective July 1, 2001, the Group adopted SFAS No. 141, Business
Combinations. SFAS No. 141 requires that all business combinations initiated
after June 30, 2001, be accounted for using the purchase method. Also under SFAS
No. 141, identified intangible assets acquired in a purchase business
combination must be separately valued and recognized on the balance sheet if
they meet certain requirements.

     Effective January 1, 2002, the Group adopted SFAS No. 142, Goodwill and
Other Intangible Assets, which establishes the accounting and reporting for
intangible assets acquired individually or with a group of other assets, but not
those acquired in a business combination, at acquisition. It also addresses the
accounting and reporting for goodwill and other intangible assets subsequent to
an acquisition. The adoption of SFAS No. 142 has a material effect on the
consolidated financial statements.

     Effective January 1, 2002, the Group adopted SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which superseded SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets to be disposed of. The new
standard maintains the previous accounting for the impairment or disposal of
long-lived assets, but also establishes more restrictive criteria that have to
be met to classify such as "held for sale". The adoption of SFAS No. 144 did not
have a material effect on the consolidated financial statements.

     Effective October 1, 2002, the Group adopted SFAS No. 147, Acquisitions of
Certain Financial Institutions. SFAS No. 147 requires that business combinations
involving depository financial institutions within its scope, except for
combinations between mutual institutions, be accounted for under SFAS No. 141.
Previously, generally accepted accounting principles for acquisitions of
financial institutions provided for recognition of the excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. Under SFAS No.
147, such excess is

                                       F-17
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accounted for as goodwill. The impact of adopting SFAS No. 147 did not
materially affect the consolidated financial statements.

     In April 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. The new guidance
amends SFAS No. 133 for decisions made: (a) as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS No.
133, (b) in connection with other FASB projects dealing with financial
instruments, and (c) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contains
financing components. SFAS No. 149 is generally effective for contracts entered
into or modified after June 30, 2003, with a few exceptions, and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. The Group is currently assessing the impact of SFAS No. 149 on
its financial condition and results of its operations.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, but now requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the balance sheet. Further, SFAS No. 150 requires disclosure
regarding the terms of those instruments and settlement alternatives. The
guidance in SFAS No. 150 is generally effective for all financial instruments
entered into or modified after May 31, 2003, and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. The Group
is currently assessing the impact of SFAS No. 150 on its financial condition and
results of its operations.

     In November 2002, FASB issued FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees. FIN 45
requires a guarantor to recognize a liability at the inception of certain
guarantees for the fair value of the obligation, including the ongoing
obligation to stand ready to perform over the term of the guarantee. Guarantees,
as defined in FIN 45, include contracts that contingently require the Group to
make payments to a guaranteed party based on changes in an underlying that is
related to an asset, liability or equity security of the guaranteed party,
performance guarantees, indemnification agreements or indirect guarantees of
indebtedness of others. This new accounting is effective for certain guarantees
issued or modified after December 31, 2002. In addition, FIN 45 requires certain
additional disclosures that are presented in Note 30. Management does not expect
that the adoption of FIN 45 will have a material impact on the Group's financial
position or its results of operations.

     In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.
FIN 46 provides a new framework for identifying variable interest entities
("VIEs") and determining when a company should include the assets, liabilities,
noncontrolling interests and results of activities of VIEs in its consolidated
financial statements. FIN 46 requires VIEs to be consolidated by a company if
that company is subject to a majority of the risk of loss from the VIEs'
activities or entitled to receive a majority of the entity's residual returns,
or both. FIN 46 is effective immediately for VIEs created after January 31, 2003
and is effective January 1, 2004 for VIEs created prior to February 1, 2003. The
Group is currently assessing the impact of FIN 46 on its financial position and
its operations.

                                       F-18
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3.  BUSINESS CHANGES AND DEVELOPMENTS

 FORMATION OF SHINHAN FINANCIAL GROUP

     On September 1, 2001, the Group was formed through a business combination
involving exchanges of the Group's common stock with the former stockholders of
the Bank, Shinhan Capital, Shinhan Securities and Shinhan ITM as discussed in
Note 1.

     The fair value of the acquired net assets of Shinhan Capital, Shinhan
Securities and Shinhan ITM amounted to 31,917 million Won, 253,880 million Won
and 19,053 million Won, respectively. The acquired assets and liabilities of the
Shinhan Capital, Shinhan Securities and Shinhan ITM were recorded at fair value,
with the differences between the fair value of the net assets acquired and the
purchase consideration representing goodwill or negative goodwill, as
appropriate. With respect to the acquisitions of Shinhan Capital and Shinhan
ITM, goodwill of 1,616 million Won and 2,432 million Won, respectively, was
recognized. The acquisition of the Shinhan Securities resulted in negative
goodwill, which was initially allocated to the identifiable intangible assets,
premises and equipment on a pro rata basis. After those asset balances were
reduced to zero, the remaining unallocated negative goodwill in the amount of
63,811 million Won was recognized as an extraordinary gain.

 ACQUISITION OF JEJU BANK

     On April 4, 2002, the Group acquired 51.0 percent of the total outstanding
common stock of Jeju Bank from the Korea Depository Insurance Corporation
("KDIC"). On July 5, 2002, the Group acquired additional common stock from Jeju
Bank and increased its ownership to 62.4 percent. The total purchase price was
approximately 42,935 million Won in cash. The acquisition of Jeju Bank was
accounted for using the purchase method and has been reflected in the
consolidated financial statements as of the acquisition date. The fair value of
net assets acquired amounted to 68,628 million Won. Furthermore, an initial
negative goodwill of 25,693 million Won was recognized, and allocated to the
identifiable intangible assets, premises and equipment on a pro rata basis.

 ACQUISITION OF GOOD MORNING SECURITIES CO., LTD. ("GOOD MORNING SECURITIES")

     Between June 18, 2002 and July 9, 2002, the Group acquired 31.7 percent of
the total outstanding common stock of Good Morning Securities for approximately
405,216 million Won in cash. Subsequently, Good Morning Securities acquired
360,499 million Won of its own stock as treasury stock, increasing the Group's
ownership in Good Morning Securities to 45.4 percent. On July 31, 2002, the
Group contributed its 100 percent interest in Shinhan Securities to Good Morning
Securities to obtain an additional 15.0 percent of ownership interest. The Group
recognized a gain of 10,642 million Won on the sale of its 39.53 percent
investment in Shinhan Securities. After the transaction, the Group effectively
owned 60.47 percent of the combined entity, which changed its name to Good
Morning Shinhan Securities Co., Ltd. ("Good Morning Shinhan Securities"). The
aggregate fair value of net assets acquired amounted to 236,628 million Won. In
connection with this acquisition, the Group recorded goodwill of 284,659 million
Won. The goodwill was assigned to the brokerage and capital market units in the
amounts of 247,029 million Won and 37,630 million Won, respectively. None of the
amount is deductible for tax purpose.

 DISPOSAL OF SHINHAN ITM

     The Group sold 50.0 percent interest in its wholly-owned subsidiary,
Shinhan ITM, to BNP Paribas in October 2002. Subsequently, Shinhan ITM changed
its name to Shinhan BNP Paribas Investment Trust Management Co., Ltd., and
became an equity investee of the Group.

                                       F-19
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4.  RESTRICTED CASH

     The following table presents restricted cash at December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              --------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>        <C>
Reserve deposits with the BOK...............................  W382,839   W  750,063
Cash restricted for investment activities...................   184,340      504,126
Deposits with insurance companies...........................    87,117       79,743
Other.......................................................    23,536       31,426
                                                              --------   ----------
  Total restricted cash.....................................  W677,832   W1,365,358
                                                              ========   ==========
</Table>

     Reserve deposits with the BOK represent the amounts required under the Bank
of Korea Act for payment of certificate of deposits, other time deposits and
mutual installment deposits. Cash restricted for investment activities
represents amounts that the Group is contractually restricted for lending
purposes and is reserved solely for purposes of performing investment activities
for its customers. Deposits with insurance companies are contractually
restricted from being withdrawn prior to their maturities in 2003 and 2004.

5.  CALL LOANS AND SECURITIES PURCHASED UNDER RESALE AGREEMENTS

     Call loans and securities purchased under resale agreements, at their
respective carrying values, consist of the following at December 31:

<Table>
<Caption>
                                                                 2001        2002
                                                              ----------   --------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>          <C>
Call loans..................................................  W1,809,407   W575,533
Securities purchased under resale agreements................       6,631         --
                                                              ----------   --------
  Total call loans and securities purchased under resale
     agreements.............................................  W1,816,038   W575,533
                                                              ==========   ========
</Table>

     Interest income from call loans and securities purchased under resale
agreements, which have been included in other interest income, amounted to
51,722 million Won and 41,461 million Won during the years ended December 31,
2001 and 2002, respectively.

                                       F-20
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  TRADING ACTIVITIES

     Trading assets, at fair value, consist of the following at December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              --------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>        <C>
Debt securities
  Korean Treasury and government agencies...................  W240,893   W  346,199
  Corporations..............................................   166,185      179,538
  Financial institutions....................................   299,154      204,341
Equity securities...........................................   151,315      195,581
Derivative instruments
  Foreign exchange derivatives..............................    24,534       68,712
  Interest rate derivatives.................................    70,941       55,162
  Credit derivatives........................................       580           --
  Equity derivatives........................................     2,186       15,398
                                                              --------   ----------
     Total trading assets...................................  W955,788   W1,064,931
                                                              ========   ==========
</Table>

     Trading liabilities, at fair value, consist of the following derivative
financial instruments at December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Derivative instruments
  Foreign exchange derivatives..............................  W 32,624    W 54,156
  Interest rate derivatives.................................    83,514      59,886
  Credit derivatives........................................       510          --
  Equity derivatives........................................     2,186      16,970
                                                              --------    --------
     Total trading liabilities..............................  W118,834    W131,012
                                                              ========    ========
</Table>

     The following represents trading profits (losses) for the years ended
December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   --------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Debt securities.............................................  W(33,443)   W 8,365
Equity securities...........................................    27,740     (4,401)
Derivative instruments......................................    12,769     84,063
                                                              --------    -------
     Net trading profits....................................  W  7,066    W88,027
                                                              ========    =======
</Table>

     For the years ended December 31, 2001 and 2002, net unrealized holding
losses on trading securities of 3,696 million Won and 18,888 million Won,
respectively, were included in net trading profits.

                                       F-21
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7.  SECURITIES

     The amortized costs and estimated fair values of the Group's
available-for-sale and held-to-maturity securities and the related unrealized
gains and losses at December 31 are as follow:

<Table>
<Caption>
                                                  2001                                                2002
                            -------------------------------------------------   -------------------------------------------------
                                           GROSS        GROSS                                  GROSS        GROSS
                            AMORTIZED    UNREALIZED   UNREALIZED                AMORTIZED    UNREALIZED   UNREALIZED
                               COST        GAINS        LOSSES     FAIR VALUE      COST        GAINS        LOSSES     FAIR VALUE
                            ----------   ----------   ----------   ----------   ----------   ----------   ----------   ----------
                                                                    (IN MILLIONS OF WON)
<S>                         <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
AVAILABLE-FOR-SALE
  SECURITIES
Debt securities
  Korean Treasury and
    governmental
    agencies..............  W2,180,137    W 67,667     W 8,482     W2,239,322   W2,181,307    W 49,596     W 1,360     W2,229,543
  Corporations............   1,369,378      59,117       7,929      1,420,566    1,234,389      27,229      31,038      1,230,580
  Financial
    institutions..........   1,802,237      35,010       6,579      1,830,668    2,077,089      31,586       6,093      2,102,582
  Foreign governments.....      11,075       4,252          --         15,327        5,412       2,228          --          7,640
  Mortgage-backed and
    asset-backed
    securities............     344,226       4,016         369        347,873      678,953       6,764         373        685,344
Marketable equity
  securities..............   1,167,964      67,526       1,938      1,233,552    2,469,456      21,082       9,519      2,481,019
                            ----------    --------     -------     ----------   ----------    --------     -------     ----------
    Total.................   6,875,017     237,588      25,297      7,087,308    8,646,606     138,485      48,383      8,736,708
                            ==========    ========     =======     ==========   ==========    ========     =======     ==========
HELD-TO-MATURITY
  SECURITIES
Debt securities
  Korean Treasury and
    governmental
    agencies..............   3,931,990     131,617       8,466      4,055,141    3,131,624     121,455         270      3,252,809
  Corporations............     645,609      13,476       1,075        658,010      439,270      15,360         382        454,248
  Financial
    institutions..........   1,087,942      14,680         350      1,102,272      563,246       8,476          29        571,693
  Mortgage-backed and
    asset-backed
    securities............     372,251       4,249          51        376,449      273,537       5,573          --        279,110
                            ----------    --------     -------     ----------   ----------    --------     -------     ----------
    Total.................  W6,037,792    W164,022     W 9,942     W6,191,872   W4,407,677    W150,864     W   681     W4,557,860
                            ==========    ========     =======     ==========   ==========    ========     =======     ==========
</Table>

     The BOK is the central bank that establishes monetary policies for Korea.
The Korea Development Bank ("KDB") is owned and controlled by the Korean
government. Of the total amounts listed above in financial institutions category
at December 31, 2001 and 2002, the fair value of available-for-sale debt
securities includes 1,348,156 million Won and 1,304,866 million Won,
respectively, that were issued by BOK and KDB. Of the total amounts listed above
in financial institutions category at December 31, 2001 and 2002, the amortized
cost of held-to-maturity debt securities includes 422,482 million Won and
210,853 million Won, respectively, that were related to BOK and KDB.

     The Group has recognized impairment losses on available-for-sale and
held-to-maturity securities, where decreases in value were deemed to be
other-than-temporary during the years ended December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Available-for-sale securities...............................   W18,377     W41,427
Held-to-maturity securities.................................       129       1,140
                                                               -------     -------
     Total other-than-temporary impairment losses...........   W18,506     W42,567
                                                               =======     =======
</Table>

     Any deterioration in Korean economic conditions, or in specific situations
of the issuers of the securities, could adversely affect the fair value of
securities held by the Group.

                                       F-22
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Interest and dividends on securities are comprised of the following for the
years ended December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Interest income.............................................  W963,403    W747,332
Dividends...................................................     1,524       1,779
                                                              --------    --------
     Total interest and dividend income.....................  W964,927    W749,111
                                                              ========    ========
</Table>

     For the years ended December 31, 2001 and 2002, proceeds from sales of
available-for-sale securities amounted to 6,627,718 million Won and 10,554,089
million Won, respectively. Gross realized gains amounted to 174,056 million Won
and 268,958 million Won for the years ended December 31, 2001 and 2002,
respectively. Gross realized losses amounted to 58,271 million Won and 83,044
million Won for the years ended December 31, 2001 and 2002, respectively.

     The amortized cost and estimated fair value of the Group's
available-for-sale and held-to-maturity debt securities at December 31, 2002 by
contractual maturity are shown in the table below. Expected maturities may
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.

<Table>
<Caption>
                                     AVAILABLE-FOR-SALE         HELD-TO-MATURITY
                                       DEBT SECURITIES           DEBT SECURITIES
                                   -----------------------   -----------------------
                                   AMORTIZED                 AMORTIZED
                                      COST      FAIR VALUE      COST      FAIR VALUE
                                   ----------   ----------   ----------   ----------
                                                 (IN MILLIONS OF WON)
<S>                                <C>          <C>          <C>          <C>
Within 1 year....................  W2,316,058   W2,347,884   W1,887,797   W1,936,148
Over 1 year through 5 years......   3,617,815    3,656,558    1,910,408    1,979,049
Over 5 years through 10 years....     239,670      247,538      518,807      546,497
Over 10 years....................       3,607        3,709          332          475
Securities not due at a
  single maturity date...........          --           --       90,333       95,691
                                   ----------   ----------   ----------   ----------
     Total.......................  W6,177,150   W6,255,689   W4,407,677   W4,557,860
                                   ==========   ==========   ==========   ==========
</Table>

                                       F-23
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8.  LOANS

     The composition of the loan portfolio at December 31 is as follows:

<Table>
<Caption>
                                                              2001          2002
                                                           -----------   -----------
                                                             (IN MILLIONS OF WON)
<S>                                                        <C>           <C>
Corporate
  Commercial and industrial..............................  W13,458,369   W15,800,896
  Other commercial.......................................    6,748,082     9,351,818
  Lease financing........................................      598,311       635,871
Consumer
  Mortgage and home equity...............................    7,252,472    11,539,104
  Credit cards...........................................    2,070,199     2,762,961
  Other consumer.........................................    3,537,429     4,961,738
                                                           -----------   -----------
     Total loans, gross..................................   33,664,862    45,052,388
     Deferred loan origination costs.....................       52,590        82,607
                                                           -----------   -----------
                                                            33,717,452    45,134,995
     Less: Allowance for loan losses.....................      720,318       995,725
                                                           -----------   -----------
     Total loans, net....................................  W32,997,134   W44,139,270
                                                           ===========   ===========
</Table>

     During 2001 and 2002, the Group received convertible debt securities having
a fair market value of 66,746 million Won and 1,356 million Won, respectively,
and marketable equity securities having a fair market value of 74,377 million
Won and 24,510 million Won, respectively, through the restructuring of 23 loans
in 2001 and 31 loans in 2002, having an aggregate book value of 228,684 million
Won in 2001 and 114,156 million Won in 2002. The Group recognized aggregate
charge-offs of 87,561 million Won and 88,290 million Won related to these
transactions during the years ended December 31, 2001 and 2002, respectively.

     Impaired loans are those on which the Group believes it is probable that it
will not be able to collect all amounts due according to the contractual terms
of the loan. The following table sets forth information about the Group's
impaired loans at December 31:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Impaired loans with an allowance...........................  W1,010,118   W1,131,412
Impaired loans without an allowance........................     481,422      131,498
                                                             ----------   ----------
  Total impaired loans.....................................   1,491,540    1,262,910
                                                             ==========   ==========
Allowance for impaired loans...............................  W  384,569   W  479,693
Average balance of impaired loans during the year..........  W1,924,001   W1,310,670
Interest income recognized on impaired loans...............  W   66,659   W   41,517
</Table>

     Included in the above table are smaller balance commercial loans managed on
a portfolio basis which have been collectively identified as impaired amounting
to 150,788 million Won and 176,508 million Won at December 31, 2001 and 2002,
respectively.

     As discussed in Note 1, adverse economic conditions in the Korean economy
may continue to have an adverse effect on the Groups' debtors. The Group owns
investment securities of and has loans outstanding to a number of Korean
companies that have experienced financial difficulties. The ultimate
collectibility of these

                                       F-24
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

amounts is subject to a number of factors, including the successful performance
of the debtors under various restructuring plans in place or in process of
negotiation and their ability to perform on loan and debt obligations given the
status of the Korean economy and the potential continuation for the adverse
trends or other unfavorable developments. Consequently, it is reasonably
possible that adjustments could be made to the reserves for impaired loans and
to the carrying amount of investments in the near term in amounts that may be
material to the Group's consolidated financial statements.

     The following table summarizes the changes in the allowance for loan losses
and the allowance for guarantees and acceptances for the years ended December
31:

<Table>
<Caption>
                                                      2001                                     2002
                                     --------------------------------------   ---------------------------------------
                                                   GUARANTEES                               GUARANTEES
                                                      AND                                      AND
                                       LOANS     ACCEPTANCES(1)     TOTAL       LOANS     ACCEPTANCES(1)     TOTAL
                                     ---------   --------------   ---------   ---------   --------------   ----------
                                                                   (IN MILLIONS OF WON)
<S>                                  <C>         <C>              <C>         <C>         <C>              <C>
Balance at beginning of the year...  W 827,947      W78,355       W 906,302   W 720,318      W71,671       W  791,989
Provision for loan losses..........    411,487                      411,487     236,219                       236,219
Provision for guarantees and
  acceptances......................                  (6,684)         (6,684)                   9,841            9,841
Allowance relating to
  Loans reacquired from Korea Asset
    Management Corporation subject
    to recourse....................     45,390           --          45,390      64,957           --           64,957
  Acquisition of Jeju Bank.........         --           --              --      20,413           --           20,413
  Acquisition of Good Morning
    Securities.....................         --           --              --      76,647           --           76,647
  Acquisition of Shinhan Capital...     63,613           --          63,613          --           --               --
  Acquisition of Shinhan ITM.......         18           --              18          --           --               --
  Acquisition of Shinhan
    Securities.....................     22,928           --          22,928          --           --               --
  Disposal of Shinhan ITM..........         --           --              --         (25)          --              (25)
                                     ---------      -------       ---------   ---------      -------       ----------
                                       131,949           --         131,949     161,992           --          161,992
    Charge-offs....................   (778,702)          --        (778,702)   (216,587)          --         (216,587)
    Recoveries.....................    127,637           --         127,637      93,783           --           93,783
                                     ---------      -------       ---------   ---------      -------       ----------
    Balance at end of the year.....  W 720,318      W71,671       W 791,989   W 995,725      W81,512       W1,077,237
                                     =========      =======       =========   =========      =======       ==========
</Table>

- ---------------

Note:

(1) The allowance for guarantees and acceptances is included in other
    liabilities.

     The Group originates direct financing leases on certain machinery,
computers, and various other equipment for customers in a variety of industries.
Income attributable to these leases is initially recorded as unearned income and
subsequently recognized as interest income, using the effective interest method,
over the term of the leases. The terms of the leases are generally from 1 to 12
years. The components of the net

                                       F-25
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investment in direct financing leases at December 31, which are included in the
respective loan balances, are as follow:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Gross lease payments receivable.............................  W 672,739   W 696,380
Estimated unguaranteed residual values......................     59,679      51,215
Unearned income.............................................   (134,107)   (111,724)
                                                              ---------   ---------
                                                              W 598,311   W 635,871
                                                              =========   =========
</Table>

     The scheduled maturities of net lease payments receivable at December 31
are as follow:

<Table>
<Caption>
                                                               (IN MILLIONS
                                                                 OF WON)
                                                               ------------
<S>                                                            <C>
YEAR ENDING
2003........................................................     W228,427
2004........................................................      167,302
2005........................................................      124,805
2006........................................................       75,323
Thereafter..................................................       40,014
                                                                 --------
  Total.....................................................     W635,871
                                                                 ========
</Table>

9.  PREMISES AND EQUIPMENT

     Premises and equipment at December 31 are as follow:

<Table>
<Caption>
                                                                2001         2002
                                                              ---------   ----------
                                                               (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Land........................................................  W 178,312   W  232,977
Buildings...................................................    266,742      441,828
Equipment and furniture.....................................    305,896      414,494
Capitalized software costs..................................     32,204       41,499
Leasehold improvements......................................     61,361       73,791
Construction in progress....................................         --          160
Operating lease assets......................................     29,780      110,702
                                                              ---------   ----------
  Total premises and equipment, gross.......................    874,295    1,315,451
  Less: Accumulated depreciation and amortization...........   (344,386)    (487,013)
                                                              ---------   ----------
     Total premises and equipment, net......................  W 529,909   W  828,438
                                                              =========   ==========
</Table>

     Depreciation expense on buildings, equipment and furniture, leasehold
improvements and operating lease assets amounted to 59,769 million Won and
81,531 million Won, and amortization expense on software costs amounted to 7,575
million Won and 9,765 million Won for the years ended December 31, 2001 and
2002, respectively. Accumulated depreciation on operating lease assets at
December 31, 2001 and 2002 were 977 million Won and 17,435 million Won,
respectively.

                                       F-26
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.  GOODWILL AND INTANGIBLE ASSETS

     The Group recorded goodwill and finite-lived intangible assets of 284,659
million Won and 78,136 million Won, respectively, in connection with the
acquisition of Good Morning Securities and merger between Good Morning
Securities and Shinhan Securities in 2002. The Group also recorded core deposit
intangible assets of 5,004 million Won in connection with the acquisition of
Jeju Bank in 2002.

     The change in goodwill for the year ended December 31, 2002 is as follows:

<Table>
<Caption>
                                                  GOOD MORNING
                                                    SHINHAN      SHINHAN   SHINHAN
                                                   SECURITIES    CAPITAL     ITM       TOTAL
                                                  ------------   -------   -------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                               <C>            <C>       <C>       <C>
BALANCE AT BEGINNING OF THE YEAR................   W      --     W1,616    W 2,432   W   4,048
Acquisition.....................................     284,659         --         --     284,659
Disposition.....................................          --         --     (2,432)     (2,432)
Impairment loss.................................    (137,002)        --         --    (137,002)
                                                   ---------     ------    -------   ---------
BALANCE AT END OF THE YEAR......................   W 147,657     W1,616    W    --   W 149,273
                                                   =========     ======    =======   =========
</Table>

     The uncertainties in the global and Korean economies have had a negative
impact on the Korean financial market. The sharp decline in the market trading
volume and the profitability margins on proprietary trading in the second half
of the year 2002 have significantly decreased Good Morning Shinhan Securities'
brokerage commission income and its trading profit, the main income streams of
its respective units. The Group promptly reassessed all key assumptions
underlying goodwill valuation, including those relating to short-term and
long-term growth rates, profitability margins, and projected market share. As a
result of the analysis, the Group determined that impairment charges of 115,450
million Won and 21,552 million Won were necessary related to goodwill recorded
in connection with the acquisition of Good Morning Shinhan Securities' brokerage
and capital market units because the fair value of each reporting unit was less
than the book value of the respective unit at year end. The impairment charge
was measured based on the difference between the implied fair value and the
carrying amount of the goodwill in each respective reporting unit.

     The intangible assets subject to amortization consist of the following at
December 31:

<Table>
<Caption>
                                              2001                                 2002
                               ----------------------------------   ----------------------------------
                                GROSS                      NET       GROSS                      NET
                               CARRYING   ACCUMULATED    CARRYING   CARRYING   ACCUMULATED    CARRYING
                                AMOUNT    AMORTIZATION    AMOUNT     AMOUNT    AMORTIZATION    AMOUNT
                               --------   ------------   --------   --------   ------------   --------
                                                        (IN MILLIONS OF WON)
<S>                            <C>        <C>            <C>        <C>        <C>            <C>
Core deposit.................    W --        W  --         W --     W 5,004      W   (443)    W 4,561
Brokerage customer
  relationship...............     970         (970)          --      68,327       (11,725)     56,602
KSFC deposit.................      --           --           --      10,779        (1,744)      9,035
                                 ----        -----         ----     -------      --------     -------
  Total intangible assets
     subject to
     amortization............    W970        W(970)        W --     W84,110      W(13,912)    W70,198
                                 ====        =====         ====     =======      ========     =======
</Table>

     Amortization expense on intangible assets was 970 million Won and 12,942
million Won during the years ended December 31, 2001 and 2002, respectively.
Estimated amortization expense for the years ended December 31, 2003, 2004,
2005, 2006, 2007, and thereafter is 30,602 million Won, 28,554 million Won,
6,029 million Won, 2,864 million Won, 523 million Won, and 1,626 million Won,
respectively. The Group did not have any goodwill prior to July 1, 2001.

                                       F-27
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  OTHER ASSETS

     Other assets consist of the following at December 31:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Accrued interest and dividends receivable..................  W  513,609   W  425,565
Receivables for foreign exchange spot contracts............     767,281      381,867
Accounts receivable........................................     254,604      205,266
Accrued income.............................................      82,134      129,790
Deferred tax assets........................................     205,691      257,677
Other investments..........................................     189,887      196,520
Prepaid expenses...........................................      18,025       27,188
Due from trust account.....................................     130,589           --
Others.....................................................      43,748       23,721
                                                             ----------   ----------
  Total other assets.......................................  W2,205,568   W1,647,594
                                                             ==========   ==========
</Table>

12. DEPOSITS

     Deposits are as follow at December 31:

<Table>
<Caption>
                                                                                    WEIGHTED-
                                                                                   AVERAGE RATE
                                                          2001          2002       PAID IN 2002
                                                       -----------   -----------   ------------
                                                         (IN MILLIONS OF WON)
<S>                                                    <C>           <C>           <C>
INTEREST-BEARING DEPOSITS
  Interest-bearing demand deposits...................  W   281,550   W   639,954       1.39%
  Savings deposits...................................    9,223,762    10,561,867       1.85%
  Certificate of deposit accounts....................    2,866,823     2,781,649       4.90%
  Other time deposits................................   17,167,486    20,119,228       4.91%
  Mutual installment deposits........................    1,496,089     1,783,361       6.07%
                                                       -----------   -----------
                                                        31,035,710    35,886,059       4.05%
                                                       -----------   -----------
NONINTEREST-BEARING DEPOSITS
  Demand accounts....................................    1,183,651     1,162,528         --
                                                       -----------   -----------
     Total deposits..................................  W32,219,361   W37,048,587       3.93%
                                                       ===========   ===========
</Table>

     Other time deposits include premium accounts for top customers, tax savings
accounts for high net worth customers and savings accounts for household
financing and foreign currency deposits.

     Mutual installment deposits enable customers to become eligible for
mortgage and other consumer loans as well as corporate loans while maintaining
an account with the Group.

                                       F-28
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The contractual maturities of certificate of deposits, other time deposits
and mutual installment deposits at December 31 are as follow:

<Table>
<Caption>
                                                               (IN MILLIONS OF
                                                                    WON)
                                                               ---------------
<S>                                                            <C>
YEAR ENDING
2003........................................................     W22,111,772
2004........................................................       1,218,311
2005........................................................         552,963
2006........................................................         441,953
2007........................................................         194,843
Thereafter..................................................         164,396
                                                                 -----------
  Total.....................................................     W24,684,238
                                                                 ===========
</Table>

     The KDIC provides deposit insurance up to a total of 50 million Won per
depositor in each bank pursuant to the Depositor Protection Act for deposits due
after January 1, 2001, regardless of the placement date of deposit.

13.  SHORT-TERM BORROWINGS

     Short-term borrowings consist of borrowed funds with original maturities of
less than one year at December 31:

<Table>
<Caption>
                                                          2001                     2002
                                                 ----------------------   ----------------------
                                                              WEIGHTED-                WEIGHTED-
                                                               AVERAGE                  AVERAGE
                                                              INTEREST                 INTEREST
                                                  BALANCE       RATE       BALANCE       RATE
                                                 ----------   ---------   ----------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                              <C>          <C>         <C>          <C>
Borrowings from the BOK........................  W1,403,499     2.93%     W  333,908     2.34%
Borrowings in foreign currencies...............   2,951,320     5.27%      4,067,622     2.49%
Borrowings from trust account..................     856,543     4.78%        375,212     4.40%
Call money.....................................     243,857     4.46%        150,508     3.96%
Other borrowings(1)............................     303,789     5.65%      2,067,346     5.66%
                                                 ----------               ----------
  Total short-term borrowings..................  W5,759,008               W6,994,596
                                                 ==========               ==========
</Table>

- ---------------

Note:

(1) The majority of other borrowings relate to borrowings from other financial
    institutions.

     Total interest expense on short-term borrowings amounted to 338,504 million
Won and 252,912 million Won, of which 48,202 million Won and 58,126 million Won,
respectively, related to call money, during 2001 and 2002, respectively.

                                       F-29
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14.  SECURED BORROWINGS

     A summary of the secured borrowings and relevant collateral at carrying
values at December 31 is as follows:

<Table>
<Caption>
                                                                      2001                                 2002
                                                       ----------------------------------   ----------------------------------
                                                                         COLLATERAL                           COLLATERAL
                                                        SECURED     ---------------------    SECURED     ---------------------
                                            MATURITY   BORROWINGS    LOANS     SECURITIES   BORROWINGS    LOANS     SECURITIES
                                            --------   ----------   --------   ----------   ----------   --------   ----------
                                                                                (IN MILLIONS OF WON)
<S>                                         <C>        <C>          <C>        <C>          <C>          <C>        <C>
Shinhan 1st Securitization Specialty
 L.L.C....................................  2003       W  142,100   W240,600   W       --   W  142,100   W240,600   W       --
 6.57%-15.00% senior collateralized
 bond obligation
Shinhan 2nd Securitization Specialty Co.,
 Ltd......................................  2003-          84,360    107,480          790       69,360     28,866        4,801
 6.54%-25.00% senior collateralized          2011
 bond obligation
Shinhan 3rd Securitization Specialty
 L.L.C....................................  2006               --         --           --      170,000    170,000           --
 7.00%-9.20% senior collateralized
 bond obligation
Shinhan 4th Securitization Specialty Co.,
 Ltd......................................  2008-              --         --           --       23,830     40,357          891
 10.00%-20.00% subordinated collateralized   2011
 bond obligation
Other securities sold under repurchase
 agreements...............................  2003-       3,861,902         --    4,105,913    4,300,609         --    4,643,759
 1.55%-15.60%                                2004
                                                       ----------   --------   ----------   ----------   --------   ----------
   Total secured borrowings...............             W4,088,362   W348,080   W4,106,703   W4,705,899   W479,823   W4,649,451
                                                       ==========   ========   ==========   ==========   ========   ==========
</Table>

15.  LONG-TERM DEBT

     The following table is a summary of long-term debt (net of unamortized
discounts) at December 31:

<Table>
<Caption>
                                               INTEREST
                                              RATES (%)    MATURITY       2001         2002
                                              ----------   ---------   ----------   ----------
                                                                        (IN MILLIONS OF WON)
<S>                                           <C>          <C>         <C>          <C>
SENIOR
WON-DENOMINATED
  Notes payable to the Small Business
     Corporation............................   4.40-5.50        2005   W  261,876   W  265,735
  Notes payable to the Industrial Bank of
     Korea..................................   4.50-5.38   2003-2017      153,153      135,259
  Notes payable to the Institute of
     Information Technology Assessment......   2.95-6.25   2003-2011      117,138      131,198
  Notes payable to other Korean government
     funds..................................   1.00-6.70   2003-2017      294,377      345,883
  Fixed and floating rate
     debentures(1)(2).......................  4.85-15.00   2003-2048    2,084,064    5,541,329
  Other notes payable.......................   5.75-6.25   2004-2006       25,783       50,000
                                                                       ----------   ----------
     Subtotal...............................                            2,936,391    6,469,404
FOREIGN-DENOMINATED
  Floating rate debentures(1)...............   2.38-4.00   2003-2005      349,679      469,415
  Other floating rate notes payable(1)......   0.41-1.49   2003-2009      193,896       77,269
                                                                       ----------   ----------
     Subtotal...............................                              543,575      546,684
     Total Senior debt......................                            3,479,966    7,016,088
                                                                       ----------   ----------
</Table>

                                       F-30
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                               INTEREST
                                              RATES (%)    MATURITY       2001         2002
                                              ----------   ---------   ----------   ----------
                                                                        (IN MILLIONS OF WON)
<S>                                           <C>          <C>         <C>          <C>
SUBORDINATED
WON-DENOMINATED
  Fixed rate debentures to insurance
     companies..............................   6.50-7.90   2007-2009      200,000      450,000
  Other fixed rate debentures(3)............  6.35-15.13   2003-2009    1,293,441    1,093,597
  Notes payable to insurance companies......  5.00-10.00   2007-2008       79,000       70,000
                                                                       ----------   ----------
     Subtotal...............................                            1,572,441    1,613,597
FOREIGN-DENOMINATED
  Floating rate debentures(1)...............        2.63%         --      150,000           --
                                                                       ----------   ----------
     Total subordinated debt................                            1,722,441    1,613,597
                                                                       ----------   ----------
       Long-term debt, gross................                            5,202,407    8,629,685
       Less: Unamortized discounts..........                             (325,960)    (395,033)
                                                                       ----------   ----------
       Long-term debt, net..................                           W4,876,447   W8,234,652
                                                                       ==========   ==========
</Table>

- ---------------

Notes:

(1) Interest rates on floating rate debt are those rates in effect at December
    31, 2002.

(2) Majority of these debentures are miscellaneous bank borrowings from
    individual lenders.

(3) Majority of these debentures are miscellaneous bank borrowings from
    corporate lenders and Korean governmental entities.

     Long-term debt is predominately denominated in Korean Won, US dollars, or
Japanese Yen with both fixed and floating interest rates. Floating rates are
generally determined periodically by formulas based on certain money market
rates tied to the six-month London Interbank Offered Rate (LIBOR) or the monthly
Public Fund Prime Rate published by the Korean government, and are reset on a
monthly, quarterly or semi-annual basis. The weighted-average interest rate for
long-term debt was 7.16 percent and 6.32 percent at December 31, 2001 and 2002,
respectively. Certain long-term debt agreements contain cross-default provisions
and accelerating clauses for early termination in the event of default.

                                       F-31
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

 DEBT MATURITY SCHEDULE

     The combined aggregate amount of all long-term debt by contractual
maturities at December 31 is as follows:

<Table>
<Caption>
                                                               (IN MILLIONS OF WON)
                                                               --------------------
<S>                                                            <C>
YEAR ENDING
2003........................................................        W3,379,812
2004........................................................         1,443,197
2005........................................................         1,318,551
2006........................................................           478,982
2007........................................................           749,754
Thereafter..................................................         1,259,389
                                                                    ----------
  Long-term debt, gross.....................................         8,629,685
  Less: Unamortized discount................................          (395,033)
                                                                    ----------
  Long-term debt, net.......................................        W8,234,652
                                                                    ==========
</Table>

16.  ACCRUED EXPENSES AND OTHER LIABILITIES

     Accrued expenses and other liabilities at December 31 are comprised of the
following:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Accrued interest and dividend payables.....................  W1,090,957   W1,079,269
Payables for foreign exchange spot contracts...............     768,475      381,360
Accrued severance benefits.................................     146,301      159,416
Accrued expenses...........................................      24,299       22,994
Accounts payable...........................................     413,258      230,760
Unearned income............................................      83,200       86,802
Income tax payable.........................................      10,825      164,782
Withholding value-added tax and other taxes................      43,886       75,432
Deferred tax liabilities...................................     122,956      119,898
Guarantee deposits received................................     118,904      155,524
Due to agencies............................................     188,704      200,442
Allowance for losses on guarantees and acceptances.........      71,671       81,512
Utility bill payments received on behalf of government.....     256,265      169,757
Others.....................................................     222,978      265,017
                                                             ----------   ----------
  Total accrued expenses and other liabilities.............  W3,562,679   W3,192,965
                                                             ==========   ==========
</Table>

                                       F-32
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17.  COMMISSIONS AND FEES

     Details of commissions and fees from nontrust management activities for the
years ended December 31 are as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Brokerage fees and commissions..............................  W 42,406    W170,160
Other fees and commissions:
  Credit card fees..........................................    93,904     122,038
  Commissions received on remittance........................    36,067      40,878
  Commissions received on import and export letters of
     credit.................................................    31,045      34,816
  Financial guarantee fees..................................    11,739      10,459
  Commissions received in foreign exchange activities.......    15,624      17,671
  Other fees................................................    39,072      77,873
                                                              --------    --------
     Total other fees and commissions.......................   227,451     303,735
                                                              --------    --------
       Total commissions and fees from nontrust
          management........................................  W269,857    W473,895
                                                              ========    ========
</Table>

18.  OTHER NONINTEREST INCOME AND OTHER NONINTEREST EXPENSES

     Components of other noninterest income for the years ended December 31 are
as follow:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Net foreign exchange gain...................................  W 81,043    W110,667
Gain on disposal of premises and equipment..................       113       1,013
Income on operating lease...................................     1,689      22,913
Rental income...............................................     6,981       8,077
Extinguished prescription of deposits.......................     5,187       5,106
Other.......................................................    28,055      55,342
                                                              --------    --------
  Total other noninterest income............................  W123,068    W203,118
                                                              ========    ========
</Table>

     Components of other noninterest expenses for the years ended December 31
are as follow:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Miscellaneous taxes.........................................  W 26,461    W 75,748
Credit card fees............................................    23,308      44,635
Loss on disposal of premises and equipment..................     4,587      11,487
Loss on disposal of other real estate.......................    38,777       5,556
Other fees and commissions..................................    84,813      81,525
Others......................................................    17,134      43,520
                                                              --------    --------
  Total other noninterest expenses..........................  W195,080    W262,471
                                                              ========    ========
</Table>

19.  EXTRAORDINARY GAIN

     On September 1, 2001, the Group acquired the remaining 85.72% of the
outstanding common shares of Shinhan Securities that the Group did not already
own. The exchange ratio was 0.3594 share of Shinhan
                                       F-33
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Securities common stock into one share of the Group's common stock based on the
relative stock price of the Group's common stock to the common stock of Shinhan
Securities. The exchange ratio was approved by the shareholders of the Group and
Shinhan Securities on August 9, 2001. The acquisition was accounted for using
the purchase method.

     The purchase price for the outstanding shares of Shinhan Securities was
approximately 95,088 million Won based on the fair value of our common stock at
June 29, 2001, the merger agreement and announcement date. The fair value of
85.72% of net assets acquired was 253,879 million Won. The excess of the fair
value of the net assets acquired over the purchase consideration resulted in a
negative goodwill of 158,791 million Won.

     The following table summarizes the 85.72% of the estimated fair values of
assets and liabilities of Shinhan Securities at the date of acquisition:

<Table>
<Caption>
                                                              (IN MILLIONS
                                                                OF WON)
                                                              ------------
<S>                                                           <C>
Cash and cash equivalents...................................    W 52,290
Deposits....................................................     153,970
Call loans..................................................       3,600
Trading assets..............................................     171,527
Securities..................................................      10,072
Loans, net of allowance for loan losses.....................      17,083
Other non-allocable assets(a)...............................      66,809
                                                                --------
     Total non-allocable assets.............................     475,351
                                                                --------
Premises and equipment......................................      47,824
Intangible assets:
  Brokerage customer relationship...........................      43,355
  Other.....................................................       3,801
                                                                --------
     Total assets...........................................    W570,331
                                                                ========
Due to depositors...........................................     166,797
Borrowings and debentures...................................     118,702
Other liabilities...........................................      30,953
                                                                --------
     Total liabilities......................................    W316,452
                                                                ========
Fair value of 85.72% of net assets..........................    W253,879
                                                                ========
</Table>

- ---------------

(a) Other non-allocable assets primarily include deferred tax assets, security
    deposits, and other current assets.

     Pursuant to SFAS No. 141, the Group recognized 63,811 million Won of
extraordinary gain for the year ended December 31, 2001, which is the excess
negative goodwill after allocation to premises and equipment, brokerage customer
relationship and other intangible assets.

                                       F-34
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20.  COMMON STOCK

 ISSUANCES OF COMMON STOCK

     As of December 31, 2002, the Group had 292,361,125 shares of common stock
issued and 262,487,063 shares of common stock outstanding, including 40,432,628
shares (13.8%) issued and 13,576,770 shares (4.64%) outstanding as global
depositary shares, which are listed on the Luxembourg Stock Exchange.

     The Group is authorized to issue bonds with stock purchase warrants up to
total par value of 500,000 million Won. At December 31, 2002, the Group had
bonds with stock purchase warrants outstanding of 972 million Won exercisable to
194,324 shares of the Group's common stock.

     The holders of bonds with stock purchase warrants exercised their rights to
purchase 13,876,572 and 16,933 shares of the Group's common stock in 2001 and
2002, respectively.

 TREASURY STOCK

     Korean Commercial Law requires companies involved in business combination
transactions to obtain the approval of the acquiring company's stockholders and
to provide an opportunity for dissenting stockholders to exercise appraisal
rights. Upon exercise of the appraisal rights, these companies would be required
to purchase stocks from those stockholders at a predetermined price.

     During the formation of the Group in 2001, the Bank, Shinhan Capital and
Shinhan Securities purchased 3,376,216 shares, 429 shares and 99,468 shares of
their respective common stock from dissenting stockholders. These shares were
subsequently exchanged to the Group's common stock and became the Group's
treasury stock. In addition, as part of the formation, the Group issued
38,958,609, 971,964 and 1,624,821 shares of common stock to exchange for all the
existing treasury stock of the Bank, Shinhan Capital and Shinhan Securities,
respectively.

     Prior to the formation of the Group, the Bank owned 4,800,000, 3,400,743
and 1,000,000 shares of Shinhan Capital, Shinhan Securities and Shinhan ITM,
respectively. Shinhan Securities also owned 3,400,000 shares of Shinhan ITM's
common stock. As part of the formation, these shares were also exchanged to the
Group's common stock, which subsequently became the treasury stock of the Group.

     Subsequent to the formation of the Group, on December 14, 2001, 11,693,767
shares of the Group's treasury stock were reissued at 13,288 Won per share to
BNP Paribas who owns 4.0 percent of the Group's outstanding common stock.

21.  REDEEMABLE PREFERRED STOCK

     Under the decision of Financial Supervisory Commission ("FSC") in
accordance with the Act Concerning the Structural Improvement of the Financial
Industry, the Bank took over certain assets, including loans classified as
normal or special mentioned, and assumed substantially all of the liabilities of
Donghwa Bank in 1998. On December 28, 1998, the Bank issued 58.5 million shares
of noncumulative, nonparticipating 1 percent redeemable preferred stock with a
par value of 5,000 Won to Korea Deposit Insurance Corporation ("KDIC") in
exchange for KDIC marketable, noncallable bonds having a face amount of 292,500
million Won. The issuance of the redeemable preferred stock and the purchase of
the bonds from KDIC were effected to improve its Bank of International
Settlements ("BIS") ratio after the purchase and assumption arrangement related
to Donghwa Bank.

     The KDIC bonds are guaranteed by the Korean government and were scheduled
to mature in March 2004. Interest on the bonds is paid quarterly and principal
is payable in full at maturity. The KDIC bonds bear interest of 1 percent per
annum, and the preferred stock is subject to a noncumulative dividend of 1
percent. The preferred stock is redeemable pursuant to a set redemption
schedule. Preferred stock that is

                                       F-35
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

not redeemed at the scheduled redemption date is subject to an increased
dividend rate equal to the current market rate of the KDIC bonds at such date.

     In August 2001, the Bank repurchased all of the preferred stock prior to
the formation of the Group. In connection with these redemptions, KDIC redeemed
all of the bonds issued to the Bank. As of December 31, 2001, there were no
remaining preferred stock or bonds outstanding. Interest income on the bonds was
netted against the dividends declared on the preferred stock, resulting in no
net effect on operations or retained earnings in 2001.

22.  RETAINED EARNINGS

     Retained earnings consist of the following at December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              --------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>        <C>
Appropriated retained earnings for legal reserve............  W     --   W   22,076
Unappropriated retained earnings............................   638,296    1,054,830
                                                              --------   ----------
  Total retained earnings...................................  W638,296   W1,076,906
                                                              ========   ==========
</Table>

     The Financial Holding Company Act requires the Group to appropriate as a
legal reserve an amount equal to a minimum of 10 percent of annual net income
until such reserve equals 100 percent of its paid-in capital. This reserve is
not available for payment of cash dividends, but may be transferred to capital
stock or used to reduce an accumulated deficit, if any, by an appropriate
resolution of the Group's board of directors.

     Pursuant to the Tax Preferential Control Law, the Group is required to
appropriate, as a reserve for business rationalization, amounts equal to the tax
reductions arising from tax exemptions and tax credits. This reserve is not
available for payment of cash dividends, but may be transferred to capital stock
or used to reduce an accumulated deficit, if any.

     Pursuant to the Korean tax laws, the Group is allowed to claim the amount
of retained earnings appropriated to reserves for overseas investment losses as
a deduction from taxable income for tax reporting purposes. These reserves are
not available for payment of dividends until used for the specified purpose or
reversed.

     At December 31, 2001 and 2002, the Group did not have any required reserves
for business rationalization and for overseas investment losses.

23.  REGULATORY REQUIREMENTS

     The Group and the Bank are subject to various regulatory capital
requirements administered by the FSC as well as the Basel Committee on Banking
Regulations and Supervisory Practices/BIS guidelines. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Group's consolidated financial statements.

     In conformity with the FSC regulation on financial holding companies, the
Group applied the net equity to requisite capital ratio calculated under FSC
guidelines to evaluate capital adequacy. All Korean financial holding companies
must meet the minimum requisite capital ratio of 100 percent, as regulated by
the FSC. Requisite capital as required by FSC represents the sum of the minimum
equity capital amount to meet the 8 percent minimum capital adequacy ratio
requirements for the Bank, 8 percent of the holding company's total assets
including off-balance assets and 8 percent of the direct subsidiaries' total
assets including off-balance assets.

                                       F-36
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The guidelines also require that the computation be based on the Group's
consolidated financial statements under accounting principles generally accepted
in Korea ("Korean GAAP") which vary in certain significant respects from US
GAAP.

     The Group's requisite capital adequacy ratio mandated by the FSC, is
presented in the table below at December 31:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON,
                                                             EXCEPT CAPITAL RATIOS)
<S>                                                          <C>          <C>
Equity Capital.............................................  W3,903,850   W4,842,795
Requisite Capital..........................................   2,904,023    3,698,754
Requisite Capital Ratio....................................      134.43%      130.93%
</Table>

     In conformity with the FSC and the Basel Committee on Banking Regulations
and Supervisory Practices/BIS guidelines, the Bank applies the BIS risk-adjusted
capital ratios to evaluate its capital adequacy. Banking organizations engaged
in international banking are required to maintain a minimum 8 percent total
risk-based capital ratio calculated by dividing total risk-adjusted capital by
total risk-weighted assets, including a Tier 1 capital ratio of at least 4
percent. In the event the Bank does not maintain a consolidated BIS ratio of 8
percent, it is subject to corrective actions recommended by the FSC based on the
actual financial position and capital ratio of the Bank.

     As required by the FSC guidelines, the following capital ratios are
calculated based on the Bank's consolidated financial statements under Korean
GAAP which vary in certain significant respects from US GAAP at December 31:

<Table>
<Caption>
                                                              2001          2002
                                                           -----------   -----------
                                                             (IN MILLIONS OF WON,
                                                            EXCEPT CAPITAL RATIOS)
<S>                                                        <C>           <C>
Tier 1 capital...........................................  W 2,955,932   W 2,749,354
Tier 2 capital...........................................    1,343,492     1,707,140
Less: Investment in nonconsolidated equity
  investees(1)...........................................           --       (48,911)
                                                           -----------   -----------
     Total risk-adjusted capital.........................  W 4,299,424   W 4,407,583
                                                           ===========   ===========
Risk-weighted assets
  On-balance sheet assets................................  W31,974,792   W37,035,716
  Off-balance sheet assets...............................    3,797,224     3,351,610
                                                           -----------   -----------
     Total risk-weighted assets..........................  W35,772,016   W40,387,326
                                                           ===========   ===========
Capital adequacy ratio...................................        12.02%        10.91%
  Tier 1 capital ratio...................................         8.26%         6.81%
  Tier 2 capital ratio...................................         3.76%         4.23%
</Table>

- ---------------

Note:

(1) Equity investees engaged in banking and financial activities in which the
    Bank owns more than 15 percent are deducted from total capital, not deducted
    directly from Tier 1 and Tier 2 pursuant to the guidelines of the FSC.

     Effective January 1, 2002, in addition to the existing capital ratio
calculations, all banks in Korea are required to report to the FSC an
alternative set of capital ratios with components based on credit and market

                                       F-37
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

risks. The Bank is subject to the same existing requirements to maintain minimum
adequacy ratios at December 31:

<Table>
<Caption>
                                                                        2002
                                                               ----------------------
                                                                (IN MILLIONS OF WON,
                                                               EXCEPT CAPITAL RATIOS)
<S>                                                            <C>
Tier 1 capital..............................................        W 2,749,354
Tier 2 capital..............................................          1,658,229
                                                                    -----------
  Total risk-adjusted capital...............................          4,407,583
                                                                    -----------
  Total risk-weighted assets................................        W40,358,227
                                                                    ===========
Capital adequacy ratio......................................              10.92%
  Tier 1 capital ratio......................................               6.81%
  Tier 2 capital ratio......................................               4.11%
</Table>

24.  INCOME TAXES

     Allocation of national and local income taxes between current and deferred
portions is as follows for the years ended December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
CURRENT TAX EXPENSE
  National..................................................  W168,238    W299,473
  Local.....................................................    16,824      29,947
                                                              --------    --------
     Total current tax expense..............................   185,062     329,420
                                                              --------    --------
DEFERRED TAX EXPENSE (BENEFIT)
  National..................................................    34,798      (8,276)
  Local.....................................................     3,480        (828)
                                                              --------    --------
     Total deferred tax expense (benefit)...................    38,278      (9,104)
                                                              --------    --------
     Total tax expense......................................  W223,340    W320,316
                                                              ========    ========
</Table>

     The preceding table does not reflect the tax effects of unrealized gains
and losses on available-for-sale securities. The tax effects of these items are
recorded directly as other comprehensive income within stockholder's equity.

                                       F-38
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A reconciliation of income tax expense at the Korean statutory income tax
rate to actual income tax expense for the years ended December 31 is as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON,
                                                                EXCEPT TAX RATES)
<S>                                                           <C>         <C>
Statutory tax rate..........................................      30.8%       29.7%
Income before income tax expense, minority interest,
  extraordinary items and cumulative effect of changes in
  accounting principle......................................  W654,921    W919,893
                                                              --------    --------
Prima facie tax calculated at the statutory tax rate........   201,716     273,208
Income not assessable for tax purposes......................    (3,313)     (5,134)
Expenses not deductible for tax purposes....................     6,793       6,086
Impairment loss on goodwill.................................        --      40,690
Adjustment for overseas tax rates...........................    (2,050)     (1,473)
Change in statutory tax rate................................     3,084          --
Increase in valuation allowance.............................    10,472       1,720
Other.......................................................     6,638       5,219
                                                              --------    --------
Income tax expense..........................................  W223,340    W320,316
                                                              ========    ========
</Table>

     The components of net deferred income tax assets ("DTA") and liabilities,
included in other assets and other liabilities, respectively, at December 31,
are as follow:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
DEFERRED INCOME TAX ASSETS
  Allowance for loan losses.................................  W  79,601   W  87,225
  Allowance for guarantees and acceptances..................     37,647      38,989
  Valuation of trading assets...............................        155      13,307
  Premises and equipment....................................     40,674      45,953
  Available-for-sale securities.............................     98,659      92,477
  Other assets..............................................      8,510       4,034
  Other temporary differences...............................      6,251       3,857
  Net operating losses carry forward........................     13,713      70,860
                                                              ---------   ---------
                                                                285,210     356,702
     Less: Valuation allowance..............................    (10,472)    (69,299)
                                                              ---------   ---------
     Deferred income tax assets.............................    274,738     287,403
                                                              ---------   ---------
</Table>

                                       F-39
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
DEFERRED INCOME TAX LIABILITIES
  Valuation of trading assets...............................    (19,887)     (2,375)
  Foreign exchange contracts and derivative instruments.....       (146)     (7,224)
  Allowance for loan losses.................................     (2,997)     (8,318)
  Accrued interest and dividend receivable..................    (98,338)    (65,144)
  Accrued interest and dividend payable.....................     (1,385)     (5,412)
  Other assets..............................................         (8)    (26,314)
  Other temporary differences...............................       (195)     (5,111)
                                                              ---------   ---------
     Deferred income tax liabilities........................   (122,956)   (119,898)
                                                              ---------   ---------
       Net deferred income tax assets, including OCI related
          DTA...............................................    151,782     167,505
       Less: OCI related DTA................................    (69,047)    (29,726)
                                                              ---------   ---------
       Net deferred income tax assets excluding, OCI related
          DTA...............................................  W  82,735   W 137,779
                                                              =========   =========
</Table>

     Management believes it is uncertain whether certain subsidiaries will
generate sufficient profits to offset their tax losses in 2001 and 2002.
Accordingly, a valuation allowance totaling 10,472 million Won and 69,299
million Won in 2001 and 2002, respectively, has been established for deferred
income tax assets related to net operating losses ("NOLs") that may not be
realized. At December 31, 2001 and 2002, the subsidiaries of the Group had tax
NOLs totaling 46,171 million Won and 238,581 million Won, respectively. These
losses expire in the period ranging from 2003 to 2005.

25.  EARNINGS PER SHARE

     Basic earnings per share represents income available to common stockholders
divided by the weighted-average number of common stocks outstanding during the
period. Diluted earnings per share reflects additional common stocks that would
have been outstanding if dilutive potential common stocks have been issued, as
well as any adjustment to income that would result from the assumed issuance.
Dilutive potential common stocks that may be issued by the Group relate solely
to outstanding stock options and bonds with stock purchase warrants, and are
determined using the treasury stock method. Effects of stock options and bonds
with stock purchase warrants are excluded from the computation if the effect
would be antidilutive.

                                       F-40
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table is a summary of the computation of earnings per share
for the years ended December 31:

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
                                                               (IN MILLIONS OF WON,
                                                              EXCEPT PER SHARE DATA)
<S>                                                           <C>          <C>
BASIC EPS
  Net income before extraordinary gain and cumulative effect
     of changes in accounting principle.....................   W432,440     W589,422
  Extraordinary gain........................................     63,811           --
  Cumulative effect of changes in accounting principle......       (196)          --
                                                               --------     --------
  Net income................................................    496,055      589,422
                                                               --------     --------
  Weighted-average number of common stocks outstanding
     (thousands)............................................    254,680      262,480
Net income per share
  Net income before extraordinary gain and cumulative effect
     of changes in accounting principle.....................      1,698        2,246
  Extraordinary gain........................................        251           --
  Cumulative effect of changes in accounting principle......         (1)          --
                                                               --------     --------
       Basic net income per share...........................   W  1,948     W  2,246
                                                               ========     ========
</Table>

                                       F-41
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
                                                               (IN MILLIONS OF WON,
                                                              EXCEPT PER SHARE DATA)
<S>                                                           <C>          <C>
DILUTED EPS
  Net income before extraordinary gain and cumulative effect
     of changes in accounting principle.....................   W432,440     W589,422
  Plus: Dividends on convertible preferred stock............      1,796           --
                                                               --------     --------
  Net income before extraordinary gain and cumulative effect
     of changes in accounting principle for purposes of
     computing diluted net income per share.................    434,236      589,422
  Extraordinary gain........................................     63,811           --
  Cumulative effect of changes in accounting principle......       (196)          --
                                                               --------     --------
  Net income for purposes of computing diluted net income
     per share..............................................   W497,851     W589,422
                                                               --------     --------
  Weighted-average number of common stock outstanding
     (thousands)............................................    254,680      262,480
  Dilutive effect of convertible preferred stock
     (thousands)............................................     37,504           --
  Dilutive effect of bond with warrants (thousands).........      7,031          288
  Dilutive effect of stock options (thousands)..............         --           44
                                                               --------     --------
  Weighted-average number of common stock outstanding,
     assuming dilution (thousands)..........................    299,215      262,812
                                                               --------     --------
Net income per share
  Net income before extraordinary gain and cumulative effect
     of changes in accounting principle.....................   W  1,451     W  2,243
  Extraordinary gain........................................        213           --
  Cumulative effect of changes in accounting principle......         (1)          --
                                                               --------     --------
     Diluted net income per share...........................   W  1,663     W  2,243
                                                               ========     ========
</Table>

26.  EMPLOYEE SEVERANCE PLAN

     Employees with one or more years of service are entitled to receive a
lump-sum payment upon termination of their employment with the Group, based on
their length of service and rates of pay at the time of termination ("severance
plan"). Under the Korean National Pension Fund Law, the Group was required to
pay a certain percentage of employee severance benefits to the National Pension
Fund prior to April 1999. The Group has no additional liability once the amount
has been contributed, thus the Group deducts contributions made to the National
Pension Fund from its accrued employee severance plan obligations. The
compensation cost of employees' severance benefit is recognized based on the
vested benefits to which the employees are entitled if they separate
immediately.

     Under limited circumstances, employees can withdraw their accumulated
unpaid severance amounts before their termination of employment ("interim
severance payment"). Such withdrawal was included in the amount of plan payments
for both years. Total interim severance payment made by the Group in 2001 and
2002 was 9,962 million Won and 17,961 million Won, respectively.

     The Group paid termination benefits of 8,235 million Won and 19,578 million
Won for the years ended December 31, 2001 and 2002, respectively.

                                       F-42
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Accrued employee severance plan obligations included in other liabilities
at December 31 are as follow:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
BALANCE AT BEGINNING OF THE YEAR............................  W161,392    W193,227
Severance benefit expense...................................    47,310      50,623
Balance from the acquisition of subsidiaries................     2,722      19,054
Plan payments...............................................   (18,197)    (37,539)
                                                              --------    --------
                                                               193,227     225,365
Less: Balance of payments remaining with National Pension
  Fund and Severance Insurance Deposit......................   (46,926)    (65,949)
                                                              --------    --------
BALANCE AT END OF THE YEAR..................................  W146,301    W159,416
                                                              ========    ========
</Table>

27.  EMPLOYEE STOCK OPTION PLANS

     The Group has various stock-based compensation plans to reward its
employees and key executives of the Group. The Group measures stock-based
compensation expense using the fair value based method of accounting.

     Compensation cost against income was 1,982 million Won and 7,715 million
Won in 2001 and 2002, respectively. The per share weighted fair value of the
stock options granted to employees and key executives of the Group and the Bank
were 7,364 Won and 3,222 Won for fiscal year 2001, respectively, and 10,443 Won
and 7,359 Won for fiscal year 2002, respectively. These amounts were estimated
on the date of the grant using the Black-Scholes option-pricing model. The
weighted-average assumptions used for grants made in 2001 and 2002 are as
follow:

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
<S>                                                           <C>          <C>
Risk-free interest rate.....................................        5.58%        6.33%
Expected lives..............................................  4.50 years   4.01 years
Expected volatility.........................................       69.82%       58.39%
Expected dividend rate......................................        5.81%        4.21%
</Table>

 SHINHAN FINANCIAL GROUP PLAN

     The Group has authorized 58,472,225 shares of options to be granted to
certain executives of the Group to purchase its common stock. On May 22, 2002,
the Group granted certain executives of the Group, the Bank, and Shinhan Capital
1,004,200 options at an exercise price of 18,910 Won per share, with a vesting
period of 2 years. For the options granted, the Group may issue common stock or
pay in cash the difference between the exercise and market price at the date of
exercise. Restrictions on the grants include continued employment for a
specified period and lapse after the second year of vesting. Upon vesting,
options may be exercised between 3 to 6 years from the grant date. Certain
performance goals need to be attained for the options to be exercisable.

 SHINHAN BANK PLAN

     The Bank has authorized 24,436,037 shares of options to be granted to
purchase its common stocks. On March 5, 2001, the Bank granted certain
executives 265,000 options at an exercise price of 13,900 Won per share, with a
vesting period of 2 years. For the granted options, the Bank may issue common
stock or pay in cash the difference between the exercise and the market price at
the date of exercise. Restrictions on the grants include continued employment
for a specified period and lapse after the second year of vesting. Upon

                                       F-43
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

vesting, options may be exercised between 4 to 6 years from the grant date.
Certain performance goals need to be attained for the vested options to be
exercisable. Subsequent to the formation of the Group, all outstanding shares of
the Bank's common stock were exchanged for the Group's common stock. The Bank's
common stock is no longer publicly traded.

     Change in options during the years ended December 31, is as follows:

<Table>
<Caption>
                                             SHINHAN FINANCIAL GROUP              SHINHAN BANK
                                           ----------------------------   ----------------------------
                                                       WEIGHTED-AVERAGE               WEIGHTED-AVERAGE
                                           NUMBER OF    EXERCISE PRICE     NUMBER      EXERCISE PRICE
                                            SHARES        PER SHARE       OF SHARES      PER SHARE
                                           ---------   ----------------   ---------   ----------------
                                                            (WON)                          (WON)
<S>                                        <C>         <C>                <C>         <C>
Outstanding at January 1, 2001...........         --       W    --         280,000        W11,700
Granted..................................         --            --         265,000         13,900
Forfeited................................         --            --         (15,906)        11,700
                                           ---------                       -------
Outstanding at December 31, 2001.........         --            --         529,094         12,802
                                           ---------                       -------
Granted..................................  1,004,200        18,910              --             --
Forfeited................................         --            --         (56,551)        13,770
                                           ---------                       -------
Outstanding at December 31, 2002.........  1,004,200       W18,910         472,543        W12,686
                                           =========                       =======
Exercisable at December 31, 2002.........         --                            --
</Table>

     Information pertaining to options outstanding at December 31, 2002 is as
follows:

<Table>
<Caption>
                                                       SHINHAN FINANCIAL GROUP
                          ----------------------------------------------------------------------------------
                               OPTIONS OUTSTANDING
                          ------------------------------                           OPTIONS EXERCISABLE
                                        WEIGHTED-AVERAGE                      ------------------------------
                            NUMBER         REMAINING       WEIGHTED-AVERAGE     NUMBER      WEIGHTED-AVERAGE
EXERCISE PRICE            OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
- --------------            -----------   ----------------   ----------------   -----------   ----------------
                                                                (WON)                            (WON)
<S>                       <C>           <C>                <C>                <C>           <C>
W18,910.................   1,004,200       3.39 years          W18,910            --              W --
</Table>

<Table>
<Caption>
                                                             SHINHAN BANK
                          ----------------------------------------------------------------------------------
                               OPTIONS OUTSTANDING
                          ------------------------------                           OPTIONS EXERCISABLE
                                        WEIGHTED-AVERAGE                      ------------------------------
                            NUMBER         REMAINING       WEIGHTED-AVERAGE     NUMBER      WEIGHTED-AVERAGE
EXERCISE PRICES           OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
- ---------------           -----------   ----------------   ----------------   -----------   ----------------
                                                                (WON)                            (WON)
<S>                       <C>           <C>                <C>                <C>           <C>
W11,700.................    260,764        1.74 years          W11,700             --             W --
W13,900.................    211,779        2.68 years           13,900             --               --
                            -------        ----------          -------           ----             ----
                            472,543        2.16 years          W12,686             --             W --
                            =======        ==========          =======           ====             ====
</Table>

28.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of a financial instrument is the current amount that would
be exchanged between willing parties, other than in a forced sale or
liquidation. Fair value is best determined based on quoted market prices.
However, in many instances, there are no quoted market prices for the Group's
various financial instruments. In cases where quoted market prices are not
available, the fair values are estimated using present value or other valuation
techniques.

     Those techniques are significantly affected by the assumptions used, which
include expected future cash flows and discount rates. Accordingly, the fair
value estimates may not be realized in an immediate settlement of the
instruments. Certain financial instruments and all nonfinancial instruments are
excluded from the scope

                                       F-44
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of SFAS No. 107, Disclosure about Fair Value of Financial Instruments.
Accordingly, the aggregate fair value amount of the items presented under SFAS
No. 107 may not necessarily represent the total underlying fair value of the
Group since the fair value of the excluded items are not obtained.

     The following methods and assumptions are used by the Group in estimating
fair value disclosures for its financial instruments:

     Assets and Liabilities for which fair value approximates carrying
value:  The carrying values of certain financial assets and liabilities are
reported at cost, including cash and cash equivalents, restricted cash, accrued
interest and dividends receivable, accrued interest payable, security deposits,
other asset except for nonmarketable equity investments and other liabilities.
The carrying values of these financial assets and liabilities are considered to
approximate their fair values due to their short-term nature and negligible
losses due to credit risks.

     Interest-bearing deposits in banks:  The carrying amounts of short-term
interest-bearing deposits approximate their fair value. Fair value of other
interest-bearing deposits is estimated using discounted cash flow analysis on
current rates for similar types of deposits.

     Trading assets/liabilities:  Fair values for trading assets, including
derivative financial instruments so classified are based on quoted market
prices, where available. If quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments except for certain
options and swaps for which pricing models are used.

     Securities:  Fair values for available-for-sale and held-to-maturity
securities are based on quoted market prices, or quoted market prices of
comparable instruments if the quoted market prices are not available.

     Nonmarketable equity investments:  Nonmarketable equity investments, which
are recorded in other assets, consist primarily of private equity investments.
The fair values of these investments are based on the latest obtainable net
asset value of the investees and adjusted for impairment losses.

     Loans:  Loans and advances are net of allowance for loan losses. The fair
value of fixed rate loans is estimated by discounting contractual cash flows
based on current rates at which similar loans would be made to borrowers for the
same maturities. The fair values of variable rate loans that reprice frequently
with no significant changes in credit risk are considered to approximate their
carrying values in the consolidated balance sheets.

     Deposits:  The carrying amounts of variable-rate interest and
noninterest-bearing deposits approximate their fair values at the balance sheet
date. Fair values for fixed rate interest-bearing deposits are estimated using
discounted cash flow analysis using interest rates currently offered for
deposits with similar maturities.

     Short-term borrowings:  The carrying amounts of call money, securities sold
under repurchase agreements and short-term borrowings approximate their fair
values due to their short-term nature and negligible losses due to credit risks.

     Long-term debt:  The fair values of the Group's long-term borrowings are
estimated based on quoted market prices, where available. For those notes where
quoted market prices are not obtainable, a discounted cash flow analysis is used
based on the Group's current incremental borrowing rates for similar types of
borrowing arrangements.

     Derivative financial instruments:  All derivatives are recognized on the
consolidated balance sheets at fair value based on quoted market prices, dealer
or counterparty quotes, where available. If quoted market prices are not
available, pricing or valuation models are applied to current market information
to estimate fair value.

                                       F-45
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The estimated fair values, and related carrying or notional amounts of the
Group's financial instruments at December 31, are as follow:

<Table>
<Caption>
                                                   2001                       2002
                                          -----------------------   ------------------------
                                           CARRYING                  CARRYING
                                            AMOUNT     FAIR VALUE     AMOUNT      FAIR VALUE
                                          ----------   ----------   -----------   ----------
                                                         (IN MILLIONS OF WON)
<S>                                       <C>          <C>          <C>           <C>
Financial assets
  Financial assets for which carrying
     value approximates fair value......  W3,653,433   W3,653,433   W 3,583,035   W3,583,035
  Interest-bearing deposits in banks....     254,735      254,735       124,764      124,764
  Trading assets........................     955,788      955,788     1,064,931    1,064,931
  Securities............................  13,125,100   13,279,180    13,144,385   13,294,568
  Loans.................................  32,997,134   32,929,652    44,139,270   44,720,990
  Nonmarketable equity investments
     included in other assets...........     189,887      193,330       196,520      203,352
Financial liabilities
  Financial liabilities for which
     carrying value approximates fair
     value..............................  W3,562,679   W3,562,679   W 3,192,965   W3,192,965
  Deposits..............................  32,219,361   32,807,271    37,048,587   37,494,205
  Trading liabilities...................     118,834      118,834       131,012      131,012
  Short-term borrowings.................   5,759,008    5,759,008     6,994,596    6,994,596
  Secured borrowings....................   4,088,362    4,079,437     4,705,899    4,696,447
  Long-term debt........................   4,876,447    5,060,236     8,234,652    8,472,994
</Table>

     The differences between the carrying amounts and the fair values of
guarantees, commercial letters of credit, standby letters of credit, and other
lending commitments are immaterial to the consolidated financial statements.

29.  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     On January 1, 2001, the Group adopted SFAS No. 133 for its derivative
instruments. For the years ended December 31, 2001 and 2002, the Group applied
hedge accounting exclusively to those interest rate swap transactions that
qualified for the short-cut method. Since the Group assumed no ineffectiveness
for those transactions, no ineffective portion was recognized in the
consolidated statements of income for both years presented. The adoption of SFAS
No. 133 on January 1, 2001 resulted in an after-tax reduction to net income of
196 million Won, relating principally to the recognition of the ineffective
portion of the fair value hedges in earnings, and an after-tax increase in other
comprehensive income of 242 million Won, relating principally to the termination
of the synthetic accounting treatment for the interest rate swaps qualified as
hedges prior to the adoption.

     In the normal course of business, the Group enters into derivatives and
foreign exchange contracts to help its customers manage their risk exposures.
The Group also uses derivative instruments for its own trading accounts and to
manage its asset and liability exposures to interest rate and foreign exchange
risks.

     The Group uses interest rate derivatives principally to manage exposures to
fluctuations in fair value due to interest rate risk. Pay-fixed receive-variable
interest rate swap contracts are used to convert fixed rate assets, principally
securities, into synthetic variable rate instruments. Receive-fixed pay-variable
interest rate swaps contracts are used to convert fixed rate funding sources,
principally debt, into synthetic variable rate funding instruments.
Cross-currency interest rate swaps are contracts that generally involve the
exchange of

                                       F-46
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

both interest and principal amounts in two different currencies to manage
exposures to fluctuations in fair value due to foreign exchange risks.
Cross-currency swaps are used by the Group to convert its assets and funding
from functional currency to local currency.

     Derivative instruments may expose the Group to market risk or credit risk
in excess of the amounts recorded on the balance sheets. Market risk arises due
to market price, interest rate and foreign exchange rate fluctuations that may
result in a decrease in the market value of a financial instrument and/or an
increase in its funding cost. Exposure to market risk is managed through
position limits and other controls and by entering into hedging transactions.
Credit risk is the possibility that losses may occur from counterparty's failure
to perform according to the terms of the contract, when the value of collateral
held, if any, is not adequate to cover such losses. Credit risk is controlled
through credit approvals, limits and monitoring procedures based on the same
credit policies used for on-balance-sheet instruments. Generally, collateral or
other security is not required. The amount of collateral obtained, if any, is
based on the nature of the financial instrument and management's credit
evaluation of each counterparty.

     The majority of the derivatives do not qualify for hedge accounting under
SFAS No. 133 and are reclassified from derivatives originally qualified as
hedging derivatives under pre-SFAS No. 133 standards to trading derivatives
after the adoption, except for those qualified under the short-cut method.
Management of the Group plans to implement hedge accounting to contracts entered
into in the future by meeting the hedge accounting criteria.

30.  COMMITMENTS AND CONTINGENCIES

 LEGAL PROCEEDINGS

     Various legal claims arise from time to time in the normal course of
business, which in the opinion of management, will have no material effect on
the Group's consolidated financial statements.

 LEASE COMMITMENTS

     At December 31, 2002, the Group is obliged under a number of noncancelable
operating leases for premises and equipment used primarily for banking purposes.
Total rental expense for the years ended December 31, 2001 and 2002 was 33,738
million Won and 38,375 million Won, respectively. Pursuant to the terms of
noncancelable lease agreements pertaining to premises and equipment, in effect
at December 31, 2002, future minimum rent commitment under various operating
leases is as follows:

<Table>
<Caption>
                                                               (IN MILLIONS OF WON)
                                                               --------------------
<S>                                                            <C>
YEAR ENDING
2003........................................................         W13,474
2004........................................................           8,650
2005........................................................           2,670
2006........................................................           1,153
2007........................................................             731
Thereafter..................................................             518
                                                                     -------
                                                                     W27,196
                                                                     =======
</Table>

     In lieu of rent, certain lease agreements require the Group to advance a
noninterest-bearing refundable deposit to the landlord for the Group's use
during the lease term. The amount of the advance is determined by the prevailing
market rate. The Group has recorded rental expense and interest income related
to these leases of 17,113 million Won and 19,440 million Won on deposit balances
of 361,162 million Won and

                                       F-47
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

451,072 million Won for the years ended December 31, 2001 and 2002,
respectively. Such amounts were calculated based on the fixed interest rate for
time deposits with similar maturities.

  CREDIT COMMITMENTS

     The following table summarizes the contractual amounts relating to unused
loan commitments at December 31:

<Table>
<Caption>
                                                                 2001          2002
                                                              -----------   -----------
                                                                (IN MILLIONS OF WON)
<S>                                                           <C>           <C>
Commitments to extend credit
  Commercial................................................  W19,686,300   W29,007,699
  Credit card lines.........................................    7,160,652     7,827,011
  Other consumer............................................    1,177,320     1,752,870
Commercial letters of credit................................    1,606,824     2,202,070
                                                              -----------   -----------
                                                              W29,631,096   W40,789,650
                                                              ===========   ===========
</Table>

     Commitments to extend credit represent unfunded portions of authorizations
to extend credit in the form of loans. The commitments expire on fixed dates and
a customer has to comply with predetermined conditions to draw funds under the
commitments. With respect to credit risk on commitments to extend credit, the
Group is potentially exposed to loss in an amount equal to the total unused
commitments. The majority of the Group's unfunded commitments are not guarantees
under FIN 45.

     Commercial letters of credit are undertakings by the Group on behalf of
customers authorizing third parties to draw drafts on the Group up to a
stipulated amount under specific terms and conditions. They are generally
short-term and collateralized by the underlying shipments of goods to which they
relate and therefore have significantly less risk.

  OBLIGATION UNDER GUARANTEES

     The Group provides a variety of guarantees to its customers to enhance
their credit standing and enable them to complete a variety of business
transactions. The majority of these commitments expire without being drawn upon.
As a result, total contractual amounts are not representative of the Group's
actual credit exposure. The table below summarizes all of the Group's guarantees
under FIN 45 at December 31, 2002.

<Table>
<Caption>
                                                                                                  MAXIMUM
                                                                                    AMOUNT OF    POTENTIAL
                                                                                   RECOURSE OR   AMOUNT OF
                                     EXPIRE WITHIN   EXPIRE AFTER   TOTAL AMOUNT   COLLATERAL      FUTURE
                                       ONE YEAR        ONE YEAR     OUTSTANDING       HELD        PAYMENTS
                                     -------------   ------------   ------------   -----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                  <C>             <C>            <C>            <C>           <C>
Standby letters of credit..........   W  223,750      W   18,064     W  241,814     W 56,602     W  241,814
Financial guarantees...............      423,699          99,107        522,806      113,422        522,806
Performance guarantees.............      128,425          52,571        180,996       47,524        180,996
Liquidity facilities to SPEs.......      410,523       1,456,208      1,866,731       13,998      1,866,731
Loans sold with recourse...........           --          77,983         77,983       50,708         77,983
Market value guarantees on trust
  funds............................      425,055       1,167,149      1,592,204           --      1,592,204
Other..............................        9,465              --          9,465        3,306          9,465
                                      ----------      ----------     ----------     --------     ----------
                                      W1,620,917      W2,871,082     W4,491,999     W285,560     W4,491,999
                                      ==========      ==========     ==========     ========     ==========
</Table>

                                       F-48
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Group issues standby letters of credit that represent irrevocable
obligations to pay third party beneficiaries when its customers fail to repay
loans or debt instruments, which are generally in foreign currencies.

     Financial guarantees are used in various transactions to enhance the credit
standing of the Group's customers. They represent irrevocable assurance, subject
to satisfaction of certain conditions, that the Group will make payment in the
event that the customers fail to fulfill their obligations to third parties.
Such financial obligations include a return of security deposits and the payment
of service fees.

     Performance guarantees are issued to guarantee customers' tender bids on
construction or similar projects or to guarantee completion of such projects in
accordance with contractual terms. They are also issued to support a customer's
obligation to supply specified products, commodities, maintenance or other
services to third parties.

     Liquidity facilities to SPEs represent irrevocable commitments to provide
contingent liquidity credit lines including commercial paper purchase agreements
to SPEs for which the Group serves as the administrator. The SPEs are
established by clients to have access to funding from the commercial paper
market or the corporate debt market by transferring assets to the SPEs. The
Group has commitments to provide liquidity to the SPEs in amounts up to
1,866,731 million Won at December 31, 2002. Although the Group does not sell
assets to these SPEs, it would be required to provide funding under the
liquidity credit lines in the event that the SPEs do not hold enough funds to
make scheduled payments on their outstanding senior debt securities. Under the
commercial paper purchase agreements, the Group is required to purchase
commercial paper issued by the SPEs when enough funding is not available in the
commercial paper market. The Group has limited credit exposure to these SPEs
because the risk of first loss is borne by the clients or other third parties,
or the SPEs are over-collateralized with the assets sold to them.

     Loans sold with recourse represent certain non-performing loans the Group
sold to Korea Asset Management Corporation ("KAMCO") prior to 1999. These are
accounted for as sales and therefore derecognized from the Group's balance sheet
since control over these loans has been surrendered to KAMCO. The sales
agreements contain a recourse obligation under which KAMCO can obligate the
Group to repurchase certain of the related loans if the related debtors fail to
perform in accordance with specific restructuring plans. The recourse obligation
has no expiration date. The Group estimates a recourse liability at the date of
sale which reflects an estimate of the loss that is probable of occurring at the
future date of repurchase and takes into consideration actual repurchases which
have occurred in subsequent periods, and repurchases which are expected to occur
based on an understanding of the current status of the underlying loans.

     A gain or loss was recognized at the date of sale in earnings representing
the difference between the settled purchase price received from KAMCO and the
carrying amount of the loan in respect of those loans where no recourse
liability existed, or for those that were not passed back before the remaining
outstanding balance was repaid by the borrower.

     For those loans where a recourse liability existed, a gain or loss was
still recognized as of the date of sale after reflecting this liability.

     Outstanding loans for which KAMCO has recourse amounted to 158,597 million
Won and 95,624 million Won at December 31, 2001 and 2002, respectively. At
December 31, 2001 and 2002, the Group has recorded in other liabilities 41,442
million Won and 25,165 million Won, respectively, representing its estimated
obligation to repurchase the outstanding loans with recourse.

     Market value guarantees on trust funds represent guarantee of principal or
fixed rate of return issued to trust fund investors. Several subsidiaries of the
Group manage funds on behalf of its customers through the operation of various
trust accounts in accordance with the Korean Trust Law and the Korean Trust
Business

                                       F-49
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Act. Trust assets and liabilities are excluded from the consolidated financial
statements of the Group, and thus are recorded in separate accounts from those
of the Group's business.

     At December 31, 2001 and 2002, the allowance for guarantees and acceptances
includes 21,088 million Won and 40,150 million Won, respectively, which are
related to standby and performance letters of credit and, financial guarantees.
And the allowance for guarantees and acceptances is reported in other
liabilities.

     In addition to the guarantees identified above, the Group has entered into
credit derivatives with unrelated third parties for yield enhancement purposes.
These credit derivatives expired in March 2002 and had a notional value of 100
million USD, which represented the maximum potential amount of future payments
on the contracts. No amount of recourse or collateral was held. At December 31,
2001, these derivatives were carried at fair value with 590 million Won in
trading assets and 510 million Won in trading liabilities.

  PLEDGED ASSETS

     The primary components of assets pledged as collateral for borrowings and
other purposes at December 31 are as follow:

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
                                                               (IN MILLIONS OF WON)
<S>                                                           <C>          <C>
Short-term and long-term deposits...........................  W   88,763   W   83,867
Trading securities..........................................      37,910       46,407
Available-for-sale securities...............................   2,130,660    3,533,863
Held-to-maturity securities.................................   2,863,266    2,388,457
Loans.......................................................     348,080      479,823
Real estate.................................................       1,189      104,706
Other assets................................................         408       36,762
                                                              ----------   ----------
                                                              W5,470,276   W6,673,885
                                                              ==========   ==========
</Table>

31.  CONCENTRATIONS OF GEOGRAPHIC AND CREDIT RISK

  GEOGRAPHIC RISK

     Loans to borrowers based in Korea represented 97 percent and 98 percent of
the Group's loan portfolio at December 31, 2001 and 2002, respectively.
Investments in debt and equity securities of Korean entities represented 99
percent and 98 percent of the Group's investment portfolio at December 31, 2001
and 2002, respectively.

  CREDIT RISK

     Concentrations of credit risk arise when a number of customers are engaged
in similar business activities, or activities in the same geographic region, or
have similar economic characteristics that would cause their ability to meet
their contractual obligations to be similarly affected by changes in economic
conditions. Note 6 and Note 7 discuss the types of securities in which the Group
invests. Note 8 discusses the type of loans in which the Group engages.

     The Group regularly monitors various segments of its credit risk portfolio
to assess potential concentration of risks and to obtain collateral when deemed
necessary. No entity was responsible for 10 percent or more of the Group's total
loans outstanding or total interest and dividend income at December 31, 2001 and
2002 and for the years then ended.

                                       F-50
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The table below indicates major products including both on-balance sheet
(principally loans) and off-balance sheet (principally commitments to extend
credit) exposures at December 31:

<Table>
<Caption>
                                         2001                                      2002
                        ---------------------------------------   ---------------------------------------
                          CREDIT      ON-BALANCE    OFF-BALANCE     CREDIT      ON-BALANCE    OFF-BALANCE
                         EXPOSURE        SHEET         SHEET       EXPOSURE        SHEET         SHEET
                        -----------   -----------   -----------   -----------   -----------   -----------
                                                      (IN MILLIONS OF WON)
<S>                     <C>           <C>           <C>           <C>           <C>           <C>
Commercial and
  industrial.........   W23,452,620   W13,458,369   W 9,994,251   W33,558,497   W15,800,896   W17,757,601
Other commercial.....    18,854,723     6,748,082    12,106,641    23,749,602     9,351,818    14,397,784
Lease financing......       598,311       598,311            --       635,871       635,871            --
Mortgage and home
  equity.............     7,284,432     7,252,472        31,960    11,764,699    11,539,104       225,595
Credit cards.........     9,230,851     2,070,199     7,160,652    10,589,972     2,762,961     7,827,011
Other consumer.......     4,682,789     3,537,429     1,145,360     6,489,013     4,961,738     1,527,275
                        -----------   -----------   -----------   -----------   -----------   -----------
                        W64,103,726   W33,664,862   W30,438,864   W86,787,654   W45,052,388   W41,735,266
                        ===========   ===========   ===========   ===========   ===========   ===========
</Table>

32.  RELATED PARTY TRANSACTIONS

     A number of banking transactions are entered into with related parties in
the normal course of business. These include trust and loans to executives,
directors and affiliated parties. These transactions are carried out on arm's
length terms and conditions and at market rates.

  TRUST

     Under the Trust Act and the Trust Business Act, the Bank serves as a
trustee to the trust accounts in a trust management capacity in the normal
course of business.

  LOANS TO EXECUTIVES, DIRECTORS AND AFFILIATED PARTIES

     The table below summarizes the changes in the amount of loans to executive
officers, directors, director nominees, their immediate families and companies
affiliated with the directors at December 31:

<Table>
<Caption>
                                                                   2002
                                                               ------------
                                                               (IN MILLIONS
                                                                 OF WON)
<S>                                                            <C>
Loans at beginning of the year..............................     W213,185
New loans...................................................        2,244
Repayments..................................................      (21,421)
                                                                 --------
Loans at end of the year....................................     W194,008
                                                                 ========
</Table>

                                       F-51
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The outstanding balances at December 31, and the related expense and income
for the years ended for related party transactions are as follow:

<Table>
<Caption>
                                                         2001                            2002
                                             -----------------------------   -----------------------------
                                                           EXECUTIVES,                     EXECUTIVES,
                                                          DIRECTORS AND                   DIRECTORS AND
                                              TRUST     AFFILIATED PARTIES    TRUST     AFFILIATED PARTIES
                                             --------   ------------------   --------   ------------------
                                                                 (IN MILLIONS OF WON)
<S>                                          <C>        <C>                  <C>        <C>
Loans......................................  W     --        W213,185        W     --        W194,008
Other assets...............................   195,497              --         127,381              --
Short-term borrowings......................   856,543              --         338,950              --
Other liabilities..........................       265              --             626              --
Other interest income......................    15,304              --           1,388              --
Trust management fees......................   129,850              --         120,268              --
Interest expense on short-term
  borrowings...............................    11,690              --           9,401              --
</Table>

33.  PRINCIPAL SUBSIDIARIES

<Table>
<Caption>
                                                                               PERCENTAGE OF
                                                                                 OWNERSHIP
                                                               COUNTRY OF      --------------
                                                              INCORPORATION    2001     2002
                                                              -------------    -----    -----
<S>                                                           <C>              <C>      <C>
Shinhan Bank................................................      Korea          100%     100%
Shinhan Capital Co., Ltd. ..................................      Korea          100%     100%
Shinhan System Co., Ltd. ...................................      Korea        99.99%     100%
Shinhan Finance Ltd. .......................................      China          100%     100%
Shinhan Card Co., Ltd. .....................................      Korea           --      100%
Shinhan Credit Information Co., Ltd. .......................      Korea           --      100%
e-Shinhan Inc. .............................................      Korea        73.67%   73.67%
Jeju Bank...................................................      Korea           --    62.42%
Goodmorning Shinhan Securities Co., Ltd. ...................      Korea           --    60.47%
SPEs
  Shinhan 1st Securitization Specialty, L.L.C.(1)...........      Korea            2%       2%
  Shinhan 2nd Securitization Specialty L.L.C.(1)............      Korea            2%       2%
  Shinhan 3rd Securitization Specialty, L.L.C.(2)...........      Korea           --        2%
  Shinhan 4th Securitization Specialty L.L.C.(2)............      Korea           --        2%
Shinhan Securities Co., Ltd.(3).............................      Korea          100%      --
Shinhan ITM Co., Ltd. ......................................      Korea          100%      --
</Table>

- ---------------

Notes:

(1) These loan securitization vehicles were established in 2001 and have been
    consolidated in the consolidated financial statements of the Group at
    December 31, 2001 and 2002 as the majority owner of each vehicle has only a
    nominal capital investment and we retain substantial risks and rewards
    related to the loans that we transferred to these entities.

(2) These loan securitization vehicles were established in 2002 and have been
    consolidated in the consolidated financial statements of the Group at
    December 31, 2002 as the majority owner of each

                                       F-52
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    vehicle has only a nominal capital investment and we retain substantial
    risks and rewards related to the loans that we transferred to these
    entities.

(3) Shinhan Securities was merged into Good Morning Shinhan Securities in 2002.

     All holdings are in the common stock of the respective subsidiaries.

34.  SEGMENT REPORTING

     For management reporting purposes, the Group's business segment results are
reported to management under K GAAP. The Group is organized into six major
business segments: retail banking, corporate banking, treasury and securities
investment, other banking services, securities brokerage services, and credit
card. The Group's reportable segments are based on the nature of the products
and services provided, the type or class of customers, and the Group's
management organization, and provide the basis on which the Group reports its
primary segment information:

     - Retail banking -- Activities within this segment include savings and
       demand deposits, consumer loans and mortgages of individual customers and
       sole proprietors who borrowed 1,000 million Won or less.

     - Corporate banking -- Activities within this segment include loans,
       overdrafts, other credit facilities, deposits in foreign currencies and
       other foreign currency activities. The corporate banking segment's assets
       and liabilities are mainly from transactions with customers including
       small and medium sized private companies, publicly traded enterprises and
       sole proprietors who borrowed more than 1,000 million Won.

     - Treasury and securities investment -- Activities within this segment
       include the Bank's internal asset and liability management, proprietary
       trading in securities and derivatives, and proprietary investment in
       security portfolios using the Bank's capital.

     - Other banking services -- Activities within this segment include impaired
       loan management, administration of the Bank's operation and operation of
       the foreign branches.

     - Securities brokerage services -- Activities within this segment include a
       full range of brokerage services, investment advice and financial
       planning to retail customers, and various investment banking services to
       corporate customers conducted through its subsidiary, Good Morning
       Shinhan Securities.

     - Credit card -- Activities within this segment include processing domestic
       as well as overseas credit and debit card operation. The credit card
       segment's assets and liabilities are mainly from transactions with
       individual or corporate cardholders and card merchants.

     Other operations of the Group comprise activities of holding company and
other subsidiaries, which include significant entities such as Jeju Bank, and
Shinhan Capital and other less significant entities, none of which constitutes a
separately reportable segment.

     Operating revenues and expenses and interest income and expense, related to
both third party and intersegment transactions, are included in determining the
operating earnings of each respective segment. The provision for income tax is
comprised of corporate income tax and resident tax surcharges. The income tax
expenses are allocated to the respective segment based upon performance.

     Transactions between the business segments are reflected on terms
established by management.

                                       F-53
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


     Information about reporting segments at and for the years ended December
31, is as follows:
<Table>
<Caption>
                                                                      2001
                         -----------------------------------------------------------------------------------------------
                                             SHINHAN BANK                        HOLDING COMPANY AND OTHER SUBSIDIARIES
                         -----------------------------------------------------   ---------------------------------------
                                                     TREASURY AND     OTHER      SECURITIES
                           RETAIL       CORPORATE     SECURITIES     BANKING     BROKERAGE
                           BANKING       BANKING      INVESTMENT     SERVICES     SERVICES    CREDIT CARD       OTHER
                         -----------   -----------   ------------   ----------   ----------   ------------   -----------
                                                              (IN MILLIONS OF WON)
<S>                      <C>           <C>           <C>            <C>          <C>          <C>            <C>
Net interest income....  W   611,506   W   390,068   W    74,282    W   73,461    W  5,434     W  223,416    W   41,269
Noninterest income.....      187,219       248,144       495,169       176,649     136,199            261       245,133
                         -----------   -----------   -----------    ----------    --------     ----------    ----------
    Total revenue......      798,725       638,212       569,451       250,110     141,633        223,677       286,402

Provision for loan
  losses...............       22,938       286,957       (17,895)      214,368       1,833         46,630        52,493
Provision for
  guarantees and
  acceptances..........          296           659                          (7)
Noninterest expense....      343,141       242,265       508,291       244,618     114,746         28,284        30,451
Depreciation and
  amortization.........       24,640         3,026           650        35,368       4,915            208        14,494
                         -----------   -----------   -----------    ----------    --------     ----------    ----------
    Net income (loss)
      before tax.......      407,710       105,305        78,405      (244,237)     20,139        148,555       188,964
Income tax expense
  (benefit)............      105,513        40,355        33,317       (76,334)      6,356         45,752       (10,139)
                         -----------   -----------   -----------    ----------    --------     ----------    ----------
    Net income
      (loss)...........      302,197        64,950        45,088      (167,903)     13,783        102,803       199,103
US GAAP adjustments....     (109,324)      275,188       (33,239)       16,668      58,573        (27,094)     (217,089)
Intersegment
  transactions.........      (63,918)       62,686        32,455         9,656         168              3       (68,699)
                         -----------   -----------   -----------    ----------    --------     ----------    ----------
    Consolidated net
      income (loss)....      128,955       402,824        44,304      (141,579)     72,524         75,712       (86,685)
                         -----------   -----------   -----------    ----------    --------     ----------    ----------
    Segments' total
      assets...........  W15,532,959   W13,775,095   W19,305,867    W2,645,333    W631,405     W2,096,790    W5,407,660
                         ===========   ===========   ===========    ==========    ========     ==========    ==========

<Caption>
                                                   2001
                         ---------------------------------------------------------

                          SUBTOTAL
                           BEFORE        US GAAP      INTERSEGMENT
                         ELIMINATION   ADJUSTMENTS   TRANSACTIONS(1)      TOTAL
                         -----------   -----------   ---------------   -----------
                                           (IN MILLIONS OF WON)
<S>                      <C>           <C>           <C>               <C>
Net interest income....  W 1,419,436   W   (76,341)    W   (87,617)    W 1,255,478
Noninterest income.....    1,488,774      (234,482)       (622,463)        631,829
                         -----------   -----------     -----------     -----------
    Total revenue......    2,908,210      (310,823)       (710,080)      1,887,307

Provision for loan
  losses...............      607,324      (275,950)         80,113         411,487
Provision for
  guarantees and
  acceptances..........          948        (7,632)                         (6,684)
Noninterest expense....    1,511,796       (69,740)       (747,261)        694,795
Depreciation and
  amortization.........       83,301       (12,941)         (2,046)         68,314
                         -----------   -----------     -----------     -----------
    Net income (loss)
      before tax.......      704,841        55,440         (40,886)        719,395
Income tax expense
  (benefit)............      144,820        91,757         (13,237)        223,340
                         -----------   -----------     -----------     -----------
    Net income
      (loss)...........      560,021       (36,317)        (27,649)        496,055
US GAAP adjustments....      (36,317)
Intersegment
  transactions.........      (27,649)
                         -----------   -----------     -----------     -----------
    Consolidated net
      income (loss)....      496,055                                       496,055
                         -----------   -----------     -----------     -----------
    Segments' total
      assets...........  W59,395,109   W(3,021,009)    W(1,272,548)    W55,101,552
                         ===========   ===========     ===========     ===========
</Table>

- ---------------

Note:

(1) Includes eliminations for consolidation, intersegment transactions and
    certain differences in classification under management reporting system.

                                       F-54
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<Table>
<Caption>
                                                                     2002
                       ------------------------------------------------------------------------------------------------
                                           SHINHAN BANK                         HOLDING COMPANY AND OTHER SUBSIDIARIES
                       -----------------------------------------------------   ----------------------------------------
                                                   TREASURY AND     OTHER      SECURITIES
                         RETAIL       CORPORATE     SECURITIES     BANKING      BROKERAGE
                         BANKING       BANKING      INVESTMENT     SERVICES     SERVICES     CREDIT CARD       OTHER
                       -----------   -----------   ------------   ----------   -----------   ------------   -----------
                                                             (IN MILLIONS OF WON)
<S>                    <C>           <C>           <C>            <C>          <C>           <C>            <C>
Net interest
  income.............  W   717,988   W   366,275   W    53,761    W  178,751   W   22,192     W  290,685    W  107,736
Noninterest income...      205,415       274,594       683,418       168,857      559,424            253       718,694
                       -----------   -----------   -----------    ----------   ----------     ----------    ----------
    Total revenue....      923,403       640,869       737,179       347,608      581,616        290,938       826,430

Provision for loan
  losses.............       46,387        23,288       (20,379)      129,105       (5,679)        63,273        20,728
Provision for
  guarantees and
  acceptances........         (523)       (8,351)                       (544)
Noninterest
  expense............      426,662       271,931       654,408       378,677      535,120         69,471       119,448
Depreciation and
  amortization.......       28,502         2,979           686        30,635       17,191                       33,944
                       -----------   -----------   -----------    ----------   ----------     ----------    ----------
    Net income (loss)
      before tax.....      422,375       351,022       102,464      (190,265)      34,984        158,194       652,310
Income tax expense
  (benefit)..........       92,761       104,457        44,590       (41,427)      11,288         47,040        11,461
                       -----------   -----------   -----------    ----------   ----------     ----------    ----------
    Net income
      (loss).........      329,614       246,565        57,874      (148,838)      23,696        111,154       640,849
US GAAP adjustments..     (112,999)      115,726       159,619         4,284     (144,824)       (77,302)     (612,723)
Intersegment
  transactions.......     (110,051)      (82,360)       40,381        61,696       (1,247)        59,147        29,161
                       -----------   -----------   -----------    ----------   ----------     ----------    ----------
    Consolidated net
      income
      (loss).........      106,564       279,931       257,874       (82,858)    (122,375)        92,999        57,287
                       -----------   -----------   -----------    ----------   ----------     ----------    ----------
  Segments' total
    assets...........  W21,255,161   W19,005,811   W14,300,455    W4,327,975   W1,570,244     W2,473,694    W8,572,749
                       ===========   ===========   ===========    ==========   ==========     ==========    ==========

<Caption>
                                                 2002
                       ---------------------------------------------------------

                        SUBTOTAL
                         BEFORE        US GAAP      INTERSEGMENT
                       ELIMINATION   ADJUSTMENTS   TRANSACTIONS(1)      TOTAL
                       -----------   -----------   ---------------   -----------
                                         (IN MILLIONS OF WON)
<S>                    <C>           <C>           <C>               <C>
Net interest
  income.............  W 1,737,388   W  (233,938)    W   (73,278)    W 1,430,172
Noninterest income...    2,610,655      (360,456)     (1,212,894)      1,037,305
                       -----------   -----------     -----------     -----------
    Total revenue....    4,348,043      (594,394)     (1,286,172)      2,467,477

Provision for loan
  losses.............      256,723         1,515         (22,019)        236,219
Provision for
  guarantees and
  acceptances........       (9,418)       19,259                           9,841
Noninterest
  expense............    2,455,717      (121,737)     (1,126,539)      1,207,441
Depreciation and
  amortization.......      113,937       132,222        (141,921)        104,238
                       -----------   -----------     -----------     -----------
    Net income (loss)
      before tax.....    1,531,084      (625,653)          4,307         909,738
Income tax expense
  (benefit)..........      270,170        42,566           7,580         320,316
                       -----------   -----------     -----------     -----------
    Net income
      (loss).........    1,260,914      (668,219)         (3,273)        589,422
US GAAP adjustments..     (668,219)
Intersegment
  transactions.......       (3,273)
                       -----------   -----------     -----------     -----------
    Consolidated net
      income
      (loss).........      589,422                                       589,422
                       -----------   -----------     -----------     -----------
  Segments' total
    assets...........  W71,506,089   W(4,624,869)    W(2,095,090)    W64,786,130
                       ===========   ===========     ===========     ===========
</Table>

- ---------------

Note:

(1) Includes eliminations for consolidation, intersegment transactions and
    certain differences in classification under management reporting system

                                       F-55
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Following is a reconciliation of the business segments' total assets to the
consolidated total assets at December 31.

<Table>
<Caption>
                                                                 2001          2002
                                                              -----------   -----------
                                                                (IN MILLIONS OF WON)
<S>                                                           <C>           <C>
Segments' total assets......................................  W59,395,109   W71,506,089
US GAAP adjustments.........................................   (3,021,009)   (4,624,869)
Intersegment transactions...................................   (1,272,548)   (2,095,090)
                                                              -----------   -----------
  Consolidated total assets.................................  W55,101,552   W64,786,130
                                                              ===========   ===========
</Table>

     Following is a reconciliation of the business segments' total revenue to
the consolidated total revenue for the years ended December 31.

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
                                                               (IN MILLIONS OF WON)
<S>                                                           <C>          <C>
Segments' total revenue.....................................  W2,908,210   W4,348,043
US GAAP adjustments.........................................    (310,823)    (594,394)
Intersegment transactions...................................    (710,080)  (1,286,172)
                                                              ----------   ----------
  Consolidated total revenue................................  W1,887,307   W2,467,477
                                                              ==========   ==========
</Table>

     The adjustments presented in the tables above represent consolidated total
assets and consolidated total revenue not specifically allocated to individual
business segments.

     Geographic segment disclosures have been excluded as assets and revenues
attributable to external customers in foreign countries are not significant.

35.  TRUST ACCOUNTS

     In accordance with the Trust Act and the Trust Business Act, the Group acts
as the trustee for the trust accounts of its customers. In a trust management
capacity, the Group is required to exercise due care in managing and preserving
the trust principal. Trust accounts are recorded separately from the Group's
other banking related accounts and not included in the consolidated financial
statements. The Group has both guaranteed and nonguaranteed trust accounts. For
the guaranteed trust accounts, the Group is required to guarantee a certain
percentage of return at maturity on the trust principal deposited by the
customers. Under such guarantee, the Group accrued a liability when the loss is
considered probable and reasonably estimable. For a further discussion on the
consolidation scope of the guaranteed trusts, see Note 36. For the nonguaranteed
trusts, the Group receives periodic trust management fees based on a certain
percentage of principal under management.

36.  VARIABLE INTEREST ENTITIES

     In January 2003, the FASB issued FIN 46 which addresses off-balance sheet
financing entities. Entities that would be assessed for consolidation under this
new rule are typically SPEs, although other non-SPE-type entities may also be
subject to the new rule. As discussed in Note 1, the Group transfers certain
loans to its SPEs and such SPEs are consolidated by the Group under the current
accounting guidance. At December 31, 2002, assets of consolidated SPEs were
approximately 553,984 million Won.

     In addition, the Group has significant involvement with other VIEs that it
will not likely consolidate because it is not considered the primary
beneficiary. These SPEs are structured by other third parties. In all cases, the
Group does not absorb the majority of the entities' losses nor does it receive a
majority of the entities' expected residual returns, or both. These entities
facilitate client transactions, and the Group provides

                                       F-56
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the entities with administration service and liquidity. The transactions with
the entities are conducted at arm's length, and individual credit decisions are
based upon the analysis of the specific SPE, taking into consideration of the
quality of the underlying assets. The Group records and reports these
transactions with the SPEs similar to any other third party transactions. For
example, liquidity facilities to the entities are included in the Group's
credit-related commitments described in more detail in Note 30. Total assets of
these entities at December 31, 2002 were approximately 5,800,181 million Won. At
December 31, 2002, the Group's maximum loss exposure associated with these
entities, which is the total variable interest, is approximately 1,866,731
million Won. As most of these liquidity facilities expire without being drawn,
the total variable interest of these facilities is not, in the Group's view,
representative of the Group's actual future funding requirement.

     In connection with the Group's guaranteed trusts as more fully discussed in
Note 35, it is likely that such VIEs will be consolidated because the Group is
deemed the primary beneficiary. These trusts are structured by the Group. In all
cases, the Group absorbs the majority of the entity's losses by providing a
guarantee of the principal amount invested. The assets held within guarantee
trust accounts total 1,538,027 million Won. The Group's maximum exposure to loss
related to such trusts amounted to 1,592,204 million Won, which is the total
variable interest in these structures.

37.  OTHER COMPREHENSIVE INCOME

     The components of other comprehensive income and related tax effects for
the years ended December 31 are as follow:

<Table>
<Caption>
                                                        FOREIGN       NET UNREALIZED      ACCUMULATED
                                                       CURRENCY          GAIN ON             OTHER
                                                      TRANSLATION   AVAILABLE-FOR-SALE   COMPREHENSIVE
                                                      ADJUSTMENTS       SECURITIES          INCOME
                                                      -----------   ------------------   -------------
                                                                    (IN MILLIONS OF WON)
<S>                                                   <C>           <C>                  <C>
BALANCE AT JANUARY 1, 2001..........................    W7,715           W122,076          W129,791
Foreign currency translation adjustment, net of tax
  effect of W2,737..................................     6,479                 --             6,479
Net change in unrealized gain on available-for-sale
  securities, net of tax effect of W11,476..........        --             27,164            27,164
                                                        ------           --------          --------
BALANCE AT DECEMBER 31, 2001........................    14,194            149,240           163,434
                                                        ------           --------          --------
Foreign currency translation adjustment, net of tax
  effect of W2,619..................................    (6,199)                --            (6,199)
Net change in unrealized gain on available-for-sale
  securities, net of tax effect of W36,702..........        --            (86,874)          (86,874)
                                                        ------           --------          --------
BALANCE AT DECEMBER 31, 2002........................    W7,995            W62,366           W70,361
                                                        ======           ========          ========
</Table>

38.  SUBSEQUENT EVENTS

     In the first quarter of 2003, accounting irregularities were discovered at
SK Global to which most commercial banks in Korea, including the Group, have
substantial exposure. These irregularities concealed the weak financial
condition of SK Global over a period of several years. In March 2003, the
principal creditor banks of SK Global acknowledged that SK Global is a troubled
company subject to formal workout procedures under the Corporate Restructuring
Promotion Act of Korea and agreed to postpone the maturity of all domestic
credits of SK Global until June 18, 2003.

     In June 2003, the domestic creditors of SK Global agreed to a workout
program under which the creditors participating in this program will buy out the
outstanding credits of the dissenting creditors by

                                       F-57
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

providing cash in the amount of approximately 30% of the outstanding loans. In
addition, in July 2003, the domestic creditors' committee and the steering
committee of the overseas creditors of SK Global agreed to a workout program
under which the domestic creditors will buy out the outstanding credits of the
dissenting foreign creditors by providing cash in the amount of 43% of the
outstanding loans as well as incentives which will be in the form of bonds with
warrants. The cash payment shall be repaid in four installments of 40% on
December 31, 2003, 30% on March 31, 2004, 20% on June 30, 2004 and 10% on
September 30, 2004. Depending on whether the approval rate of all the foreign
creditors is 95% or more, between 90 to 95% or between 80 to 90%, the amount of
the incentives will be 5%, 4% or 3% of the total outstanding credit as of March
11, 2003. The bonds with warrants, which can be exercised in 2005, will be due
in 2007, without any interest, and will be repaid in a one-time payment.

     The agreement, which has been endorsed by the steering committee of
overseas creditors, remains subject to each overseas creditor's approval. The
steering committee of overseas creditors was originally required to obtain the
approval from each overseas creditor and present a written statement of consent
to the domestic creditors by mid-august 2003. The domestic creditors have since
extended this deadline to September 17, 2003. At a shareholders' meeting held on
September 9, 2003, SK Global changed its legal name to SK Networks.

     Once finally approved by the overseas creditors, domestic creditors are
expected to finalize the detailed terms of the workout program, which will among
other things, require SK Corporation, the major shareholder of SK Global and the
creditors of SK Global participating in the workout program to convert
approximately W2.4 trillion in principal amount of total debt into equity
securities, consisting of common shares, redeemable preferred shares and
convertible bonds, of SK Global, after writing off substantially all of the pre-
existing equity securities. While the workout program may also call for
additional restructuring of survival debt, including extension of maturities and
reduction of interest rates, the detailed terms are expected to be finalized by
the end of 2003.

     On January 23, 2003, the Public Fund Oversight Committee (the "PFOC"), a
unit within Korea's Ministry of Finance and Economy, which determined the
preferred bidder in connection with KDIC's contemplated disposition of its
80.04% equity interest in Chohung Bank, chose the Group as the preferred bidder
to become the purchaser of KDIC's equity interest held by KDIC in Chohung Bank.

     On July 9, 2003, as a result of the bid negotiations with the PFOC, the
Group entered into a Stock Purchase Agreement ("Agreement") with KDIC to
purchase from KDIC 543,570,144 shares of Chohung Bank's common stock, which
constitute 80.04% of the issued and outstanding common stock of Chohung Bank,
Korea's oldest bank, providing both retail and commercial banking services. The
closing date of the acquisition, per the terms of the Agreement, will be no
later than September 30, 2003. The purchase price is approximately 2,446 billion
Won, comprised of the following:

     1.  Cash of 900 billion Won,

     2.  46,583,961 newly issued shares of the Group's redeemable preferred
stock ("RPS") with an aggregate estimated fair value of 777 billion Won,

     3.  44,720,603 newly issued shares of the Group's redeemable convertible
preferred stock ("RCPS") with an aggregate estimated fair value of 744 billion
Won,

     4.  Direct acquisition costs of 25 billion Won.

     The RPS will be issued in five series no later than the Closing Date,
redeemable over seven years after the issue date. If there is any RPS
outstanding on the last day of the redemption period ("RPS Final Redemption
Date"), the Group will be obligated to redeem all outstanding RPS to the extent
that distributable profits are available for such purchase. In the event that
the Group does not have sufficient

                                       F-58
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

distributable profits to redeem all outstanding RPS on the RPS Final Redemption
Date, the RPS will remain outstanding until sufficient distributable profits are
available. The Group may, at its option, elect to redeem all or part of the
outstanding RPS at any time during the redemption period. The holder of RPS will
not have any voting rights, unless dividends on the RPS are not distributed in
any given year, in which case each RPS will be given one voting right.

     The RCPS will be issued in three series no later than the Closing Date,
redeemable at any time after the fourth anniversary date of the issue date and
from time to time until the fifth anniversary date of the issue date. If there
is any RCPS outstanding on the last day of the redemption period ("RCPS Final
Redemption Date"), the Group is obligated to redeem the outstanding RCPS to the
extent that distributable profits are available for the purchase. In the event
that the Group does not have sufficient distributable profits to redeem all
outstanding RCPS on the RCPS Final Redemption Date, the RCPS will remain
outstanding until sufficient distributable profits are available. The Group may,
at its option, elect to redeem all or part of the any outstanding RCPS at any
time during the redemption period. KDIC may convert the RCPS into newly issued
common stock of the Group at a conversion ratio of 1:1, based on a scheduled
conversion after the first anniversary date of the issue date until the fourth
anniversary of the issue date. The holder of RCPS will not have any voting
rights, unless dividends on the RCPS are not distributed in any given year, in
which case each RCPS will be given one voting right.

     In addition, the Agreement stipulates that the Group will pay the KDIC
certain contingent consideration, the amount of which cannot be determined. The
first element of contingent consideration, referred to as the Asset Indemnity,
relates to reimbursement of 80.04% of future credit losses related to acquired
assets. The second element of contingent consideration, referred to as the
General Indemnity, relates to reimbursement of losses from certain
preacquisition contingencies and any breach of representations and warranties of
the Agreement. The third element of contingent consideration relates to a profit
earn-out.

     a.  A payment of 652 billion Won will be made to the KDIC on the second
anniversary of the Closing Date. This amount will be reduced by an amount equal
to 80.04% of certain future credit losses related to acquired corporate and
credit card loans, including loans sold with recourse to KAMCO, plus accrued
interest, occurring between December 31, 2002 and the end of the last quarter
before the second anniversary of the Closing Date. The amount of this payment is
dependent upon future events and is not reasonably estimable.

     b.  A payment of 167 billion Won will be paid to the KDIC on the second
anniversary of the Closing Date. This amount will be reduced by losses incurred
by the Group related to certain preacquisition contingencies occurring within
the period commencing on the Closing date and ending on the second anniversary
of the Closing Date, plus accrued interest. These losses include any settlement
of contingencies that existed but were unknown prior to the Closing Date, losses
from any breach of the representations and warranties of the Agreement, and
losses on certain loans sold with recourse not covered under the Asset
Indemnity. The amount of this payment is dependent upon future events and is not
reasonably estimable.

     c.  A profit earn-out amount equal to 20% of Chohung Bank's excess
consolidated net income for the years ended 2004, 2005, and 2006 in the
aggregate, determined under Korean GAAP, in excess of 1.8 trillion Won. In the
event that Chohung Bank's operation is merged into that of the Bank's, the net
income used for the calculation for the year in which the two entities are
merged would equal to the combined net income of the Bank and Chohung Bank for
the two years prior to the merger.

     In accordance with the Agreement, KDIC also has the right to override the
conversion schedule and convert all its RCPS in the event of a qualifying public
offering of the Group's common stock ("QPO") provided that in no event can KDIC
convert its RCPS within one year of the Closing Date. A QPO is defined as a
public offering of the Group's common stock that (i) is made to the public prior
to December 11, 2004 exclusively for cash, (ii) has an aggregate offer price in
excess of US$200 million, (iii) provides the Group

                                       F-59
<PAGE>
               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

with a public float in excess of US$1 billion immediately after the public
offering, and (iv) has more than 100 institutional investors or qualified
institutional buyers. In the event of a QPO, KDIC may convert all its RCPS into
the Group's common stock at a conversion ratio of 1:1. The Group agreed to pay
KDIC the difference between 18,086 Won per share and 118% of the market price of
its common stock at the date of a QPO conversion. Since it is not certain when,
if at all, a QPO event will ever occur, this guarantee represents a contingent
liability for the Group that cannot be determined and accrued for at the Closing
Date.

                                       F-60
<PAGE>

                            SHINHAN FINANCIAL GROUP
            UNAUDITED CONSOLIDATED SEMI-ANNUAL FINANCIAL STATEMENTS
                          AS OF JUNE 30, 2002 AND 2003
                    PREPARED IN ACCORDANCE WITH KOREAN GAAP

                                       F-61
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                      JUNE 30, 2003 AND DECEMBER 31, 2002
     (IN MILLIONS OF WON AND THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
                                  (UNAUDITED)

<Table>
<Caption>
                                                                     WON               U.S. DOLLARS (NOTE 2)
                                                          -------------------------   ------------------------
                                                              2003          2002         2003          2002
                                                          ------------   ----------   -----------   ----------
<S>                                                       <C>            <C>          <C>           <C>
ASSETS
Cash and due from bank (notes 4, 16, 17 and 18).........  W  3,888,635    2,847,134   $ 3,259,270    2,386,333
Securities (notes 5, 16 and 18).........................    16,816,079   15,454,214    14,094,442   12,952,991
Loans, net (notes 6 and 18).............................    49,667,238   45,244,361    41,628,730   37,921,684
Fixed assets, net (notes 7, 16 and 17)..................     1,057,352    1,093,844       886,223      916,809
Other assets, net (notes 8, 9 and 18)...................     3,272,312    2,128,042     2,742,697    1,783,624
                                                          ------------   ----------   -----------   ----------
    Total assets........................................  W 74,701,616   66,767,595   $62,611,362   55,961,441
                                                          ============   ==========   ===========   ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
  Deposits (notes 10 and 18)............................  W 42,467,454   38,722,333   $35,594,212   32,455,228
  Borrowings (notes 11 and 18)..........................    13,924,779   11,351,814    11,671,091    9,514,552
  Debentures, net (notes 12 and 18).....................     9,708,319    8,395,403     8,137,054    7,036,629
  Retirement and severance benefits, net (note 13)......       176,420      159,519       147,867      133,701
  Other liabilities (note 14 and 18)....................     4,511,229    4,177,159     3,781,099    3,501,100
                                                          ------------   ----------   -----------   ----------
    Total liabilities...................................    70,788,201   62,806,228    59,331,323   52,641,210
STOCKHOLDERS' EQUITY:
  Common stock of W5,000 par value......................     1,461,806    1,461,806     1,225,217    1,225,217
    Authorized -- 1,000,000,000 shares
    Issued -- 292,361,125 shares
  Consolidated capital surplus..........................     1,887,708    1,887,708     1,582,187    1,582,188
  Consolidated retained earnings........................       603,101      670,763       505,491      562,202
  Consolidated capital adjustments (notes 19 and 20)....      (372,622)    (379,797)     (312,314)    (318,328)
  Minority interest in consolidated subsidiaries........       333,422      320,887       279,458      268,952
                                                          ------------   ----------   -----------   ----------
    Total stockholders' equity..........................     3,913,415    3,961,367     3,280,039    3,320,231
Commitments and contingencies (note 29)
                                                          ------------   ----------   -----------   ----------
    Total liabilities and stockholders' equity..........  W 74,701,616   66,767,595   $62,611,362   55,961,441
                                                          ============   ==========   ===========   ==========
</Table>

          See accompanying notes to consolidated financial statements
                                       F-62
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF EARNINGS
          FOR THE QUARTER AND SIX-MONTHS ENDED JUNE 30, 2003 AND 2002
               (IN MILLIONS OF WON AND THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<Table>
<Caption>
                                                                    WON                          U.S. DOLLARS (NOTE 2)
                                               ----------------------------------------------   -----------------------
                                                   QUARTER ENDED          SIX-MONTHS ENDED       QUARTER     SIX-MONTHS
                                                      JUNE 30,                JUNE 30,            ENDED        ENDED
                                               ----------------------   ---------------------    JUNE 30,     JUNE 30,
                                                  2003        2002        2003        2002         2003         2003
                                               ----------   ---------   ---------   ---------   ----------   ----------
<S>                                            <C>          <C>         <C>         <C>         <C>          <C>
OPERATING REVENUE:
  Interest income (note 30):
    Interest on due from banks...............  W   15,344       9,788      32,494      23,912   $   12,861      27,235
    Interest on securities...................     233,912     242,148     485,085     482,580      196,054     406,575
    Interest on loans........................     722,594     660,762   1,400,580   1,229,211      605,644   1,173,900
    Other....................................       4,098       6,742       7,182      12,032        3,435       6,020
                                               ----------   ---------   ---------   ---------   ----------   ---------
                                                  975,948     919,440   1,925,341   1,747,735      817,994   1,613,730
  Fees and commission income.................     264,718     183,876     480,625     360,555      221,874     402,837
  Insurance income...........................         495          --         685          --          415         574
  Other operating income:
    Dividends on securities..................       1,826       3,589       4,534       4,660        1,530       3,800
    Realized gain from sale of trading
      securities.............................      33,102      16,826      53,905      46,442       27,744      45,181
    Unrealized gain on trading securities....      17,281       1,552      15,729       6,811       14,484      13,183
    Gain on foreign currency transactions....      26,070      93,281      79,873     122,084       21,851      66,946
    Gain on derivatives......................     144,972     363,469     405,963     484,263      121,509     340,259
    Other (note 21)..........................      13,773      12,753      34,543      29,575       11,544      28,952
                                               ----------   ---------   ---------   ---------   ----------   ---------
                                                  237,024     491,470     594,547     693,835      198,662     498,321
                                               ----------   ---------   ---------   ---------   ----------   ---------
                                                1,478,185   1,594,786   3,001,198   2,802,125    1,238,945   2,515,462
                                               ----------   ---------   ---------   ---------   ----------   ---------
OPERATING EXPENSES:
  Interest expense:
    Interest on deposits.....................     360,759     336,548     724,429     660,559      302,371     607,182
    Interest on borrowings...................     122,604     164,455     232,087     306,440      102,761     194,525
    Interest on debentures...................     124,472      82,982     245,089     154,637      104,326     205,422
    Other....................................       3,685       6,552       8,821      14,395        3,089       7,393
                                               ----------   ---------   ---------   ---------   ----------   ---------
                                                  611,520     590,537   1,210,426   1,136,031      512,547   1,014,522
  Fees and commission expense................      37,121      41,720      61,117      81,823       31,113      51,225
  Insurance expense..........................       1,596          --       2,654          --        1,338       2,224
  Other operating expenses:
    Realized loss from sale of trading
      securities.............................      17,391      14,634      43,062      20,806       14,576      36,093
    Unrealized loss on trading securities....       8,807      22,549      11,664      10,893        7,382       9,776
    Bad debt expense.........................     330,467      76,002     483,737     107,078      276,982     405,445
    Loss on derivatives......................     100,537     351,045     339,612     465,200       84,265     284,647
    Loss on foreign currency transactions....      37,133      63,867      73,005      75,661       31,123      61,189
    General and administrative expenses (note
      22)....................................     226,700     157,248     503,434     348,481      190,009     421,955
    Other (note 21)..........................      51,786      34,776      92,611      61,639       43,405      77,622
                                               ----------   ---------   ---------   ---------   ----------   ---------
                                                  772,821     720,121   1,547,125   1,089,758      647,742   1,296,727
                                               ----------   ---------   ---------   ---------   ----------   ---------
                                                1,423,058   1,352,378   2,821,322   2,307,612    1,192,740   2,364,698
                                               ----------   ---------   ---------   ---------   ----------   ---------
OPERATING INCOME.............................      55,127     242,408     179,876     494,513       46,205     150,764
                                               ----------   ---------   ---------   ---------   ----------   ---------
</Table>

                                       F-63
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF EARNINGS, CONTINUED
          FOR THE QUARTER AND SIX-MONTHS ENDED JUNE 30, 2003 AND 2002
 (IN MILLIONS OF WON AND THOUSANDS OF U.S. DOLLARS, EXCEPT EARNINGS PER SHARE)
                                  (UNAUDITED)

<Table>
<Caption>
                                                                    WON                          U.S. DOLLARS (NOTE 2)
                                               ----------------------------------------------   -----------------------
                                                   QUARTER ENDED          SIX-MONTHS ENDED       QUARTER     SIX-MONTHS
                                                      JUNE 30,                JUNE 30,            ENDED        ENDED
                                               ----------------------   ---------------------    JUNE 30,     JUNE 30,
                                                  2003        2002        2003        2002         2003         2003
                                               ----------   ---------   ---------   ---------   ----------   ----------
<S>                                            <C>          <C>         <C>         <C>         <C>          <C>
NON-OPERATING INCOME:
  Realized gain from sale of
    available-for-sale securities............      23,066      17,394      32,777      39,987       19,333      27,472
  Reversal of impairment loss on
    available-for-sale securities............       4,134       6,038       5,773       7,516        3,465       4,839
  Unrealized gain on available-for-sale
    securities...............................          --       8,324          --      22,561           --          --
  Other (note 23)............................      45,714      12,773      53,185      39,094       38,315      44,577
                                               ----------   ---------   ---------   ---------   ----------   ---------
                                                   72,914      44,529      91,735     109,158       61,113      76,888
NON-OPERATING EXPENSES:
  Realized loss from sale of
    available-for-sale securities............       7,284      67,455      20,287      72,306        6,105      17,004
  Realized loss from sale of investment
    securities accounted for by the equity
    method...................................         166          --         166          --          139         139
  Impairment loss on available-for-sale
    securities...............................       7,749      14,434      18,388      47,253        6,495      15,412
  Unrealized loss on available-for-sale
    securities...............................          --       3,422          --       2,108           --          --
  Unrealized loss on investment securities
    accounted for by the equity method.......         379         201         378         462          318         317
  Other (note 23)............................       9,245       7,798      26,469      20,987        7,748      22,185
                                               ----------   ---------   ---------   ---------   ----------   ---------
                                                   24,823      93,310      65,688     143,116       20,805      55,057
                                               ----------   ---------   ---------   ---------   ----------   ---------
Ordinary income..............................     103,218     193,627     205,923     460,555       86,513     172,595
Extraordinary gain...........................          --         458          --         443           --          --
                                               ----------   ---------   ---------   ---------   ----------   ---------
Earnings before income taxes.................     103,218     194,085     205,923     460,998       86,513     172,595
Income taxes (note 24).......................      36,203      58,260      91,316     134,742       30,344      76,537
                                               ----------   ---------   ---------   ---------   ----------   ---------
Net earnings before minority interest........      67,015     135,825     114,607     326,256       56,169      96,058
Net gain in minority interest................      21,045       2,389      12,221       2,389       17,639      10,243
                                               ----------   ---------   ---------   ---------   ----------   ---------
NET EARNINGS.................................  W   45,970     133,436     102,386     323,867   $   38,530      85,815
                                               ==========   =========   =========   =========   ==========   =========
Ordinary income per share in Won and U.S.
  dollars (note 25)..........................  W      175         390         507       1,233   $     0.15        0.42
                                               ==========   =========   =========   =========   ==========   =========
Net earnings per share in Won and U.S.
  dollars (note 25)..........................  W      175         390         508       1,234   $     0.15        0.43
                                               ==========   =========   =========   =========   ==========   =========
</Table>

          See accompanying notes to consolidated financial statements
                                       F-64
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE QUARTER AND SIX-MONTHS ENDED JUNE 30, 2003
               (IN MILLIONS OF WON AND THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<Table>
<Caption>
                                                                   WON              U.S. DOLLARS (NOTE 2)
                                                         -----------------------   -----------------------
                                                          QUARTER     SIX-MONTHS    QUARTER     SIX-MONTHS
                                                           ENDED        ENDED        ENDED        ENDED
                                                          JUNE 30,     JUNE 30,     JUNE 30,     JUNE 30,
                                                            2003         2003         2003         2003
                                                         ----------   ----------   ----------   ----------
<S>                                                      <C>          <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings.........................................  W   45,970     102,386    $   38,530      85,815
  Adjustments to reconcile net earnings to net cash
    provided by (used in) operating activities:
    Depreciation expense...............................      26,138      51,608        21,908      43,255
    Amortization expense...............................       5,801      11,461         4,862       9,606
    Bad debt expense...................................     330,467     483,737       276,982     405,445
    Provision of retirement and severance benefits.....       9,442      30,902         7,914      25,901
    Realized loss from sale of securities..............      24,841      63,515        20,820      53,236
    Unrealized loss on securities......................       9,186      12,042         7,700      10,093
    Impairment loss on securities......................       7,749      18,388         6,495      15,412
    Loss on foreign currency transactions..............      36,405      71,162        30,513      59,645
    Loss on derivatives................................      21,669     260,745        18,162     218,544
    Stock compensation expense.........................       5,366       4,047         4,498       3,392
    Net gain in minority interest......................      21,045      12,221        17,639      10,243
    Realized gain from sale of securities..............     (56,168)    (86,682)      (47,077)    (72,653)
    Unrealized gain on securities......................     (17,281)    (15,729)      (14,484)    (13,183)
    Reversal of impairment loss on securities..........      (4,134)     (5,773)       (3,465)     (4,839)
    Gain on foreign currency transactions..............     (25,901)    (77,723)      (21,709)    (65,144)
    Gain on derivatives................................     (52,696)   (313,688)      (44,167)   (262,918)
    Increase in securities.............................    (582,396)   (654,233)     (488,137)   (548,347)
    Increase in other assets...........................     (88,401)   (907,796)      (74,093)   (760,872)
    Increase (decrease) in other liabilities...........    (309,568)    420,241      (259,466)    352,227
    Retirement and severance benefits paid.............      (6,253)    (11,331)       (5,241)     (9,497)
    Decrease (increase) in National Pension Fund.......       1,543      (2,924)        1,293      (2,451)
    Decrease in deposit for severance benefit
      insurance........................................         183         350           153         293
    Other, net.........................................      (5,094)      6,377        (4,270)      5,345
                                                         ----------   ---------    ----------   ---------
      Net cash used in operating activities............    (602,087)   (526,697)     (504,640)   (441,452)
                                                         ----------   ---------    ----------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash provided by investing activities:
    Decrease in available-for-sale securities..........   4,168,021   6,994,923     3,493,438   5,862,814
    Decrease in held-to-maturity securities............     297,960     445,880       249,736     373,715
    Decrease in investment securities accounted for by
      the equity method................................       1,529       1,529         1,282       1,281
    Decrease in loans..................................     676,076     955,320       566,654     800,704
    Disposition of fixed assets........................      47,976      48,720        40,211      40,835
    Decrease in other assets...........................     122,322     227,361       102,525     190,425
                                                         ----------   ---------    ----------   ---------
                                                          5,313,884   8,673,733     4,453,846   7,269,774
</Table>

                                       F-65
<PAGE>

               SHINHAN FINANCIAL GROUP CO., LTD. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
               FOR THE QUARTER AND SIX-MONTHS ENDED JUNE 30, 2003
               (IN MILLIONS OF WON AND THOUSANDS OF U.S. DOLLARS)
                                  (UNAUDITED)

<Table>
<Caption>
                                                                WON                U.S. DOLLARS (NOTE 2)
                                                     -------------------------   -------------------------
                                                       QUARTER     SIX-MONTHS      QUARTER     SIX-MONTHS
                                                        ENDED         ENDED         ENDED         ENDED
                                                      JUNE 30,      JUNE 30,      JUNE 30,      JUNE 30,
                                                        2003          2003          2003          2003
                                                     -----------   -----------   -----------   -----------
<S>                                                  <C>           <C>           <C>           <C>
  Cash used in investing activities:
    Increase in available-for-sale securities......   (3,489,927)   (7,696,016)   (2,925,092)   (6,450,437)
    Increase in held-to-maturity securities........     (276,824)     (429,532)     (232,021)     (360,013)
    Increase in loans..............................   (3,405,130)   (5,762,222)   (2,854,019)   (4,829,622)
    Purchase of fixed assets.......................      (21,995)      (46,805)      (18,435)      (39,229)
    Increase in other assets.......................     (283,778)     (265,646)     (237,849)     (222,514)
    Decrease in other liabilities..................      (99,500)     (140,317)      (83,396)     (117,607)
                                                     -----------   -----------   -----------   -----------
                                                      (7,577,154)  (14,340,538)   (6,350,812)  (12,019,422)
                                                     -----------   -----------   -----------   -----------
      Net cash used in investing activities........   (2,263,270)   (5,666,805)   (1,896,966)   (4,749,648)
                                                     -----------   -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Cash provided by financing activities:
    Increase in deposits...........................    1,144,182     3,745,122       959,000     3,138,984
    Increase in borrowings.........................    6,145,497    15,773,530     5,150,865    13,220,627
    Increase in debentures.........................    1,958,357     3,493,077     1,641,402     2,927,731
    Increase in other liabilities..................      265,076       282,875       222,174       237,093
                                                     -----------   -----------   -----------   -----------
                                                       9,513,112    23,294,604     7,973,441    19,524,435
  Cash used in financing activities:
    Decrease in borrowings.........................   (5,515,635)  (13,197,903)   (4,622,945)  (11,061,858)
    Decrease in debentures.........................     (761,516)   (2,168,559)     (638,267)   (1,817,584)
    Issuance cost on debentures paid...............       (3,608)      (40,906)       (3,024)      (34,285)
    Decrease in other liabilities..................     (696,331)     (494,130)     (583,631)     (414,156)
    Dividends paid.................................     (127,549)     (158,078)     (106,906)     (132,494)
    Acquisition of treasury stock..................           --           (25)           --           (21)
                                                     -----------   -----------   -----------   -----------
                                                      (7,104,639)  (16,059,601)   (5,954,773)  (13,460,398)
                                                     -----------   -----------   -----------   -----------
      Net cash provided by financing activities....    2,408,473     7,235,003     2,018,668     6,064,037
                                                     -----------   -----------   -----------   -----------
Net increase (decrease) in cash and cash
  equivalents......................................     (456,884)    1,041,501      (382,938)      872,937
Cash and cash equivalents, beginning of period.....    4,345,519     2,847,134     3,642,208     2,386,333
                                                     -----------   -----------   -----------   -----------
Cash and cash equivalents, end of period...........  W 3,888,635     3,888,635   $ 3,259,270     3,259,270
                                                     ===========   ===========   ===========   ===========
</Table>

          See accompanying notes to consolidated financial statements
                                       F-66
<PAGE>

                       SHINHAN FINANCIAL GROUP CO., LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2003
                                  (UNAUDITED)

(1)  GENERAL DESCRIPTION ON CONSOLIDATED COMPANIES

     Shinhan Financial Group Co., Ltd., the controlling company, and its
subsidiaries included in consolidation or accounted for by the equity method are
summarized as follows:

  (A) CONTROLLING COMPANY

     Shinhan Financial Group Co., Ltd. (the "Company"), was incorporated on
September 1, 2001 by way of the transfer of all issued shares owned by
shareholders of Shinhan Bank, Shinhan Securities Co., Ltd., Shinhan Capital Co.,
Ltd. and Shinhan BNP Paribas Investment Trust Management Co., Ltd. (formerly
Shinhan Investment Trust Management Co., Ltd.) to the Company. The Company was
formed for the purpose of providing management services and financing to
subsidiaries with W1,461,721 million of initial capital stock and the Company's
shares were listed on the Korea Stock Exchange on September 10, 2001.

     As of June 30, 2003, the Company has 16 subsidiaries which are consolidated
or accounted for by the equity method, and its capital stock was W1,461,806
million.

  (B) SUBSIDIARIES INCLUDED IN CONSOLIDATION

  a. Shinhan Bank

     Shinhan Bank was incorporated on September 15, 1981 under the General
Banking Act of Korea to engage in commercial banking and trust business. Its
capital stock as of June 30, 2003 was W1,223,153 million and it has 352 branch
offices and 174 automated teller machine locations.

  b. Goodmorning Shinhan Securities Co., Ltd.

     Goodmorning Shinhan Securities Co., Ltd. ("Goodmorning Shinhan Securities")
was incorporated on April 2, 1973 to engage in securities trading, underwriting
and brokerage services and its shares were listed on the Korea Stock Exchange on
December 19, 1986. On June 18, 2002, the Company acquired a 29% share of Good
Morning Securities Co., Ltd. from its largest shareholders and on July 31, 2002,
Good Morning Securities Co., Ltd. was merged with Shinhan Securities Co., Ltd.,
which was one of subsidiaries of the Company, at the exchange rate of 1.9976
Good Morning Securities Co., Ltd. shares for each Shinhan Securities Co., Ltd.
share, and renamed to Goodmorning Shinhan Securities. As of June 30, 2003, it
operates through 84 branches and its capital stock was W796,998 million.

  c. Shinhan Card Co., Ltd.

     Shinhan Card Co., Ltd. ("Shinhan Card") was established on June 1, 2002
under the Credit Specialty Finance Law through the spin-off of the credit card
division of Shinhan Bank. Shinhan Card is engaged principally in credit card
services, factoring, consumer loans and installment financing and it holds 1.86
million franchise accounts and 2.67 million of credit card holders. Its capital
stock as of June 30, 2003 was W152,847 million.

  d. Shinhan Capital Co., Ltd.

     Shinhan Capital Co., Ltd. ("Shinhan Capital") was incorporated on April 19,
1991 to engage in the leasing and rental business and it changed its name on May
27, 1999 from Shinhan Leasing Co., Ltd. to Shinhan Capital. Its capital stock as
June 30, 2003 was W80,000 million.

                                       F-67
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  e. Shinhan BNP Paribas Investment Trust Management Co., Ltd.

     On August 1, 1996, Shinhan BNP Paribas Investment Trust Management Co.,
Ltd. ("Shinhan BNP Paribas ITMC") was established and obtained a license to
engage in the business of investment and trust of securities and advisory
services under the Investment and Trust of Securities Law. Shinhan BNP Paribas
ITMC's capital stock was W40,000 million as of June 30, 2003. Additionally, on
October 24, 2002, the Company sold 3,999,999 shares (50% of total outstanding
shares -- 1 share) of Shinhan Investment Trust Management Co., Ltd., which has
been renamed to Shinhan BNP Paribas ITMC, to BNP Paribas Asset Management and it
renamed to Shinhan BNP Paribas ITMC.

  f. Jeju Bank

     Jeju Bank was incorporated on March 18, 1969 under the General Banking Act
of Korea to engage in the commercial banking and trust business and listed its
shares on the Korea Stock Exchange on December 28, 1972. On April 4, 2002, Jeju
Bank became one of subsidiaries of the Company through acquiring a 51% share
from Korea Deposit Insurance Corporation. Additionally, the Company's percentage
of ownership increased to 62% with the acquisition of additional common shares
at W20,177 million on July 5, 2002 and its capital stock as of June 30, 2003 was
W77,644 million.

  g. SH&C Life Insurance Co., Ltd.

     SH&C Life Insurance Co., Ltd. ("SH&C Life Insurance") was established in
October 1, 2002 to engage in insurance business and other related business. Its
capital stock as of June 30, 2003 was W30,000 million.

  h. Trust accounts of Shinhan and Jeju Bank

     Trust accounts in which Shinhan and Jeju Bank guarantees repayment of
principal and, in certain cases, minimum interest earnings are included in
consolidation.

  i. Shinhan Finance Ltd.

     Shinhan Finance Ltd. ("Shinhan Finance") was incorporated in November 1990
in Hong Kong as a wholesale bank and has USD 55.6 million of capital stock as of
June 30, 2003.

  j. Good Morning Securities Europe Ltd.

     Good Morning Securities Europe Ltd. ("Good Morning Securities Europe") was
established in 1991 and has been providing securities trading, underwriting and
derivative brokerage services in Europe under the Securities and Futures
Authority (SFA) of UK. Its capital stock as of June 30, 2003 was GBP 5 million.

  k. Good Morning Securities USA Inc.

     Good Morning Securities USA Inc. ("Good Morning Securities USA") was
established in 1993 and has been providing securities trading, underwriting and
derivative brokerage services under the Federal Securities Act of USA. Its
capital stock as of June 30, 2003 was USD 4.2 million.

                                       F-68
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Ownerships between the Company and its subsidiaries included in
consolidation as of June 30, 2003 and December 31, 2002 are as follows:

<Table>
<Caption>
                                                                2003                      2002
                                                       -----------------------   -----------------------
                                                         NUMBER      OWNERSHIP     NUMBER      OWNERSHIP
INVESTOR                         INVESTEE               OF SHARES       (%)       OF SHARES       (%)
- --------                         --------              -----------   ---------   -----------   ---------
<S>                              <C>                   <C>           <C>         <C>           <C>
The Company....................  Shinhan Bank          244,630,672     100.0     244,630,672     100.0
   "   ........................  Goodmorning Shinhan
                                 Securities(*)          94,084,384      59.4      94,084,384      59.4
   "   ........................  Shinhan Card           30,569,400     100.0      30,569,400     100.0
   "   ........................  Shinhan Capital        16,000,000     100.0      16,000,000     100.0
   "   ........................  Shinhan BNP Paribas
                                 ITMC                    4,000,001      50.0       4,000,001      50.0
   "   ........................  Jeju Bank               9,692,369      62.4       9,692,369      62.4
   "   ........................  SH&C Life Insurance     3,000,001      50.0       3,000,001      50.0
Shinhan Bank...................  The Company            29,873,295      10.2      29,873,674      10.2
   "   ........................  Shinhan Finance            55,600     100.0          55,600     100.0
Goodmorning Shinhan
  Securities...................  Good Morning
                                 Securities Europe       5,000,000     100.0       5,000,000     100.0
   "   ........................  Good Morning
                                 Securities USA             15,000     100.0          15,000     100.0
</Table>

- ---------------

(*) 1,047,213 and 1,041,408 shares of treasury stock as of June 30, 2003 and
    December 31, 2002 considered

  (C) SUBSIDIARIES ACCOUNTED FOR BY THE EQUITY METHOD

  a. e-Shinhan Inc.

     e-Shinhan Inc. ("e-Shinhan") was incorporated on February 21, 2001 to
engage in the business of internet brokerage service and comprehensive
management services on customer accounts. Its capital stock as of June 30, 2003
was W2,820 million.

  b. Shinhan Macquarie Financial Advisory Co., Ltd.

     Shinhan Macquarie Financial Advisory Co., Ltd. ("Shinhan Macquarie") was
incorporated on August 1, 2001 to engage in the business of financial advisory
services and cross border leasing. Its capital stock as of June 30, 2003 was
W1,000 million.

  c. Shinhan Credit Information Co., Ltd.

     Shinhan Credit Information Co., Ltd. ("Shinhan Credit Information") was
established on July 8, 2002 as wholly owned subsidiary of the Company to engage
in the business of debt collection services and credit research. Its capital
stock as of June 30, 2003 was W3,000 million.

     In addition, on June 18, 2003, the Company sold 49% (294,000 shares) of
total outstanding shares in Shinhan Credit Information to LSH Holdings LLC.

  d. Shinhan System Co., Ltd.

     Shinhan System Co., Ltd. ("Shinhan System") was incorporated in May 1991 to
engage in computer services and its capital stock as of June 30, 2003 was W1,000
million.

                                       F-69
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Ownerships in subsidiaries accounted for by the equity method of accounting
as of June 30, 2003 and December 31, 2002 is as follows:

<Table>
<Caption>
                                                            2003                    2002              REASON FOR
                                                    ---------------------   ---------------------   EXCLUSION FROM
                                                     NUMBER     OWNERSHIP    NUMBER     OWNERSHIP    THE SCOPE OF
INVESTOR               INVESTEE (EQUITY METHOD)     OF SHARES      (%)      OF SHARES      (%)      CONSOLIDATION
- --------               ------------------------     ---------   ---------   ---------   ---------   --------------
<S>                    <C>                          <C>         <C>         <C>         <C>         <C>
The Company..........  e-Shinhan                     415,495       73.7      415,495       73.7     Asset under
                                                                                                    W7 billion
   "   ..............  Shinhan Macquarie             102,000       51.0      102,000       51.0          "
   "   ..............  Shinhan Credit Information    306,000       51.0      600,000      100.0          "
Shinhan Bank.........  Shinhan System                200,000      100.0      200,000      100.0          "
</Table>

(2)  BASIS OF FINANCIAL STATEMENTS PRESENTATION AND SUMMARY OF SIGNIFICANT
     ACCOUNTING POLICIES

  (A) BASIS OF FINANCIAL STATEMENTS PRESENTATION

     The Company maintains its official accounting records in Korean won and
prepares statutory consolidated financial statements in the Korean language
(Hangul) in conformity with the accounting principles generally accepted in the
Republic of Korea. Certain accounting principles applied by the Company 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 consolidated financial statements are
intended for use only by those who are informed about Korean accounting
principles and practices. The accompanying consolidated financial statements
have been condensed, restructured and translated into English (with certain
expanded descriptions) from the Korean language financial statements.

     The Company adopted Statements of Korea Accounting Standards (SKAS) No. 2
through No. 9, effective from the first fiscal year beginning after December 31,
2002, while SKAS No. 6, "Events Occurring after the Balance Sheet Date", has
been adopted since the year ended December 31, 2002 with encouraged earlier
application. Certain accounts of prior year's consolidated financial statements
were reclassified to conform to the current year's presentation. Additionally,
in application of SKAS No. 2, "Interim Financial Reporting", the Company did not
present the statements of cash flows for the quarter and six-months ended June
30, 2002 under the interim measure to effective date of this new standard.

     Certain information included in the Korean language consolidated financial
statements, but not required for a fair presentation of the Company's financial
position, results of operations or cash flows, is not presented in the
accompanying consolidated financial statements.

  (B) BASIS OF FINANCIAL STATEMENTS TRANSLATION

     The consolidated financial statements are expressed in Korean Won and,
solely for the convenience of the reader, have been translated into U.S. dollars
at the rate of W1,193.10 to US$1, the basic exchange rate on June 30, 2003.
These translations should not be construed as a representation that any or all
of the amounts shown could be converted into U.S. dollars at this or any other
rate.

  (C) INVESTMENTS IN SECURITIES

     Effective from the fiscal year after December 31, 2002, the Company adopted
SKAS No. 8, "Investments in Securities". In accordance with SKAS No. 8, certain
debt and equity securities should be classified into one of the three categories
of held-to-maturity, available-for-sale, or trading securities at the time of
acquisition and such determination should be reassessed at each balance sheet
date. Investments in debt securities that the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity. Securities
that are bought and held principally for the purpose of selling them in the near
term

                                       F-70
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(thus held for only a short period of time) are classified as trading
securities. Trading generally reflects active and frequent buying and selling,
and trading securities are generally used to generate profit on short-term
differences in price. Investments not classified as either held-to-maturity or
trading securities are classified as available-for-sale securities.

     Trading securities are carried at fair value, with unrealized holding gains
and losses included in earnings. Available-for-sale securities are carried at
fair value, with unrealized holding gains and losses reported as a capital
adjustment. Investments in equity that do not have readily determinable fair
values are stated at cost. Declines in value judged to be other-than-temporary
on available-for-sale securities are charged to current results of operations.
Investments in debt securities that are classified into held-to-maturity are
reported at amortized cost at the balance sheet date and such amortization is
included in interest income.

     Marketable securities are at the quoted market prices as of the period end.
Non-marketable debt securities are recorded at the fair values derived from the
discounted cash flows by using an interest rate deemed to approximate the market
interest rate. The market interest rate is determined by the issuers' credit
rate announced by the accredited credit rating agencies in Korea. Money market
funds are recorded at the fair value determined by the investment management
companies.

  (D) INVESTMENT SECURITIES ACCOUNTED FOR BY THE EQUITY METHOD

     Investments in affiliated companies owned 20% or more or over which the
Company has significant management control are stated at an amount as determined
using the equity method.

     Under the equity method of accounting, the Company's initial investment is
recorded at cost and is subsequently increased to reflect the Company's share of
the investee income and reduced to reflect the Company's share of the investee
losses or dividends received. Any excess in the Company's acquisition cost over
the Company's share of the investee's identifiable net assets is generally
recorded as goodwill or other intangibles and amortized by the straight-line
method over the estimated useful life. Goodwill (negative goodwill) is amortized
over a reasonable period, generally less than 20 years. When events or
circumstances indicate that carrying amount may not be recoverable, the Company
reviews goodwill for any impairment.

     Under the equity method of accounting, the Company does not record its
share of losses of affiliate companies when such losses would make the Company's
investment in such entity less than zero.

     In case of translating financial statements denominated in foreign
currencies, where the balances are determined by the equity method, assets and
liabilities are translated at current rate as of the balance sheet date and
capital accounts at historical rate. Any differences resulting from such foreign
currency translation are accounted for as valuation gains (losses) under the
equity method, a component of capital adjustments in the stockholder's equity.

  (E) ALLOWANCE FOR LOAN LOSSES

     Shinhan Bank established the credit risk-rating model, which considers the
borrowers' capacity to repay and credit risk ("Forward Looking Criteria: FLC")
in classifying its corporate loans and making provisions for loan losses. Based
on the above model, the Company and its subsidiaries classified their corporate
loans by ten credit risk ratings and made provisions for loan losses in the
amount of 0.2 - 2%, 4%, 20%, 95% and 100% of those classified in category 1 - 6
(normal), 7 (precautionary), 8 (sub-standard), 9 (doubtful) and 10 (estimated
loss), respectively, while household loans and credit card loans were classified
by considering current financial status including delinquency period,
bankruptcies and collaterals value. For those loans was made provision for loan
losses of 0.75 - 1%, 5 - 7%, 20%, 55% - 60% and 100% of those classified in
normal, precautionary, sub-standard, doubtful and estimated loss, respectively.

                                       F-71
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (F) TROUBLED LOANS RESTRUCTURING

     Restructured loans which are related to companies involved in bankruptcy
proceedings, composition proceedings or workout programs with creditors are
stated at present value of expected future cash flows, and the difference
between carrying amount and the present value of expected future cash flows is
presented as a present value discount, and amortized and credited to operations
as interest income using the effective interest rate method. In addition, an
allowance for the present value on restructured loans is made depending on the
credit conditions of borrowers.

  (G) FIXED ASSETS

  i) Tangible Assets

     Tangible assets are stated at cost, except for the case of revaluation made
in accordance with the Asset Revaluation Law. Significant additions or
improvements extending value or useful lives of assets are capitalized, while
normal maintenance and repairs are charged to expense when incurred.

     Depreciation is computed using the declining-balance method, except
straight-line method for building and leasehold improvement, over estimated
useful lives of the related assets.

  ii) Intangible Assets

     Intangible assets are stated at acquisition cost less amortization computed
using the straight-line method over useful lives of related intangible assets.

  (H) DISCOUNT ON DEBENTURES

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

  (I) RETIREMENT AND SEVERANCE BENEFITS

     Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and length of
service when they leave the Company. The Company's estimated liability under the
plan which would be payable if all employees left on the balance sheet date is
accrued in the accompanying balance sheets. A portion of the liability is
covered by an employees' severance pay insurance where the employees have a
vested interest in the deposit with the insurance companies. The deposits for
retirement insurance is, therefore, reflected in the accompanying balance sheet
as a deduction from the liability for retirement and severance benefits.

     Under the National Pension Scheme of Korea, the Company transferred a
certain portion of retirement allowances of employees to the National Pension
Fund. The amount transferred will reduce the retirement and severance benefit
amount to be payable to the employees when they leave the Company and is
accordingly reflected in the accompanying financial statements as a reduction
from the retirement and severance benefit liability.

  (J) ALLOWANCE FOR GUARANTEES AND ACCEPTANCES

     The Company provides an allowance for losses on guarantees and acceptances,
which are classified as substandard, doubtful and estimated loss using the same
method as that used to provide for losses on its corporate loans.

                                       F-72
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (K) INCOME TAXES

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

     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 taxation 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 substantially enacted at the balance sheet date.

     A deferred tax asset is recognized only to the extent that it is probable
that future taxable earnings 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.

  (L) TRANSLATION OF FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES

     Monetary assets and liabilities denominated in foreign currencies are
translated into Korean Won at the balance sheet date, with the resulting gains
and losses recognized in current results of operations. As permitted by the
Financial Accounting Standards, monetary assets and liabilities denominated in
foreign currencies are translated into Korean Won at W1,193.10 and W1,200.40 to
US$1, the basic rate of exchange on June 30, 2003 and December 31, 2002,
respectively, except for swap funds which are translated at the specified rates
in the contracts. Non-monetary assets and liabilities denominated in foreign
currencies, which are stated at historical cost, are translated into Korean Won
at the foreign exchange rate ruling at the date of the transaction. Financial
statements of overseas branches are also translated into Korean Won at the above
base rates on the balance sheet dates.

  (M) DERIVATIVES

     Derivative instruments are presented as assets or liabilities valued
principally at the fair value of rights or obligations associated with the
derivative contracts. The unrealized gain or loss from derivative transactions
is recognized in current operations.

     However, for derivative instruments for the purpose of hedging the exposure
to the variability of cash flows of a forecasted transaction, the
hedge-effective portion of the derivative's gain or loss is deferred as a
capital adjustment, a component of stockholder's equity. The ineffective portion
of the gain or loss is charged or credited to current results of operations.

  (N) ACCOUNTING FOR LEASES AND RENTALS

     The Company accounts for and classifies its lease transactions as either
the operating or capital lease, depending on the terms of the lease under the
Korean Lease Accounting Standards.

     If a lease is substantially noncancellable and meets one or more of the
criteria listed below, the present value of future minimum lease payments is
reflected as an obligation under capital lease. Otherwise, it is classified as
an operating lease with lease payments expensed as incurred.

     - Ownership of the leased property shall be transferred to the lessee at
       the end of the lease term without additional payment or for a contract
       price.

     - The lease has a bargain purchase option.

     - The lease term is equal to 75% or more of the estimated economic useful
       life of the leased property.

                                       F-73
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     - The present value at the beginning of the lease term of the minimum lease
       payments equals or exceeds 90% of the fair value of the leased property.

     In case of capital leases, the portion originated from principal is
accounted for as collections of outstanding receivables and the remaining
interest income is accounted for as revenue in the current period. Revenue from
operating leases is recognized on a straight-line basis over the lease term.

     All costs and charges incurred in connection with acquiring lease assets by
inception date of the lease are recorded as advance payments on operating lease
assets or capital lease receivables.

     Additionally, depreciation of assets for operating leases is computed using
the straight-line method over the economic useful lives (or lease terms if
contracted before April 1, 1998).

  (O) STOCK OPTIONS

     The stock option program allows the Company's employees to acquire shares
of the Company or to be compensated for the market price difference. In case of
stock grant type, the Company values stock options based upon an option pricing
model under the fair value method and recognizes this value as an expense and a
capital adjustment over the period in which the options vest. In case of price
compensation type, the Company recognizes the compensation expense as an expense
and a liability over the period in which the options vest.

  (P) INTEREST INCOME RECOGNITION

     Interest income on loans is recognized on the accrual basis, except for
interest income on loans having overdue interest and principal and loans to
customers who are bankrupt.

  (Q) CONTINGENT LIABILITIES

     Contingent losses are generally recognized as a liability when probable and
reasonably estimable.

(3)  STANDARDS APPLIED FOR PREPARING CONSOLIDATED FINANCIAL STATEMENTS

     (a) The investment account of the Controlling Company was offset against
the stockholders' equity account of each subsidiary as of the date of
acquisition.

     (b) The Company records differences between the cost of investment accounts
and the corresponding fair value of subsidiaries' net assets at the time of
acquisition as goodwill (negative goodwill) and those are amortized over certain
periods, which are less than 20 years.

     (c) All significant inter-company transactions and account balances among
the consolidated companies have been fully eliminated in consolidation.

     (d) Additional allowances for loan losses on certain subsidiaries' loans
are provided in the consolidated financial statements for the purpose of
applying consistent standards to all subsidiaries. As results, W1,805 million
and W12,952 million of additional allowance for loan losses of Goodmorning
Shinhan Securities, Shinhan Capital and Jeju Bank are provided as of June 30,
2003 and December 31, 2002, respectively.

                                       F-74
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4)  CASH AND DUE FROM BANKS

     (a) Cash and due from banks as of June 30, 2003 and December 31, 2002
consist of the following:

<Table>
<Caption>
                                                 WON             U.S. DOLLARS (NOTE 2)
                                       -----------------------   ----------------------
                                          2003         2002         2003        2002
                                       -----------   ---------   ----------   ---------
<S>                                    <C>           <C>         <C>          <C>
Cash on hand in Won..................  W 1,104,648     903,183   $  925,864     757,005
Cash on hand in foreign currencies...       54,538      55,994       45,711      46,932
                                       -----------   ---------   ----------   ---------
                                         1,159,186     959,177      971,575     803,937
Due from banks in Won................    2,514,644   1,745,695    2,107,656   1,463,159
Due from banks in foreign
  currencies.........................      214,805     142,262      180,039     119,237
                                       -----------   ---------   ----------   ---------
                                         2,729,449   1,887,957    2,287,695   1,582,396
                                       -----------   ---------   ----------   ---------
                                       W 3,888,635   2,847,134   $3,259,270   2,386,333
                                       ===========   =========   ==========   =========
</Table>

     (b) Restricted due from banks as of June 30, 2003 and December 31, 2002 are
as follows:

<Table>
<Caption>
                                           2003        2002      RESTRICTIONS
                                        ----------   ---------   ------------
<S>                                     <C>          <C>         <C>
Due from banks in Won:
  Reserve deposits in the Bank of
     Korea............................  W1,269,176     749,928   General Banking Act
  Due from banks for customers'
     accounts.........................     627,887     495,500   Reserve for customers'
                                                                 deposits
  Other...............................      87,383     129,639   Deposit for severance
                                                                 benefit insurance and other
Due from banks in foreign
  currencies..........................      19,950      74,976   Pledged for contract
                                                                 performance
                                        ----------   ---------
                                        W2,004,396   1,450,043
                                        ==========   =========
</Table>

     (c) The maturities of the due from banks by remaining period as of June 30,
2003 and December 31, 2002 are summarized as follows:

<Table>
<Caption>
                                                                    DUE
                                                       DUE       FROM BANKS
                                                   FROM BANKS    IN FOREIGN
REMAINING PERIOD (AS OF JUNE 30, 2003)               IN WON      CURRENCIES     TOTAL
- --------------------------------------             -----------   ----------   ---------
<S>                                                <C>           <C>          <C>
Within 3 months..................................  W   829,327    206,882     1,036,209
3 months - 6 months..............................       54,915      4,653        59,568
6 months - 1 year................................      196,948         --       196,948
1-3 years........................................       23,606         --        23,606
Thereafter.......................................    1,409,848      3,270     1,413,118
                                                   -----------    -------     ---------
                                                   W 2,514,644    214,805     2,729,449
                                                   ===========    =======     =========
</Table>

                                       F-75
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                    DUE
                                                       DUE       FROM BANKS
                                                   FROM BANKS    IN FOREIGN
REMAINING PERIOD (AS OF DECEMBER 31, 2002)           IN WON      CURRENCIES     TOTAL
- ------------------------------------------         -----------   ----------   ---------
<S>                                                <C>           <C>          <C>
Within 3 months..................................  W   686,579    131,569       818,148
3 months - 6 months..............................       35,531      6,002        41,533
6 months - 1 year................................       98,354         --        98,354
1-3 years........................................       43,406         --        43,406
Thereafter.......................................      851,825      4,691       856,516
                                                   -----------    -------     ---------
                                                   W 1,715,695    142,262     1,857,957
                                                   ===========    =======     =========
</Table>

(5)  SECURITIES

     Securities as of June 30, 2003 and December 31, 2002 consist of the
following:

<Table>
<Caption>
                                              WON               U.S. DOLLARS (NOTE 2)
                                    ------------------------   ------------------------
                                       2003          2002         2003          2002
                                    -----------   ----------   -----------   ----------
<S>                                 <C>           <C>          <C>           <C>
Trading securities................  W 2,655,666    2,014,293   $ 2,225,854    1,688,285
Available-for-sale securities.....   10,029,959    9,146,301     8,406,638    7,665,996
Held-to-maturity securities.......    4,123,091    4,284,183     3,455,779    3,590,800
Investment securities by the
  equity method...................        7,363        9,437         6,171        7,910
                                    -----------   ----------   -----------   ----------
                                    W16,816,079   15,454,214   $14,094,442   12,952,991
                                    ===========   ==========   ===========   ==========
</Table>

  (A) TRADING SECURITIES

     i) Trading securities as of June 30, 2003 and December 31, 2002 consist of
the following:

<Table>
<Caption>
                                                 WON             U.S. DOLLARS (NOTE 2)
                                        ----------------------   ----------------------
                                           2003        2002         2003        2002
                                        ----------   ---------   ----------   ---------
<S>                                     <C>          <C>         <C>          <C>
Stocks................................  W   86,545      76,934   $   72,538      64,482
Government bonds......................     681,608     411,403      571,292     344,819
Finance debentures....................     696,475     636,852      583,752     533,779
Corporate bonds.......................     913,188     742,440      765,391     622,278
Beneficiary certificates..............     227,850      97,870      190,973      82,030
Commercial paper......................      50,000      48,794       41,908      40,897
                                        ----------   ---------   ----------   ---------
                                        W2,655,666   2,014,293   $2,225,854   1,688,285
                                        ==========   =========   ==========   =========
</Table>

     ii) Details of debt securities classified as trading securities as of June
30, 2003 and December 31, 2002 consist of the following:

<Table>
<Caption>
                                                               2003
                                         ------------------------------------------------
                                            FACE      ACQUISITION     FAIR        BOOK
                                           VALUE         COST       VALUE(*)    VALUE(**)
                                         ----------   -----------   ---------   ---------
<S>                                      <C>          <C>           <C>         <C>
Government bonds.......................  W  686,019      683,422      684,117     681,608
Finance debentures.....................     711,092      695,507      699,373     696,475
Corporate bonds........................     908,415      910,353      914,555     913,188
                                         ----------    ---------    ---------   ---------
                                         W2,305,526    2,289,282    2,298,045   2,291,271
                                         ==========    =========    =========   =========
</Table>

                                       F-76
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                               2002
                                         ------------------------------------------------
                                            FACE      ACQUISITION     FAIR        BOOK
                                           VALUE         COST       VALUE(*)    VALUE(**)
                                         ----------   -----------   ---------   ---------
<S>                                      <C>          <C>           <C>         <C>
Government bonds.......................  W  408,214      411,901      412,703     411,403
Finance debentures.....................     657,650      635,289      638,807     636,852
Corporate bonds........................     733,596      744,186      743,218     742,440
                                         ----------    ---------    ---------   ---------
                                         W1,799,460    1,791,376    1,794,728   1,790,695
                                         ==========    =========    =========   =========
</Table>

- ---------------

 (*) Debt securities are recorded at fair value using the market yield of bonds
     provided by the bond credit rating and pricing associations.

(**) The difference between fair value and book value is recorded as accrued
     income.

  (B) AVAILABLE-FOR-SALE SECURITIES

     i) Available-for-sale securities as of June 30, 2003 and December 31, 2002
consist of the following:

<Table>
<Caption>
                                                 WON             U.S. DOLLARS (NOTE 2)
                                       -----------------------   ----------------------
                                          2003         2002         2003        2002
                                       -----------   ---------   ----------   ---------
<S>                                    <C>           <C>         <C>          <C>
Stocks...............................  W   185,284     224,488   $  155,296     188,155
Investment in special fund...........       51,698       9,371       43,331       7,854
Government bonds.....................      533,965     556,279      447,544     466,247
Finance debentures...................    2,478,302   1,919,808    2,077,196   1,609,092
Corporate bonds......................    3,014,089   3,203,031    2,526,267   2,684,629
Beneficiary certificates.............    2,488,330   2,432,095    2,085,601   2,038,467
Securities in foreign currencies.....    1,066,856     801,229      894,188     671,552
Other................................      211,435          --      177,215          --
                                       -----------   ---------   ----------   ---------
                                       W10,029,959   9,146,301   $8,406,638   7,665,996
                                       ===========   =========   ==========   =========
</Table>

     ii) Details of debt securities classified as available-for-sale securities
as of June 30, 2003 and December 31, 2002 consist of the following:

<Table>
<Caption>
                                                               2003
                                         ------------------------------------------------
                                            FACE      ACQUISITION     FAIR        BOOK
                                           VALUE         COST       VALUE(*)    VALUE(**)
                                         ----------   -----------   ---------   ---------
<S>                                      <C>          <C>           <C>         <C>
Government bonds.......................  W  521,683      518,302      566,794     533,965
Finance debentures.....................   2,525,000    2,476,806    2,519,028   2,478,302
Corporate bonds........................   3,021,613    3,069,313    3,058,050   3,014,089
                                         ----------    ---------    ---------   ---------
                                         W6,068,296    6,064,421    6,143,872   6,026,356
                                         ==========    =========    =========   =========
</Table>

<Table>
<Caption>
                                                               2002
                                         ------------------------------------------------
                                            FACE      ACQUISITION     FAIR        BOOK
                                           VALUE         COST       VALUE(*)    VALUE(**)
                                         ----------   -----------   ---------   ---------
<S>                                      <C>          <C>           <C>         <C>
Government bonds.......................  W  547,446      541,301      586,886     556,279
Finance debentures.....................   1,956,000    1,923,275    1,952,046   1,919,808
Corporate bonds........................   3,179,063    3,224,382    3,277,389   3,203,031
                                         ----------    ---------    ---------   ---------
                                         W5,682,509    5,688,958    5,816,321   5,679,118
                                         ==========    =========    =========   =========
</Table>

                                       F-77
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

 (*) Debt securities are recorded at fair value using the market yield of bonds
     provided by the bond credit rating and pricing associations.

(**) The difference between fair value and book value is recorded as accrued
     income.

     iii) Equity securities classified as available-for-sale securities as of
June 30, 2003 and December 31, 2002 are as follows:

<Table>
<Caption>
                                                                  2003
                                            -------------------------------------------------
                                            OWNERSHIP   ACQUISITION   NET ASSET OR     BOOK
                                               (%)         COST        FAIR VALUE      VALUE
                                            ---------   -----------   -------------   -------
<S>                                         <C>         <C>           <C>             <C>
Stock:
  Hyundai Engineering & Construction Co.,
     Ltd. ................................     1.38      W 35,057         17,458       17,458
  SK Telecom Co., Ltd. ...................     0.12        17,106         20,993       20,993
  Shinwon Co., Ltd. ......................     2.15         4,738            742          742
  Ssangyong Motors Co., Ltd. .............     0.21         2,809          1,660        1,660
  Handsome Co., Ltd. .....................     1.43         3,533          2,812        2,812
  Samyang Foods Co., Ltd. ................    44.81         2,121         12,343       12,343
  Real Telecom Co., Ltd. .................     4.48         2,438            513        2,438
  Kia Motors Co., Ltd. ...................     0.09         2,640          2,640        2,640
  NamSun Co., Ltd. .......................     4.87         3,195          2,996        2,996
  Korea Securities Finance Co. ...........     3.39        11,573         15,537       11,573
  Korea Securities Depository.............     1.60           843          4,968          843
  Other...................................       --       110,065        108,831      108,786
                                                         --------        -------      -------
                                                          196,118        191,493      185,284
                                                         --------        -------      -------
Investment in special fund:
  Stock Market Stabilization Fund.........                 27,642         42,646       42,646
  Korea Stock Exchange....................                  2,612         21,134        2,612
  Good KDB 2nd Securitization Specialty
     Co., Ltd. ...........................                  3,000          3,083        3,000
  Other...................................                  3,441          3,642        3,440
                                                         --------        -------      -------
                                                           36,695         70,505       51,698
                                                         --------        -------      -------
                                                         W232,813        261,998      236,982
                                                         ========        =======      =======
</Table>

                                       F-78
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                  2002
                                            -------------------------------------------------
                                            OWNERSHIP   ACQUISITION   NET ASSET OR     BOOK
                                               (%)         COST        FAIR VALUE      VALUE
                                            ---------   -----------   -------------   -------
<S>                                         <C>         <C>           <C>             <C>
Stock:
  Saehan Industries Inc. .................     2.45      W  2,248          2,144        2,144
  Korea Securities Finance Co. ...........     3.39        11,573         14,645       11,573
  Hanwha Investment Trust Management Co.,
     Ltd. ................................     4.50         1,350          1,419        1,419
  Korea ECN Securities Co., Ltd. .........     6.25         1,600          1,468        1,600
  ShinDongBang Co., Ltd. .................     2.74         1,987            928          928
  Shinwon Co., Ltd. ......................     3.29         7,260          2,578        2,578
  Handsome Co., Ltd. .....................     1.48         3,533          2,269        2,269
  Hyundai Engineering & Construction Co.,
     Ltd. ................................     2.69        65,364         20,982       20,982
  SK Telecom Co., Ltd. ...................     0.04         4,822          7,718        7,718
  INTEC Telecom Co., Ltd. ................     4.03         2,438            768        2,438
  Hyundai Petrochemical Co., Ltd. ........     5.34         9,244         41,313        9,244
  Other...................................     2.45       205,017        182,477      161,595
                                                         --------        -------      -------
                                                          316,436        278,709      224,488
                                                         --------        -------      -------
Investment in special fund:
  Stock Market Stabilization Fund.........                  4,835          5,936        5,936
  Other...................................                  3,435          3,562        3,435
                                                         --------        -------      -------
                                                            8,270          9,498        9,371
                                                         --------        -------      -------
                                                         W324,706        288,207      233,859
                                                         ========        =======      =======
</Table>

     iv) The maturity of available-for-sale securities by remaining period as of
June 30, 2003 are as follows:

<Table>
<Caption>
                                          GOVERNMENT    FINANCE     CORPORATE
REMAINING PERIOD                            BONDS      DEBENTURES     BONDS       TOTAL
- ----------------                          ----------   ----------   ---------   ---------
<S>                                       <C>          <C>          <C>         <C>
Due within 3 months.....................   W 29,673      461,262      404,134     895,069
3 months - 6 months.....................     10,719      360,384      367,580     738,683
6 months - 1 year.......................    155,332      972,669      627,550   1,755,551
1 - 3 years.............................    224,688      673,743      886,400   1,784,831
Thereafter..............................    113,553       10,244      728,425     852,222
                                           --------    ---------    ---------   ---------
                                           W533,965    2,478,302    3,014,089   6,026,356
                                           ========    =========    =========   =========
</Table>

                                       F-79
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     v) Available-for-sale securities denominated in foreign currencies
classified by issuing country as of June 30, 2003 and December 31, 2002 are as
follows:

<Table>
<Caption>
                                      2003                                2002
                        ---------------------------------   ---------------------------------
                                      EQUIVALENT   RATIO                  EQUIVALENT   RATIO
                        U.S. DOLLAR      WON        (%)     U.S. DOLLAR      WON        (%)
                        -----------   ----------   ------   -----------   ----------   ------
<S>                     <C>           <C>          <C>      <C>           <C>          <C>
Korea.................   $683,726     W  815,753    76.47    $460,564      W552,883     69.00
U.S.A.................     81,835         97,638     9.15      97,772       117,366     14.66
Malaysia..............     11,640         13,888     1.30      11,640        13,973      1.75
Indonesia.............         --             --       --         300           360      0.04
Philippines...........      6,076          7,250     0.68       6,365         7,640      0.95
Germany...............     12,590         15,021     1.41      12,562        15,079      1.88
Japan.................      2,706          3,228     0.30       3,190         3,829      0.48
Other.................     95,615        114,078    10.69      75,057        90,099     11.24
                         --------     ----------   ------    --------      --------    ------
                         $894,188     W1,066,856   100.00    $667,450      W801,229    100.00
                         ========     ==========   ======    ========      ========    ======
</Table>

  (C) HELD-TO-MATURITY SECURITIES

     i) Held-to-maturity securities as of June 30, 2003 and December 31, 2002
consist of the following:

<Table>
<Caption>
                                                 WON             U.S. DOLLARS (NOTE 2)
                                        ----------------------   ----------------------
                                           2003        2002         2003        2002
                                        ----------   ---------   ----------   ---------
<S>                                     <C>          <C>         <C>          <C>
Government bonds......................  W  525,353     539,505   $  440,326     452,188
Finance debentures....................     271,774     402,768      227,788     337,581
Corporate bonds.......................   3,183,740   3,213,403    2,668,460   2,693,323
Securities in foreign currencies......     142,224     128,504      119,205     107,706
Other.................................          --           3           --           2
                                        ----------   ---------   ----------   ---------
                                        W4,123,091   4,284,183   $3,455,779   3,590,800
                                        ==========   =========   ==========   =========
</Table>

     ii) Details of debt securities classified as held-to-maturity securities as
of June 30, 2003 and December 31, 2002 consist of the following:

<Table>
<Caption>
                                                               2003
                                         ------------------------------------------------
                                            FACE      ACQUISITION     FAIR        BOOK
                                           VALUE         COST       VALUE(*)    VALUE(**)
                                         ----------   -----------   ---------   ---------
<S>                                      <C>          <C>           <C>         <C>
Government bonds.......................  W  523,303      519,821      622,693     525,353
Finance debentures.....................     272,944      275,139      296,076     271,774
Corporate bonds........................   3,174,509    3,196,037    3,349,105   3,183,740
                                         ----------    ---------    ---------   ---------
                                         W3,970,756    3,990,997    4,267,874   3,980,867
                                         ==========    =========    =========   =========
</Table>

<Table>
<Caption>
                                                               2002
                                         ------------------------------------------------
                                            FACE      ACQUISITION     FAIR        BOOK
                                           VALUE         COST       VALUE(*)    VALUE(**)
                                         ----------   -----------   ---------   ---------
<S>                                      <C>          <C>           <C>         <C>
Government bonds.......................  W  543,903      532,735      622,457     539,505
Finance debentures.....................     408,462      404,785      445,557     402,768
Corporate bonds........................   3,210,405    3,223,072    3,382,375   3,213,403
                                         ----------    ---------    ---------   ---------
                                         W4,162,770    4,160,592    4,450,389   4,155,676
                                         ==========    =========    =========   =========
</Table>

                                       F-80
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

(*) Debt securities are recorded at fair value using the market yield of bonds
    provided by the bond credit rating and pricing associations.

(**) The difference between fair value and book value is recorded as accrued
     income.

     iii) The maturity of held-to-maturity securities by remaining period as of
June 30, 2003 and December 31, 2002 are as follows:

<Table>
<Caption>
                                           GOVERNMENT    FINANCE     CORPORATE
REMAINING PERIOD (AS OF JUNE 30, 2003)       BONDS      DEBENTURES     BONDS       TOTAL
- --------------------------------------     ----------   ----------   ---------   ---------
<S>                                        <C>          <C>          <C>         <C>
Due within 3 months......................   W  4,984      17,648     1,061,815   1,084,447
3 months - 6 months......................     68,385      58,165       138,394     264,944
6 months - 1 year........................     62,932      23,816       252,246     338,994
1 - 3 years..............................    272,579     122,232     1,070,873   1,465,684
Thereafter...............................    116,473      49,913       660,412     826,798
                                            --------     -------     ---------   ---------
                                            W525,353     271,774     3,183,740   3,980,867
                                            ========     =======     =========   =========
</Table>

<Table>
<Caption>
                                            GOVERNMENT    FINANCE     CORPORATE
REMAINING PERIOD (AS OF DECEMBER 31, 2002)    BONDS      DEBENTURES     BONDS       TOTAL
- ------------------------------------------  ----------   ----------   ---------   ---------
<S>                                         <C>          <C>          <C>         <C>
Due within 3 months......................    W    354      82,160        45,005     127,519
3 months - 6 months......................         476      66,650        91,340     158,466
6 months - 1 year........................      65,171      57,672     1,301,399   1,424,242
1 - 3 years..............................     301,321     146,381     1,119,998   1,567,700
Thereafter...............................     172,183      49,905       655,661     877,749
                                             --------     -------     ---------   ---------
                                             W539,505     402,768     3,213,403   4,155,676
                                             ========     =======     =========   =========
</Table>

     iv) Held-to-maturity securities denominated in foreign currencies
classified by issuing country as of June 30, 2003 and December 31, 2002 are as
follows:

<Table>
<Caption>
                                        2003                                2002
                          ---------------------------------   ---------------------------------
                                        EQUIVALENT   RATIO                  EQUIVALENT   RATIO
                          U.S. DOLLAR      WON        (%)     U.S. DOLLAR      WON        (%)
                          -----------   ----------   ------   -----------   ----------   ------
<S>                       <C>           <C>          <C>      <C>           <C>          <C>
Korea...................   $103,876      W123,934     87.13    $ 91,721      W110,103     85.68
U.S.A...................      1,939         2,313      1.63       1,940         2,329      1.81
Indonesia...............      2,500         2,983      2.10       2,500         3,001      2.34
Other...................     10,891        12,994      9.14      10,890        13,071     10.17
                           --------      --------    ------    --------      --------    ------
                           $119,206      W142,224    100.00    $107,051      W128,504    100.00
                           ========      ========    ======    ========      ========    ======
</Table>

                                       F-81
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

 (D) INVESTMENT SECURITIES ACCOUNTED FOR BY THE EQUITY METHOD

     i) Details of investment securities by the equity method as of June 30,
2003 and December 31, 2002 are as follows:

<Table>
<Caption>
                                                              2003
                       ----------------------------------------------------------------------------------
                                   INVESTMENT,
                                    SALE AND       EQUITY
                       BEGINNING    DIVIDEND,      METHOD      RETAINED     CAPITAL      TOTAL    ENDING
SUBSIDIARIES            BALANCE        NET       GAIN (LOSS)   EARNINGS   ADJUSTMENTS   CHANGES   BALANCE
- ------------           ---------   -----------   -----------   --------   -----------   -------   -------
<S>                    <C>         <C>           <C>           <C>        <C>           <C>       <C>
e-Shinhan............   W3,892           --         (523)         (1)          --         (524)    3,368
Shinhan Macquarie....      423           --         (423)         --           --         (423)       --
Shinhan Credit
  Information........    3,121       (1,695)         560          --           --       (1,135)    1,986
Shinhan System.......    2,001           --            8          --           --            8     2,009
                        ------       ------         ----          --          ---       ------     -----
                        W9,437       (1,695)        (378)         (1)          --       (2,074)    7,363
                        ======       ======         ====          ==          ===       ======     =====
</Table>

<Table>
<Caption>
                                                              2002
                       ----------------------------------------------------------------------------------
                                   INVESTMENT,
                                    SALE AND       EQUITY
                       BEGINNING    DIVIDEND,      METHOD      RETAINED     CAPITAL      TOTAL    ENDING
SUBSIDIARIES            BALANCE        NET       GAIN (LOSS)   EARNINGS   ADJUSTMENTS   CHANGES   BALANCE
- ------------           ---------   -----------   -----------   --------   -----------   -------   -------
<S>                    <C>         <C>           <C>           <C>        <C>           <C>       <C>
e-Shinhan............   W4,673           --         (806)         (1)          26         (781)    3,892
Shinhan Macquarie....      776         (484)         134          (3)          --         (353)      423
Shinhan Credit
  Information........       --        3,000          121          --           --        3,121     3,121
Shinhan System.......    1,864           --          137          --           --          137     2,001
Shinhan Research.....      158         (158)          --          --           --         (158)       --
                        ------       ------         ----          --          ---       ------     -----
                        W7,471        2,358         (414)         (4)          26        1,966     9,437
                        ======       ======         ====          ==          ===       ======     =====
</Table>

                                       F-82
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6)  LOANS

     (a) Loans outstanding as of June 30, 2003 and December 31, 2002 consist of
the following:

<Table>
<Caption>
                                              WON               U.S. DOLLARS (NOTE 2)
                                    ------------------------   ------------------------
                                       2003          2002         2003          2002
                                    -----------   ----------   -----------   ----------
<S>                                 <C>           <C>          <C>           <C>
Loans in Won......................  W36,575,371   32,616,614   $30,655,746   27,337,703
Loans in foreign currencies.......    3,997,133    3,489,504     3,350,208    2,924,737
Domestic import usance bills......    1,498,792    1,154,569     1,256,216      967,705
Call loans........................      258,766      610,606       216,885      511,781
Korean Won bills bought...........    1,413,304      833,721     1,184,565      698,786
Foreign currency bills bought.....    2,146,304    2,263,872     1,798,931    1,897,471
Payments on guarantees and
  acceptances.....................       61,306       89,657        51,384       75,146
Credit card loans.................    2,302,070    2,795,865     1,929,486    2,343,362
Privately placed bonds............    1,827,922    1,484,356     1,532,078    1,244,117
Factoring receivables.............       63,532       63,627        53,250       53,329
Loans convertible into equity
  securities......................        6,504        6,504         5,451        5,452
Financing lease receivables.......      640,616      621,427       536,934      520,851
Other.............................       17,570       17,706        14,726       14,840
                                    -----------   ----------   -----------   ----------
                                     50,809,190   46,048,028    42,585,860   38,595,280
Less: allowance for loan losses...   (1,125,750)    (785,773)     (943,550)    (658,598)
      present value discounts.....      (16,202)     (17,894)      (13,580)     (14,998)
                                    -----------   ----------   -----------   ----------
                                    W49,667,238   45,244,361   $41,628,730   37,921,684
                                    ===========   ==========   ===========   ==========
</Table>

     (b) The maturities of loans by remaining period as of June 30, 2003 and
December 31, 2002 are as follows:

<Table>
<Caption>
                                                        LOANS
                                         LOANS IN     IN FOREIGN
REMAINING PERIOD (AS OF JUNE 30, 2003)      WON       CURRENCIES     OTHER        TOTAL
- --------------------------------------  -----------   ----------   ----------   ----------
<S>                                     <C>           <C>          <C>          <C>
Due within 3 months..................   W 5,697,637   1,002,971     6,305,631   13,006,239
3 months - 6 months..................     4,798,156     986,360       786,542    6,571,058
6 months - 1 year....................    12,032,393     966,670     1,007,657   14,006,720
1 - 3 years..........................    10,623,587     374,785     1,625,044   12,623,416
Thereafter...........................     3,423,598     666,347       511,812    4,601,757
                                        -----------   ---------    ----------   ----------
                                        W36,575,371   3,997,133    10,236,686   50,809,190
                                        ===========   =========    ==========   ==========
</Table>

                                       F-83
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                             LOANS
                                                           IN FOREIGN
REMAINING PERIOD (AS OF DECEMBER 31, 2002)  LOANS IN WON   CURRENCIES     OTHER       TOTAL
- ------------------------------------------  ------------   ----------   ---------   ----------
<S>                                         <C>            <C>          <C>         <C>
Due within 3 months....................     W 4,971,684      393,060    6,373,742   11,738,486
3 months - 6 months....................       4,393,858      699,390      811,375    5,904,623
6 months - 1 year......................       8,379,063    1,332,252      878,332   10,589,647
1 - 3 years............................      11,489,933      452,397    1,383,218   13,325,548
Thereafter.............................       3,382,076      612,405      495,243    4,489,724
                                            -----------    ---------    ---------   ----------
                                            W32,616,614    3,489,504    9,941,910   46,048,028
                                            ===========    =========    =========   ==========
</Table>

     (c) Loan classified by country as of June 30, 2003 and December 31, 2002
are as follows:

<Table>
<Caption>
                                                         2003
                            --------------------------------------------------------------
                                            LOANS
                             LOANS IN     IN FOREIGN     OTHER
                                WON       CURRENCIES     LOANS        TOTAL      RATIO (%)
                            -----------   ----------   ----------   ----------   ---------
<S>                         <C>           <C>          <C>          <C>          <C>
Korea.....................  W36,575,371   3,268,955    10,036,050   49,880,376     98.17
U.S.A.....................           --       8,874            --        8,874      0.02
U.K.......................           --      21,140            --       21,140      0.04
Japan.....................           --     610,732         9,664      620,396      1.22
Germany...................           --          --        35,793       35,793      0.07
Italy.....................           --          --        85,307       85,307      0.17
Ireland...................           --          --        59,655       59,655      0.12
Indonesia.................           --      27,981            --       27,981      0.06
Thailand..................           --         597            --          597      0.00
Hongkong..................           --      58,234        10,217       68,451      0.13
Singapore.................           --         620            --          620      0.00
                            -----------   ---------    ----------   ----------    ------
                            W36,575,371   3,997,133    10,236,686   50,809,190    100.00
                            ===========   =========    ==========   ==========    ======
</Table>

                                       F-84
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                         2002
                             -------------------------------------------------------------
                                             LOANS
                              LOANS IN     IN FOREIGN     OTHER
                                 WON       CURRENCIES     LOANS       TOTAL      RATIO (%)
                             -----------   ----------   ---------   ----------   ---------
<S>                          <C>           <C>          <C>         <C>          <C>
Korea......................  W32,616,614   2,820,291    9,696,621   45,133,526     98.01
U.S.A......................           --       7,124       30,010       37,134      0.08
U.K........................           --          --        1,059        1,059      0.00
Japan......................           --     628,671           --      628,671      1.37
Germany....................           --      12,004       60,020       72,024      0.16
Italy......................           --          --       60,020       60,020      0.13
Canada.....................           --          --        7,923        7,923      0.02
Austria....................           --          --       42,014       42,014      0.09
Ireland....................           --          --       24,008       24,008      0.05
Indonesia..................           --      16,148           --       16,148      0.04
Thailand...................           --       3,204           --        3,204      0.01
Vietnam....................           --       1,041           --        1,041      0.00
Hongkong...................           --          --       20,235       20,235      0.04
Singapore..................           --       1,021           --        1,021      0.00
                             -----------   ---------    ---------   ----------    ------
                             W32,616,614   3,489,504    9,941,910   46,048,028    100.00
                             ===========   =========    =========   ==========    ======
</Table>

     (d) Loans classified by consumer as of June 30, 2003 and December 31, 2002
are as follows:

<Table>
<Caption>
                                                         2003
                            --------------------------------------------------------------
                                            LOANS
                             LOANS IN     IN FOREIGN
                                WON       CURRENCIES     OTHER        TOTAL      RATIO (%)
                            -----------   ----------   ----------   ----------   ---------
<S>                         <C>           <C>          <C>          <C>          <C>
Corporate.................  W18,808,267   3,845,211     7,923,509   30,576,987     60.18
Household.................   17,372,361     151,703     2,171,111   19,695,175     38.76
Public and other..........      394,743         219       142,066      537,028      1.06
                            -----------   ---------    ----------   ----------    ------
                            W36,575,371   3,997,133    10,236,686   50,809,190    100.00
                            ===========   =========    ==========   ==========    ======
</Table>

<Table>
<Caption>
                                                         2002
                             -------------------------------------------------------------
                                             LOANS
                              LOANS IN     IN FOREIGN
                                 WON       CURRENCIES     OTHER       TOTAL      RATIO (%)
                             -----------   ----------   ---------   ----------   ---------
<S>                          <C>           <C>          <C>         <C>          <C>
Corporate..................  W15,945,863   3,427,197    7,410,253   26,783,313     58.16
Household..................   16,538,978      45,938    2,225,690   18,810,606     40.85
Public and other...........      131,773      16,369      305,967      454,109      0.99
                             -----------   ---------    ---------   ----------     -----
                             W32,616,614   3,489,504    9,941,910   46,048,028       100
                             ===========   =========    =========   ==========     =====
</Table>

                                       F-85
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (e) Restructured loans due to commencement of bankruptcy proceedings,
composition proceedings or workout programs during the six-months ended June 30,
2002 and the year ended December 31, 2002 are as follows:

<Table>
<Caption>
                                                             2003
                                  -----------------------------------------------------------
                                                                     WORKOUT
                                                             -----------------------
                                                             CORPORATE   INDIVIDUALS
                                  COMPOSITION   BANKRUPTCY     LOANS        LOANS      TOTAL
                                  -----------   ----------   ---------   -----------   ------
<S>                               <C>           <C>          <C>         <C>           <C>
Loan for equity conversion......    W    --        6,282         389          --        6,671
Reduction in interest rate......         --       34,863       1,446         244       36,553
                                    -------       ------      ------         ---       ------
Loan balance before
  restructuring.................         --       41,145       1,835         244       43,224
Loan balance after
  restructuring.................         --       31,444       1,332         207       32,983
                                    -------       ------      ------         ---       ------
Loss resulting from
  restructuring.................    W    --        9,701         503          37       10,241
                                    =======       ======      ======         ===       ======
</Table>

<Table>
<Caption>
                                                             2002
                                  -----------------------------------------------------------
                                                                     WORKOUT
                                                             -----------------------
                                                             CORPORATE   INDIVIDUALS
                                  COMPOSITION   BANKRUPTCY     LOANS        LOANS      TOTAL
                                  -----------   ----------   ---------   -----------   ------
<S>                               <C>           <C>          <C>         <C>           <C>
Loan for equity conversion......    W 6,793        1,905         668          --        9,366
Converted into CBs..............         --           --         493          --          493
Reduction in interest rate......      3,436        2,094      14,779          --       20,309
                                    -------       ------      ------         ---       ------
Loan balance before
  restructuring.................     10,229        3,999      15,940          --       30,168
Loan balance after
  restructuring.................      3,550        1,151      13,284          --       17,985
                                    -------       ------      ------         ---       ------
Loss resulting from
  restructuring.................    W 6,679        2,848       2,656          --       12,183
                                    =======       ======      ======         ===       ======
</Table>

     (f) Changes in allowance for losses on loans, accounts receivable and
accrued income for the six-months ended June 30, 2003 and the year ended
December 31, 2002 are as follows:

<Table>
<Caption>
                                                                     2003
                                                      ----------------------------------
                                                      BEGINNING    INCREASE     ENDING
                                                       BALANCE    (DECREASE)    BALANCE
                                                      ---------   ----------   ---------
<S>                                                   <C>         <C>          <C>
The Company.........................................  W  3,846      (3,846)           --
Shinhan Bank........................................   565,844     309,607       875,451
Shinhan Bank (Trust account)........................    24,023         868        24,891
Shinhan Finance.....................................     3,266       9,306        12,572
Goodmorning Shinhan Securities(*)...................    49,333     (20,688)       28,645
Shinhan Card........................................    96,104      56,712       152,816
Shinhan Capital(*)..................................    33,787     (13,009)       20,778
Shinhan BNP Paribas ITMC............................        10           2            12
Jeju Bank(*)........................................    29,318         621        29,939
Jeju Bank (Trust account)...........................       142        (128)           14
                                                      --------     -------     ---------
  Total(**).........................................  W805,673     339,445     1,145,118
                                                      ========     =======     =========
</Table>

- ---------------
(*)   Amounts include additional allowance for loan losses of W1,815 million and
      W12,952 million as of June 30, 2003 and December 31, 2002, respectively.

(**)  Allowance for losses on other assets is included.

                                       F-86
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                     2002
                                                      ----------------------------------
                                                      BEGINNING    INCREASE     ENDING
                                                       BALANCE    (DECREASE)    BALANCE
                                                      ---------   ----------   ---------
<S>                                                   <C>         <C>          <C>
The Company.........................................  W  1,472       2,374         3,846
Shinhan Bank........................................   567,344      (1,500)      565,844
Shinhan Bank (Trust account)........................    30,225      (6,202)       24,023
Shinhan Finance.....................................     3,949        (683)        3,266
Goodmorning Shinhan Securities(*)(**)...............    48,854         479        49,333
Shinhan Card........................................        --      96,104        96,104
Shinhan Capital(*)..................................   102,454     (68,667)       33,787
Shinhan BNP Paribas ITMC............................        25         (15)           10
Jeju Bank(*)........................................    26,952       2,366        29,318
Jeju Bank (Trust account)...........................       153         (11)          142
                                                      --------     -------     ---------
  Total(***)........................................  W781,428      24,245       805,673
                                                      ========     =======     =========
</Table>

- ---------------
(*)   Amounts include additional allowance for loan losses of W12,952 million as
      of December 31, 2002.

(**)  Allowance for loan losses of Shinhan Securities Co., Ltd. considered
      before to merger.

(***) Allowance for losses on other assets is included.

(7)  FIXED ASSETS

     Fixed assets as of June 30, 2003 and December 31, 2002 consist of the
following:

<Table>
<Caption>
                                                 WON             U.S. DOLLARS (NOTE 2)
                                        ----------------------   ----------------------
                                           2003        2002         2003        2002
                                        ----------   ---------   ----------   ---------
<S>                                     <C>          <C>         <C>          <C>
Tangible assets:
  Land................................  W  346,722     346,538   $  290,606     290,452
  Buildings...........................     467,967     465,484      392,228     390,147
  Other...............................     520,916     571,048      436,607     478,625
  Less: accumulated depreciation......    (439,414)   (455,839)    (368,296)   (382,063)
                                        ----------   ---------   ----------   ---------
                                           896,191     927,231      751,145     777,161
                                        ----------   ---------   ----------   ---------
Intangible assets:
  Goodwill............................     153,040     161,542      128,271     135,397
  Negative goodwill...................      (5,998)     (6,340)      (5,027)     (5,314)
  Other...............................      14,073      11,365       11,795       9,526
                                        ----------   ---------   ----------   ---------
                                           161,115     166,567      135,039     139,609
                                        ----------   ---------   ----------   ---------
Other fixed assets....................          46          46           39          39
                                        ----------   ---------   ----------   ---------
                                        W1,057,352   1,093,844   $  886,223     916,809
                                        ==========   =========   ==========   =========
</Table>

                                       F-87
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The officially declared value of land used in domestic branches at June 30,
2003 and December 31, 2002, as announced by the Minister of Construction and
Transportation, is as follows:

<Table>
<Caption>
                                              BOOK VALUE             DECLARED VALUE
                                        ----------------------   ----------------------
                                           2003        2002         2003        2002
                                        ----------   ---------   ----------   ---------
<S>                                     <C>          <C>         <C>          <C>
Land (Domestic only)..................  W  346,029     345,832      264,320     261,145
</Table>

     The officially declared value, which is used for government purposes, does
not represent the fair value.

(8)  OTHER ASSETS

     Other assets as of June 30, 2003 and December 31, 2002 consist of the
following:

<Table>
<Caption>
                                                 WON             U.S. DOLLARS (NOTE 2)
                                        ----------------------   ----------------------
                                           2003        2002         2003        2002
                                        ----------   ---------   ----------   ---------
<S>                                     <C>          <C>         <C>          <C>
Accounts receivable...................  W1,383,903     572,367   $1,159,922     479,731
Advance payments......................      13,525      11,623       11,336       9,742
Prepaid expenses......................      40,088      24,863       33,600      20,839
Prepaid income taxes..................      10,383       3,268        8,703       2,739
Accrued income........................     481,415     465,144      403,499     389,862
Operating lease assets................     155,026     177,678      129,935     148,921
Less: accumulated depreciation........     (64,318)    (79,247)     (53,908)    (66,421)
      allowance for losses............        (169)       (147)        (142)       (123)
Guarantee deposits paid...............     458,446     454,956      384,248     381,323
Deferred tax assets...................      79,285     102,052       66,453      85,535
Derivative assets.....................     227,287     120,443      190,501     100,949
Other.................................     507,233     295,409      425,139     247,598
                                        ----------   ---------   ----------   ---------
                                         3,292,104   2,148,409    2,759,286   1,800,695
Less: allowance for losses............     (19,199)    (19,753)     (16,092)    (16,556)
      present value discounts.........        (593)       (614)        (497)       (515)
                                        ----------   ---------   ----------   ---------
                                        W3,272,312   2,128,042   $2,742,697   1,783,624
                                        ==========   =========   ==========   =========
</Table>

                                       F-88
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9)  LEASE ASSETS

  (A) OPERATING LEASE ASSETS

     Operating lease assets classified by industry as of June 30, 2003 and
December 31, 2002 are as follows:

<Table>
<Caption>
                                                                2003      2002
                                                              --------   -------
<S>                                                           <C>        <C>
Mining......................................................  W  4,473     7,603
Manufacturing:
  Food and beverages........................................     4,061    14,678
  Clothing and fabrics......................................     4,966     5,580
  Paper and publishing......................................    11,248    25,654
  Chemicals.................................................    18,202    21,296
  Mining....................................................     1,094     1,236
  Metal.....................................................       138       214
  Electrical components and equipment.......................    11,784     7,658
  Other manufacturing.......................................     2,883     8,317
                                                              --------   -------
                                                                54,376    84,633
Energy and gas..............................................    15,255    14,302
Construction................................................     4,697     2,637
Retail/wholesale and lodging................................     7,381     6,236
Transportation and containers...............................    20,598    20,507
Banking, insurance and other financing......................       530        77
Medical.....................................................    14,563    14,266
Public and consumer services................................    33,153    27,417
                                                              --------   -------
                                                               155,026   177,678
Less: accumulated depreciation..............................   (64,318)  (79,247)
     allowance for losses on disposition of lease assets....      (169)     (147)
                                                              --------   -------
                                                              W 90,539    98,284
                                                              ========   =======
</Table>

     (b) The collection schedule of future lease receivables as of June 30,
2003, is as follows:

<Table>
<Caption>
                                                         OPERATING   FINANCING
                                                           LEASE       LEASE      TOTAL
                                                         ---------   ---------   -------
<S>                                                      <C>         <C>         <C>
Jul. 1, 2003 - Jun. 30, 2004...........................   W43,815     255,183    298,998
Jul. 1, 2004 - Jun. 30, 2005...........................    27,572     207,139    234,711
Jul. 1, 2005 - Jun. 30, 2006...........................     9,556     143,071    152,627
Jul. 1, 2006 - Jun. 30, 2007...........................     2,160      58,409     60,569
  Thereafter...........................................     1,489      52,254     53,743
                                                          -------     -------    -------
                                                           84,592     716,056    800,648
Unrealized interest income on financing lease..........        --     (75,440)   (75,440)
                                                          -------     -------    -------
                                                          W84,592     640,616    725,208
                                                          =======     =======    =======
</Table>

                                       F-89
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(10)  DEPOSITS

     (a) Deposits as of June 30, 2003 and December 31, 2002 consist of the
following:

<Table>
<Caption>
                                              WON               U.S. DOLLARS (NOTE 2)
                                    ------------------------   ------------------------
                                       2003          2002         2003          2002
                                    -----------   ----------   -----------   ----------
<S>                                 <C>           <C>          <C>           <C>
Korean Won deposits...............  W35,179,444   33,851,353   $29,485,746   28,372,603
Foreign currency deposits.........    3,208,355    2,094,331     2,689,092    1,755,369
Negotiable certificates of
  deposits........................    4,079,655    2,776,649     3,419,374    2,327,256
                                    -----------   ----------   -----------   ----------
                                    W42,467,454   38,722,333   $35,594,212   32,455,228
                                    ===========   ==========   ===========   ==========
</Table>

     (b) The maturities of deposits by remaining period as of June 30, 2003 is
as follows:

<Table>
<Caption>
                                                       FOREIGN     NEGOTIABLE
                                        KOREAN WON    CURRENCY    CERTIFICATES
REMAINING PERIOD (AS OF JUNE 30, 2003)   DEPOSITS     DEPOSITS    OF DEPOSITS      TOTAL
- --------------------------------------  -----------   ---------   ------------   ----------
<S>                                     <C>           <C>         <C>            <C>
Due within 3 months..................   W10,865,147   1,968,749    1,909,711     14,743,607
3 months - 6 months..................     4,082,107     428,565    1,707,089      6,217,761
6 months - 1 year....................     8,762,473     315,915      391,756      9,470,144
1 - 3 years..........................     2,545,203     495,126       71,099      3,111,428
Thereafter...........................     8,924,514          --           --      8,924,514
                                        -----------   ---------    ---------     ----------
                                        W35,179,444   3,208,355    4,079,655     42,467,454
                                        ===========   =========    =========     ==========
</Table>

<Table>
<Caption>
                                                           FOREIGN     NEGOTIABLE
                                            KOREAN WON    CURRENCY    CERTIFICATES
REMAINING PERIOD (AS OF DECEMBER 31, 2002)  DEPOSITS(*)   DEPOSITS    OF DEPOSITS     TOTAL(*)
- ------------------------------------------  -----------   ---------   ------------   ----------
<S>                                         <C>           <C>         <C>            <C>
Due within 3 months....................     W10,113,071   1,101,437    1,719,391     12,933,899
3 months - 6 months....................       3,781,970     333,393      883,531      4,998,894
6 months - 1 year......................       9,132,488     304,313      115,654      9,552,455
1 - 3 years............................       2,084,954     355,188       58,073      2,498,215
Thereafter.............................       8,723,824          --           --      8,723,824
                                            -----------   ---------    ---------     ----------
                                            W33,836,307   2,094,331    2,776,649     38,707,287
                                            ===========   =========    =========     ==========
</Table>

- ---------------
(*) Excluding W15,046 million of deposits in Jeju Bank's trust accounts

                                       F-90
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(11)  BORROWINGS

     (a) Borrowings as of June 30, 2003 and December 31, 2002 consist of the
following:

<Table>
<Caption>
                                                WON               U.S. DOLLARS (NOTE 2)
                                      ------------------------   -----------------------
                                         2003          2002         2003         2002
                                      -----------   ----------   -----------   ---------
<S>                                   <C>           <C>          <C>           <C>
Borrowings in Won...................  W 2,742,569    1,900,616   $ 2,298,692   1,593,006
Borrowings in foreign currencies....    4,781,448    4,670,846     4,007,584   3,914,882
Bonds sold with repurchase
  agreements........................    4,211,284    4,300,609     3,529,699   3,604,567
Bills sold..........................      639,187      206,965       535,736     173,468
Due to the Bank of Korea in foreign
  currencies........................       64,749       75,285        54,269      63,100
Call money..........................    1,485,542      197,493     1,245,111     165,529
                                      -----------   ----------   -----------   ---------
                                      W13,924,779   11,351,814   $11,671,091   9,514,552
                                      ===========   ==========   ===========   =========
</Table>

     (b) Details of subordinated borrowings as of June 30, 2003 and December 31,
2002 are as follows:

<Table>
<Caption>
                                                              INTEREST
LENDER                             PERIOD OF CONTRACT         RATE (%)     2003      2002
- ------                             ------------------         --------   --------   ------
<S>                           <C>                             <C>        <C>        <C>
Hungkuk Life Insurance......  Dec. 31, 1997 - Dec. 31, 2007     7.0      W 40,000   40,000
Kyobo Life Insurance........  Jun. 30, 1998 - Jun 30, 2008      5.5        30,000   30,000
                                                                         --------   ------
                                                                         W 70,000   70,000
                                                                         ========   ======
</Table>

     (c) The maturities of borrowings as of June 30, 2003 and December 31, 2002
are as follows:

<Table>
<Caption>
                                                     BORROWINGS
                                        BORROWINGS   IN FOREIGN
REMAINING PERIOD (AS OF JUNE 30, 2003)    IN WON     CURRENCIES     OTHER       TOTAL
- --------------------------------------  ----------   ----------   ---------   ----------
<S>                                     <C>          <C>          <C>         <C>
Due within 3 months...................  W1,662,066   2,538,143    3,570,733    7,770,942
3 months - 6 months...................     168,067   1,206,225      980,148    2,354,440
6 months - 1 year.....................      49,653     505,830    1,302,979    1,858,462
1 - 3 years...........................     195,491     510,653      545,452    1,251,596
Thereafter............................     667,292      20,597        1,450      689,339
                                        ----------   ---------    ---------   ----------
                                        W2,742,569   4,781,448    6,400,762   13,924,779
                                        ==========   =========    =========   ==========
</Table>

<Table>
<Caption>
                                                         BORROWINGS
                                            BORROWINGS   IN FOREIGN
REMAINING PERIOD (AS OF DECEMBER 31, 2002)    IN WON     CURRENCIES     OTHER       TOTAL
- ------------------------------------------  ----------   ----------   ---------   ----------
<S>                                         <C>          <C>          <C>         <C>
Due within 3 months.....................    W  808,083   2,000,221    2,347,348    5,155,652
3 months - 6 months.....................        41,731   1,029,718    1,223,431    2,294,880
6 months - 1 year.......................        89,700   1,004,765      799,335    1,893,800
1 - 3 years.............................       283,406     610,921      406,991    1,301,318
Thereafter..............................       677,696      25,221        3,247      706,164
                                            ----------   ---------    ---------   ----------
                                            W1,900,616   4,670,846    4,780,352   11,351,814
                                            ==========   =========    =========   ==========
</Table>

                                       F-91
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(12)  DEBENTURES

     (a) Debentures as of June 30, 2003 and December 31, 2002 consist of the
following:

<Table>
<Caption>
                                                 WON             U.S. DOLLARS (NOTE 2)
                                       -----------------------   ----------------------
                                          2003         2002         2003        2002
                                       -----------   ---------   ----------   ---------
<S>                                    <C>           <C>         <C>          <C>
Korean Won debentures................  W 9,768,877   8,331,629   $8,187,811   6,983,177
Foreign currency debentures..........      397,856     469,236      333,464     393,291
                                       -----------   ---------   ----------   ---------
                                        10,166,733   8,800,865    8,521,275   7,376,468
Less: discounts on debentures........     (458,414)   (405,462)    (384,221)   (339,839)
                                       -----------   ---------   ----------   ---------
                                       W 9,708,319   8,395,403   $8,137,054   7,036,629
                                       ===========   =========   ==========   =========
</Table>

     (b) Details of Korean Won debentures as of June 30, 2003 and December 31,
2002 are as follows:

<Table>
<Caption>
                                            2003                        2002
                                  -------------------------   -------------------------
                                                 INTEREST                    INTEREST
                                  FACE VALUE     RATE (%)     FACE VALUE     RATE (%)
                                  ----------   ------------   ----------   ------------
<S>                               <C>          <C>            <C>          <C>
Discounted debenture............  W3,670,000   4.34 - 5.04    W3,910,000   4.01 - 6.00
Coupon debenture................   3,970,000   4.65 - 7.47     2,674,425   5.25 - 8.20
Debenture with stock
  warrants(*)...................     299,064      15.00          299,064      15.00
Subordinated debenture..........   1,810,443   5.25 - 15.13    1,432,172   6.23 - 15.13
                                  ----------                  ----------
                                   9,749,507                   8,315,661
Add: loss on fair value hedge...      19,370                      15,968
                                  ----------                  ----------
                                  W9,768,877                  W8,331,629
                                  ==========                  ==========
</Table>

- ---------------

(*) This debenture represents non-guaranteed and non-separable debenture with
    stock warrants issued on December 2, 1998 at 15% of compound interest with
    an exercise price of W5,000 per share. In respect of the debentures, the
    Bank recorded W298,520 million and W298,539 million of discount on
    debentures as of June 30, 2003 and December 31, 2002, respectively. The
    exercise period will expire on December 2, 2003 and these debenture will
    mature on December 2, 2048.

     (c) Details of foreign currency debentures as of June 30, 2003 and December
31, 2002 are as follows:

<Table>
<Caption>
                                              2003                                   2002
                              ------------------------------------   ------------------------------------
                              U.S. DOLLARS   EQUIVALENT   INTEREST   U.S. DOLLARS   EQUIVALENT   INTEREST
                                (NOTE 2)        WON       RATE (%)     (NOTE 2)        WON       RATE (%)
                              ------------   ----------   --------   ------------   ----------   --------
<S>                           <C>            <C>          <C>        <C>            <C>          <C>
MTN(*)......................    $295,000      W362,063    1.59 - 4     $354,000      W433,224    4/L+0.2
Non-guaranteed debenture....      30,000        35,793     L+0.85        30,000        36,012    L+0.85
                                --------      --------                 --------      --------
                                $325,000      W397,856                 $384,000      W469,236
                                ========      ========                 ========      ========
</Table>

                                       F-92
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

(*) Shinhan Bank established two programs with Merrill Lynch International
    Limited and other four financial institutions to issue Euro Medium Term Note
    (EMTN) on November 9, 1995 and Global Medium Term Note (GMTN) on August 20,
    1999. Details of the programs are as follows:

<Table>
    <S>                                <C>
    Total amount which can be issued:  US $2,000,000
    Place of trading:                  London Stock Exchange
    Issue price:                       Face value or discounted value
    Maturity date and interest date:   Various depending on date of issuance
    Repayment:                         Maturity date
    Additionally, valuation gain (loss) on derivatives is included in equivalent Won amount.
</Table>

     (d) The maturities of debentures by remaining period as of June 30, 2003
and December 31, 2002 are as follows:

<Table>
<Caption>
                                                                 FOREIGN
                                                   KOREAN WON    CURRENCY
REMAINING PERIOD (AS OF JUNE 30, 2003)             DEBENTURES   DEBENTURES     TOTAL
- --------------------------------------             ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Due within 3 months..............................  W  980,231         --        980,231
3 months - 6 months..............................   1,210,000         --      1,210,000
6 months - 1 year................................   2,450,000    113,345      2,563,345
1 - 3 years......................................   2,789,370    284,511      3,073,881
Thereafter.......................................   2,339,276         --      2,339,276
                                                   ----------    -------     ----------
                                                   W9,768,877    397,856     10,166,733
                                                   ==========    =======     ==========
</Table>

<Table>
<Caption>
                                                                  FOREIGN
                                                    KOREAN WON    CURRENCY
REMAINING PERIOD (AS OF DECEMBER 31, 2002)          DEBENTURES   DEBENTURES     TOTAL
- ------------------------------------------          ----------   ----------   ---------
<S>                                                 <C>          <C>          <C>
Due within 3 months...............................  W1,514,887         --     1,514,887
3 months - 6 months...............................     536,807         --       536,807
6 months - 1 year.................................   2,138,065    193,144     2,331,209
1 - 3 years.......................................   2,042,179    276,092     2,318,271
Thereafter........................................   2,099,691         --     2,099,691
                                                    ----------    -------     ---------
                                                    W8,331,629    469,236     8,800,865
                                                    ==========    =======     =========
</Table>

                                       F-93
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(13)  RETIREMENT AND SEVERANCE BENEFITS

     Changes in retirement and severance benefits for the six-months ended June
30, 2003 and the year ended December 31, 2002 are as follows:

<Table>
<Caption>
                                                     WON           U.S. DOLLARS (NOTE 2)
                                              ------------------   ----------------------
                                                2003      2002        2003        2002
                                              --------   -------   ----------   ---------
<S>                                           <C>        <C>       <C>          <C>
Beginning balance...........................  W225,188   192,465    $188,742     161,315
Adjustment due to consolidation scope.......        --    15,838          --      13,275
Adjustment due to foreign exchange rate.....        (7)       (7)         (6)         (6)
Payment.....................................   (11,435)  (56,765)     (9,585)    (47,578)
Provision...................................    30,902    73,657      25,901      61,736
                                              --------   -------    --------     -------
Ending balance..............................   244,648   225,188     205,052     188,742
Less: contribution to National Pension
      Fund..................................   (59,818)  (56,802)    (50,136)    (47,609)
      deposit for severance benefit
      insurance.............................    (8,410)   (8,867)     (7,049)     (7,432)
                                              --------   -------    --------     -------
                                              W176,420   159,519    $147,867     133,701
                                              ========   =======    ========     =======
</Table>

(14)  OTHER LIABILITIES

     Other liabilities as of June 30, 2003 and December 31, 2002 consist of the
following:

<Table>
<Caption>
                                                 WON             U.S. DOLLARS (NOTE 2)
                                        ----------------------   ----------------------
                                           2003        2002         2003        2002
                                        ----------   ---------   ----------   ---------
<S>                                     <C>          <C>         <C>          <C>
Allowance for losses on guarantees and
  acceptances.........................  W   16,341       3,659   $   13,696       3,067
Other allowances......................      30,306      30,716       25,401      25,745
Borrowings from trust accounts........     281,329     278,578      235,797     233,491
Foreign exchange remittances
  pending.............................     142,731     158,937      119,631     133,213
Securities sold.......................     232,462          --      194,839          --
Accounts payable......................   1,127,815     539,108      945,281     451,855
Accrued expenses......................   1,139,455   1,108,373      955,037     928,986
Income tax payable....................      17,478     172,343       14,649     144,450
Dividend payable......................       2,073       2,629        1,738       2,204
Advance receipts......................       3,355       6,056        2,812       5,076
Unearned revenues.....................      89,403      87,414       74,934      73,266
Taxes withheld........................      36,106      76,096       30,262      63,780
Guarantee deposits received...........     195,713     149,729      164,037     125,496
Derivatives liabilities...............     222,623     112,677      186,592      94,441
Deferred tax liabilities..............          72         262           60         220
Guarantee deposits for subscription...       6,801       4,945        5,700       4,145
Miscellaneous.........................     967,166   1,445,637      810,633   1,211,665
                                        ----------   ---------   ----------   ---------
                                        W4,511,229   4,177,159   $3,781,099   3,501,100
                                        ==========   =========   ==========   =========
</Table>

                                       F-94
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(15)  GUARANTEES AND ACCEPTANCES

     (a) The guarantees and acceptances as of June 30, 2003 and December 31,
2002 are as follows:

<Table>
<Caption>
                                                                 2003        2002
                                                              ----------   ---------
<S>                                                           <C>          <C>
GUARANTEES AND ACCEPTANCES OUTSTANDING
  Guarantees and acceptances in Won:
     Guarantees for contract performance....................  W  126,379      99,936
     Guarantees on loan collaterals.........................      44,081      54,660
     Guarantees on debentures...............................      15,872      15,900
     Other..................................................     346,907     273,656
                                                              ----------   ---------
                                                                 533,239     444,152
                                                              ----------   ---------
  Guarantees and acceptances in foreign currencies:
     Acceptances on letters of credit.......................     420,046     408,397
     Acceptances for letters of guarantee for importers.....     109,087     101,381
     Other..................................................     407,455     390,264
                                                              ----------   ---------
                                                                 936,588     900,042
                                                              ----------   ---------
CONTINGENT GUARANTEES AND ACCEPTANCES
  Letters of credit.........................................   1,557,512   1,939,913
  Other.....................................................     240,038     271,163
                                                              ----------   ---------
                                                               1,797,550   2,211,076
                                                              ----------   ---------
                                                              W3,267,377   3,555,270
                                                              ==========   =========
</Table>

     (b) Outstanding commitments as of June 30, 2003 and December 31, 2002 are
as follows:

<Table>
<Caption>
                                                                 2003        2002
                                                              ----------   ---------
<S>                                                           <C>          <C>
Commitments for loans in Won................................  W3,718,070   2,213,114
Commitments for loans in foreign currencies.................      81,866     153,891
Other commitments in foreign currencies.....................      89,777      72,098
                                                              ----------   ---------
                                                              W3,889,713   2,439,103
                                                              ==========   =========
</Table>

                                       F-95
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (c) The guarantees and acceptances provided by country as of June 30, 2003
and December 31, 2002 are as follows:

<Table>
<Caption>
                                                         2003
                       ------------------------------------------------------------------------
                        GUARANTEES AND ACCEPTANCES OUTSTANDING IN
                       -------------------------------------------   CONTINGENT GUARANTEES AND
                               WON             FOREIGN CURRENCIES           ACCEPTANCES
                       --------------------   --------------------   --------------------------
                       BALANCE    RATIO (%)   BALANCE    RATIO (%)     BALANCE       RATIO (%)
                       --------   ---------   --------   ---------   ------------   -----------
<S>                    <C>        <C>         <C>        <C>         <C>            <C>
Korea................  W533,239    100.00     W870,219      92.9      W1,701,122        94.63
U.S.A. ..............        --        --       42,479      4.54          50,204         2.79
Japan................        --        --       20,480      2.19          24,879         1.38
U.K. ................        --        --        1,973      0.21           5,845         0.33
China................        --        --          704      0.08           4,774         0.27
Vietnam..............        --        --          733      0.08          10,305         0.57
Australia............        --        --           --        --               5           --
German...............        --        --           --        --              32           --
Other................        --        --           --        --             384         0.03
                       --------    ------     --------    ------      ----------       ------
                       W533,239    100.00     W936,588    100.00      W1,797,550       100.00
                       ========    ======     ========    ======      ==========       ======
</Table>

<Table>
<Caption>
                                                         2002
                       ------------------------------------------------------------------------
                        GUARANTEES AND ACCEPTANCES OUTSTANDING IN
                       -------------------------------------------   CONTINGENT GUARANTEES AND
                               WON             FOREIGN CURRENCIES           ACCEPTANCES
                       --------------------   --------------------   --------------------------
                       BALANCE    RATIO (%)   BALANCE    RATIO (%)     BALANCE       RATIO (%)
                       --------   ---------   --------   ---------   ------------   -----------
<S>                    <C>        <C>         <C>        <C>         <C>            <C>
Korea................  W444,152    100.00     W859,427     95.49      W2,073,762        93.79
U.S.A. ..............        --        --          193      0.02         102,108         4.62
Japan................        --        --       36,844      4.09          23,105         1.04
U.K. ................        --        --        1,926      0.21              28         0.00
China................        --        --          666      0.07           1,158         0.05
Vietnam..............        --        --          685      0.08           9,176         0.42
Australia............        --        --          140      0.02             758         0.03
German...............        --        --           16      0.00             661         0.03
Other................        --        --          145      0.02             320         0.01
                       --------    ------     --------    ------      ----------       ------
                       W444,152    100.00     W900,042    100.00      W2,211,076       100.00
                       ========    ======     ========    ======      ==========       ======
</Table>

     (d) The guarantees and acceptances provided by consumer as of June 30, 2003
and December 31, 2002 are as follows:

<Table>
<Caption>
                                                            2003
                          ------------------------------------------------------------------------
                           GUARANTEES AND ACCEPTANCES OUTSTANDING IN
                          -------------------------------------------   CONTINGENT GUARANTEES AND
                                  WON             FOREIGN CURRENCIES           ACCEPTANCES
                          --------------------   --------------------   --------------------------
                          BALANCE    RATIO (%)   BALANCE    RATIO (%)     BALANCE       RATIO (%)
                          --------   ---------   --------   ---------   ------------   -----------
<S>                       <C>        <C>         <C>        <C>         <C>            <C>
Corporate...............  W522,875     98.06     W936,341     99.97      W1,731,296        96.32
Household...............    10,364      1.94          246      0.03             747         0.04
Public and other........        --        --            1        --          65,507         3.64
                          --------    ------     --------    ------      ----------       ------
                          W533,239    100.00     W936,588    100.00      W1,797,550       100.00
                          ========    ======     ========    ======      ==========       ======
</Table>

                                       F-96
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                            2002
                          ------------------------------------------------------------------------
                           GUARANTEES AND ACCEPTANCES OUTSTANDING IN
                          -------------------------------------------   CONTINGENT GUARANTEES AND
                                  WON             FOREIGN CURRENCIES           ACCEPTANCES
                          --------------------   --------------------   --------------------------
                          BALANCE    RATIO (%)   BALANCE    RATIO (%)     BALANCE       RATIO (%)
                          --------   ---------   --------   ---------   ------------   -----------
<S>                       <C>        <C>         <C>        <C>         <C>            <C>
Corporate...............  W443,121     99.77     W899,765     99.97      W2,109,180        95.39
Household...............       959      0.22          235      0.03             540         0.02
Public and other........        72      0.02           42        --         101,356         4.58
                          --------    ------     --------    ------      ----------       ------
                          W444,152    100.00     W900,042    100.00      W2,211,076       100.00
                          ========    ======     ========    ======      ==========       ======
</Table>

     (e) The allowances for losses on guarantees and acceptances provided
according to the same credit risk classifications on loans as of June 30, 2003
and December 31, 2002 are as follows:

<Table>
<Caption>
                                                                    2003
                                ----------------------------------------------------------------------------
                                 NORMAL    PRECAUTIONARY   SUBSTANDARD   DOUBTFUL   ESTIMATED LOSS    TOTAL
                                --------   -------------   -----------   --------   --------------   -------
<S>                             <C>        <C>             <C>           <C>        <C>              <C>
GUARANTEES AND ACCEPTANCES
  IN WON
Balance.......................  W520,920      10,948            835         365            171       533,239
Allowances....................        --          --            169         347            171           687
                                --------      ------         ------       -----         ------       -------
Ratio (%).....................        --          --          20.00       95.00         100.00          0.13
                                ========      ======         ======       =====         ======       =======
GUARANTEES AND ACCEPTANCES
  IN FOREIGN CURRENCIES
Balance.......................  W847,344      12,639         76,189          --            416       936,588
Allowances....................        --          --         15,238          --            416        15,654
                                --------      ------         ------       -----         ------       -------
Ratio (%).....................        --          --          20.00       95.00         100.00          1.67
                                ========      ======         ======       =====         ======       =======
</Table>

<Table>
<Caption>
                                                                    2002
                                ----------------------------------------------------------------------------
                                 NORMAL    PRECAUTIONARY   SUBSTANDARD   DOUBTFUL   ESTIMATED LOSS    TOTAL
                                --------   -------------   -----------   --------   --------------   -------
<S>                             <C>        <C>             <C>           <C>        <C>              <C>
GUARANTEES AND ACCEPTANCES
  IN WON
Balance.......................  W435,180       7,349          1,274         208            141       444,152
Allowances....................        --          --            255         199            141           594
                                --------      ------          -----       -----         ------       -------
Ratio (%).....................        --          --          20.00       95.00         100.00          0.13
                                ========      ======          =====       =====         ======       =======
GUARANTEES AND ACCEPTANCES
  IN FOREIGN CURRENCIES
Balance.......................  W874,397      15,150          9,211       1,257             27       900,042
Allowances....................        --          --          1,842       1,195             27         3,064
                                --------      ------          -----       -----         ------       -------
Ratio (%).....................        --          --          20.00       95.00         100.00          0.34
                                ========      ======          =====       =====         ======       =======
</Table>

                                       F-97
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(16)  PLEDGED ASSETS

     Assets pledged as collateral as of June 30, 2003 and December 31, 2002 are
summarized as follows:

<Table>
<Caption>
ACCOUNTS                    2003        2002     RELATED TRANSACTIONS FOR
- --------                 ----------   ---------  ------------------------
<S>                      <C>          <C>        <C>
Cash and due from
  banks................  W    7,702       9,465  Credit card loans and beneficiary certificates
Securities.............   1,773,542   1,515,725  Borrowings, derivatives and settlements
Land and buildings.....     203,202          --  Collaterals
                         ----------   ---------
                         W1,984,446   1,525,190
                         ==========   =========
</Table>

(17)  INSURED ASSETS

     Insured assets as of June 30, 2003 are summarized as follows:

<Table>
<Caption>
ASSETS INSURED                                                  2003      2002
- --------------                                                --------   -------
<S>                                                           <C>        <C>
Cash........................................................  W 12,380    12,350
Tangible assets.............................................   605,086   544,195
Antiques....................................................    19,097    19,097
Other tangible assets.......................................    29,684    30,470
                                                              --------   -------
                                                              W666,247   606,112
                                                              ========   =======
</Table>

     In addition, the Company maintains fire insurance for its assets, key
employees' indemnity insurance, worker's compensation insurance for its
employees and other insurance policies covering loss and liability arising from
accidents.

(18)  FOREIGN CURRENCY DENOMINATED ASSETS AND LIABILITIES

     Assets and liabilities denominated in foreign currency as of June 30, 2003
and December 31, 2002 consist of the following:

<Table>
<Caption>
                                           FOREIGN CURRENCY          EQUIVALENT WON
                                        ----------------------   ----------------------
                                           2003        2002         2003        2002
                                        ----------   ---------   ----------   ---------
<S>                                     <C>          <C>         <C>          <C>
ASSETS:
  Cash and due from banks.............  $  225,750     165,158   W  269,343     198,256
  Securities..........................   1,013,393     774,519    1,209,080     929,733
  Loans...............................   6,778,671   6,139,577    8,087,631   7,369,949
  Other assets........................     119,830      43,554      142,969      52,283
                                        ----------   ---------   ----------   ---------
                                        $8,137,644   7,122,808   W9,709,023   8,550,221
                                        ==========   =========   ==========   =========
LIABILITIES:
  Deposits............................  $2,689,091   1,744,693   W3,208,355   2,094,331
  Borrowings..........................   4,381,038   4,147,803    5,227,016   4,979,021
  Debentures..........................     333,464     389,900      397,856     469,236
  Other liabilities...................     157,066     151,299      187,397     181,618
                                        ----------   ---------   ----------   ---------
                                        $7,560,659   6,433,695   W9,020,624   7,724,206
                                        ==========   =========   ==========   =========
</Table>

                                       F-98
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(19)  CONSOLIDATED CAPITAL ADJUSTMENTS

     Consolidated capital adjustments as of June 30, 2003 and December 31, 2002
consist of the following:

<Table>
<Caption>
                                                   WON            U.S. DOLLARS (NOTE 2)
                                           --------------------   ----------------------
                                             2003        2002        2003        2002
                                           ---------   --------   ----------   ---------
<S>                                        <C>         <C>        <C>          <C>
Treasury stock...........................  W(391,300)  (391,300)  $(327,969)   (327,969)
Unrealized loss on securities:
  Available-for-sale securities..........     10,498      6,065       8,799       5,083
  Investment securities by the equity
     method..............................         26         26          22          22
Stock options: (note 20)
  Options granted by the Company.........      5,753      3,004       4,822       2,518
  Options granted by the subsidiaries....        300        (99)        251         (83)
Cumulative effects on foreign currency
  translation adjustments................      2,101      2,507       1,761       2,101
                                           ---------   --------   ---------    --------
                                           W(372,622)  (379,797)  $(312,314)   (318,328)
                                           =========   ========   =========    ========
</Table>

     Above treasury stock is the Company's stock (29,873 thousand shares and
29,874 thousand shares as of June 30, 2003 and December 31, 2002, respectively)
possessed by Shinhan Bank, and it is planned to be disposed of in the near
future.

(20)  STOCK OPTIONS

     The stock options consist of the Company's stock options which were granted
to the personnel of the Company and its subsidiaries, and the subsidiaries'
stock options which were granted to the personnel of the subsidiaries. As of
June 30, 2003, details of the stock options granted by the Company under a
resolution at the Board of Directors' meeting are as follows:

     (a) Details of the Company's stock options

<Table>
<S>                      <C>                                <C>
Grant date.............            May 22, 2002                       May 15, 2003
Shares granted.........          1,004,200 shares                   1,156,300 shares
Share expired to                   35,298 shares                           --
  date.................
Shares outstanding.....           968,902 shares                    1,156,300 shares
Type of stock            Stock grant or price compensation  Stock grant or price compensation
  options..............
Exercise price (Won)...               W18,910                            W11,800
Exercise period........  Within 4 years after 2 years from  Within 4 years after 2 years from
                                    grant date                         grant date
Forfeited period.......    after 6 years from grant date      after 6 years from grant date
</Table>

                                       F-99
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (b) The Company calculated the compensation expenses using the fair value
         method for stock grant and details are as follows:

<Table>
<Caption>
GRANT DATE                                                 MAY 22, 2002   MAY 15, 2003
- ----------                                                 ------------   ------------
<S>                                                        <C>            <C>
Risk-free interest rate..................................     6.43%          4.25%
Expected exercise period.................................    4 years        4 years
Expected stock price volatility..........................     27.13%         22.11%
Expected dividend yield..................................       0%             0%
Expected ratios of no-exercise...........................       0%             0%
Weighted average fair value (Won)........................     W9,812         W5,292
</Table>

     (c) Changes in stock compensation expense for the six-months ended June 30,
2003 are as follows:

<Table>
<Caption>
                                                            PERSONNEL OF   PERSONNEL OF
GRANT DATE             STOCK COMPENSATION EXPENSE           THE COMPANY    SUBSIDIARIES   TOTAL
- ----------             --------------------------           ------------   ------------   -----
<S>                    <C>                                  <C>            <C>            <C>
May 22, 2002.........  Recorded at beginning of the            W  643         2,361       3,004
                       period
                       Incurred during the period                 480         1,876       2,356
                       To be recorded in subsequent               697         3,450       4,147
                       periods
May 15, 2003.........  Recorded at beginning of the                --            --          --
                       period
                       Incurred during the period                  90           303         393
                       To be recorded in subsequent             1,310         4,416       5,726
                       periods
</Table>

                                      F-100
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(21)  OTHER OPERATING INCOME (EXPENSES)

     Other operating income (expenses) for the quarter and six-months ended June
30, 2003 and 2002 consist of the following:

<Table>
<Caption>
                                                       WON                    U.S. DOLLARS (NOTE 2)
                                       ------------------------------------   ---------------------
                                        QUARTER ENDED     SIX-MONTHS ENDED    QUARTER    SIX-MONTHS
                                           JUNE 30,           JUNE 30,         ENDED       ENDED
                                       ----------------   -----------------   JUNE 30,    JUNE 30,
                                        2003      2002     2003      2002       2003        2003
                                       -------   ------   -------   -------   --------   ----------
<S>                                    <C>       <C>      <C>       <C>       <C>        <C>
OTHER OPERATING INCOME:
  Trust management commissions.......  W10,783   10,070   21,010    20,116    $ 9,038      17,610
  Gain on disposition of lease
     assets..........................    1,273      350    1,778     1,235      1,067       1,490
  Reversal of allowance for loan
     losses..........................        7       --    8,069        --          6       6,763
  Reversal of allowance for
     guarantees and acceptances......       --    1,376       --     4,413         --          --
  Reversal of other allowance........    1,021       --    1,163        --        856         975
  Reversal of negative goodwill......      171      343      343       343        143         287
  Other..............................      518      614    2,180     3,468        434       1,827
                                       -------   ------   ------    ------    -------      ------
                                       W13,773   12,753   34,543    29,575    $11,544      28,952
                                       =======   ======   ======    ======    =======      ======
OTHER OPERATING EXPENSES:
  Contributions to government
     funds...........................  W14,045   12,077   26,779    22,763    $11,772      22,445
  Provision for allowance for
     guarantees and acceptances......   12,682       --   12,682        --     10,629      10,629
  Provision for other allowance......       --       --       --        --         --          --
  Loss on disposition of lease
     assets..........................      759    1,039    2,100     1,642        636       1,760
  Depreciation on lease assets.......    8,282    6,351   16,544    12,629      6,942      13,866
  Trust management commissions.......       --       --    2,808        --         --       2,354
  Other..............................   16,018   15,309   31,698    24,605     13,426      26,568
                                       -------   ------   ------    ------    -------      ------
                                       W51,786   34,776   92,611    61,639    $43,405      77,622
                                       =======   ======   ======    ======    =======      ======
</Table>

                                      F-101
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(22)  GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses for the quarter and six-months ended
June 30, 2003 and 2002 consist of the following:

<Table>
<Caption>
                                                   WON                     U.S. DOLLARS (NOTE 2)
                                  --------------------------------------   ---------------------
                                    QUARTER ENDED      SIX-MONTHS ENDED    QUARTER    SIX-MONTHS
                                       JUNE 30,            JUNE 30,         ENDED       ENDED
                                  ------------------   -----------------   JUNE 30,    JUNE 30,
                                    2003      2002      2003      2002       2003        2003
                                  --------   -------   -------   -------   --------   ----------
<S>                               <C>        <C>       <C>       <C>       <C>        <C>
Salaries and wages..............  W 86,607    57,035   198,349   138,148   $ 72,590    166,247
Provision for retirement and
  severance benefits............     9,442     7,201    30,902    22,285      7,914     25,901
Other employee benefits.........    25,214    19,035    71,472    52,844     21,133     59,905
Rent............................     8,779     6,216    17,637    12,635      7,358     14,782
Entertainment...................     1,947     1,537     4,444     2,701      1,632      3,725
Depreciation....................    26,138    19,847    51,608    36,193     21,908     43,255
Amortization....................     5,801        40    11,461        78      4,862      9,606
Taxes and dues..................    10,262     6,856    19,466    14,010      8,601     16,315
Advertising.....................    11,007     8,116    19,781    15,448      9,225     16,580
Other...........................    41,503    31,365    78,314    54,139     34,786     65,639
                                  --------   -------   -------   -------   --------    -------
                                  W226,700   157,248   503,434   348,481   $190,009    421,955
                                  ========   =======   =======   =======   ========    =======
</Table>

(23)  OTHER NON-OPERATING INCOME (EXPENSES)

     Other non-operating income (expenses) for the quarter and six-months ended
June 30, 2003 and 2002 consist of the following:

<Table>
<Caption>
                                                       WON                    U.S. DOLLARS (NOTE 2)
                                       ------------------------------------   ---------------------
                                        QUARTER ENDED     SIX-MONTHS ENDED    QUARTER    SIX-MONTHS
                                           JUNE 30,           JUNE 30,         ENDED       ENDED
                                       ----------------   -----------------   JUNE 30,    JUNE 30,
                                        2003      2002     2003      2002       2003        2003
                                       -------   ------   -------   -------   --------   ----------
<S>                                    <C>       <C>      <C>       <C>       <C>        <C>
OTHER NON-OPERATING INCOME:
  Gain on sale of loans..............  W    --       --       --    11,636    $    --          --
  Gain on disposition of fixed
     assets..........................   28,496      250   28,573       271     23,884      23,948
  Rent...............................    2,832    1,586    5,279     2,744      2,373       4,425
  Other..............................   14,386   10,937   19,333    24,443     12,058      16,204
                                       -------   ------   ------    ------    -------      ------
                                       W45,714   12,773   53,185    39,094    $38,315      44,577
                                       =======   ======   ======    ======    =======      ======
OTHER NON-OPERATING EXPENSES:
  Loss on sale of loans..............       --       --       --     7,815         --          --
  Loss on disposition of fixed
     assets..........................      747      131    1,123       187        626         941
  Loss on redemption of debentures...       --       --       --       475         --          --
  Donation...........................       74       54      212        71         62         178
  Other..............................    8,424    7,613   25,134    12,439      7,060      21,066
                                       -------   ------   ------    ------    -------      ------
                                       W 9,245    7,798   26,469    20,987    $ 7,748      22,185
                                       =======   ======   ======    ======    =======      ======
</Table>

                                      F-102
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(24) INCOME TAXES

     (a) The Company is subject to income taxes based on taxable earnings which
result in the normal tax rate of 29.7%. The components of income taxes for the
quarter and six-months ended June 30, 2003 and 2002 are as follows:

<Table>
<Caption>
                                                     WON                    U.S. DOLLARS (NOTE 2)
                                     ------------------------------------   ---------------------
                                       QUARTER ENDED     SIX-MONTHS ENDED   QUARTER    SIX-MONTHS
                                         JUNE 30,            JUNE 30,        ENDED       ENDED
                                     -----------------   ----------------   JUNE 30,    JUNE 30,
                                      2003      2002      2003     2002       2003        2003
                                     -------   -------   ------   -------   --------   ----------
<S>                                  <C>       <C>       <C>      <C>       <C>        <C>
Current income taxes...............  W33,317    77,202   68,740   146,586   $27,925      57,615
Changes in deferred taxes:
  temporary differences............    3,174   (18,737)   7,038   (11,789)    2,660       5,899
  tax loss carryforwards...........     (288)     (205)  15,538       (55)     (241)     13,023
                                     -------   -------   ------   -------   -------      ------
                                     W36,203    58,260   91,316   134,742   $30,344      76,537
                                     =======   =======   ======   =======   =======      ======
</Table>

                                      F-103
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (b) Changes in significant accumulated temporary differences and tax
effects for the six-months ended June 30, 2003 and the year ended December 31,
2002 are as follows:

<Table>
<Caption>
                                                                 2003
                                               -----------------------------------------
                                               BEGINNING                         ENDING
                                                BALANCE    INCREASE   DECREASE   BALANCE
                                               ---------   --------   --------   -------
<S>                                            <C>         <C>        <C>        <C>
DEDUCTIBLE TEMPORARY DIFFERENCES:
  Securities.................................  W252,422     99,822      2,178    350,066
  Impairment loss on securities..............   278,886         --     35,198    243,688
  Unrealized loss on securities..............    19,897      4,245         --     24,142
  Retirement and severance benefits..........    68,295         --      2,647     65,648
  Bad debt expense...........................   160,954         --     65,426     95,528
  Stock compensation expense.................     2,347        693         --      3,040
  Allowance for losses on guarantees and
     acceptances.............................    35,359         --      4,768     30,591
  Other......................................    43,540     63,863     11,530     95,873
                                               --------    -------    -------    -------
                                                861,700    168,623    121,747    908,576
                                               --------    -------    -------    -------
TAXABLE TEMPORARY DIFFERENCES:
  Securities.................................    25,470      3,035        159     28,346
  Unrealized loan on securities..............   450,866     73,018     73,123    450,761
  Accrued income.............................   219,612     23,246         --    242,858
  Group retirement and severance benefits....    59,749         92         --     59,841
  Other......................................    16,326      4,438      1,455     19,309
                                               --------    -------    -------    -------
                                                772,023    103,829     74,737    801,115
                                               --------    -------    -------    -------
     Net.....................................    89,677     64,794     47,010    107,461
ADDITION/DEDUCTION
  Tax effects on Shinhan Card(*).............        --                           (3,004)
  Tax effects on Jeju Bank(*)................   (47,783)                          (5,798)
  Tax effects on SH&C Life Insurance(*)......       249                               16
  Unrealized gain from valuation by the
     equity method(**).......................   206,689                          126,460
                                               --------                          -------
Realizable temporary differences.............   248,832                          225,135
                                               --------                          -------
Tax effect of cumulative temporary
  difference.................................    73,903                           66,865
Tax effects of tax loss carryforwards........    27,886                           12,348
                                               --------                          -------
Net deferred tax assets(***).................  W101,789                           79,213
                                               ========                          =======
</Table>

- ---------------

  (*) Tax effects are not recognized due to uncertainty of realization in the
      near future.
 (**) W126,460 million of tax effects on valuation gain under the equity method
      are not recognized due to uncertainty of realization of deferred income
      taxes for each subsidiary.
(***) The amount consists of deferred tax asset of W79,285 million and deferred
      tax liability of W72 million.

                                      F-104
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                 2002
                                               -----------------------------------------
                                               BEGINNING                         ENDING
                                                BALANCE    INCREASE   DECREASE   BALANCE
                                               ---------   --------   --------   -------
<S>                                            <C>         <C>        <C>        <C>
DEDUCTIBLE TEMPORARY DIFFERENCES:
  Securities.................................  W  7,463        129         --      7,592
  Impairment loss on securities..............   162,392    116,494         --    278,886
  Unrealized loss securities.................   211,998     52,730         --    264,728
  Retirement and severance benefits..........       679     67,616         --     68,295
  Bad debt expense...........................   108,674     52,280         --    160,954
  Stock compensation expense.................     1,998        349         --      2,347
  Allowance for losses on guarantees and
     acceptances.............................    15,397     19,962         --     35,359
  Other......................................    69,293      5,725     31,478     43,540
                                               --------    -------    -------    -------
                                                577,894    315,285     31,478    861,701
                                               --------    -------    -------    -------
TAXABLE TEMPORARY DIFFERENCES:
  Securities.................................    17,074        277     12,008      5,343
  Unrealized gain on securities..............   489,255         --     38,388    450,867
  Accrued income.............................   333,979         --    114,367    219,612
  Group retirement and severance benefits....       106     59,643         --     59,749
  Other......................................    42,393     26,061     32,001     36,453
                                               --------    -------    -------    -------
                                                882,807     85,981    196,764    772,024
                                               --------    -------    -------    -------
     Net(*)..................................  (304,913)   229,304    (165,286)   89,677
ADDITION/DEDUCTION
  Tax effects on Jeju Bank(**)...............        --                          (47,783)
  Tax effects on SH&C Life Insurance(**).....        --                              249
  Unrealized gain from valuation by the
     equity method(***)......................   225,795                          206,689
                                               --------                          -------
Realizable temporary differences.............   (79,118)                         248,832
                                               --------                          -------
Tax effect of cumulative temporary
  difference.................................   (23,498)                          73,903
Tax effects of tax loss
  carryforwards(****)........................     7,877                           27,886
                                               --------                          -------
Net deferred tax assets
  (liabilities)(*****).......................  W(15,621)                         101,789
                                               ========                          =======
</Table>

- ---------------

    (*) Temporary differences arising from the acquisition of Jeju Bank and
        Goodmorning Shinhan Securities amounting to W10,884 million and W45,143
        million, respectively, are included.

   (**) Tax effects are not recognized due to uncertainty of realization in the
        near future.

  (***) W206,689 million of tax effects on valuation gain under the equity
        method are not recognized due to uncertainty of realization of deferred
        income taxes for each subsidiary.

 (****) Tax effects of tax loss carryforwards arising from the acquisition of
        Goodmorning Shinhan Securities amounting to W69,136 million is included.
(*****) The amount consists of deferred tax asset of W102,051 million and
        deferred tax liability of W262 million.

                                      F-105
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (c) Effective tax rates for the quarter and six-months ended June 30, 2003
and 2002 are as follows:

<Table>
<Caption>
                                                                        SIX-MONTHS ENDED
                                               QUARTER ENDED JUNE 30,       JUNE 30,
                                               ----------------------   -----------------
                                                  2003        2002       2003      2002
                                               ----------   ---------   -------   -------
<S>                                            <C>          <C>         <C>       <C>
Earnings before income taxes.................   W103,218     194,085    205,923   460,998
Income taxes.................................     36,203      58,260     91,316   134,742
                                                --------     -------    -------   -------
Effective income tax rate....................     35.07%      30.02%     44.34%    29.23%
                                                ========     =======    =======   =======
</Table>

(25)  EARNINGS PER SHARE

     Earnings per common share is calculated by dividing net earnings by the
weighted average number of shares of common stock outstanding. Earnings per
share for the quarter and six-months ended June 30, 2003 and 2002 are computed
as follows:

<Table>
<Caption>
                                            WON                    U.S. DOLLARS (NOTE 2)
                           -------------------------------------   ----------------------
                             QUARTER ENDED     SIX-MONTHS ENDED    QUARTER    SIX-MONTHS
                               JUNE 30,            JUNE 30,         ENDED        ENDED
                           -----------------   -----------------   JUNE 30,    JUNE 30,
                            2003      2002      2003      2002       2003        2003
                           -------   -------   -------   -------   --------   -----------
<S>                        <C>       <C>       <C>       <C>       <C>        <C>
Net earnings for
  period.................  W45,970   133,436   102,386   323,867   $38,530      85,815
Plus: extraordinary loss
  (gain).................       --      (458)       --      (443)       --          --
Less: income taxes on
  extraordinary loss
  (gain).................       --       136        --       132        --          --
                           -------   -------   -------   -------   -------      ------
Ordinary income..........   45,970   133,114   102,386   323,556    38,530      85,815
Weighted average number
  of shares outstanding
  (in million share).....      262       262       262       262       262         262
                           -------   -------   -------   -------   -------      ------
Ordinary earnings per
  share in Won and U.S.
  dollars................  W   175       390       507     1,233   $  0.15        0.42
                           =======   =======   =======   =======   =======      ======
Net earnings per share in
  Won and U.S. dollars...  W   175       390       508     1,234   $  0.15        0.43
                           =======   =======   =======   =======   =======      ======
</Table>

     In addition, diluted earnings per share are not computed because the stock
options have no dilutive effect.

     (a) SECURITIES APPLICABLE TO COMMON SHARES

<Table>
<Caption>
                                                                                 NUMBER
                                                                               OF SHARES
                                                    CONVERTIBLE PERIOD        TO BE ISSUED
                                               ----------------------------   ------------
<S>                                            <C>                            <C>
Stock options................................  May 22, 2004 - May 22, 2008       968,902
    "      ..................................  May 15, 2005 - June 15, 2009    1,156,200
                                                                               ---------
                                                                               2,125,102
                                                                               =========
</Table>

                                      F-106
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (b) Ordinary and net earnings per share for the three-months ended March
31, 2003, 2002 and the year ended December 31, 2002 are as follows:

<Table>
<Caption>
                                                    THREE-MONTHS                         THREE-MONTHS
                                                       ENDED           YEAR ENDED           ENDED
                                                   MARCH 31, 2003   DECEMBER 31, 2002   MARCH 31, 2003
                                                   --------------   -----------------   --------------
<S>                                                <C>              <C>                 <C>
Ordinary/net earnings per share in Won...........       W215              2,294              726
</Table>

(26)  DERIVATIVES

     (a) Details of unsettled derivative instruments as of June 30, 2003 and
December 31, 2002 are as follows:

<Table>
<Caption>
                                                                  2003
                                                  ------------------------------------
                                                        PURPOSE OF TRANSACTIONS
                                                  ------------------------------------
                                                    TRADING       HEDGE       TOTAL
                                                  -----------   ---------   ----------
<S>                                               <C>           <C>         <C>
CURRENCY RELATED
  Forwards.....................................   W 5,836,155          --    5,836,155
  Swap.........................................       335,959      23,934      359,893
  Call options.................................       120,314          --      120,314
  Put options..................................       256,944                  256,944
                                                  -----------   ---------   ----------
                                                    6,549,372      23,934    6,573,306
                                                  -----------   ---------   ----------
INTEREST RATE RELATED
  Futures......................................       279,228          --      279,228
  Call options.................................        70,000          --       70,000
  Put options..................................        95,000          --       95,000
  Swap                                              6,730,828   2,001,954    8,732,782
  Government bonds.............................        37,038          --       37,038
                                                  -----------   ---------   ----------
                                                    7,212,094   2,001,954    9,214,048
                                                  -----------   ---------   ----------
STOCK PRICE INDEX RELATED
  Futures......................................        10,426          --       10,426
  Call options.................................       892,587          --      892,587
  Put options..................................       891,753          --      891,753
  ELS..........................................         2,524          --        2,524
                                                  -----------   ---------   ----------
                                                    1,797,290          --    1,797,290
                                                  -----------   ---------   ----------
                                                  W15,558,756   2,025,888   17,584,644
                                                  ===========   =========   ==========
</Table>

                                      F-107
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                  2002
                                                   -----------------------------------
                                                         PURPOSE OF TRANSACTIONS
                                                   -----------------------------------
                                                    TRADING       HEDGE       TOTAL
                                                   ----------   ---------   ----------
<S>                                                <C>          <C>         <C>
CURRENCY RELATED
  Forwards......................................   W3,732,439          --    3,732,439
  Swap..........................................      645,577      24,080      669,657
  Call options..................................       18,006          --       18,006
  Put options...................................       24,008          --       24,008
                                                   ----------   ---------   ----------
                                                    4,420,030      24,080    4,444,110
                                                   ----------   ---------   ----------
INTEREST RATE RELATED
  Futures.......................................      378,499       4,308      382,807
  Options.......................................       20,000          --       20,000
  Swap..........................................    4,775,747   1,647,336    6,423,083
                                                   ----------   ---------   ----------
                                                    5,174,246   1,651,644    6,825,890
                                                   ----------   ---------   ----------
STOCK PRICE INDEX RELATED
  Futures.......................................       29,176      63,805       92,981
  Options.......................................       37,868          --       37,868
                                                   ----------   ---------   ----------
                                                       67,044      63,805      130,849
                                                   ----------   ---------   ----------
                                                   W9,661,320   1,739,529   11,400,849
                                                   ==========   =========   ==========
</Table>

                                      F-108
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (b) Valuation on trading and hedging derivative instruments as of June 30,
2003 and December 31, 2002 are as follows:

<Table>
<Caption>
                                                              2003
                                       ---------------------------------------------------
                                         VALUATION GAIN (LOSSES)          FAIR VALUE
                                       ---------------------------   ---------------------
                                       TRADING    HEDGE     TOTAL    ASSETS    LIABILITIES
                                       -------   -------   -------   -------   -----------
<S>                                    <C>       <C>       <C>       <C>       <C>
CURRENCY RELATED
  Forwards...........................  W10,757        --    10,757    54,512      44,989
  Swap...............................   (1,631)      628    (1,003)   36,890      25,741
  Call options.......................     (648)       --      (648)    1,496          --
  Put options........................     (227)       --      (227)       --       2,000
                                       -------   -------   -------   -------     -------
                                         8,251       628     8,879    92,898      72,730
                                       -------   -------   -------   -------     -------
INTEREST RATE RELATED
  Call options.......................      866        --       866     1,105          --
  Put options........................     (655)       --      (655)       --       1,093
  Swap...............................    1,367   (15,517)  (14,150)   75,823      94,696
  Government bonds...................       29        --        29        --          --
                                       -------   -------   -------   -------     -------
                                         1,607   (15,517)  (13,910)   76,928      95,789
                                       -------   -------   -------   -------     -------
STOCK PRICE INDEX RELATED
  Futures............................        5        --         5     2,524          --
  Call options.......................   14,108        --    14,108    54,937          --
  Put options........................   (8,352)       --    (8,352)       --      54,104
  ELS................................      425        --       425        --          --
                                       -------   -------   -------   -------     -------
                                         6,186        --     6,186    57,461      54,104
                                       -------   -------   -------   -------     -------
                                       W16,044   (14,889)    1,155   227,287     222,623
                                       =======   =======   =======   =======     =======
</Table>

                                      F-109
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                              2002
                                       ---------------------------------------------------
                                         VALUATION GAIN (LOSSES)          FAIR VALUE
                                       ---------------------------   ---------------------
                                       TRADING    HEDGE     TOTAL    ASSETS    LIABILITIES
                                       -------   -------   -------   -------   -----------
<S>                                    <C>       <C>       <C>       <C>       <C>
CURRENCY RELATED
  Forwards...........................  W21,184        --    21,184    51,731      32,412
  Swap...............................   (2,457)   (4,417)   (6,874)   12,763      19,818
  Call options.......................      558        --       558       439          --
  Put options........................     (775)       --      (775)       --         743
                                       -------   -------   -------   -------     -------
                                        18,510    (4,417)   14,093    64,933      52,973
                                       -------   -------   -------   -------     -------
INTEREST RATE RELATED
  Options............................       12        --        12       146         146
  Swap...............................   (2,711)   11,797     9,086    54,915      57,538
                                       -------   -------   -------   -------     -------
                                        (2,699)   11,797     9,098    55,061      57,684
                                       -------   -------   -------   -------     -------
STOCK PRICE INDEX RELATED
  Futures............................   (1,233)       --    (1,233)      449       1,648
  Options............................    1,407        --     1,407        --         372
                                       -------   -------   -------   -------     -------
                                           184        --       184       449       2,020
                                       -------   -------   -------   -------     -------
                                       W15,995     7,380    23,375   120,443     112,677
                                       =======   =======   =======   =======     =======
</Table>

(27)  STATEMENTS OF CASH FLOWS

     (a) Cash and cash equivalents as of June 30, 2003 in statements of cash
flows are equivalent to cash and due from banks on the balance sheets.

     (b) Significant transactions not involving cash inflows or outflows for the
quarter and six-months ended June 30, 2003 are as follows:

<Table>
<Caption>
                                                              ENDED JUNE 30, 2003
                                                              --------------------
                                                              QUARTER   SIX-MONTHS
                                                              -------   ----------
<S>                                                           <C>       <C>
Reclassification of advance payments to financing lease
  receivable................................................  W38,512     78,710
Reclassification of advance payments to operating assets....    1,219      1,962
Conversion of loans into securities.........................    3,939      4,403
Increase in present value discount due to restructuring.....       --      6,923
Changes in capital adjustments due to consolidation.........   82,789      5,891
Changes in retained earnings due to consolidation...........       60     12,536
Amortization offseted to retained earnings due to accounting
  change....................................................       --         20
Reclassification of available-for-sale securities to
  loans.....................................................    2,769      2,769
Reclassification of held-to-maturity securities to
  available-for-sale securities.............................       --     26,610
</Table>

(28)  EMPLOYEES BENEFITS

     The Company and its subsidiaries have provided housing loans of W92,493
million and W87,674 million to employees as of June 30, 2003 and December 31,
2002, respectively.

                                      F-110
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(29)  COMMITMENTS AND CONTINGENCIES

  (A) GUARANTEES AND ACCEPTANCES

     Guarantees and acceptances and commitments as of June 30, 2003 are
summarized as follows:

<Table>
<S>                                                            <C>
Guarantees and acceptances outstanding......................   W1,469,827
Contingent guarantees and acceptances.......................    1,797,550
Commitments.................................................    3,889,713
Endorsed bills..............................................       16,849
</Table>

  (B) The Company and its subsidiaries pledged its 21 notes and 2 blank checks
      to financial institutions as collateral for borrowings.

  (C) LITIGATION

     As of June 30, 2003, the Company and its subsidiaries has 83 pending
lawsuits as a defendant (total amount: W282,958 million). The Company's
management expects that ultimate liability and significant losses as a result of
these lawsuits would not materially effect their financial position.

  (D) LOANS AND SECURITIES RELATED TO COMPANIES INVOLVED IN BANKRUPTCY
      PROCEEDINGS, COMPOSITION PROCEEDINGS OR WORKOUT PROGRAMS WITH CREDITORS

     As of June 30, 2003, the Company and its subsidiaries are holding loans
(including guarantees) provided to and securities issued by companies involved
in bankruptcy proceedings, composition proceedings or workout programs with
creditors amounting to W704,865 million. The Company recorded an allowance for
losses on these loans and incurred valuation losses on these securities in
accordance with Korean GAAP. However, the ultimate recoverability of these loans
and securities will depend on the terms of the companies' restructuring plans
approved by the bankruptcy court or the creditors and the success of the
companies in implementing the plans. The ultimate outcome of this matter cannot
presently be determined.

  (E) LOANS AND SECURITIES RELATED TO ECONOMICALLY TROUBLED COUNTRIES

     As of June 30, 2003, Shinhan Bank is holding loans (including guarantees)
and securities amounting to W42,645 million ($35,743 thousand), which were
provided to or issued by the companies in Indonesia, Russia and other
economically troubled countries. Shinhan Bank recorded an allowance for losses
on these loans and valuation losses on these securities in accordance with
Korean GAAP. However, the ultimate recoverability of these loans and securities
cannot presently be determined.

  (F) LOANS SOLD UNDER REPURCHASE AGREEMENTS TO KOREA ASSET MANAGEMENT
      CORPORATION

     As of June 30, 2003, Goodmorning Shinhan Securities, Shinhan and Jeju Bank
has outstanding loans, which were transferred to the Korea Asset Management
Corporation (KAMCO) and are subject to be repurchased when certain conditions
are met, amounting to W77,400 million. Related to these outstanding loans, those
subsidiaries established W21,500 million of an allowance for loan losses as of
June 30, 2003, however, additional gains or losses will be recorded upon
repurchase of or settlement for the loans by KAMCO in accordance with the
recourse provisions.

     In addition, outstanding loans held by the trust account of the Shinhan
Bank is W3,900 million as of June 30, 2003, however, additional gains or losses
will be recorded upon repurchase of or settlement for the loans by KAMCO in
accordance with the recourse provisions.

  (G) SECURITIZATION

     Prior to the fiscal year end December 31, 2002, Shinhan Bank sold W197,441
million of loans through issuing asset backed securities, and in relation to
those sales, Shinhan Bank has provided W56,000 million of

                                      F-111
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reselling rights for the purpose of credit enhancement. Additional losses may be
recorded upon exercising reselling rights in accordance with these
securitization plans.

  (H) SUBSIDY FOR TRUST ACCOUNTS

     As of June 30, 2003, Shinhan Bank and Jeju Bank guarantees repayment of
principal and, in certain cases, minimum interest earnings on trust account
assets amounting to W1,740,722 million and W12,400 million, respectively, and
the losses compensated by Jeju Bank for the six-months ended June 30, 2003 were
W124 million. Additional gains or losses will be recorded based upon the results
of the future operations of these guaranteed trust accounts.

  (I) LOANS RELATED TO FINANCIALLY TROUBLED COMPANIES

     As of June 30, 2003, Shinhan Bank is holding loans (including guarantees
and acceptances) provided to and securities issued by SK Global Co., Ltd.,
amounting to W505,532 million, provides W223,678 million of allowance for loan
losses and recorded W4,677 million of impairment loss as of June 30, 2003.
Actual losses on these loans and securities may differ materially from the
management's assessments. The accompanying consolidated financial statements do
not reflect the impact of the uncertainty on the financial position of the
Company.

(30)  SIGNIFICANT TRANSACTIONS AMONG CONSOLIDATED COMPANIES

  (A) SIGNIFICANT TRANSACTIONS

     Significant transactions among consolidated companies for the quarter and
six-months ended June 30, 2003 and 2002 are as follows:

<Table>
<Caption>
                                                                QUARTER ENDED     SIX-MONTHS ENDED
                                                                   JUNE 30,           JUNE 30,
                                                               ----------------   ----------------
REVENUE EARNED         EXPENSE INCURRED         ACCOUNT         2003      2002     2003      2002
- --------------         -----------------   -----------------   -------   ------   -------   ------
<S>                    <C>                 <C>                 <C>       <C>      <C>       <C>
Controlling company and subsidiaries included in consolidation:
  The Company........  Shinhan Bank        Interest income     W 1,148    1,729     2,163    3,472
     "   ............  Goodmorning         Interest income       2,003       --     4,026       --
                       Shinhan
                       Securities
     "   ............  Shinhan Card        Interest income      16,700       --    22,557       --
     "   ............  Shinhan Capital     Interest income       6,762    3,443    12,720    5,661
     "   ............  Jeju Bank           Interest income         410      183       814      183
  Shinhan Bank.......  Goodmorning         Interest income         487    1,179       873    1,360
                       Shinhan
                       Securities
     "   ............     "                Rental income            60       --        61       --
     "   ............  Shinhan Card        Interest income       1,616       --     2,629       --
     "   ............     "                Fees and             15,932    7,250    36,605    7,250
                                           commission income
     "   ............     "                Rental income           190       --       408       --
     "   ............  Shinhan Capital     Interest income         895       --     1,508    4,707
     "   ............     "                Rental income            71       --       154       --
     "   ............  Jeju Bank           Interest income          60       --       119       --
     "   ............  Shinhan Bank        Trust management     11,032   15,248    22,550   45,090
                       (Trust)             income
     "   ............  Shinhan Finance     Interest income       1,018    1,897     2,341    3,494
</Table>

                                      F-112
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                QUARTER ENDED     SIX-MONTHS ENDED
                                                                   JUNE 30,           JUNE 30,
                                                               ----------------   ----------------
REVENUE EARNED         EXPENSE INCURRED         ACCOUNT         2003      2002     2003      2002
- --------------         -----------------   -----------------   -------   ------   -------   ------
<S>                    <C>                 <C>                 <C>       <C>      <C>       <C>
  Shinhan Bank
     (Trust).........  Shinhan Bank        Due from banking        356      368       840    1,387
                                           account
  Shinhan Finance....  Shinhan Bank        Interest income         225      540       604    1,466
  Goodmorning Shinhan
     Securities......  Shinhan Bank        Interest income         121       --       321       --
     "   ............     "                Rental income             9       --         9       --
     "   ............  Shinhan Card        Rental income            53       --       105       --
  Shinhan Card.......  Shinhan Bank        Interest income           5       --         5       --
     "   ............     "                Fees and                 15       --        15       --
                                           commission income
  Shinhan Capital....  Shinhan Bank        Interest income         117      626       192      754
     "   ............     "                Gain on               1,024       --       551       --
                                           derivatives
  Shinhan BNP Paribas
     ITMC............  Shinhan Bank        Interest income         107       --       179       --
  Jeju Bank..........  Shinhan Bank        Interest income          31       --        46       --
     "   ............  Jeju Bank (Trust)   Fees and                  9       --       820       87
                                           commission income
  Jeju Bank (Trust)..  Jeju Bank           Due from banking         57       --       205      184
                                           account
  SH&C Life
     Insurance.......  Shinhan Bank        Interest income         123       --       257       --
                                                               -------   ------   -------   ------
                                                                60,636   32,463   113,677   75,095
                                                               -------   ------   -------   ------
Subsidiaries accounted for by the equity method:
  Shinhan Bank.......  Shinhan Credit      Rental income            52       --       113       --
                       Information
     "   ............  Shinhan System      Rental income            71       --       154       --
  e-Shinhan..........  Shinhan Bank        Interest income          36       --        78       --
     "   ............  Shinhan Card        Fees and                  3       --         8       --
                                           commission income
  Shinhan Credit
     Information.....  Shinhan Bank        Fees and                673       --     1,232       --
                                           commission income
     "   ............     "                Interest income           7       --        20       --
     "   ............  Goodmorning         Fees and                  7       --         7       --
                                           commission income
     "   ............  Shinhan Card        Fees and              2,152       --     3,576       --
                                           commission income
     "   ............  Shinhan Capital     Fees and                 37       --        37       --
                                           commission income
     "   ............  Jeju Bank           Fees and                150       --       284       --
                                           commission income
</Table>

                                      F-113
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                QUARTER ENDED     SIX-MONTHS ENDED
                                                                   JUNE 30,           JUNE 30,
                                                               ----------------   ----------------
REVENUE EARNED         EXPENSE INCURRED         ACCOUNT         2003      2002     2003      2002
- --------------         -----------------   -----------------   -------   ------   -------   ------
<S>                    <C>                 <C>                 <C>       <C>      <C>       <C>
  Shinhan System.....  Shinhan Bank        Interest income           7       10        19       16
     "   ............     "                Other income            583      764     1,451    1,230
                                                               -------   ------   -------   ------
                                                                 3,778      774     6,979    1,246
                                                               -------   ------   -------   ------
                                                               W64,414   33,237   120,656   76,341
                                                               =======   ======   =======   ======
</Table>

  (B) ACCOUNT BALANCES

     Significant account balances among consolidated companies as of June 30,
2003 and December 31, 2002 are as follows:

<Table>
<Caption>
CREDITOR                      DEBTOR                  ACCOUNT               2003        2002
- --------               --------------------   ------------------------   ----------   ---------
<S>                    <C>                    <C>                        <C>          <C>
Controlling company and subsidiaries included in consolidation:
  The Company........  Shinhan Bank           Bank deposits              W   24,104      10,613
     "   ............     "                   Other asset (Guarantee          7,673       6,902
                                              deposits)
     "   ............     "                   Loans (Privately placed        50,000      50,000
                                              debentures)
     "   ............     "                   Other assets (accounts          4,099       2,171
                                              receivable)
     "   ............     "                   Other assets (accrued             126         123
                                              income)
     "   ............  Goodmorning Shinhan    Loans (Privately placed       130,000     130,000
                       Securities             debentures)
     "   ............     "                   Other assets (accrued             110         134
                                              income)
     "   ............  Shinhan Card           Loans                       1,280,000     200,000
     "   ............     "                   Other assets (accounts             50          --
                                              receivable)
     "   ............     "                   Other assets (accrued           5,407         925
                                              income)
     "   ............  Shinhan Capital        Loans                         518,689     369,127
     "   ............     "                   Other assets (accounts            375         190
                                              receivable)
     "   ............     "                   Other assets (accrued           3,888       2,965
                                              income)
  The Company........  Shinhan BNP Paribas    Other assets (accounts          1,000          --
                       ITMC                   receivable)
     "   ............  Jeju Bank              Loans (Privately placed        20,000      20,000
                                              debentures)
     "   ............     "                   Other assets (accrued             186         186
                                              income)
</Table>

                                      F-114
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
CREDITOR                      DEBTOR                  ACCOUNT               2003        2002
- --------               --------------------   ------------------------   ----------   ---------
<S>                    <C>                    <C>                        <C>          <C>
  Shinhan Bank.......  Goodmorning Shinhan    Loans (Privately placed        30,000      70,000
                       Securities             debentures)
     "   ............     "                   Other assets (accrued             344       1,047
                                              income)
     "   ............     "                   Other asset (Guarantee            530         530
                                              deposits)
     "   ............  Shinhan Card           Loans (Call loans)             10,900       7,500
     "   ............     "                   Other assets (accrued             345          --
                                              income)
     "   ............  Shinhan Capital        Loans                          74,267      37,959
     "   ............     "                   Loans (Privately placed        10,000          --
                                              debentures)
     "   ............     "                   Other assets (Derivative          323          --
                                              assets)
     "   ............     "                   Other assets (accrued             159         133
                                              income)
     "   ............  Jeju Bank              Loans (Privately placed         3,140       3,140
                                              debentures)
     "   ............  Shinhan Bank (Trust)   Other assets (accrued         139,336     120,927
                                              income)
     "   ............  Shinhan Finance        Bank deposits                   3,134       7,995
     "   ............     "                   Loans                         273,773     314,756
     "   ............     "                   Loans (Call loans)                 --       1,576
     "   ............     "                   Other assets (Derivative       66,814      20,407
                                              assets)
  Shinhan Bank
     (Trust).........  Shinhan Bank           Due from banking               99,044      82,179
                                              accounts
  Shinhan Finance....  Shinhan Bank           Loans                         248,305     274,306
     "   ............     "                   Loans (Call loans)                 --       3,601
  Goodmorning Shinhan
     Securities......  Shinhan Bank           Bank deposits                  11,201      11,908
     "   ............     "                   Other asset (Guarantee          5,589       5,526
                                              deposits)
  Goodmorning Shinhan
     Securities......     "                   Other assets (accrued             104         252
                                              income)
  Shinhan Card.......  The Company            Other assets (Prepaid           2,406          --
                                              expense)
     "   ............  Shinhan Bank           Due from bank                      81          --
     "   ............     "                   Other asset (Guarantee          1,189         387
                                              deposits)
     "   ............  Goodmorning Shinhan    Other asset (Guarantee          3,289       3,289
                       Securities             deposits)
</Table>

                                      F-115
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
CREDITOR                      DEBTOR                  ACCOUNT               2003        2002
- --------               --------------------   ------------------------   ----------   ---------
<S>                    <C>                    <C>                        <C>          <C>
  Shinhan Capital....  Shinhan Bank           Short-term financial           36,483      16,666
                                              instruments
     "   ............     "                   Other assets (Prepaid              39          --
                                              expense)
     "   ............     "                   Other assets (Derivative        2,365       2,000
                                              assets)
     "   ............     "                   Other assets (accrued              52          --
                                              income)
     "   ............     "                   Other asset (Guarantee            292         418
                                              deposits)
  Shinhan BNP Paribas
     ITMC............  Shinhan Bank           Due from bank                  14,189       8,985
     "   ............  Goodmorning Shinhan    Other asset (Guarantee          3,496         850
                       Securities             deposits)
  Jeju Bank..........  Shinhan Bank           Loans (Call loans)              4,892       4,922
     "   ............     "                   Bank deposits                      30          --
     "   ............     "                   Other assets (Prepaid              18          --
                                              expense)
     "   ............     "                   Other assets (accrued               1          --
                                              income)
  Jeju Bank
     (Trust).........  Jeju Bank              Due from banking                5,485      36,262
                                              accounts
  SH&C Life
     Insurance.......  Shinhan Bank           Cash and cash                  10,353      12,327
                                              equivalents
     "   ............     "                   Other assets (accrued             290          --
                                              income)
                                                                         ----------   ---------
                                                                          3,107,965   1,843,184
                                                                         ----------   ---------
  Subsidiaries accounted for by the equity method:
  The Company........  Shinhan Credit         Other assets (accounts             16          --
                       Information            receivable)
  e-Shinhan..........  Shinhan Bank           Cash and cash                     562       3,718
                                              equivalents
     "   ............     "                   Bonds with repurchase           2,400          --
                                              agreement
     "   ............     "                   Other assets (accrued              18          --
                                              income)
  Shinhan Macquarie..  Shinhan Bank           Cash and cash                   1,137         168
                                              equivalents
</Table>

                                      F-116
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
CREDITOR                      DEBTOR                  ACCOUNT               2003        2002
- --------               --------------------   ------------------------   ----------   ---------
<S>                    <C>                    <C>                        <C>          <C>
  Shinhan Credit
     Information.....  Shinhan Bank           Cash and cash                     956       1,395
                                              equivalents
     "   ............     "                   Other assets (accounts            314          --
                                              receivable)
     "   ............     "                   Other asset (Guarantee            740          --
                                              deposits)
     "   ............  Goodmorning Shinhan    Other asset (Guarantee          1,000          --
                       Securities             deposits)
     "   ............     "                   Other assets (accounts              1          --
                                              receivable)
     "   ............  Shinhan Card           Other assets (accounts            798          --
                                              receivable)
     "   ............  Shinhan Capital        Other assets (accounts              6          --
                                              receivable)
     "   ............  Jeju Bank              Other assets (accounts             58          --
                                              receivable)
     "   ............     "                   Other asset (Guarantee             60          --
                                              deposits)
Shinhan System.......  Shinhan Bank           Bank deposits                   1,952       2,175
     "   ............     "                   Other asset (Guarantee            185          --
                                              deposits)
     "   ............     "                   Other assets (accrued           1,596          --
                                              income)
                                                                         ----------   ---------
                                                                             11,799       7,456
                                                                         ----------   ---------
                                                                         W3,119,764   1,850,640
                                                                         ==========   =========
</Table>

  (C) GUARANTEES AND ACCEPTANCES

     Guarantees and acceptances as of June 30, 2003 are as follows:

<Table>
<Caption>
                                                                                               AMOUNT OF
                                                                   GUARANTEES AND            GUARANTEES AND
GUARANTOR                              GUARANTEE               ACCEPTANCES PROVIDED ON        ACCEPTANCES
- ---------                       ------------------------   -------------------------------   --------------
<S>                             <C>                        <C>                               <C>
The Company...................  Goodmorning Shinhan
                                Securities                 Lease guarantee deposits (*)         W50,000
Shinhan Bank..................  Shinhan Capital            Letter of credit                      16,483
   "   .......................  Shinhan Finance            Loans                                 11,722
Goodmorning Shinhan
  Securities..................  Good Morning Securities
                                USA                        Guarantees on operation                2,148
                                                                                                -------
                                                                                                W80,353
                                                                                                =======
</Table>

- ---------------

(*) Interest expense incurred on lease contract is separately guaranteed.

                                      F-117
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(31)  CONDENSED FINANCIAL STATEMENTS OF CONSOLIDATED COMPANIES

  (A) BALANCE SHEETS

     Condensed balance sheets of the Company and its subsidiaries as of June 30,
2003 and December 31, 2002 are as follows:

<Table>
<Caption>
                                                                   2003
                                                 -----------------------------------------
                                                                                 TOTAL
                                                    TOTAL         TOTAL      STOCKHOLDERS'
SUBSIDIARIES                                       ASSETS      LIABILITIES      EQUITY
- ------------                                     -----------   -----------   -------------
<S>                                              <C>           <C>           <C>
Controlling company and subsidiaries
  included in consolidation:
  The Company..................................  W 5,961,318    2,010,059      3,951,259
  Shinhan Bank.................................   66,491,704   63,492,179      2,999,525
  Shinhan Bank (Trust).........................    1,740,772    1,740,772             --
  Shinhan Finance..............................      507,780      447,132         60,648
  Goodmorning Shinhan Securities...............    2,176,006    1,555,622        620,384
  Good Morning Securities Europe...............        3,827           63          3,764
  Good Morning Securities USA..................        6,083          264          5,819
  Shinhan Card.................................    2,210,011    2,036,233        173,778
  Shinhan Capital..............................    1,028,726      931,955         96,771
  Shinhan BNP Paribas ITMC.....................       46,902        3,826         43,076
  Jeju Bank....................................    1,696,314    1,597,575         98,739
  Jeju Bank (Trust)............................       15,845       15,845             --
  SH&C Life Insurance..........................       28,567          297         28,270
                                                 -----------   ----------      ---------
                                                  81,913,855   73,831,822      8,082,033

Subsidiaries accounted for by the equity method:
  e-Shinhan....................................        4,873          301          4,572
  Shinhan Macquarie............................        3,539        3,787           (248)
  Shinhan Credit Information...................        5,358        1,465          3,893
  Shinhan System...............................        2,345          336          2,009
                                                 -----------   ----------      ---------
                                                      16,115        5,889         10,226
                                                 -----------   ----------      ---------
                                                 W81,929,970   73,837,711      8,092,259
                                                 ===========   ==========      =========
</Table>

                                      F-118
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                   2002
                                                 -----------------------------------------
                                                                                 TOTAL
                                                    TOTAL         TOTAL      STOCKHOLDERS'
SUBSIDIARIES                                       ASSETS      LIABILITIES      EQUITY
- ------------                                     -----------   -----------   -------------
<S>                                              <C>           <C>           <C>
Controlling company and subsidiaries
included in consolidation:
  The Company..................................  W 4,784,979      774,759      4,010,220
  Shinhan Bank.................................   58,889,402   56,028,924      2,860,478
  Shinhan Bank (Trust).........................    1,742,131    1,742,131             --
  Shinhan Finance..............................      513,726      446,894         66,832
  Goodmorning Shinhan Securities...............    1,570,244      982,268        587,976
  Good Morning Securities Europe...............        3,942           56          3,886
  Good Morning Securities USA..................        9,462        1,980          7,482
  Shinhan Card.................................    2,473,694    2,226,234        247,460
  Shinhan Capital..............................      960,234      876,551         83,683
  Shinhan BNP Paribas ITMC.....................       47,081        1,918         45,163
  Jeju Bank....................................    1,800,648    1,699,577        101,071
  Jeju Bank (Trust)............................       16,045       16,045             --
  SH&C Life Insurance..........................       29,738          478         29,260
                                                 -----------   ----------      ---------
                                                  72,841,326   64,797,815      8,043,511
Subsidiaries accounted for by the equity method:
  e-Shinhan....................................        5,758          475          5,283
  Shinhan Macquarie............................        3,503        2,675            828
  Shinhan Credit Information...................        3,931          810          3,121
  Shinhan System...............................        2,457          455          2,002
                                                 -----------   ----------      ---------
                                                      15,649        4,415         11,234
                                                 -----------   ----------      ---------
                                                 W72,856,975   64,802,230      8,054,745
                                                 ===========   ==========      =========
</Table>

                                      F-119
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (B) STATEMENTS OF EARNINGS

     Condensed statements of earnings of the Company and its subsidiaries for
the quarter and six-months ended June 30, 2003 and 2002 are as follows:

<Table>
<Caption>
                                                      SIX-MONTHS ENDED JUNE 30, 2003
                                        ----------------------------------------------------------
                                                                  OPERATING   ORDINARY      NET
                                        OPERATING    OPERATING     INCOME      INCOME     EARNINGS
SUBSIDIARIES                             REVENUE      EXPENSE      (LOSS)      (LOSS)     (LOSSES)
- ------------                            ----------   ----------   ---------   ---------   --------
<S>                                     <C>          <C>          <C>         <C>         <C>
Controlling company and subsidiaries
  included in consolidation:
  The Company.........................  W  156,053       52,645    103,408     102,423    102,423
  Shinhan Bank........................   2,340,516    2,103,162    237,354     219,388    151,701
  Shinhan Bank (Trust)................      60,499       58,193      2,306          --         --
  Shinhan Finance.....................       8,074       13,910     (5,836)     (5,758)    (5,758)
  Goodmorning Shinhan Securities......     307,973      296,229     11,744      46,272     23,609
  Good Morning Securities Europe......         865        1,100       (235)       (235)      (235)
  Good Morning Securities USA.........         131        1,414     (1,283)     (1,983)    (1,667)
  Shinhan Card........................     206,966      280,862    (73,896)    (73,921)   (73,683)
  Shinhan Capital.....................      69,695       56,215     13,480      12,190      8,598
  Shinhan BNP Paribas ITMC............       6,270        6,875       (605)       (163)      (120)
  Jeju Bank...........................      70,486       72,529     (2,043)       (972)     1,057
  Jeju Bank (Trust)...................       1,213        1,213         --          --         --
  SH&C Life Insurance.................       1,382        2,030       (648)     (1,619)    (1,619)
                                        ----------   ----------    -------     -------    -------
                                         3,230,123    2,946,377    283,746     295,622    204,306
Subsidiaries accounted for by
  the equity method:
  e-Shinhan...........................       1,081        1,814       (733)       (709)      (709)
  Shinhan Macquarie...................       3,082        4,295     (1,213)     (1,003)    (1,352)
  Shinhan Credit Information..........       5,882        4,813      1,069       1,089        772
  Shinhan System......................       1,774        1,785        (11)          7          7
                                        ----------   ----------    -------     -------    -------
                                            11,819       12,707       (888)       (616)    (1,282)
                                        ----------   ----------    -------     -------    -------
                                        W3,241,942    2,959,084    282,858     295,006    203,024
                                        ==========   ==========    =======     =======    =======
</Table>

                                      F-120
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                       QUARTER ENDED JUNE 30, 2003
                                        ----------------------------------------------------------
                                                                  OPERATING   ORDINARY      NET
                                        OPERATING    OPERATING     INCOME      INCOME     EARNINGS
SUBSIDIARIES                             REVENUE      EXPENSE      (LOSS)      (LOSS)     (LOSSES)
- ------------                            ----------   ----------   ---------   ---------   --------
<S>                                     <C>          <C>          <C>         <C>         <C>
Controlling company and subsidiaries
  included in consolidation:
  The Company.........................  W   76,074       31,241     44,833      45,989     45,989
  Shinhan Bank........................   1,133,716    1,059,326     74,390      85,376     57,741
  Shinhan Bank (Trust)................      30,314       28,638      1,676          --         --
  Shinhan Finance.....................       3,867       10,422     (6,555)     (6,572)    (6,572)
  Goodmorning Shinhan Securities......     166,164      144,905     21,259      52,578     44,354
  Good Morning Securities Europe......         575          539         36          38         38
  Good Morning Securities USA.........         131           11        120         158        158
  Shinhan Card........................     108,238      147,774    (39,536)    (39,532)   (39,532)
  Shinhan Capital.....................      47,100       38,910      8,190       7,139      5,070
  Shinhan BNP Paribas ITMC............       3,052        1,876      1,176       1,747      1,231
  Jeju Bank...........................      35,014       36,335     (1,321)     (1,528)       501
  Jeju Bank (Trust)...................         340          216        124          --         --
  SH&C Life Insurance.................         837        1,772       (935)       (935)      (935)
                                        ----------   ----------    -------     -------    -------
                                         1,605,422    1,501,965    103,457     144,458    108,043

Subsidiaries accounted for by
  the equity method:
  e-Shinhan...........................         509          874       (365)       (385)      (385)
  Shinhan Macquarie...................         110        1,114     (1,004)       (999)    (1,204)
  Shinhan Credit Information..........       3,652        2,908        744         751        434
  Shinhan System......................         787          764         23          29         29
                                        ----------   ----------    -------     -------    -------
                                             5,058        5,660       (602)       (604)    (1,126)
                                        ----------   ----------    -------     -------    -------
                                        W1,610,480    1,507,625    102,855     143,854    106,917
                                        ==========   ==========    =======     =======    =======
</Table>

                                      F-121
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                              SIX-MONTHS ENDED JUNE 30, 2002
                                ----------------------------------------------------------
                                                          OPERATING   ORDINARY      NET
                                OPERATING    OPERATING     INCOME      INCOME     EARNINGS
SUBSIDIARIES                     REVENUE      EXPENSE      (LOSS)      (LOSS)     (LOSSES)
- ------------                    ----------   ----------   ---------   ---------   --------
<S>                             <C>          <C>          <C>         <C>         <C>
Controlling company and
subsidiaries included in
consolidation:
  The Company.................  W  341,275       13,919    327,356     327,356    323,867
  Shinhan Bank................   2,417,002    1,963,155    453,847     428,718    305,998
  Shinhan Bank (Trust)........      71,143       70,986        157          --         --
  Shinhan Finance.............      11,670        6,907      4,763       4,947      4,947
  Shinhan Securities..........     209,481      192,746     16,735      11,160      7,723
  Shinhan Card(*).............      30,170       24,525      5,645       5,622      3,947
  Shinhan Capital.............      86,915       80,033      6,882       8,552      5,995
  Shinhan ITMC................       6,008        3,246      2,762       2,548      2,126
  Jeju Bank...................      69,471       60,904      8,567      10,263     10,263
  Jeju Bank (Trust)...........         495          767       (272)         --         --
  Good Morning Securities(**).     129,048      105,721     23,327      20,154     37,932
  Good Morning ITMC(**).......       1,942        1,406        536         530        530
  Good Morning Securities
     Europe(**)...............         296          474       (178)       (180)      (180)
  Good Morning Securities
     USA(**)..................       5,488        2,507      2,981       2,982      2,982
                                ----------   ----------    -------     -------    -------
                                 3,380,404    2,527,296    853,108     822,652    706,130

Subsidiaries accounted for by
the equity method:
  e-Shinhan...................         864        1,527       (663)       (602)      (602)
  Shinhan Macquarie...........       2,885        3,104       (219)       (659)       352
  Shinhan System..............       1,305        1,510       (205)       (188)      (188)
                                ----------   ----------    -------     -------    -------
                                     5,054        6,141     (1,087)     (1,449)      (438)
                                ----------   ----------    -------     -------    -------
                                W3,385,458    2,533,437    852,021     821,203    705,692
                                ==========   ==========    =======     =======    =======
</Table>

- ---------------

(*)  Operating results for 1 month from June 1, 2002 (date of inception)
     reflected.

(**) Operating results from April 1, 2002 to June 30, 2002 reflected.

                                      F-122
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                       QUARTER ENDED JUNE 30, 2002
                                        ----------------------------------------------------------
                                                                  OPERATING   ORDINARY      NET
                                        OPERATING    OPERATING     INCOME      INCOME     EARNINGS
SUBSIDIARIES                             REVENUE      EXPENSE      (LOSS)      (LOSS)     (LOSSES)
- ------------                            ----------   ----------   ---------   ---------   --------
<S>                                     <C>          <C>          <C>         <C>         <C>
Controlling company and subsidiaries
  included in consolidation:
  The Company.........................  W  144,513        7,588    136,925     136,925    133,436
  Shinhan Bank........................   1,356,749    1,135,671    221,078     176,189    125,372
  Shinhan Bank (Trust)................      31,353       30,379        974          --         --
  Shinhan Finance.....................       6,085        3,498      2,587       2,536      2,536
  Shinhan Securities..................     102,419       98,650      3,769       1,959      1,158
  Shinhan Card(*).....................      30,170       24,525      5,645       5,622      3,947
  Shinhan Capital.....................      53,070       51,943      1,127       2,215      1,273
  Shinhan ITMC........................       3,108        1,549      1,559       1,888      1,330
  Jeju Bank...........................      36,835       33,514      3,321       5,221      5,221
  Jeju Bank (Trust)...................         171          355       (184)         --         --
  Good Morning Securities.............     129,048      105,721     23,327      20,154     37,932
  Good Morning ITMC...................       1,942        1,406        536         530        530
  Good Morning Securities Europe......         296          474       (178)       (180)      (180)
  Good Morning Securities USA.........       5,488        2,507      2,981       2,982      2,982
                                        ----------   ----------    -------     -------    -------
                                         1,901,247    1,497,780    403,467     356,041    315,537

Subsidiaries accounted for by
the equity method:
  e-Shinhan...........................         423          811       (388)       (349)      (349)
  Shinhan Macquarie...................         245          316        (71)       (451)      (198)
  Shinhan System......................         794          639        155         166        166
                                        ----------   ----------    -------     -------    -------
                                             1,462        1,766       (304)       (634)      (381)
                                        ----------   ----------    -------     -------    -------
                                        W1,902,709    1,499,546    403,163     355,407    315,156
                                        ==========   ==========    =======     =======    =======
</Table>

- ---------------

(*) Operating results for 1 month from June 1, 2002 (date of inception)
    reflected.

(32)  SIGNIFICANT EVENT OCCURRED SUBSEQUENTLY AFTER BALANCE SHEET DATE

     On July 9, 2003, the Company made an agreement with the Korea Deposit
Insurance Corporation to acquire 80.04% (543,570,144 shares) of total
outstanding shares in Chohung Bank, at maximum ceiling of W6,200 per share,
pursuant to the resolution of the Company's Board of Directors passed on June
21, 2003.

                                      F-123
<PAGE>
                       SHINHAN FINANCIAL GROUP CO., LTD.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(33)  ECONOMIC ENVIRONMENT

     In response to general unstable economic conditions, the Korean government
and the private sector have been implementing structural reforms to historical
business practices. Implementation of these reforms is progressing slowly,
particularly in the areas of restructuring private enterprises and reforming the
banking industry. The Korean government continues to apply pressure to Korean
companies to restructure into more efficient and profitable firms. The Company
and its subsidiaries may be either directly or indirectly affected by these
general unstable economic conditions and the reform program described above. The
accompanying consolidated financial statements reflect management's assessment
of the impact to date of the economic situation on the financial position of the
Company and its subsidiaries. Actual results may differ materially from
management's current assessment.

                                      F-124
<PAGE>

(PRICEWATERHOUSECOOPERS LOGO)

<Table>
<S>                                                               <C>
- -------------------------------------------------------------------------------------------------------
                                                                  SAMIL ACCOUNTING CORPORATION
                                                                  Kukje Center Building 15th Flr.
                                                                  191 Hankangro 2ga, Yongsanku
                                                                  Seoul 140-702, KOREA
                                                                  (Yongsan P.O. Box 266, 140-600)
                                                                  Tel +82 (2) 709 0800
                                                                  Fax +82 (2) 792 7001
</Table>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Chohung Bank

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, changes in stockholders' equity and
cash flows present fairly, in all material respects, the financial position of
Chohung Bank and its subsidiaries (the "Bank") at December 31, 2001 and 2002,
and the results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Bank's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     As more fully discussed in Note 1 to the consolidated financial statements,
the Bank has been significantly affected, and may continue to be affected in the
foreseeable future, by the general adverse economic conditions in the Republic
of Korea and in the Asia Pacific region.

Seoul, Korea
August 14, 2003, except for Note 34
as to which the date is September 9, 2003

                                      F-125
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                  2001           2002           2002
                                                              ------------   ------------   -------------
                                                              (IN MILLIONS OF KOREAN WON,    (UNAUDITED)
                                                                EXCEPT PER SHARE DATA)      (IN THOUSANDS
                                                                                               OF US$,
                                                                                             EXCEPT PER
                                                                                             SHARE DATA)
<S>                                                           <C>            <C>            <C>
ASSETS
Cash and cash equivalents...................................  W 1,678,026    W 1,862,750     $ 1,570,218
Restricted cash.............................................      175,923      1,244,519       1,049,076
Interest-bearing deposits in banks..........................      195,711        177,109         149,295
Call loans and securities purchased under resale
  agreements................................................       96,369        466,496         393,236
Trading assets..............................................    1,481,714      1,193,897       1,006,404
Available-for-sale securities...............................   12,346,573      9,623,847       8,112,490
Loans (net of allowance for loan losses of W2,031,796 in
  2001 and W2,678,361 in 2002)..............................   33,473,829     43,436,502      36,615,107
Customers' liability on acceptances.........................    1,380,104      1,383,595       1,166,311
Premises and equipment, net.................................      721,853        692,842         584,036
Security deposits...........................................      426,260        460,192         387,922
Other assets................................................    2,922,259      3,460,054       2,916,677
                                                              -----------    -----------     -----------
    Total assets............................................  W54,898,621    W64,001,803     $53,950,772
                                                              ===========    ===========     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits
  Interest-bearing..........................................  W36,273,874    W42,371,268     $35,717,161
  Noninterest-bearing.......................................    1,648,217      1,903,033       1,604,175
Trading liabilities.........................................       25,505         82,563          69,597
Acceptances outstanding.....................................    1,380,104      1,383,595       1,166,311
Short-term borrowings.......................................    5,538,654      5,524,743       4,657,121
Secured borrowings..........................................    2,267,705      1,351,032       1,138,862
Long-term debt..............................................    3,281,191      6,461,151       5,446,473
Accrued expenses and other liabilities......................    3,314,921      3,535,478       2,980,256
                                                              -----------    -----------     -----------
    Total liabilities.......................................   53,730,171     62,612,863      52,779,956
                                                              -----------    -----------     -----------
Commitments and contingencies...............................           --             --              --
Minority interest...........................................       17,361         16,190          13,647
STOCKHOLDERS' EQUITY:
Common stock, 5,000 Won par value, authorized 2,000,000,000
  shares, 679,078,115 shares issued and 661,764,465 shares
  outstanding in 2001, and 679,118,429 shares issued and
  outstanding in 2002.......................................    3,395,391      3,395,592       2,862,338
Additional paid-in capital..................................    1,729,304      1,721,536       1,451,181
Accumulated deficit.........................................   (4,069,096)    (3,924,904)     (3,308,526)
Accumulated other comprehensive income, net of taxes........      222,926        180,526         152,176
Treasury stock, at cost, 17,313,650 shares in 2001..........     (127,436)            --              --
                                                              -----------    -----------     -----------
    Total stockholders' equity..............................    1,151,089      1,372,750       1,157,169
                                                              -----------    -----------     -----------
    Total liabilities, minority interest and stockholders'
      equity................................................  W54,898,621    W64,001,803     $53,950,772
                                                              ===========    ===========     ===========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                      F-126
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                 2001         2002           2002
                                                              ----------   ----------   ---------------
                                                                  (IN MILLIONS OF         (UNAUDITED)
                                                              KOREAN WON, EXCEPT PER     (IN THOUSANDS
                                                                    SHARE DATA)         OF US$, EXCEPT
                                                                                        PER SHARE DATA)
<S>                                                           <C>          <C>          <C>
INTEREST AND DIVIDEND INCOME
  Interest and fees on loans................................  W3,024,068   W3,343,140     $2,818,124
  Interest and dividends on securities......................     830,311      682,554        575,364
  Trading assets............................................      72,193       86,733         73,112
  Other interest income.....................................      80,202       38,464         32,424
                                                              ----------   ----------     ----------
    Total interest income...................................   4,006,774    4,150,891      3,499,024
INTEREST EXPENSE
  Interest on deposits......................................   1,610,316    1,438,849      1,212,888
  Interest on short-term borrowings.........................     310,910      222,719        187,743
  Interest on secured borrowings............................     131,991       98,458         82,996
  Interest on long-term debt................................     291,002      344,574        290,461
                                                              ----------   ----------     ----------
    Total interest expense..................................   2,344,219    2,104,600      1,774,088
NET INTEREST INCOME.........................................   1,662,555    2,046,291      1,724,936
PROVISION FOR LOAN LOSSES...................................     552,616    1,384,749      1,167,284
PROVISION FOR GUARANTEES AND ACCEPTANCES....................    (134,238)     (55,296)       (46,612)
                                                              ----------   ----------     ----------
NET INTEREST INCOME AFTER PROVISIONS FOR LOAN LOSSES, AND
  GUARANTEES AND ACCEPTANCES................................   1,244,177      716,838        604,264
NON INTEREST INCOME
  Commissions and fees......................................     414,958      485,129        408,943
  Net trust management fees.................................      43,292       (8,663)        (7,303)
  Net trading profits.......................................      76,167       90,115         75,963
  Other.....................................................     308,356      205,694        173,391
                                                              ----------   ----------     ----------
    Total noninterest income................................     842,773      772,275        650,994
NON INTEREST EXPENSES
  Employee compensation and severance benefits..............     250,685      332,622        280,386
  Depreciation and amortization.............................      68,753       75,178         63,372
  General and administrative expenses.......................     268,707      304,108        256,350
  Net losses on securities..................................      42,487       51,118         43,090
  Write-down of other investments...........................      43,646       69,774         58,816
  Credit card fees..........................................      67,908      104,395         88,001
  Other.....................................................     243,263      318,686        268,639
                                                              ----------   ----------     ----------
    Total noninterest expenses..............................     985,449    1,255,881      1,058,654
INCOME BEFORE INCOME TAX EXPENSE, MINORITY INTEREST, AND
  CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE......   1,101,501      233,232        196,604
Income tax expense..........................................     362,093       74,771         63,029
Minority interest...........................................       3,439        4,889          4,121
                                                              ----------   ----------     ----------
INCOME BEFORE CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING
  PRINCIPLE.................................................     735,969      153,572        129,454
Cumulative effect of changes in accounting principle........        (655)          --             --
                                                              ----------   ----------     ----------
NET INCOME..................................................  W  735,314   W  153,572     $  129,454
                                                              ==========   ==========     ==========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                      F-127
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                2001       2002          2002
                                                              ---------   -------   ---------------
                                                                (IN MILLIONS OF       (UNAUDITED)
                                                              KOREAN WON, EXCEPT     (IN THOUSANDS
                                                                PER SHARE DATA)     OF US$, EXCEPT
                                                                                    PER SHARE DATA)
<S>                                                           <C>         <C>       <C>
NET INCOME PER SHARE OF COMMON STOCK
Basic
  Income before cumulative effect of changes in accounting
     principle..............................................    W1,126      W228         $0.19
  Cumulative effect of changes in accounting principle......        (1)       --            --
                                                                ------      ----         -----
  Net income................................................    W1,125      W228         $0.19
                                                                ======      ====         =====
Diluted
  Income before cumulative effect of changes in accounting
     principle..............................................    W1,126      W228         $0.19
  Cumulative effect of changes in accounting principle......        (1)       --            --
                                                                ------      ----         -----
  Net income................................................    W1,125      W228         $0.19
                                                                ======      ====         =====
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                      F-128
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                                         ACCUMULATED
                                                                                            OTHER
                                        COMMON STOCK         ADDITIONAL                 COMPREHENSIVE                   TOTAL
                                  ------------------------    PAID-IN     ACCUMULATED      INCOME,      TREASURY    STOCKHOLDERS'
                                    SHARES        AMOUNT      CAPITAL       DEFICIT      NET OF TAX       STOCK        EQUITY
                                  -----------   ----------   ----------   -----------   -------------   ---------   -------------
                                                        (IN MILLIONS OF KOREAN WON, EXCEPT PER SHARE DATA)
<S>                               <C>           <C>          <C>          <C>           <C>             <C>         <C>
BALANCE AT JANUARY 1, 2001......  679,078,115   W3,395,391   W1,734,772   W(4,746,045)    W220,532      W(215,219)   W  389,431
Comprehensive income:
  Net income....................           --           --           --       735,314           --             --       735,314
  Foreign currency translation
     adjustments................           --           --           --            --        5,429             --         5,429
  Net unrealized losses on
     available-for-sale
     securities.................           --           --           --            --       (3,035)            --        (3,035)
       Total comprehensive
          income................           --           --           --       735,314        2,394             --       737,708
Reissuance of treasury stock....           --           --       (5,721)      (58,365)          --         87,783        23,697
Grant of stock options..........           --           --          253            --           --             --           253
                                  -----------   ----------   ----------   -----------     --------      ---------    ----------
BALANCE AT DECEMBER 31, 2001....  679,078,115    3,395,391    1,729,304    (4,069,096)     222,926       (127,436)    1,151,089
                                  -----------   ----------   ----------   -----------     --------      ---------    ----------
Comprehensive income:
  Net income....................           --           --           --       153,572           --             --       153,572
  Foreign currency translation
     adjustments................           --           --           --            --       (8,438)            --        (8,438)
  Net unrealized losses on
     available-for-sale
     securities.................           --           --           --            --      (33,962)            --       (33,962)
       Total comprehensive
          income................           --           --           --       153,572      (42,400)            --       111,172
Issuance of common stock........       40,314          201           24            --           --             --           225
Reissuance of treasury stock....           --           --       (8,352)       (9,380)          --        127,436       109,704
Grant of stock options..........           --           --          560            --           --             --           560
                                  -----------   ----------   ----------   -----------     --------      ---------    ----------
BALANCE AT DECEMBER 31, 2002....  679,118,429   W3,395,592   W1,721,536   W(3,924,904)    W180,526      W      --    W1,372,750
                                  ===========   ==========   ==========   ===========     ========      =========    ==========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      F-129
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES
   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY -- (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                            (UNAUDITED)
                                  -----------------------------------------------------------------------------------------------
                                                                                         ACCUMULATED
                                                                                            OTHER
                                        COMMON STOCK         ADDITIONAL                 COMPREHENSIVE                   TOTAL
                                  ------------------------    PAID-IN     ACCUMULATED      INCOME,      TREASURY    STOCKHOLDERS'
                                    SHARES        AMOUNT      CAPITAL       DEFICIT      NET OF TAX       STOCK        EQUITY
                                  -----------   ----------   ----------   -----------   -------------   ---------   -------------
                                                           (IN THOUSANDS OF US$, EXCEPT PER SHARE DATA)
<S>                               <C>           <C>          <C>          <C>           <C>             <C>         <C>
BALANCE AT DECEMBER 31, 2001....  679,078,115   $2,862,169   $1,457,729   $(3,430,073)    $187,918      $(107,423)   $  970,320
Comprehensive income:
  Net income....................           --           --           --       129,454           --             --       129,454
  Foreign currency translation
     adjustments................           --           --           --            --       (7,113)            --        (7,113)
  Net unrealized losses on
     available-for-sale
     securities.................           --           --           --            --      (28,629)            --       (28,629)
       Total comprehensive
          income................           --           --           --       129,454      (35,742)            --        93,712
Issuance of common stock........       40,314          169           20            --           --             --           189
Reissuance of treasury stock....           --           --       (7,040)       (7,907)          --        107,423        92,476
Grant of stock options..........           --           --          472            --           --             --           472
                                  -----------   ----------   ----------   -----------     --------      ---------    ----------
BALANCE AT DECEMBER 31, 2002....  679,118,429   $2,862,338   $1,451,181   $(3,308,526)    $152,176      $      --    $1,157,169
                                  ===========   ==========   ==========   ===========     ========      =========    ==========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      F-130
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                  2001           2002           2002
                                                              ------------   ------------   -------------
                                                              (IN MILLIONS OF KOREAN WON)    (UNAUDITED)
                                                                                            (IN THOUSANDS
                                                                                               OF US$)
<S>                                                           <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................  W   735,314    W   153,572    $    129,454
Adjustments to reconcile net income to net cash provided by
  operating activities:
    Provision for loan losses...............................      552,616      1,384,749       1,167,284
    Provision for guarantees and acceptances................     (134,238)       (55,296)        (46,612)
    Depreciation and amortization...........................       68,753         75,178          63,372
    Accretion of discounts on long-term debt................        2,080         63,268          53,332
    Amortization on deferred loan fees and origination
      costs.................................................        7,853         32,463          27,365
    Amortization on available-for-sale debt securities......       30,813         37,857          31,912
    Net loss (gain) on equity investments...................          247         (1,306)         (1,101)
    Net gain on valuation of trading assets.................       (1,551)        (5,740)         (4,839)
    Net gain on sales of available-for-sale securities......     (164,290)       (69,721)        (58,772)
    Impairment loss on available-for-sale securities........      206,777        120,840         101,863
    Net (gain) loss on disposal of premises and equipment...      (21,734)         2,570           2,166
    Net realized foreign exchange (gain) loss...............      (16,651)        16,203          13,658
    Minority interest in net income of consolidated
      subsidiaries..........................................        3,439          4,889           4,121
    Grant of stock options..................................          253            560             472
    Write-down of other investments.........................       43,646         69,774          58,816
    Net changes in:
      Restricted cash.......................................      627,499     (1,068,596)       (900,781)
      Trading assets........................................       93,855        291,633         245,834
      Other assets..........................................    1,148,342       (671,849)       (566,340)
      Trading liabilities...................................      (54,741)        57,058          48,097
      Accrued expenses and other liabilities................        3,464        439,265         370,282
                                                              -----------    -----------    ------------
         Net cash provided by operating activities..........    3,131,746        877,371         739,583
                                                              -----------    -----------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Net decrease in interest-bearing deposits in banks......      630,492         18,602          15,681
    Net decrease (increase) in call loans and securities
      purchased under resale agreements.....................      760,544       (377,811)       (318,478)
    Proceeds from sales of available-for-sale securities....    7,494,126      7,889,286       6,650,330
    Purchases of available-for-sale securities..............   (8,728,072)    (5,266,534)     (4,439,462)
    Loan originations and principal collections, net........   (8,209,269)   (11,906,514)    (10,036,680)
    Proceeds from sales of loans............................    1,708,230        277,091         233,576
    Proceeds from sales of premises and equipment...........       40,416         78,801          66,426
    Payments for purchase of premises and equipment.........      (91,331)      (126,754)       (106,848)
    Net decrease (increase) in security deposits............          243        (33,932)        (28,603)
                                                              -----------    -----------    ------------
         Net cash used in investing activities..............  W(6,394,621)   W(9,447,765)   $ (7,964,058)
                                                              -----------    -----------    ------------
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                      F-131
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2001 AND 2002

<Table>
<Caption>
                                                                                         2002
                                                           2001           2002        (UNAUDITED)
                                                       ------------   ------------   -------------
                                                       (IN MILLIONS OF KOREAN WON)   (IN THOUSANDS
                                                                                        OF US$)
<S>                                                    <C>            <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in interest-bearing deposits.......  W 4,472,642    W 6,119,334     $ 5,158,337
     Net increase in non interest-bearing deposits...        6,589        254,816         214,799
     Net increase (decrease) in secured borrowings...      831,995       (916,673)       (772,716)
     Net (decrease) increase in short-term
       borrowings....................................     (823,082)           903             761
     Proceeds from issuance of long-term debt........    1,715,681      6,753,991       5,693,325
     Repayment of long-term debt.....................   (2,454,821)    (3,561,311)     (3,002,032)
     Proceeds from issuance of common stock..........           --            225             189
     Reissuance of treasury stock....................       29,418        118,057          99,517
     Cash dividends paid to minority interest
       holders.......................................      (10,199)        (8,530)         (7,190)
                                                       -----------    -----------     -----------
       Net cash provided by financing activities.....    3,768,223      8,760,812       7,384,990
                                                       -----------    -----------     -----------
       Effect of exchange rate changes on cash.......       (5,619)        (5,694)         (4,800)
                                                       -----------    -----------     -----------
       Net increase in cash and cash equivalents.....      499,729        184,724         155,715
CASH AND CASH EQUIVALENTS
Beginning of year....................................    1,178,297      1,678,026       1,414,503
                                                       -----------    -----------     -----------
End of year..........................................  W 1,678,026    W 1,862,750     $ 1,570,218
                                                       ===========    ===========     ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest...............................  W 2,452,475    W 2,118,406     $ 1,785,725
Cash paid for income taxes...........................       10,807         14,789          12,466
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES
Loans repurchased from Korea Asset Management
  Corporation in exchange for available-for-sale
  securities.........................................      156,071        160,505         135,299
Securities and other investments received in
  connection with loan restructuring.................      398,305        263,087         221,771
Change in cumulative translation adjustments, net of
  taxes..............................................        5,429         (8,438)         (7,113)
Change in unrealized losses on available-for-sale
  securities, net of taxes...........................       (3,035)       (33,962)        (28,629)
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                      F-132
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2002

1.  GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 BUSINESS

     Chohung Bank's predecessor entity, Han Sung Bank, was founded as the
nation's first financial institution on February 19, 1897. On October 1, 1943,
Chohung Bank became the new name of the combined entity subsequent to the merger
between Han Sung Bank and Dong Il Bank, one of the nation's oldest financial
institutions which was founded on August 8, 1906. Chohung Bank and its
subsidiaries (collectively, the "Bank") principally engage in commercial banking
and a variety of related banking services to retail and corporate customers. The
Bank conducts operations in accordance with the provisions of the Bank Act of
Korea, including its activities in the commercial banking business. The Bank is
also engaged in the trust business according to the Trust Business Act, and in
the credit card business under the Specialized Credit Financial Business Act and
other related laws.

     The Bank's activities are managed through the retail banking, corporate
banking, treasury and international business, credit card, merchant banking,
other banking services, and other subsidiaries business segments.

     At December 31, 2002, the Korean government, through the Korea Deposit
Insurance Corporation ("KDIC"), owned 80.04% of the outstanding common shares of
the Bank.

  RISK AND UNCERTAINTIES

     The Asian financial crisis that began in 1997 has adversely affected the
Korean economy, as well as those of other countries in the Asia Pacific region.
Among other effects, the Asian financial crisis precipitated economic
contractions, a reduction in the availability of credit, increased interest
rates and inflation, adverse fluctuations in currency exchange rates, growth in
the level of bankruptcies, increased unemployment and labor unrest. Such
conditions have had an adverse impact on the operations of the Bank. Further,
these effects may be exacerbated as a result of current political tensions with
the Democratic People's Republic of Korea ("North Korea"). Similarly, the Korean
government has commenced an initiative to sponsor or broker the restructuring of
large financially-troubled companies.

     Although economic conditions in Korea may have improved and some of the
trends and conditions noted above may have reversed, the Bank and its customers
may continue to be affected for the foreseeable future by certain adverse
economic conditions in Korea and in the Asia Pacific region. If these conditions
have an adverse effect on the Bank, adjustments to the carrying amount of its
loans and investments in amounts could be required, and such adjustments could
be material to the consolidated financial statements.

  USE OF ESTIMATES

     The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America ("US
GAAP") requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and reported amounts of revenues and expenses during the reporting period.
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the fair values of financial
instruments, allowance for loan losses, impairment of securities and deferred
tax assets. Actual results could differ significantly from these estimates.

  BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements, which have been prepared in
conformity with US GAAP, include the accounts of the Bank and its majority-owned
subsidiaries. All significant intercompany transactions and

                                      F-133
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

balances have been eliminated in consolidation. Operating results of companies
purchased are included from the dates of the acquisition. Assets held in an
agency or trust management capacities are not included in the consolidated
financial statements. The Bank accounts for investments in companies in which it
owns voting and economic interest of 20 percent to 50 percent and for which it
has significant influence over operating and financing decisions using the
equity method of accounting. Investment in joint ventures, where the Bank does
not have unilateral control, are accounted for using the equity method of
accounting. Investments in companies where the Bank owns less than 20 percent
and does not have the ability to exercise significant influence over operating
and financing decisions are accounted for using the cost method of accounting.
These investments are included in other assets and the Bank's share of income or
loss is included in other noninterest income or other noninterest expenses. The
Bank includes in its consolidated financial statements the accounts of certain
special purpose entities ("SPEs") in which the Bank is the sponsor and retains
substantial risks and rewards in the SPEs pursuant to Emerging Issues Task Force
Topic D-14, Transactions involving Special-Purpose Entities and Issue 90-15,
Impact of Nonsubstantive Lessors, Residual Value Guarantees, and Other
Provisions in Leasing Transactions.

  FOREIGN CURRENCY TRANSLATION

     Assets, liabilities and operations of foreign branches and subsidiaries are
recorded based on the functional currency of each entity. For certain foreign
operations, the functional currency is the local currency, in which case assets
and liabilities are translated, for consolidation purposes, at current exchange
rates from the local currency to the reporting currency, the Korean Won. Income
and expenses are translated at the weighted-average exchange rate for the
period. The resulting translation adjustments are reported as a component of
accumulated other comprehensive income within stockholders' equity on an
after-tax basis.

     Foreign currency transactions executed by domestic Korean entities are
accounted for at the exchange rates prevailing on the related transaction dates.
Assets and liabilities denominated in foreign currencies are translated to
Korean Won using period-end exchange rates, and income and expense items are
translated using average rates for the relevant period. Gains and losses
resulting from the settlement of foreign currency transactions and from the
translation of assets and liabilities denominated in foreign currencies are
recognized in the consolidated statements of income except for gains and losses
arising from the translation of available-for-sale securities which are recorded
as a component of accumulated other comprehensive income within stockholders'
equity on an after-tax basis.

  CASH AND CASH EQUIVALENTS

     For purposes of statements of cash flows, cash and cash equivalents include
cash on hand, cash items in the process of collection and amounts due from
banks, other financial institutions and the Bank of Korea ("BOK"), all of which
have original maturities within 90 days.

  SECURITIES PURCHASED UNDER RESALE AGREEMENTS AND SECURITIES SOLD UNDER
  REPURCHASE AGREEMENTS

     Securities purchased under resale agreements and securities sold under
repurchase agreements are treated as collateralized financing transactions and
are carried in the consolidated balance sheets at the amount for which the
securities will be subsequently resold or repurchased, plus accrued interest.
Interest earned on resale agreements and interest incurred on repurchase
agreements are reported as interest income and interest expense, respectively.
The Bank's policy is to take possession of securities under agreements to
resell. The fair value of the securities is monitored, and additional collateral
may be obtained when considered appropriate to protect the Bank against credit
exposure.

                                      F-134
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  TRADING ASSETS AND LIABILITIES

     The Bank engages in trading activities for both its own account and on
behalf of its customers. Trading assets and liabilities include securities and
derivatives, and are carried at fair value, which is determined based upon
quoted market prices, when available. When quoted market prices are not
available, other pricing methods, such as pricing models, quoted prices of
instruments with similar characteristics, discounted cash flows or the net asset
value of the investee are used. Securities that are held principally for resale
in the near term are recorded as trading assets with changes in fair value
recorded in earnings. Interest and dividends are included in net interest
income. Trading instruments are carried at fair value on the trade date with
changes in the fair value of trading positions recorded in earnings.

     Derivatives used for trading purposes include interest rate and foreign
currency swaps, credit indexed contracts, options, futures and forwards. Also
included are derivatives intended to serve as economic hedges of risk,
derivatives extended on behalf of customers and certain derivatives entered into
for nontrading purposes that are intended to be effective as hedges of various
economic risks. The Bank recognizes changes in the fair value of trading
derivatives as they occur in net trading profits. Derivatives executed on behalf
of customers are carried at fair value with changes in fair value recorded in
earnings, and are classified as trading assets when there is a positive fair
value and trading liabilities when there is a negative fair value.

  DERIVATIVES AND HEDGING ACTIVITIES

     As part of its asset and liability management process, the Bank uses
various derivative instruments including interest rate and currency swaps,
credit indexed contracts, options, futures and forward contracts, to manage
various interest rate and foreign exchange exposures or modify interest rate
characteristics of various balance sheet accounts.

     On January 1, 2001, the Bank adopted the Statement of Financial Accounting
Standards ("SFAS") No. 133 ("SFAS No. 133"), Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, as well as certain derivative instruments
embedded in other contracts, that are employed to manage risk outside of the
Bank's trading activities.

     For a derivative to qualify for hedge accounting, the hedging relationship
must be designated and formally documented at inception along with the
particular risk management objective and strategy for the hedge, identification
of the derivative used as the hedging instrument, the hedged item, the risk
exposure being hedged, and the method of assessing hedge effectiveness.
Derivatives used as hedges must be highly effective at reducing the risk
associated with the exposure being hedged. The effectiveness of these hedging
relationships is evaluated both prospectively and retrospectively at inception
and on an on-going basis using quantitative measures of correlation.

     All derivatives, whether designated for hedging relationships or not, are
required to be recorded on the balance sheets at fair value. If the derivative
qualifies as a fair value hedge, in which derivatives hedge the fair value of
assets, liabilities or firm commitments, changes in the fair value of the
derivative and changes in the fair value of the hedged item attributable to the
hedged risk are recognized together in earnings. The net amount, representing
hedge ineffectiveness, is reflected in current earnings. If the derivative is
designated as a cash flow hedge, in which derivatives hedge the variability of
cash flows related to floating rate assets, liabilities or forecasted
transactions, the effective portion of the change in the fair value of the
derivative is recorded in other comprehensive income and recognized in the
income statement when the hedged item affects earnings. The ineffective portion
of cash flow hedges is immediately recognized in earnings. If hedge
relationships are terminated, hedge designations are removed or forecasted
transactions are no longer expected to occur, hedge accounting treatment will
not be applied prospectively. The related hedging derivative is either
terminated or transferred to the trading account.

                                      F-135
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Bank did not apply hedge accounting for derivatives entered into for
nontrading purposes and classified such derivatives as trading assets and
liabilities. Such nontrading derivatives include interest rate swaps and cross
currency swaps that are entered to hedge interest rate and foreign exchange
risks. Certain of these derivatives are intended to be effective as economic
hedges.

  SECURITIES

     Debt securities that management has the positive intent and ability to hold
to maturity are classified as held-to-maturity and recorded at amortized cost.
Trading securities are bought and held principally for the purpose of selling
them in the near term and are carried at market value with adjustments
recognized through current income. Securities not classified as held-to-maturity
or trading, including equity securities with readily determinable fair values,
are classified as available-for-sale securities and recorded at fair value, with
unrealized gains and losses excluded from earnings and reported in other
comprehensive income.

     Purchase premiums and discounts are recognized in interest income and
expense using the effective interest method over the terms of the securities.
Declines in the fair value of held-to-maturity and available-for-sale securities
below their cost that are deemed to be other-than-temporary are reflected in
earnings as realized losses and are not permitted to be subsequently reversed.
Gains and losses on the sale of debt securities and equity securities are
recorded on the trade date and are determined using the specific identification
method and moving average method, respectively.

  OTHER INVESTMENTS

     The Bank holds certain investments that are not within the scope of SFAS
No. 115, Accounting for Certain Investments in Debt and Equity Securities. Those
investments are recorded as other assets in the balance sheets and accounted for
at cost unless there is persuasive evidence of a decrease in value which is
recorded as noninterest expense.

  INTEREST-BEARING DEPOSITS IN BANKS

     Interest-bearing deposits in banks maturing within one year are carried at
cost.

  LOANS

     Loans are reported at the principal amount outstanding adjusted for the
allowance for loan losses and deferred loan fees and origination costs. Interest
on loans is accrued at the effective interest rate and credited to income based
on the principal amount outstanding.

     The Bank generally ceases the accrual of interest when principal or
interest payments become one day past due. Any unpaid interest previously
accrued on such loans is reversed from income, and thereafter interest is
recognized only to the extent payments are received. In applying payments on
delinquent loans, payments are applied first to delinquent interest, normal
interest, and then to the loan balance until it is paid in full. Loans are
returned to accrual status when all the principal and interest amounts
contractually due are brought current.

     Interest accruals are continued for past-due loans collateralized by
customer deposits.

     Securities received by the Bank involving loans that are restructured or
settled are recorded at the fair value of the security at the date of
restructuring or settlement. Any difference between the security's fair value
and the net carrying amount of the loan is recorded as a charge-off or recovery,
as appropriate, on the loan through the allowance for loan losses.

                                      F-136
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Bank provides equipment financing to its customers through a variety of
lease arrangements. Direct financing leases are carried at the aggregate of
lease payments receivable plus estimated residual value of the leased property,
less unearned income. Unearned income is recognized using the effective interest
method.

     Transfers of loans to third parties are accounted for as sales when control
is surrendered to the transferee. The Bank derecognizes the loans from the
balance sheet including any related allowance, and recognizes all assets
obtained, and liabilities incurred, including any recourse obligations to the
transferee, at fair value. Any resulting gain or loss on the sales is recognized
in earnings.

     Conversely, the Bank only recognizes loans transferred from third parties
on the balance sheet when the Bank obtains control of the loans.

  ALLOWANCE FOR LOAN LOSSES

     The Bank's allowance for loan losses is based upon management's continuing
review and evaluation of the loan portfolio and is management's best estimate of
probable losses that have been incurred as of the balance sheet date. The level
of the allowance is based on an evaluation of the risk characteristics of the
loan portfolio and considers factors such as past loss experience and the
financial condition of the borrower. The allowance is increased by the provision
for loan losses, which is charged against current period operating results and
decreased by the amount of charge-offs, net of recoveries. The Bank's
methodology for assessing the level of the allowance consists of two key
elements, the specific allowance and the general allowance.

     A specific allowance is calculated when a corporate loan is specifically
identified as impaired. A corporate loan is considered impaired when, after
consideration of current information and events, it is probable that the Bank
will be unable to collect all amounts, including principal and interest,
according to the contractual terms of the loan. The Bank considers the following
types of loans to be impaired:

     - Loans classified as "substandard" or below according to asset
       classification guidelines of the Financial Supervisory Commission
       ("FSC");

     - Loans that are 90 days or more past due; and

     - Loans which are "troubled debt restructurings" under US GAAP.

     Once a loan is identified as impaired, management measures the impairment
based on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. If the resulting value is less than the book value of the
loan, a specific allowance is established for an amount equal to the difference.
Any amounts deemed uncollectible are charged against the allowance for loan
losses. Recoveries of previously charged-off amounts are credited to the
allowance for loan losses. Impairment criteria are applied to the entire loan
portfolio, exclusive of leases and smaller balance homogeneous loans such as
residential mortgage, consumer loans and credit cards, which are evaluated
collectively for impairment. Smaller balance corporate loans, managed on a
portfolio basis, are also evaluated collectively for impairment.

     The allowance for smaller-balance loans is determined using several
modeling tools, including a delinquency roll-rate model for credit cards, as
well as a risk rating migration model for homogeneous pools of consumer and
corporate loans. The loss factors developed through the use of such models are
based on the Bank's historical loss experiences and may be adjusted for
significant factors that, in management's judgment, affect the collectibility of
the portfolio as of the evaluation date.

     The Bank charges off unsecured consumer loan amounts past due greater than
180 days.

     The related specific allowance for loan losses is transferred as cost of
the net book value of the loan as of the date of sale when non-performing loans
are sold and derecognized from the balance sheet. The
                                      F-137
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

allowance for loan losses is re-established if loans are reacquired, at an
amount measured as of the date of reacquisition. Any movement in the allowance
in relation to these loans after reacquisition is included within the overall
provision for loan losses during the year.

  ALLOWANCE FOR GUARANTEES AND ACCEPTANCES

     The Bank analyzes its legally binding off-balance sheet commitments for
losses associated with such commitments. The Bank reviews the ability of the
counterparty of the underlying credit commitment to perform under the proposed
commitment. If it is determined that a loss is probable and estimable, the Bank
will record a liability in a similar manner as if a loan was granted under the
terms of the commitment. The allowance for guarantees and acceptances is
reflected in other liabilities.

  DEFERRED LOAN FEES AND ORIGINATION COSTS

     The Bank recognizes certain employee and other costs associated with
originating loans as a yield adjustment over the life of the loan, net of any
related fees received. These costs relate to direct loan origination activities
performed by the Bank which include evaluating the prospective borrower's
financial condition, recording guarantees, collateral and other security
arrangements, negotiating loan terms, preparing and processing loan documents,
and closing the transaction. All other lending related costs, including costs
related to activities performed by the Bank for advertising, soliciting
potential borrowers, servicing existing loans, and other ancillary activities
related to establishing and monitoring credit policies, supervision and
administration are expensed as incurred.

  FORECLOSED ASSETS

     Assets acquired through, or in lieu of, loan foreclosures are held for sale
and are initially recorded at fair value at the date of foreclosure,
establishing a new cost basis. Subsequent to foreclosure, the assets are carried
at the lower of their carrying amounts or fair values, less cost to sell, based
on periodic valuation reviews performed by management. Revenues and expenses
derived from foreclosed assets and changes in the valuation allowance are
included in other noninterest expenses.

  SECURITIZATIONS

     The Bank transfers loans to SPEs, which in turn issue beneficial interests
collateralized by such loans. These transactions have been accounted for as
sales, unless the control over these loans has not been surrendered then they
are accounted for as secured borrowings. For transfers accounted for as secured
borrowings, the loans collateralizing these borrowings are included as loans in
the balance sheet accounts, and related beneficial interests issued, which pay
interest at rates of 1 percent to 16 percent per annum, are included in secured
borrowings.

  PREMISES AND EQUIPMENT

     Buildings, equipment and furniture, and leasehold improvements are stated
at cost less accumulated depreciation and amortization. Depreciation of
buildings is computed on a straight-line basis over the estimated useful lives
of the assets, or the term of the lease, if shorter, in the case of leasehold
improvements. Depreciation of equipment and furniture is computed on a declining
balance basis over the useful lives of the assets. Gains or losses on disposals
of premises and equipment are determined by reference to their carrying amounts.
Maintenance and repairs are charged to expense as incurred.

     The Bank capitalizes certain direct costs related to developing software
for internal use, and amortizes such costs on a declining balance basis once the
software is available for use.

                                      F-138
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The estimated useful lives of premises and equipment are as follows:

<Table>
<S>                                                           <C>
Buildings...................................................  40 - 60 years
Equipment and furniture.....................................        5 years
Leasehold improvements......................................        5 years
Capitalized software costs..................................        5 years
</Table>

  IMPAIRMENT

     Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. An estimate of undiscounted future cash flows produced by the
asset, or the group of assets, is compared to the carrying value to determine
whether impairment exists. If an asset is determined to be impaired, the loss is
measured based on differences between the carrying value and quoted market
prices in active markets, if available. If quoted market prices are not
available, the estimate of fair value is based on various valuation techniques,
including a discounted value of estimated future cash flows and fundamental
analysis.

  INTEREST EXPENSE

     Interest expense is recognized on an accrual basis.

  STOCK-BASED COMPENSATION

     The Bank has adopted SFAS No. 123 ("SFAS No. 123"), Accounting for
Stock-Based Compensation, and elected to use the fair value method of accounting
for the stock-based compensation it provides to key employees and executives.
The Bank values stock options granted based upon an option-pricing model and
recognizes this value as an expense, adjusted for forfeitures, over the period
in which the options vest.

  COMMISSIONS AND FEES

     Commissions and fees from nontrust management include remittance fees and
credit card fees. These fees are recognized when the related services are
rendered.

  NET TRUST MANAGEMENT FEES

     The Bank receives fees for its management of trust assets, which are
recognized when earned. The Bank is also entitled to receive performance-based
fees for certain trust accounts. These fees, if earned, are recognized at the
end of the performance period.

     In addition, the Bank is liable for losses incurred in certain trust
accounts, which are subject to minimum return and principal guarantees. Such
losses arising from these trusts underperforming the guaranteed level are
accrued at the end of each applicable year when they are considered probable and
reasonably estimable, and are included in net trust management fees.

  INCOME TAXES

     There are two components of income tax expense, current and deferred.
Current income tax expense approximates cash to be paid or refunded for taxes
for the applicable period. Deferred tax assets and liabilities are recognized
due to differences in the basis of assets and liabilities as measured by tax
laws and their basis as reported in the financial statements. Deferred tax
expense or benefit is then recognized for the change in deferred tax liabilities
or assets between periods.

                                      F-139
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Recognition of deferred tax assets is based on management's belief that it
is more likely than not that the tax benefit associated with certain temporary
differences, tax operating loss carry forwards and tax credits will be realized.
A valuation allowance is recorded for the amount of the deferred tax items for
which it is more likely than not that realization will not occur.

  OTHER COMPREHENSIVE INCOME

     The Bank records unrealized gains and losses related to securities
classified as available-for-sale and foreign currency translation adjustments in
other comprehensive income ("OCI") within stockholders' equity. Unrealized gains
and losses on securities classified as available-for-sale securities are
reclassified into net income as the gains or losses are realized upon sale of
the securities, or when unrealized losses are deemed to be other-than-temporary.
Translation gains or losses on foreign currency translation adjustments are
reclassified to net income upon sale or liquidation of investments in foreign
operations.

  CONVENIENCE TRANSLATION

     The Bank operates primarily in Korea and its official accounting records
are maintained in Korean Won. The US Dollar amounts are provided herein as
supplementary information solely for the convenience of the reader. Korean Won
amounts are expressed in US Dollars at the rate of W1,186.30 : US$1, the US
Federal Reserve Bank of New York noon buying exchange rate in effect on December
31, 2002. The US Dollar amounts are unaudited and are not presented in
accordance with US GAAP, and should not be construed as the Korean Won amounts
represent, or have been, or could be converted into US Dollars at that or any
other rate.

2.  RECENT ACCOUNTING PRONOUNCEMENTS

     Effective July 1, 2001, the Bank adopted SFAS No. 141 ("SFAS No. 141"),
Business Combinations. SFAS No. 141 requires that all business combinations
initiated after June 30, 2001 be accounted for using the purchase method. Also,
under SFAS No. 141, identified intangible assets acquired in a purchase business
combination must be separately valued and recognized on the balance sheet if
they meet certain requirements. The adoption of SFAS No. 141 did not have a
material effect on the consolidated financial statements.

     Effective January 1, 2002, the Bank adopted SFAS No. 142 ("SFAS No. 142"),
Goodwill and Other Intangible Assets, which primarily addresses the accounting
for goodwill and intangible assets subsequent to their acquisition. SFAS No. 142
requires that goodwill be recorded at the reporting unit level, which is defined
as a operating segment or one level below. SFAS No. 142 prohibits the
amortization of goodwill but requires that it be tested for impairment at least
annually at the reporting unit level. The impairment test is to be performed in
two phases. The first step of the goodwill impairment test, used to identify
potential impairment, compares the fair value of a reporting unit with its
carrying amount, including goodwill. If the fair value of the reporting unit
exceeds its carrying account, goodwill of the reporting unit is considered not
impaired; however, if the carrying amount of a reporting unit exceeds its fair
value an additional procedure must be performed. That additional procedure
compares the implied fair value, of the reporting unit goodwill with the
carrying amount of the goodwill. An impairment loss is recorded to the extent
that the carrying amount of goodwill exceeds its implied fair value. The
adoption of SFAS No. 142 did not have a material effect on the consolidated
financial statements.

     Effective January 1, 2002, the Bank adopted SFAS No. 144 ("SFAS No. 144"),
Accounting for the Impairment or Disposal of Long-Lived Assets, which superseded
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to be Disposed
of. The new standard maintains the previous accounting for the impairment or
disposal of long-lived assets, but also establishes more restrictive criteria
that have to be met to classify such as "held for sale". The adoption of SFAS
No. 144 did not have a material effect on the consolidated financial statements.
                                      F-140
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Effective October 1, 2002, the Bank adopted SFAS No. 147 ("SFAS No. 147"),
Acquisitions of Certain Financial Institutions. SFAS No. 147 requires that
business combinations involving depository financial institutions within its
scope, except for combinations between mutual institutions, be accounted for
under SFAS No. 141. Previously, generally accepted accounting principles for
acquisitions of financial institutions provided for recognition of the excess of
the fair value of liabilities assumed over the fair value of tangible and
identifiable intangible assets acquired as an unidentifiable intangible asset.
Under SFAS No. 147, such excess is accounted for as goodwill. The impact of
adopting SFAS No. 147 did not materially affect the consolidated financial
statements.

     In April 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 149 ("SFAS No. 149"), Amendment of Statement 133 on Derivative
Instruments and Hedging Activities. SFAS No. 149 amends and clarifies accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS No. 133. The new guidance
amends SFAS No. 133 for decisions made: (a) as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS No.
133, (b) in connection with other FASB projects dealing with financial
instruments, and (c) regarding implementation issues raised in relation to the
application of the definition of a derivative, particularly regarding the
meaning of an "underlying" and the characteristics of a derivative that contains
financing components. SFAS No. 149 is generally effective for contracts entered
into or modified after June 30, 2003, with a few exceptions, and for hedging
relationships designated after June 30, 2003. The guidance is to be applied
prospectively. The Bank is currently assessing the impact of SFAS No. 149 on its
financial condition and results of its operations.

     In May 2003, the FASB issued SFAS No. 150 ("SFAS No. 150"), Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 changes the accounting for certain financial instruments
that, under previous guidance, could be classified as equity or "mezzanine"
equity, but now requiring those instruments to be classified as liabilities (or
assets in some circumstances) in the balance sheet. Further, SFAS No. 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. The guidance in SFAS No. 150 is generally effective for all
financial instruments entered into or modified after May 31, 2003, and is
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. The Bank is currently assessing the impact of SFAS No. 150 on its
financial position and results of its operations.

     In November 2002, FASB issued FASB Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees. FIN 45
requires a guarantor to recognize a liability at the inception of certain
guarantees for the fair value of the obligation, including the ongoing
obligation to stand ready to perform over the term of the guarantee. Guarantees,
as defined in FIN 45, include contracts that contingently require the Bank to
make payments to a guaranteed party based on changes in an underlying that is
related to an asset, liability or equity security of the guaranteed party,
performance guarantees, indemnification agreements or indirect guarantees of
indebtedness of others. This new accounting is effective for certain guarantees
issued or modified after December 31, 2002. In addition, FIN 45 requires certain
additional disclosures that are presented in Note 26. Management does not expect
that the adoption of FIN 45 will have a material impact on the Bank's financial
position or its results of operations.

     In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.
FIN 46 provides a new framework for identifying variable interest entities
("VIEs") and determining when a company should include the assets, liabilities,
noncontrolling interests and results of activities of VIEs in its consolidated
financial statements. FIN 46 requires VIEs to be consolidated by a company if
that company is subject to a majority of the expected losses from the VIEs'
activities or entitled to receive a majority of the VIE's expected residual
returns, or both. FIN 46 is effective immediately for VIEs created after January
31, 2003 and is effective January 1,

                                      F-141
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2004 for VIEs created prior to February 1, 2003. The Bank is currently assessing
the impact of FIN 46 on its financial position and results of its operations.

3.  RESTRICTED CASH

     Restricted cash at December 31 are as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              --------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>        <C>
Reserve deposits with the BOK...............................  W 83,283   W1,224,944
Deposits with insurance companies...........................    73,500           --
Other.......................................................    19,140       19,575
                                                              --------   ----------
  Total restricted cash.....................................  W175,923   W1,244,519
                                                              ========   ==========
</Table>

     Reserve deposits with the BOK represent the amounts required under the Bank
of Korea Act for payment of certificate of deposits, other time deposits and
mutual installment deposits. Deposits with insurance companies are contractually
restricted from being withdrawn prior to their maturities in 2002.

4.  CALL LOANS AND SECURITIES PURCHASED UNDER RESALE AGREEMENTS

     Call loans at their respective carrying values, at December 31, are as
follows:

<Table>
<Caption>
                                                                2001       2002
                                                              --------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>        <C>
Call loans..................................................  W96,369    W466,496
</Table>

     Interest income from call loans and securities purchased under resale
agreements, which have been included in other interest income, amounted to
26,535 million Won and 23,395 million Won for the years ended December 31, 2001
and 2002, respectively.

5.  TRADING ACTIVITIES

     Trading assets, at fair value, consist of the following at December 31:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Debt securities
  Korean Treasury and government agencies..................  W  685,085   W  578,757
  Corporations.............................................     189,085      311,063
  Financial institutions...................................     473,058      150,911
  Mortgage-backed and asset-backed securities..............      62,660        9,905
  Foreign government.......................................       3,217        3,298
Equity securities..........................................          --           14
Derivative instruments
  Foreign exchange derivatives.............................      20,252       50,400
  Interest rate derivatives................................      48,186       89,503
  Equity derivatives.......................................         171           46
                                                             ----------   ----------
     Total trading assets..................................  W1,481,714   W1,193,897
                                                             ==========   ==========
</Table>

                                      F-142
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Trading liabilities, at fair value, consist of the following derivative
financial instruments at December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Derivative instruments
  Foreign exchange derivatives..............................   W12,383     W50,232
  Interest rate derivatives.................................    12,684      31,617
  Credit derivatives........................................       267         690
  Equity derivatives........................................       171          24
                                                               -------     -------
     Total trading liabilities..............................   W25,505     W82,563
                                                               =======     =======
</Table>

     The following represents net trading profits for the years ended December
31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Debt securities.............................................   W46,204     W24,650
Equity securities...........................................     6,145          16
Derivative instruments......................................    23,818      65,449
                                                               -------     -------
     Net trading profits....................................   W76,167     W90,115
                                                               =======     =======
</Table>

     For the years ended December 31, 2001 and 2002, net unrealized holding
gains on trading securities of 1,551 million Won and 5,740 million Won,
respectively, were included in net trading profits.

6.  SECURITIES

     The amortized costs and estimated fair values of the Bank's
available-for-sale securities and the related unrealized gains and losses at
December 31 are as follows:

<Table>
<Caption>
                                                 2001                                                 2002
                          ---------------------------------------------------   -------------------------------------------------
                                          GROSS        GROSS                                   GROSS        GROSS
                           AMORTIZED    UNREALIZED   UNREALIZED                 AMORTIZED    UNREALIZED   UNREALIZED
                             COST         GAINS        LOSSES     FAIR VALUE       COST        GAINS        LOSSES     FAIR VALUE
                          -----------   ----------   ----------   -----------   ----------   ----------   ----------   ----------
                                                                   (IN MILLIONS OF WON)
<S>                       <C>           <C>          <C>          <C>           <C>          <C>          <C>          <C>
AVAILABLE-FOR-SALE
  SECURITIES
Debt securities
  Korean Treasury and
    government
    agencies............  W 6,758,778    W112,987     W11,369     W 6,860,396   W6,849,403    W187,023     W 6,673     W7,029,753
  Corporations..........    1,119,842      61,312      35,830       1,145,324      662,149      16,518      19,232        659,435
  Financial
    institutions........    3,337,625      40,582      15,834       3,362,373    1,576,668      28,683       1,824      1,603,527
  Foreign governments...       10,292         226          18          10,500       12,125         175         262         12,038
  Mortgage-backed and
    asset-backed
    securities..........       88,326       1,652          --          89,978       25,289         141          --         25,430
Marketable equity
  securities............      759,121     126,257       7,376         878,002      273,935      32,054      12,325        293,664
                          -----------    --------     -------     -----------   ----------    --------     -------     ----------
    Total...............  W12,073,984    W343,016     W70,427     W12,346,573   W9,399,569    W264,594     W40,316     W9,623,847
                          ===========    ========     =======     ===========   ==========    ========     =======     ==========
</Table>

     None of the Bank's securities are classified as held-to-maturity at
December 31, 2001 and 2002, respectively.

     The BOK is the central bank that establishes monetary policy for Korea. The
Korea Development Bank ("KDB") is owned and controlled by the Korean government.
Of the total amounts listed above in financial institutions category at December
31, 2001 and 2002, the fair value of available-for-sale debt securities includes
3,065,363 million Won and 1,416,792 million Won that were issued by BOK and KDB,
respectively.

                                      F-143
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Bank has recognized impairment losses on available-for-sale securities,
where decreases in value were deemed to be other-than-temporary during the years
ended December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Impairment losses on available-for-sale securities..........  W206,777    W120,840
</Table>

     Any deterioration in Korean economic conditions, or in specific situations
of the issuers of the securities could adversely affect the fair value of
securities held by the Bank.

     Interest and dividends on securities are comprised of the following for the
years ended December 31:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Interest income.............................................  W826,500    W676,615
Dividends...................................................     3,811       5,939
                                                              --------    --------
     Total interest and dividend income.....................  W830,311    W682,554
                                                              ========    ========
</Table>

     For the years ended December 31, 2001 and 2002, proceeds from sales of
available-for-sale securities amounted to 7,494,126 million Won and 7,889,286
million Won, respectively. Gross realized gains amounted to 252,462 million Won
and 160,967 million Won for the years ended December 31, 2001 and 2002,
respectively. Gross realized losses amounted to 88,172 million Won and 91,246
million Won for the years ended December 31, 2001 and 2002, respectively.

     The amortized cost and estimated fair value of the Bank's
available-for-sale debt securities at December 31, 2002 by contractual maturity
are shown in the table below. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.

<Table>
<Caption>
                                                             AVAILABLE-FOR-SALE DEBT
                                                                   SECURITIES
                                                             -----------------------
                                                             AMORTIZED
                                                                COST      FAIR VALUE
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Within 1 year..............................................  W2,387,531   W2,406,109
Over 1 year through 5 years................................   6,404,041    6,597,320
Over 5 years through 10 years..............................     300,390      291,448
Over 10 years..............................................       2,847        2,518
Securities not due at a single maturity date...............      30,825       32,788
                                                             ----------   ----------
     Total.................................................  W9,125,634   W9,330,183
                                                             ==========   ==========
</Table>

                                      F-144
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7.  LOANS

     The composition of the loan portfolio at December 31 is as follows:

<Table>
<Caption>
                                                              2001          2002
                                                           -----------   -----------
                                                             (IN MILLIONS OF WON)
<S>                                                        <C>           <C>
Corporate
  Commercial and industrial..............................  W13,902,764   W16,814,427
  Other commercial.......................................    7,079,629     7,611,049
  Lease financing........................................      552,796       429,284
Consumer
  Mortgage and home equity...............................    3,993,251     7,166,998
  Credit cards...........................................    4,868,983     5,769,957
  Other consumer.........................................    5,064,793     8,238,749
                                                           -----------   -----------
     Total loans, gross..................................   35,462,216    46,030,464
     Deferred loan origination costs.....................       43,409        84,399
                                                           -----------   -----------
                                                            35,505,625    46,114,863
     Less: Allowance for loan losses.....................   (2,031,796)   (2,678,361)
                                                           -----------   -----------
     Total loans, net....................................  W33,473,829   W43,436,502
                                                           ===========   ===========
</Table>

     During 2001 and 2002, the Bank received convertible debt securities having
a fair value of 205,134 million Won and 69,632 million Won, respectively, and
equity securities having a fair value of 193,171 million Won and 193,455 million
Won, respectively, through the restructuring of 38 loans in 2001 and 57 loans in
2002, having an aggregate book value of 713,494 million Won in 2001 and 829,866
million Won in 2002. The Bank recognized aggregate charge-offs of 315,189
million Won and 566,779 million Won related to these transactions during the
years ended December 31, 2001 and 2002, respectively.

     Impaired loans are those on which the Bank believes it is probable that it
will not be able to collect all amounts due according to the contractual terms
of the loan. Information regarding the Bank's impaired loans at December 31 are
as follows:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Impaired loans with an allowance...........................  W2,603,857   W2,185,290
Impaired loans without an allowance........................     612,413      217,917
                                                             ----------   ----------
  Total impaired loans.....................................  W3,216,270   W2,403,207
                                                             ==========   ==========
Allowance for impaired loans...............................  W1,303,484   W1,199,265
Average balance of impaired loans during the year..........  W4,523,326   W2,846,404
Interest income recognized on impaired loans...............  W  145,139   W  119,145
</Table>

     Included in the above table are smaller balance corporate loans managed on
a portfolio basis which have been collectively identified as impaired amounting
to 250,548 million Won and 242,638 million Won at December 31, 2001 and 2002,
respectively.

     The amount of loans that are placed on a nonaccrual basis are 2,586,091
million Won and 4,094,096 million Won as of December 31, 2001 and 2002,
respectively. The amount of accruing loans which are past due one day or more
are 103,527 million and 104,578 million as of December 31, 2001 and 2002,
respectively.

                                      F-145
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As discussed in Note 1, adverse economic conditions in the Korean economy
may continue to have an adverse effect on the Bank's debtors. The Bank owns
investment securities of and has loans outstanding to a number of Korean
companies that have experienced financial difficulties. The ultimate
collectibility of these amounts is subject to a number of factors, including the
successful performance of the debtors under various restructuring plans in place
or in process of negotiation and their ability to perform on loan and debt
obligations given the status of the Korean economy and the potential
continuation for the adverse trends or other unfavorable developments.
Consequently, it is reasonably possible that adjustments could be made to the
allowances for impaired loans and to the carrying amount of investments in the
near term in amounts that may be material to the Bank's consolidated financial
statements.

     The following table summarizes the changes in the allowance for loan losses
and the allowance for guarantees and acceptances for the years ended December
31:

<Table>
<Caption>
                                                   2001                                         2002
                                ------------------------------------------   ------------------------------------------
                                                GUARANTEES                                   GUARANTEES
                                                   AND                                          AND
                                   LOANS      ACCEPTANCES(1)      TOTAL         LOANS      ACCEPTANCES(1)      TOTAL
                                -----------   --------------   -----------   -----------   --------------   -----------
                                                                 (IN MILLIONS OF WON)
<S>                             <C>           <C>              <C>           <C>           <C>              <C>
Balance at beginning of the
  year........................  W 3,006,231     W 333,152      W 3,339,383   W 2,031,796      W198,914      W 2,230,710
Provision for loan losses.....      552,616            --          552,616     1,384,749            --        1,384,749
Provision for guarantees and
  acceptances.................           --      (134,238)        (134,238)           --       (55,296)         (55,296)
Allowance relating to loans
  reacquired from Korea Asset
  Management Corporation......      216,270            --          216,270       385,130            --          385,130
Charge-offs...................   (2,193,751)           --       (2,193,751)   (1,395,603)           --       (1,395,603)
Recoveries....................      450,430            --          450,430       272,289            --          272,289
                                -----------     ---------      -----------   -----------      --------      -----------
Balance at end of the year....  W 2,031,796     W 198,914      W 2,230,710   W 2,678,361      W143,618      W 2,821,979
                                ===========     =========      ===========   ===========      ========      ===========
</Table>

- ---------------

Note:

(1) The allowance for guarantees and acceptances is included in other
    liabilities.

     The Bank originates direct financing leases on certain machinery and
various other equipment, automobiles and ships for customers in a variety of
industries. Income attributable to these leases is initially recorded as
unearned income and subsequently recognized as interest income, using the
effective interest method, over the term of the leases. The terms of the leases
are generally from 1 to 15 years. The components of the net investment in direct
financing leases at December 31, which are included in the respective loan
balances, are as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   --------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Gross lease payments receivable.............................  W 662,429   W497,544
Estimated unguaranteed residual values......................      5,717      5,011
Unearned income.............................................   (115,350)   (73,271)
                                                              ---------   --------
                                                              W 552,796   W429,284
                                                              =========   ========
</Table>

                                      F-146
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The scheduled maturities of net lease payments receivable at December 31
are as follows:

<Table>
<Caption>
                                                               (IN MILLIONS
                                                                 OF WON)
                                                               ------------
<S>                                                            <C>
YEAR ENDING
2003........................................................     W 76,905
2004........................................................       63,314
2005........................................................       56,113
2006........................................................       52,992
2007 and thereafter.........................................      179,960
                                                                 --------
  Total.....................................................     W429,284
                                                                 ========
</Table>

8.  PREMISES AND EQUIPMENT

     Premises and equipment at December 31 are as follows:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Land.......................................................  W  312,604   W  265,157

Buildings..................................................     372,675      363,856

Equipment and furniture....................................     395,034      455,980

Capitalized software costs.................................      25,631       40,207

Leasehold improvements.....................................      36,176       45,465

Construction in progress...................................       6,025          817
                                                             ----------   ----------
  Total premises and equipment, gross......................   1,148,145    1,171,482

  Less: Accumulated depreciation and amortization..........    (426,292)    (478,640)
                                                             ----------   ----------
     Total premises and equipment, net.....................  W  721,853   W  692,842
                                                             ==========   ==========
</Table>

     Depreciation expense on buildings, equipment and furniture, and leasehold
improvements amounted to 61,599 million Won and 66,300 million Won, and
amortization expense on software costs amounted to 6,044 million Won and 8,094
million Won for the years ended December 31, 2001 and 2002, respectively.

                                      F-147
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9.  OTHER ASSETS

     Other assets at December 31 are as follows:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Receivables for foreign exchange spot contracts............  W  720,927   W1,395,293

Deferred tax assets........................................   1,021,651      957,653

Other investments..........................................     322,265      373,753

Accrued interest and dividends receivable..................     422,880      368,989

Accounts receivable........................................     223,514      152,380

Due from trust accounts....................................     139,000      145,400

Accrued income.............................................      38,213       33,908

Prepaid expenses...........................................      10,311        7,431

Others.....................................................      23,498       25,247
                                                             ----------   ----------
     Total other assets....................................  W2,922,259   W3,460,054
                                                             ==========   ==========
</Table>

10.  DEPOSITS

     Deposits at December 31 are as follows:

<Table>
<Caption>
                                                   WEIGHTED                     WEIGHTED
                                                   AVERAGE                      AVERAGE
                                                 RATE PAID IN                 RATE PAID IN
                                      2001           2001          2002           2002
                                   -----------   ------------   -----------   ------------
                                          (IN MILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                <C>           <C>            <C>           <C>
INTEREST-BEARING DEPOSITS
  Interest-bearing demand
     deposits....................  W 4,037,855      1.96%       W 3,997,777      1.94%
  Savings deposits...............   12,025,586      2.55%        12,159,192      1.61%
  Certificates of deposit........    2,320,531      5.89%         4,119,884      5.04%
  Other time deposits............   17,405,948      6.68%        21,415,857      5.11%
  Mutual installment deposits....      483,954      7.13%           678,558      6.58%
                                   -----------                  -----------
                                    36,273,874      4.79%        42,371,268      3.70%
                                   -----------                  -----------
NONINTEREST-BEARING DEPOSITS
  Demand deposits................    1,648,217                    1,903,033
                                   -----------                  -----------
     Total deposits..............  W37,922,091      4.63%       W44,274,301      3.58%
                                   ===========                  ===========
</Table>

     Interest-bearing demand deposits primarily represents court related
deposits.

     Other time deposits include tax-exempt saving accounts for workers, savings
accounts for household financing and foreign currency deposits.

     Mutual installment deposits enable customers to become eligible for
mortgages and other consumer loans as well as corporate loans from the Bank.

                                      F-148
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The contractual maturities of certificates of deposit, other time deposits
and mutual installment deposits at December 31 are as follows:

<Table>
<Caption>
                                                               (IN MILLIONS OF WON)
                                                               --------------------
<S>                                                            <C>
YEAR ENDING
2003........................................................       W22,957,490
2004........................................................         1,676,776
2005........................................................         1,278,679
2006........................................................           141,495
2007........................................................            95,890
Thereafter..................................................            63,969
                                                                   -----------
     Total..................................................       W26,214,299
                                                                   ===========
</Table>

     The KDIC provides deposit insurance up to a total of 50 million Won per
depositor in each bank pursuant to the Depositor Protection Act for deposits due
after January 1, 2001, regardless of the placement date of the deposit.

11.  SHORT-TERM BORROWINGS

     Short-term borrowings consisting of borrowed funds with original maturities
of less than one year at December 31 are as follows:

<Table>
<Caption>
                                                               WEIGHTED-                WEIGHTED-
                                                                AVERAGE                  AVERAGE
                                                               RATE PAID                RATE PAID
                                                     2001       IN 2001       2002       IN 2002
                                                  ----------   ---------   ----------   ---------
                                                     (IN MILLIONS OF WON, EXCEPT PERCENTAGES)
<S>                                               <C>          <C>         <C>          <C>
Borrowings from the BOK.........................  W1,150,481     4.43%     W  481,213     2.53%
Borrowings in foreign currencies................   1,833,188     4.89%      2,506,537     2.27%
Borrowings from trust accounts..................     655,804     4.82%        446,698     3.90%
Call money......................................     174,044     4.66%         79,373     3.73%
Other borrowings(1).............................   1,725,137     5.13%      2,010,922     4.18%
                                                  ----------               ----------
  Total short-term borrowings...................  W5,538,654     4.86%     W5,524,743     3.30%
                                                  ==========               ==========
</Table>

- ---------------

Note:

(1) The majority of other borrowings relate to borrowings from other financial
    institutions.

     Total interest expense on short-term borrowings amounted to 310,910 million
Won and 222,719 million Won, of which 20,919 million Won and 28,212 million Won
related to call money for the years ended 2001 and 2002, respectively.

                                      F-149
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12.  SECURED BORROWINGS

     Secured borrowings and relevant collaterals at carrying values, at December
31 are as follows:

<Table>
<Caption>
                                                                         2001                                 2002
                                                          ----------------------------------   ----------------------------------
                                                                            COLLATERAL                           COLLATERAL
                                                           SECURED     ---------------------    SECURED     ---------------------
                                               MATURITY   BORROWINGS   LOANS(3)   SECURITIES   BORROWINGS   LOANS(3)   SECURITIES
                                               --------   ----------   --------   ----------   ----------   --------   ----------
                                                                              (IN MILLIONS OF WON)
<S>                                            <C>        <C>          <C>        <C>          <C>          <C>        <C>
CHB Trustee 1st ABS Specialty Co., Ltd.......  2001       W   30,000   W    508   W      123   W       --   W     --   W       --
 9.97% senior collateralized bond obligation
LSF CHB Holdings II Ltd......................  2007           12,831     21,473           --       10,369     11,428           --
 16% senior collateralized bond obligation
CHB 2nd ABS Specialty Co., Ltd...............  2001  (1)       4,758     10,000           --        5,000      4,000        2,229
 9.5% subordinated bond obligation
CHB 3rd ABS Specialty Co., Ltd...............  2003          170,645    171,000           --      170,892    168,150           --
 7.61% senior collateralized bond obligation
CHB 3rd ABS Specialty Co., Ltd...............  2003            8,981      9,000           --        8,994      8,850           --
 15% subordinated bond obligation
CHB NPL 1st ABS Specialty Co., Ltd...........  2003-         159,221    444,053       13,342      129,496    287,117       15,996
 5.34%-7.16% senior collateralized bond
 obligation                                     2004
CHB Valuemeet 2001 year 1st Securitization
 Co., Ltd....................................  2004  (2)      10,223      2,153           --           --         --           --
 10% senior collateralized bond obligation
CHB Valuemeet 2001 year 2nd Securitization
 Co., Ltd....................................  2004  (2)       5,663      1,147           --           --         --           --
 8% senior collateralized bond obligation
CHB Valuemeet 2002 year 1st Securitization
 Co., Ltd....................................  2005               --         --           --        5,832        319           --
 8% senior collateralized bond obligation
C&G 1st Securitization Specialty Limited
 Liability Company...........................  2015               --         --           --        7,138     46,460          358
 9% senior collateralized bond obligation
Borrowing from CKH Securitization Specialty
 Co., Ltd. ..................................  2003           48,400     48,400           --       18,000     18,000           --
 1%-15.37%
Other securities sold under repurchase
 agreements..................................  2003        1,816,983         --    2,439,000      995,311         --    1,227,410
 1.53%-6.20%
                                                          ----------   --------   ----------   ----------   --------   ----------
   Total secured borrowings..................             W2,267,705   W707,734   W2,452,465   W1,351,032   W544,324   W1,245,993
                                                          ==========   ========   ==========   ==========   ========   ==========
</Table>

- ---------------

Notes:

(1) The subordinated bond obligation is past due and remains outstanding at
    December 31, 2002.

(2) The senior collateralized bond obligations were repaid by the issuer before
    maturity.

(3) Before carrying amounts, exclusive of the related specific allowance for
    loan losses.

                                      F-150
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13.  LONG-TERM DEBT

     Long-term debt (net of unamortized discounts) at December 31 is as follows:

<Table>
<Caption>
                                               INTEREST
                                              RATES (%)    MATURITY       2001         2002
                                              ----------   ---------   ----------   ----------
                                                                        (IN MILLIONS OF WON)
<S>                                           <C>          <C>         <C>          <C>
SENIOR
WON-DENOMINATED
  Notes payable to the Small Business
     Corporation............................   2.00-8.55   2003-2012   W  228,740   W  245,723
  Notes payable to the Industrial Bank of
     Korea..................................   2.45-4.70   2003-2010      176,067      147,555
  Notes payable to Korea Energy Management
     Corporation............................   2.75-6.00   2003-2016       90,653       97,207
  Notes payable to the Institute of
     Information Technology Assessment......   3.82-6.25   2003-2007       58,269       75,223
  Notes payable to other Korean government
     funds..................................   1.70-8.00   2003-2016      249,859      255,576
  Fixed and floating rate
     debentures(1)(2).......................   4.60-6.97   2003-2005      775,700    4,101,830
                                                                       ----------   ----------
       Subtotal.............................                            1,579,288    4,923,114
FOREIGN-DENOMINATED
  Floating rate debentures(4)...............   4.04-4.72        2002      205,546           --
                                                                       ----------   ----------
       Subtotal.............................                              205,546           --
       Total senior debt....................                            1,784,834    4,923,114
                                                                       ----------   ----------
SUBORDINATED
WON-DENOMINATED
  Fixed rate debentures to insurance
     companies..............................       14.70        2007       88,500       15,000
  Other fixed rate debentures(3)............  7.15-18.00   2005-2008      750,000    1,002,000
                                                                       ----------   ----------
       Subtotal.............................                              838,500    1,017,000
FOREIGN-DENOMINATED
  Fixed and floating rate debentures(1).....  6.33-11.88   2005-2010      659,046      600,192
                                                                       ----------   ----------
       Total subordinated debt..............                            1,497,546    1,617,192
                                                                       ----------   ----------
          Long-term debt, gross.............                            3,282,380    6,540,306
          Less: Unamortized discounts.......                               (1,189)     (79,155)
                                                                       ----------   ----------
          Long-term debt, net...............                           W3,281,191   W6,461,151
                                                                       ==========   ==========
</Table>

- ---------------

Notes:

(1) Interest rates on floating rate debt are those rates in effect at December
    31, 2002.

(2) Majority of these debentures are miscellaneous borrowings from individual
    lenders.

(3) Majority of these debentures are miscellaneous borrowings from corporate
    lenders and Korean governmental entities.

(4) Interest rates on floating rate debt are those rates in effect at December
    31, 2001.

     Long-term debt is predominately denominated in Korean Won, US Dollars, or
Japanese Yen with both fixed and floating interest rates. Floating rates are
generally determined periodically by formulas based on certain money market
rates tied to the six-month London Interbank Offered Rate ("LIBOR"), the monthly

                                      F-151
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Public Fund Prime Rate published by the Korean government or the three-month
certificate of deposit market rate published by Korea Securities Dealers
Association, and are reset on a monthly, quarterly or semi-annual basis. The
weighted-average interest rate for long-term debt was 8.09 percent and 6.90
percent at December 31, 2001 and 2002, respectively. Certain long-term debt
agreements contain cross-default provisions and accelerating clauses for early
termination in the event of default.

  DEBT MATURITY SCHEDULE

     The combined aggregate amount of all long-term debt by contractual
maturities at December 31 is as follows:

<Table>
<Caption>
                                                               (IN MILLIONS OF WON)
                                                               --------------------
<S>                                                            <C>
YEAR ENDING
2003........................................................        W2,056,923
2004........................................................         1,553,416
2005........................................................         1,220,136
2006........................................................           108,133
2007........................................................           688,401
Thereafter..................................................           913,297
                                                                    ----------
  Long-term debt, gross.....................................         6,540,306
  Less: Unamortized discount................................           (79,155)
                                                                    ----------
  Long-term debt, net.......................................        W6,461,151
                                                                    ==========
</Table>

14.  ACCRUED EXPENSES AND OTHER LIABILITIES

     Accrued expenses and other liabilities at December 31 are as follows:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
Payables for foreign exchange spot contracts...............  W  722,022   W1,395,089
Accrued interest and dividend payables.....................     890,912      877,033
Due to BOK.................................................     287,478      342,412
Accounts payable...........................................     419,505      213,498
Allowance for losses on guarantees and acceptances.........     198,914      143,618
Recourse liability.........................................     256,488       66,120
Unearned income............................................     105,571      101,325
Utility bill payments received on behalf of government.....      78,187       75,874
Guarantee deposits received................................     113,873       70,108
Deferred tax liabilities...................................      77,195       66,564
Withholding value-added tax and other taxes................      29,681       32,657
Accrued expenses...........................................      18,892       22,427
Accrued severance benefits.................................      10,764       21,661
Income tax payable.........................................      15,233       12,286
Others.....................................................      90,206       94,806
                                                             ----------   ----------
  Total accrued expenses and other liabilities.............  W3,314,921   W3,535,478
                                                             ==========   ==========
</Table>

                                      F-152
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15.  COMMISSIONS AND FEES

     Commissions and fees from nontrust management activities for the years
ended December 31 are as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Credit card fees............................................  W210,742    W257,220
Commissions received on remittances.........................    81,817      90,987
Commissions received on tele-banking service................    27,249      32,171
Commissions received on import and export letters of
  credit....................................................    32,557      30,012
Financial guarantee fees....................................    10,315      10,175
Commissions received as agency..............................     7,337       7,430
Other fees..................................................    44,941      57,134
                                                              --------    --------
  Total commissions and fees from nontrust management.......  W414,958    W485,129
                                                              ========    ========
</Table>

16.  OTHER NONINTEREST INCOME AND OTHER NONINTEREST EXPENSES

     Components of other noninterest income for the years ended December 31 are
as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Net gain on foreign currency translation....................  W 71,357    W 71,670
Rental income...............................................    28,989      28,166
Gain on disposal of premises and equipment..................    29,121      16,924
Miscellaneous income from written-off loans.................    48,632      15,437
Extinguished prescription of deposits.......................    11,221      11,690
Litigation settlement.......................................    49,174          --
Others......................................................    69,862      61,807
                                                              --------    --------
  Total other noninterest income............................  W308,356    W205,694
                                                              ========    ========
</Table>

     Components of other noninterest expenses for the years ended December 31
are as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
Other fees and commissions..................................  W138,142    W205,621
Miscellaneous taxes.........................................    32,338      34,306
Loss on disposal of premises and equipment..................     7,387      19,494
Others......................................................    65,396      59,265
                                                              --------    --------
  Total other noninterest expenses..........................  W243,263    W318,686
                                                              ========    ========
</Table>

17.  COMMON STOCK

  ISSUANCE OF COMMON STOCK

     As of December 31, 2001, the Bank had 679,078,115 shares of common stock
issued and 661,764,465 shares of common stock outstanding, including 90,804
shares (0.014 percent) issued and outstanding as global depositary receipts,
which are listed on the London Stock Exchange.

                                      F-153
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As of December 31, 2002, the Bank had 679,118,429 shares of common stock
issued and outstanding, including 25,524 shares (0.004 percent) issued and
outstanding as global depositary receipts listed on the London Stock Exchange.

     The Bank is authorized to issue bonds with stock purchase warrants up to
total par value of 1,000 billion Won. The Bank issued bonds with stock purchase
warrants of W550 billion in 1999. During the year ended December 31, 2001, the
Bank repaid the bonds with stock purchase warrants. However, the stock purchase
warrants exercisable to 94,988,459 shares of the Bank's common stock remained
outstanding at December 31, 2001. During the year ended December 31, 2002, the
holders of stock purchase warrants exercised their rights to purchase 40,314
shares of the Bank's common stock and the remaining stock purchase warrants
expired unexercised.

  TREASURY STOCK

     For the year ended December 31, 2001, the Bank sold 11,916,240 shares held
as treasury stock with the book value of 87,783 million Won, and awarded 10,000
shares held as treasury stock with the book value of 74 million Won to
employees. The loss on reissuance of treasury stock of 58,365 million Won was
included in the accumulated deficit. For the year ended December 31, 2002, the
Bank sold 17,313,650 shares held as treasury stock with the book value of
127,436 million Won, and recognized a loss on the sale of 9,380 million Won
included in accumulated deficit.

18.  RETAINED EARNINGS (ACCUMULATED DEFICIT)

     Accumulated deficit consists of the following at December 31:

<Table>
<Caption>
                                                                 2001          2002
                                                              ----------    ----------
                                                                (IN MILLIONS OF WON)
<S>                                                           <C>           <C>
Appropriated retained earnings for legal reserves under
  Korean GAAP...............................................          --            --
Unappropriated accumulated deficit under US GAAP............  (4,069,096)   (3,924,904)
                                                              ----------    ----------
  Total accumulated deficit.................................  (4,069,096)   (3,924,904)
                                                              ==========    ==========
</Table>

     Pursuant to the Tax Preferential Control Law, the Bank is required to
appropriate, as a reserve for business rationalization under accounting
principles generally accepted in Korea ("Korean GAAP"), amounts equal to the tax
reductions arising from tax exemptions and tax credits. This reserve is not
available for payment of cash dividends, but may be transferred to capital stock
or used to reduce an accumulated deficit, if any.

     Pursuant to the Korean tax laws, the Bank is allowed to claim the amount of
retained earnings appropriated to reserves for overseas investment losses
determined under Korean GAAP as a deduction from taxable income for tax
reporting purposes. These reserves are not available for payment of dividends
until used for the specified purpose or reversed.

     At December 31, 2001 and 2002, the Bank did not have any required reserves
for business rationalization and for overseas investment losses under Korean
GAAP.

19.  REGULATORY REQUIREMENTS

     The Bank is subject to various regulatory capital requirements administered
by the FSC as well as the Basel Committee on Banking Regulations and Supervisory
Practices/BIS guidelines. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's consolidated financial statements.

                                      F-154
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In conformity with the FSC and the Basel Committee on Banking Regulations
and Supervisory Practices/BIS guidelines, the Bank applies the BIS risk-adjusted
capital ratios to evaluate its capital adequacy. Banking organizations engaged
in international banking are required to maintain a minimum 8 percent total
risk-based capital ratio, which is calculated by dividing total risk-adjusted
capital by total risk-weighted assets, and a Tier 1 capital ratio of at least 4
percent. In the event the Bank does not maintain a total risk-based capital
ratio of 8 percent, it is subject to corrective actions recommended by the FSC
based on the actual financial position and the capital ratio of the Bank.

     As required by the FSC guidelines, the following capital ratios are based
on credit risk component only as calculated based on the Bank's consolidated
financial statements under Korean GAAP which vary in certain significant
respects from US GAAP at December 31:

<Table>
<Caption>
                                                              2001          2002
                                                           -----------   -----------
                                                             (IN MILLIONS OF WON,
                                                            EXCEPT CAPITAL RATIOS)
<S>                                                        <C>           <C>
Tier 1 capital...........................................  W 2,136,373   W 1,973,080
Tier 2 capital...........................................    1,638,094     1,742,926
Less: Investment in nonconsolidated equity
  investees(1)...........................................       (7,983)       (7,226)
                                                           -----------   -----------
     Total risk-adjusted capital.........................  W 3,766,484   W 3,708,780
                                                           ===========   ===========
Risk-weighted assets
  On-balance sheet assets................................  W33,246,588   W41,379,954
  Off-balance sheet assets...............................    2,881,588     1,567,547
                                                           -----------   -----------
     Total risk-weighted assets..........................  W36,128,176   W42,947,501
                                                           ===========   ===========
Capital adequacy ratio...................................        10.43%         8.64%
  Tier 1 capital ratio...................................         5.91%         4.59%
  Tier 2 capital ratio...................................         4.53%         4.06%
</Table>

- ---------------

Note:

(1) Equity investees engaged in banking and financial activities in which the
    Bank owns more than 15 percent are deducted from total capital, and not
    deducted directly from Tier 1 and Tier 2 pursuant to the guidelines of the
    FSC.

     Effective January 1, 2002, in addition to the existing capital ratio
calculations the Bank is required to report to the FSC an alternative set of
capital ratios with components based on credit and market risks calculated based
on the Bank's consolidated financial statements under Korean GAAP. The Bank is
subject to the same existing requirements to maintain minimum adequacy ratios at
December 31, 2002.

                                      F-155
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                       2002
                                                               ---------------------
                                                               (IN MILLIONS OF WON,
                                                                  EXCEPT CAPITAL
                                                                      RATIOS)
<S>                                                            <C>
Tier 1 capital..............................................        W 1,973,080
Tier 2 capital..............................................          1,742,926
Less: Investment in nonconsolidated equity investees(1).....             (7,226)
                                                                    -----------
  Total risk-adjusted capital...............................        W 3,708,780
                                                                    ===========
  Total risk-weighted assets................................        W42,840,889
                                                                    ===========
Capital adequacy ratio......................................               8.66%
  Tier 1 capital ratio......................................               4.61%
  Tier 2 capital ratio......................................               4.05%
</Table>

- ---------------

Note:

(1) Equity investees engaged in banking and financial activities in which the
    Bank owns more than 15 percent are deducted from total capital, and not
    deducted directly from Tier 1 and Tier 2 pursuant to the guidelines of the
    FSC.

20.  INCOME TAXES

     Allocation of national and local income taxes between current and deferred
portions for the years ended December 31 is as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   --------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
CURRENT TAX EXPENSE
  National..................................................  W 13,593    W10,766
  Local.....................................................     1,359      1,076
  Charge in lieu of utilization of loss carryforward........    65,430    111,722
  Utilization of loss carryforward..........................   (65,430)   (111,722)
                                                              --------    -------
     Total current tax expense..............................    14,952     11,842
                                                              --------    -------
DEFERRED TAX EXPENSE
  National..................................................   315,583     57,209
  Local.....................................................    31,558      5,720
                                                              --------    -------
     Total deferred tax expense.............................   347,141     62,929
                                                              --------    -------
     Total tax expense......................................  W362,093    W74,771
                                                              ========    =======
</Table>

     The preceding table does not reflect the tax effects of unrealized gains
and losses on available-for-sale securities. The tax effects of these items are
recorded directly as other comprehensive income within stockholder's equity.

                                      F-156
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A reconciliation of income tax expense at the Korean statutory income tax
rate to actual income tax expense for the years ended December 31 is as follows:

<Table>
<Caption>
                                                                  2001           2002
                                                              -------------   -----------
                                                              (IN MILLIONS OF WON, EXCEPT
                                                                      TAX RATES)
<S>                                                           <C>             <C>
Statutory tax rate..........................................         30.8%         29.7%
Income before income tax expense, minority interest and
  cumulative effect of changes in accounting principle......   W1,101,501      W233,232
                                                               ----------      --------
Prima facie tax calculated at the statutory tax rate........      339,262        69,270
Loss on sales of treasury stock.............................      (23,909)      (11,091)
Adjustment for double taxation of subsidiaries and
  branches..................................................        7,573        13,199
Adjustment for overseas tax rates...........................       (1,989)       (1,754)
Change in statutory tax rate................................       46,201            --
Nontaxable income...........................................       (7,736)       (2,635)
Nondeductible expenses......................................        3,458         5,405
Increase in valuation allowance.............................           --         3,824
Other.......................................................         (767)       (1,447)
                                                               ----------      --------
Income tax expense..........................................   W  362,093      W 74,771
                                                               ==========      ========
</Table>

                                      F-157
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The components of net deferred income tax assets ("DTA") and liabilities
included in other assets and other liabilities at December 31 are as follows:

<Table>
<Caption>
                                                                2001         2002
                                                             ----------   ----------
                                                              (IN MILLIONS OF WON)
<S>                                                          <C>          <C>
DEFERRED INCOME TAX ASSETS
  Allowance for loan losses................................  W  428,106   W  402,634
  Allowance for guarantees and acceptances.................     124,003       50,648
  Valuation of trading assets..............................      35,108       31,290
  Premises and equipment...................................     176,741      176,564
  Available-for-sale securities............................     192,865      307,764
  Other assets.............................................          --       34,679
  Other temporary differences..............................      13,419       12,005
  Net operating losses carry forward.......................     882,924      756,736
     Less: Valuation allowance.............................    (745,685)    (738,399)
                                                             ----------   ----------
     Deferred income tax assets............................  W1,107,481   W1,033,921
                                                             ==========   ==========
DEFERRED INCOME TAX LIABILITIES
  Foreign exchange contracts and derivative instruments....  W   (1,550)  W     (311)
  Accrued interest and dividend receivable.................     (62,341)     (52,151)
  Other assets.............................................      (5,411)          --
  Other temporary differences..............................      (7,893)     (14,102)
                                                             ----------   ----------
     Deferred income tax liabilities.......................     (77,195)     (66,564)
                                                             ----------   ----------
       Net deferred income tax assets, including OCI
          related DTA......................................   1,030,286      967,357
       Less: OCI related DTA...............................     (94,181)     (76,268)
       Add: Treasury stock related DTA.....................       8,351           --
                                                             ----------   ----------
       Net deferred income tax assets, excluding OCI
          related DTA......................................  W  944,456   W  891,089
                                                             ==========   ==========
</Table>

     Management believes it is uncertain whether the Bank and its certain
subsidiaries will generate sufficient profits to offset their tax losses in 2001
and 2002. Accordingly, a valuation allowance totaling 745,685 million Won and
738,399 million Won in 2001 and 2002, respectively, has been established for
deferred income tax assets related to net operating losses ("NOLs") that may not
be realized. At December 31, 2001 and 2002, the Bank and its subsidiaries had
tax NOLs totaling 2,972,808 million Won and 2,547,933 million Won, respectively.
These losses expire in the period ranging from 2003 to 2005.

21.  EARNINGS PER SHARE

     Basic earnings per share represents income available to common stockholders
divided by the weighted-average number of common stocks outstanding during the
period. Diluted earnings per share reflects additional common stocks that would
have been outstanding if dilutive potential common stocks have been issued, as
well as any adjustments to income that would result from the assumed issuance.
Potentially dilutive potential common stocks that may be issued by the Bank
relate to outstanding stock options and bonds with stock purchase warrants and
are determined using the treasury stock method. Effects of stock options and
bonds with stock purchase warrants are excluded from the computation if the
effect would be antidilutive.

                                      F-158
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table is a summary of the computation of earnings per share
for the years ended December 31:

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
                                                               (IN MILLIONS OF WON,
                                                              EXCEPT PER SHARE DATA)
<S>                                                           <C>          <C>
BASIC EPS
  Income before cumulative effect of changes in accounting
     principle..............................................   W735,969     W153,572
  Cumulative effect of changes in accounting principle......       (655)          --
                                                               --------     --------
  Net income................................................   W735,314     W153,572
                                                               --------     --------
  Basic weighted-average shares of common stocks outstanding
     (thousands)............................................    653,833      673,609
Net income per share
Income before cumulative effect of changes in accounting
  principle.................................................   W  1,126     W    228
  Cumulative effect of changes in accounting principle......         (1)          --
                                                               --------     --------
       Basic net income per share...........................   W  1,125     W    228
                                                               ========     ========
DILUTED EPS
  Income before cumulative effect of changes in accounting
     principle for purposes of computing diluted net income
     per share..............................................   W735,969     W153,572
  Cumulative effect of changes in accounting principle......       (655)          --
                                                               --------     --------
  Net income for purposes of computing diluted net income
     per share..............................................   W735,314     W153,572
                                                               --------     --------
  Basic weighted-average shares of common stock outstanding
     (thousands)............................................    653,833      673,609
  Dilutive effect of stock options (thousands)..............         --            6
                                                               --------     --------
  Diluted weighted-average shares of common stock
     outstanding (thousands)................................    653,833      673,615
Net income per share
  Income before cumulative effect of changes in accounting
     principle..............................................   W  1,126     W    228
  Cumulative effect of changes in accounting principle......         (1)          --
                                                               --------     --------
       Diluted net income per share.........................   W  1,125     W    228
                                                               ========     ========
</Table>

22.  EMPLOYEE SEVERANCE PLAN

     Employees with one or more years of service are entitled to receive a
lump-sum payment upon termination of their employment with the Bank, based on
their length of service and rates of pay at the time of termination ("severance
plan"). Under the Korean National Pension Fund Law, the Bank was required to pay
a certain percentage of employee severance benefits to the National Pension Fund
prior to April 1999. Additionally, the Bank contributes voluntarily a certain
percentage of employee severance benefits to a severance insurance deposit
account ("Severance Insurance Deposit") maintained for the benefit of employees
at an insurance company. The Bank has no additional liability once the amount
has been contributed, thus the Bank deducts contributions made to the National
Pension Fund and the Severance Insurance Deposit from its accrued employee
severance plan obligations. The compensation cost of employees' severance
benefit is recognized based on the vested benefits to which the employees are
entitled if they separate immediately.

     Under limited circumstances, employees can withdraw their accumulated
unpaid severance amounts before their termination of employment ("interim
severance payment"). Such withdrawal was included in the

                                      F-159
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

amount of plan payments for both years. Total interim severance payment made by
the Bank in 2001 was 126,063 million Won. The Bank made no interim severance
payment in 2002.

     The Bank paid severance benefits of 3,952 million Won and 2,240 million Won
for the years ended December 31, 2001 and 2002, respectively.

     Accrued employee severance plan obligations included in accrued expenses
and other liabilities at December 31 are as follows:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   --------
                                                              (IN MILLIONS OF WON)
<S>                                                           <C>         <C>
BALANCE AT BEGINNING OF THE YEAR............................  W131,103    W20,826
Accrued severance benefit...................................    19,738     33,078
Plan payments...............................................  (130,015)    (2,240)
                                                              --------    -------
                                                                20,826     51,664
Less: Balance of payments remaining with National Pension
  Fund and Severance Insurance Deposit......................   (10,062)   (30,003)
                                                              --------    -------
BALANCE AT END OF THE YEAR..................................  W 10,764    W21,661
                                                              ========    =======
</Table>

23.  EMPLOYEE STOCK OPTION PLANS

     The Bank has various stock-based compensation plans to reward key
employees, executives, and directors of the Bank. The Bank measures stock-based
compensation expense using the fair value based method of accounting under SFAS
No. 123.

     Stock-based compensation expense was 253 million Won and 560 million Won in
2001 and 2002, respectively. The per share weighted fair value of the stock
options granted to key employees, executives, and directors of the Bank were
1,416 Won and 4,963 Won for the fiscal years 2001 and 2002, respectively. These
amounts were estimated on grant dates using a Black-Scholes option-pricing
model. The weighted average assumptions used for grants made in 2001 and 2002
are as follows:

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
<S>                                                           <C>          <C>
Risk-free interest rate.....................................        5.99%        6.39%
Expected lives..............................................  4.50 years   3.50 years
Expected volatility.........................................       97.84%       91.99%
Expected dividend rate......................................          --           --
Expected BIS ratio..........................................        8.10%        8.10%
Expected NPL ratio..........................................        4.00%        4.00%
Expected relative price growth..............................      101.02%      101.02%
</Table>

     On March 27, 2000, March 9, 2001 and March 29, 2002, the Bank granted stock
options, which give the grantee the right to buy the Bank's shares, to key
employees, management, and directors, including the president and the
deputy-president. The number of stock options granted will be determined
depending on the relative stock price increase rate of the Bank over the banking
industry's stock price increase rate, the Bank's non-performing loans ratio, and
the BIS capital ratio. The stock options vest after 2 years, and become
exercisable after 2 to 3 years from the grant date for a period of 3 years. If
the stock options are exercised, the Bank has the option either to issue new
shares or shares held as treasury stock, or to pay the difference between the
market price and the exercise price in cash or with treasury stocks.

                                      F-160
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Changes in stock options during the years ended December 31 are as follows:

<Table>
<Caption>
                                                                        WEIGHTED-AVERAGE
                                                            NUMBER OF    EXERCISE PRICE
                                                             SHARES        PER SHARE
                                                            ---------   ----------------
<S>                                                         <C>         <C>
Outstanding at January 1, 2001............................    969,200        W5,000
Granted...................................................    664,000         5,000
Forfeited.................................................         --            --
                                                            ---------
Outstanding at December 31, 2001..........................  1,633,200         5,000
                                                            ---------
Granted...................................................    312,000         4,315
Forfeited.................................................         --            --
                                                            ---------
Outstanding at December 31, 2002..........................  1,945,200        W4,890
                                                            =========
Exercisable at December 31, 2002..........................         --
                                                            =========
</Table>

     Information pertaining to the stock options outstanding at December 31,
2002 is as follows:

<Table>
<Caption>
                               OPTIONS OUTSTANDING
                          ------------------------------                           OPTIONS EXERCISABLE
                                        WEIGHTED-AVERAGE                      ------------------------------
                            NUMBER         REMAINING       WEIGHTED-AVERAGE     NUMBER      WEIGHTED-AVERAGE
EXERCISE PRICE            OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
- --------------            -----------   ----------------   ----------------   -----------   ----------------
<S>                       <C>           <C>                <C>                <C>           <C>
W5,000..................   1,633,200       0.63 years           W5,000             --             W --
W4,315..................     312,000       1.25 years            4,315             --               --
                           ---------       ----------           ------            ---             ----
                           1,945,200       0.73 years           W4,890             --             W --
</Table>

24.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of a financial instrument is the current amount that would
be exchanged between willing parties, other than in a forced sale or
liquidation. Fair value is best determined based on quoted market prices.
However, in many instances, there are no quoted market prices for the Bank's
various financial instruments. In cases where quoted market prices are not
available, the fair values are estimated using present value or other valuation
techniques.

     Those techniques are significantly affected by the assumptions used, which
include expected future cash flows and discount rates. Accordingly, the fair
value estimates may not be realized in an immediate settlement of the
instruments. Certain financial instruments and all nonfinancial instruments are
excluded from the scope of SFAS No. 107 ("SFAS No. 107"), Disclosure about Fair
Value of Financial Instruments. Accordingly, the aggregate fair value amount of
the items presented under SFAS No. 107 may not necessarily represent the total
underlying fair value of the Bank since the fair value of the excluded items are
not obtained.

     The following methods and assumptions are used by the Bank in estimating
fair value disclosures for its financial instruments:

     Assets and Liabilities for which fair value approximates carrying
value:  The carrying values of certain financial assets and liabilities are
reported at cost, including cash and cash equivalents, restricted cash, call
loans, accrued interest and dividends receivable, security deposits, other
assets except for nonmarketable equity investments, accrued interest payable,
call money and other liabilities. The carrying values of these financial assets
and liabilities are considered to approximate their fair values due to their
short-term nature and negligible losses due to credit risks.

     Interest-bearing deposits in banks:  The carrying amounts of
interest-bearing deposits approximate their fair value because they are
short-term in nature or carry variable interest rates.

                                      F-161
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Trading assets/liabilities:  Fair values for trading assets, including
derivative financial instruments so classified are based on quoted market
prices, where available. If quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments except for certain
options and swaps for which pricing models are used.

     Securities:  Fair values for available-for-sale securities are based on
quoted market prices, or quoted market prices of comparable instruments if the
quoted market prices are not available.

     Nonmarketable equity investments:  Nonmarketable equity investments, which
are recorded in other assets, consist primarily of private equity investments.
The fair values of these investments are based on the latest obtainable net
asset value of the investees and adjusted for impairment losses.

     Loans:  Loans and advances are net of allowance for loan losses. The fair
value of fixed rate loans is estimated by discounting contractual cash flows
based on current rates at which similar loans would be made to borrowers for the
same maturities. The fair values of variable rate loans that reprice frequently
with no significant changes in credit risk are considered to approximate their
carrying values in the consolidated balance sheets.

     Deposits:  The carrying amounts of variable-rate interest and
noninterest-bearing deposits approximate their fair values at the balance sheet
date. Fair values for fixed rate interest-bearing deposits are estimated using
discounted cash flow analysis using interest rates currently offered for
deposits with similar maturities.

     Short-term borrowings:  The carrying amounts of call money, securities sold
under repurchase agreements and short-term borrowings approximate their fair
values due to their short-term nature and negligible losses due to credit risks.

     Long-term borrowings:  The fair values of the Bank's long-term borrowings
are estimated based on quoted market prices, where available. For those notes
where quoted market prices are not obtainable, a discounted cash flow analysis
is used based on the Bank's current incremental borrowing rates for similar
types of borrowing arrangements.

     Derivative financial instruments:  All derivatives are recognized on the
consolidated balance sheets at fair value based on quoted market prices, dealer
or counterparty quotes, where available. If quoted market prices are not
available, pricing or valuation models are applied to current market information
to estimate fair value.

                                      F-162
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The estimated fair values and related carrying or notional amounts of the
Bank's financial instruments at December 31 are as follows:

<Table>
<Caption>
                                                 2001                        2002
                                       -------------------------   -------------------------
                                        CARRYING                    CARRYING
                                         AMOUNT      FAIR VALUE      AMOUNT      FAIR VALUE
                                       -----------   -----------   -----------   -----------
                                                       (IN MILLIONS OF WON)
<S>                                    <C>           <C>           <C>           <C>
Financial assets
  Financial assets for which carrying
     value approximates fair value...  W 7,565,531   W 7,565,531   W 5,553,885   W 5,553,885
  Interest-bearing deposits in
     banks...........................      195,711       195,711       177,109       177,109
  Trading assets.....................    1,481,714     1,481,714     1,193,897     1,193,897
  Securities.........................   12,346,573    12,346,573     9,623,847     9,623,847
  Loans..............................   33,473,829    33,594,596    43,436,502    43,678,942
  Non marketable equity investment
     included in other assets........      322,265       326,687       373,753       377,296
Financial liabilities
  Financial liabilities for which
     carrying value approximates fair
     value...........................  W 3,569,971   W 3,569,971   W 3,606,999   W 3,606,999
  Deposits...........................   37,922,091    38,058,112    44,274,301    44,546,077
  Trading liabilities................       25,505        25,505        82,563        82,563
  Short-term borrowings..............    5,538,654     5,538,654     5,524,743     5,524,743
  Secured borrowings.................    2,267,705     2,280,572     1,351,032     1,357,458
  Long-term debt.....................    3,281,191     3,321,059     6,461,151     6,521,821
</Table>

     The differences between the carrying amounts and the fair values of
guarantees, commercial letters of credit, standby letters of credit, and other
lending commitments are immaterial to the consolidated financial statements.

25.  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     On January 1, 2001, the Bank adopted SFAS No. 133 for its derivative
instruments. For the years ended December 31, 2001 and 2002, the Bank did not
apply hedge accounting for its nontrading derivatives. The adoption of SFAS No.
133 on January 1, 2001 resulted in an after-tax reduction to net income of 655
million Won, relating principally to the recognition of the fair value of credit
derivatives.

     In the normal course of business, the Bank enters into derivatives and
foreign exchange contracts to help its customers manage their risk exposures.
The Bank also uses derivative instruments for its own trading accounts and to
manage its asset and liability exposures to interest rate and foreign exchange
risks.

     The Bank uses interest rate derivatives principally to manage exposures to
fluctuations in fair value due to interest rate risk. Pay-fixed receive-variable
interest rate swap contracts are used to convert fixed rate assets, principally
securities, into synthetic variable rate instruments. Receive-fixed pay-variable
interest rate swaps contracts are used to convert fixed rate funding sources,
principally debt, into synthetic variable rate funding instruments.
Cross-currency interest rate swaps are contracts that generally involve the
exchange of both interest and principal amounts in two different currencies to
manage exposures to fluctuations in fair value due to foreign exchange risks.
Cross-currency swaps are used by the Bank to convert its assets and funding from
one currency to another preferable currency.

     Derivative instruments may expose the Bank to market risk or credit risk in
excess of the amounts recorded on the balance sheets. Market risk arises due to
market price, interest rate and foreign exchange rate

                                      F-163
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fluctuations that may result in a decrease in the market value of a financial
instrument and/or an increase in its funding cost. Exposure to market risk is
managed through position limits and other controls and by entering into hedging
transactions. Credit risk is the possibility that losses may occur from
counterparty's failure to perform according to the terms of the contract, when
the value of collateral held, if any, is not adequate to cover such losses.
Credit risk is controlled through credit approvals, limits and monitoring
procedures based on the same credit policies used for on-balance-sheet
instruments. Generally, collateral or other security is not required. The amount
of collateral obtained, if any, is based on the nature of the financial
instrument and management's credit evaluation of each counterparty.

     The Bank has chosen not to apply hedge accounting under SFAS No. 133 for
any derivatives or hedge relationships. As a result, all trading and nontrading
derivatives were classified as trading derivatives after the initial adoption of
SFAS No. 133. Management of the Bank plans to apply hedge accounting to
contracts entered into in the future.

26.  COMMITMENTS AND CONTINGENCIES

  LEGAL PROCEEDINGS

     In the ordinary course of business, the Bank has been named as defendant in
certain legal actions and proceedings. It is in the opinion of management, based
on current knowledge and after consultation with external counsel, that the
outcome of such matters will not have a material adverse effect on the Bank's
consolidated financial statements.

  LEASE COMMITMENTS

     At December 31, 2002, the Bank has obligations under a number of
noncancelable operating leases for premises and equipment. Total rental expense
for the years ended December 31, 2001 and 2002 was 42,515 million Won and 48,266
million Won, respectively. Pursuant to the terms of noncancelable lease
agreements pertaining to premises and equipment in effect at December 31, 2002,
future minimum rental commitments under various noncancelable operating leases
are as follows:

<Table>
<Caption>
                                                               (IN MILLIONS OF WON)
                                                               --------------------
<S>                                                            <C>
YEAR ENDING
2003........................................................          W2,786
2004........................................................           3,369
2005........................................................             796
2006........................................................             720
2007........................................................             418
                                                                      ------
                                                                      W8,089
                                                                      ======
</Table>

     In lieu of rent, certain lease agreements require the Bank to advance a
noninterest-bearing refundable security deposit to the landlord for its use
during the lease term. The amount of the advance is determined by the prevailing
market rate. The Bank has recorded rental expense and interest income related to
these leases of 21,381 million Won and 22,194 million Won on deposit balances of
417,463 million Won and 451,342 million Won for the years ended December 31,
2001 and 2002, respectively. Such amounts were calculated based on the fixed
interest rate for time deposits with similar maturities.

                                      F-164
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CREDIT COMMITMENTS

     The following table summarizes the contractual amounts relating to unused
loan commitments at December 31:

<Table>
<Caption>
                                                                 2001          2002
                                                              -----------   -----------
                                                                (IN MILLIONS OF WON)
<S>                                                           <C>           <C>
Commitments to extend credit:
  Commercial................................................  W13,009,818   W11,449,017
  Credit card lines.........................................   17,816,089    17,874,688
  Other consumer............................................    1,267,681     1,889,126
Commercial letters of credit................................    1,495,738     1,491,856
                                                              -----------   -----------
                                                              W33,589,326   W32,704,687
                                                              ===========   ===========
</Table>

     Commitments to extend credit represent unfunded portions of authorizations
to extend credit in the form of loans. The commitments expire on fixed dates and
a customer has to comply with predetermined conditions to draw funds under the
commitments. With respect to credit risk on commitments to extend credit, the
Bank is potentially exposed to loss in an amount equal to the total unused
commitments.

     Commercial letters of credit are undertakings by the Bank on behalf of
customers authorizing third parties to draw drafts on the Bank up to a
stipulated amount under specific terms and conditions. They are generally
short-term and collateralized by the underlying shipments of goods to which they
relate and therefore have significantly less credit risk.

 OBLIGATIONS UNDER GUARANTEES

     The Bank provides a variety of guarantees to its customers to enhance their
credit standing and enable them to complete a variety of business transactions.
The majority of these commitments expire without being drawn upon. As a result,
total contractual amounts are not representative of the Bank's actual credit
exposure. The table below summarizes all of the Bank's guarantees at December
31, 2002.

<Table>
<Caption>
                                                                                             MAXIMUM
                                                                               AMOUNT OF    POTENTIAL
                                                                              RECOURSE OR   AMOUNT OF
                                EXPIRE WITHIN   EXPIRE AFTER   TOTAL AMOUNT   COLLATERAL      FUTURE
                                  ONE YEAR        ONE YEAR     OUTSTANDING       HELD        PAYMENTS
                                -------------   ------------   ------------   -----------   ----------
                                                         (IN MILLIONS OF WON)
<S>                             <C>             <C>            <C>            <C>           <C>
Standby letters of credit.....    W 60,644       W   28,173     W   88,817     W 42,214     W   88,817
Financial guarantees..........     183,949           91,271        275,220      130,061        275,220
Performance guarantees........     307,316          254,816        562,132       36,727        562,132
Loans sold with recourse......          --          137,641        137,641       69,640        137,641
Market value guarantees on
  trust accounts..............      21,896        1,124,042      1,145,938           --      1,145,938
Derivatives...................          --           30,010         30,010           --         30,010
                                  --------       ----------     ----------     --------     ----------
                                  W573,805       W1,665,953     W2,239,758     W278,642     W2,239,758
                                  ========       ==========     ==========     ========     ==========
</Table>

     The Bank issues standby letters of credit that represent irrevocable
obligations to pay third party beneficiaries when its customers fail to repay
loans or debt instruments, which are generally denominated in foreign
currencies.

     Financial guarantees are used in various transactions to enhance the credit
standing of the Bank's customers. They represent irrevocable assurance, subject
to satisfaction of certain conditions, that the Bank

                                      F-165
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

will make payment in the event that the customers fail to fulfill their
obligations to third parties. The financial guarantees generally include
guarantees issued in relation to issuance of debt securities and importing
activities of customers.

     Performance guarantees are issued to guarantee customers' tender bids on
construction or similar projects or to guarantee completion of such projects in
accordance with contractual terms. They are also issued to support a customer's
obligation to supply specified products, commodities, maintenance or other
services to third parties.

     Loans sold with recourse represent certain non-performing loans the Bank
sold to Korea Asset Management Corporation ("KAMCO") prior to 2000. These are
accounted for as sales and derecognized from the balance sheet since Chohung
Bank has surrendered control over these loans. The nature of the accounting for
the sale of these loans is dependent upon whether any recourse liabilities
existed as of the date of sale. The sales agreements contain a recourse
liability under which KAMCO can obligate the Bank to repurchase certain of these
related loans if the related debtors fail to perform in accordance with specific
restructuring plans. The recourse liability has no expiration date and reflects
an estimate of the loss that is probable of occurring at the future date of
repurchase and takes into consideration actual repurchases which have occurred
in subsequent periods, and repurchases which are expected to occur based on an
understanding of the current status of the underlying loans.

     A gain or loss was recognized at the date of sale in earnings representing
the difference between the settled purchase price received from KAMCO and the
carrying amount of the loan in respect of those loans where no recourse
liability existed, or for those that were not passed back to the Bank before the
remaining outstanding balance was repaid by the borrower.

     For those loans where a recourse liability existed, a gain or loss was
still recognized as of the transfer date after taking into consideration this
liability.

     Outstanding loans for which KAMCO has recourse amounted to 670,580 million
Won and 160,326 million Won at December 31, 2001 and 2002, respectively. At
December 31, 2001 and 2002, the Bank has recorded in other liabilities 256,488
million Won and 66,120 million Won, respectively, representing its estimated
obligation to repurchase these outstanding loans with recourse.

     Market value guarantees on trust funds represent guarantees of principal or
fixed rate of returns issued to investors in guaranteed trusts. The Bank manages
funds on behalf of its customers through the operation of various trust accounts
in accordance with the Trust Law and the Trust Business Act. Trust assets and
liabilities are excluded from the consolidated financial statements of the Bank,
and thus are recorded in separate accounts from those of the Bank's business.

     At December 31, 2001 and 2002, the allowance for guarantees and acceptances
includes 42,654 million Won and 63,054 million Won, respectively, which are
related to standby letters of credit and financial and performance guarantees.

     In addition to the guarantees identified above, the Bank has entered into
credit derivatives with unrelated third parties for yield enhancement purposes.
These credit derivatives will expire at November 2006 and have a notional value
of US$25 million, which represents the maximum potential amount of future
payments on the contracts. No amount of recourse or collateral is held. At
December 31, 2001 and 2002, these derivatives were carried at fair value with
267 million Won and 690 million Won, respectively, in trading liabilities.

                                      F-166
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  PLEDGED ASSETS

     Components of assets pledged as collateral for borrowings and other
purposes at December 31 are as follows:

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
                                                               (IN MILLIONS OF WON)
<S>                                                           <C>          <C>
Short-term and long-term deposits...........................  W   79,521   W      557
Available-for-sale securities...............................   6,056,746    3,827,441
Loans.......................................................     738,234      567,706
                                                              ----------   ----------
                                                              W6,874,501   W4,395,704
                                                              ==========   ==========
</Table>

27.  CONCENTRATIONS OF GEOGRAPHIC AND CREDIT RISKS

  GEOGRAPHIC RISK

     Loans to borrowers based in Korea represented approximately 97 percent and
98 percent of the Bank's loan portfolio at December 31, 2001 and 2002,
respectively. Investments in debt and equity securities of Korean entities
represented 98 percent and 98 percent of the Bank's investment portfolio at
December 31, 2001 and 2002, respectively.

  CREDIT RISK

     Concentrations of credit risk arise when a number of customers are engaged
in similar business activities, or activities in the same geographic region, or
have similar economic characteristics that would cause their ability to meet
their contractual obligations to be similarly affected by changes in economic
conditions. Note 5 and Note 6 discuss the types of securities in which the Bank
invests. Note 7 discusses the type of loans in which the Bank engages.

     The Bank regularly monitors various segments of its credit risk portfolio
to assess potential concentration of risks and to obtain collateral when deemed
necessary. Except for securities issued by KDIC and other governmental entities,
no entity was responsible for 10 percent or more of the Bank's total loans
outstanding, trading assets and liabilities, available-for-sale securities, or
total interest and dividend income at December 31, 2001 and 2002 and for the
years then ended.

     Major products including both on-balance sheet (principally loans) and
off-balance sheet (principally commitments to extend credit) exposures at
December 31 are as follows:

<Table>
<Caption>
                                            2001                                      2002
                           ---------------------------------------   ---------------------------------------
                             CREDIT      ON-BALANCE    OFF-BALANCE     CREDIT      ON-BALANCE    OFF-BALANCE
                            EXPOSURE        SHEET         SHEET       EXPOSURE        SHEET         SHEET
                           -----------   -----------   -----------   -----------   -----------   -----------
                                                         (IN MILLIONS OF WON)
<S>                        <C>           <C>           <C>           <C>           <C>           <C>
Commercial and
  industrial.............  W23,523,764   W13,902,764   W 9,621,000   W25,101,503   W16,814,427   W 8,287,076
Other commercial.........   12,831,506     7,079,629     5,751,877    13,191,015     7,611,049     5,579,966
Lease financing..........      552,796       552,796            --       429,284       429,284            --
Mortgage and home
  equity.................    4,133,841     3,993,251       140,590     7,333,975     7,166,998       166,977
Credit cards.............   22,685,072     4,868,983    17,816,089    23,644,645     5,769,957    17,874,688
Other consumer...........    6,191,884     5,064,793     1,127,091     9,960,898     8,238,749     1,722,149
                           -----------   -----------   -----------   -----------   -----------   -----------
                           W69,918,863   W35,462,216   W34,456,647   W79,661,320   W46,030,464   W33,630,856
                           ===========   ===========   ===========   ===========   ===========   ===========
</Table>

                                      F-167
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

28.  RELATED PARTY TRANSACTIONS

     A number of banking transactions are entered into with related parties in
the normal course of business. These include transactions with KDIC trusts and
loans to executives, directors and affiliated parties.

  KDIC

     As stated in Note 1, KDIC owned 80.04% of the outstanding common shares of
the Bank at December 31, 2002. At December 31, 2001 and 2002, the Bank held
marketable bonds issued by KDIC of 4,242 billion Won and 4,511 billion Won,
respectively, included in available-for-sale securities.

 TRUSTS

     Under the Trust Law and the Trust Business Act, the Bank serves as a
trustee to trust accounts in a trust management capacity in the normal course of
business.

  LOANS TO EXECUTIVES, DIRECTORS AND AFFILIATED PARTIES

     The changes in the amount of loans to executive officers, directors,
director nominees, their immediate families and companies affiliated with the
directors at December 31 are as follows:

<Table>
<Caption>
                                                                   2002
                                                               ------------
                                                               (IN MILLIONS
                                                                 OF WON)
<S>                                                            <C>
Loans at beginning of the year..............................      W1,204
New loans...................................................         347
Repayments..................................................        (487)
                                                                  ------
Loans at end of the year....................................      W1,064
                                                                  ======
</Table>

     The outstanding balances at December 31, and the related expense and income
for the years then ended for related party transactions are as follows:

<Table>
<Caption>
                                                      2001                            2002
                                          -----------------------------   -----------------------------
                                                        EXECUTIVES,                     EXECUTIVES,
                                                       DIRECTORS AND                   DIRECTORS AND
                                           TRUSTS    AFFILIATED PARTIES    TRUSTS    AFFILIATED PARTIES
                                          --------   ------------------   --------   ------------------
                                                              (IN MILLIONS OF WON)
<S>                                       <C>        <C>                  <C>        <C>
Loans...................................  W     --         W1,204         W     --         W1,064
Other assets............................   143,127             --          149,516             --
Short-term borrowings...................   655,804             --          446,698             --
Other income............................    16,794             --            3,986             --
Net trust management fees...............    43,292             --           (8,663)            --
Interest expense on short-term
  borrowings............................    16,534             --           12,025             --
Commissions and fees....................     2,446             --              377             --
</Table>

                                      F-168
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

29.  PRINCIPAL SUBSIDIARIES

<Table>
<Caption>
                                                                              PERCENTAGE OF
                                                                                OWNERSHIP
                                                               COUNTRY OF     -------------
                                                              INCORPORATION   2001    2002
                                                              -------------   -----   -----
<S>                                                           <C>             <C>     <C>
Chohung Investment Trust Management Co., Ltd. ..............     Korea        79.77%  79.77%
Chohung Finance Ltd., Hong Kong.............................   Hong Kong      99.99%  99.99%
Chohung Bank of New York(1).................................      USA           100%    100%
Chohung Bank (Deutschland) GmbH.............................    Germany         100%    100%
California Chohung Bank(1)..................................      USA           100%    100%
SPEs:
  CHB Trustee 1st ABS Specialty Co., Ltd.(2)................     Korea           10%     10%
  CHB 2nd ABS Specialty Co., Ltd.(2)........................     Korea            4%      4%
  CHB 3rd ABS Specialty Co., Ltd.(3)........................     Korea            4%      4%
  LSF CHB Holdings I, Ltd.(2)...............................    Bermuda          30%     30%
  LSF CHB Holdings II, Ltd.(2)..............................    Bermuda          30%     30%
  CHB NPL 1st ABS Specialty Co., Ltd.(3)....................     Korea            5%      5%
  CHB Valuemeet 2001 year 1st Securitization Co., Ltd.(3)...     Korea           50%     50%
  CHB Valuemeet 2001 year 2nd Securitization Co., Ltd.(3)...     Korea           50%     50%
  CHB Valuemeet 2002 year 1st Securitization Co., Ltd.(4)...     Korea          N/A      50%
  C&G 1st Securitization Specialty Limited Liability
     Company(4).............................................     Korea          N/A      50%
</Table>

- ---------------

Notes:

(1) Chohung Bank of New York and California Chohung Bank merged on March 24,
    2003 to form CHB America Bank.

(2) These loan securitization vehicles were established in 2000. They have been
    included in the consolidated financial statements of the Bank at December
    31, 2001 and 2002 as the majority owner of each vehicle has only a nominal
    capital investment and we retain substantial risks and rewards related to
    loans that we transferred to these entities.

(3) These loan securitization vehicles were established in 2001. They have been
    included in the consolidated financial statements of the Bank at December
    31, 2001 and 2002 as the majority owner of each vehicle has only a nominal
    capital investment and we retain substantial risks and rewards related to
    loans that we transferred to these entities.

(4) These loan securitization vehicles were established in 2002. They have been
    included in the consolidated financial statements of the Bank at December
    31, 2001 and 2002 as the majority owner of each vehicle has only a nominal
    capital investment and we retain substantial risks and rewards related to
    loans that we transferred to these entities.

30.  SEGMENT REPORTING

     For management reporting purposes, the Bank's business segment results are
reported to management under Korean GAAP. The Bank is organized into seven major
business segments: retail banking, corporate banking, treasury and international
business, credit card, merchant banking, other banking services, and other
subsidiaries. The Bank's reportable segments are based on the nature of the
products and services provided, the type or class of customers, and the Bank's
management organization, and provide the basis on which the Bank reports its
primary segment information:

     - Retail banking -- Activities within this segment include savings and
       demand deposits, consumer loans and mortgages of individual customers and
       sole proprietors who borrowed 1,000 million Won or less, private banking
       and trust management services to individual customers.

                                      F-169
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     - Corporate banking -- Activities within this segment include loans,
       overdrafts, impaired corporate loan management and other credit
       facilities and trust management services to corporate customers. The
       corporate banking segment's assets and liabilities are mainly from
       transactions with customers including small and medium sized private
       companies, publicly traded enterprises and sole proprietors who borrowed
       more than 1,000 million Won.

     - Treasury and international business -- Activities within this segment
       include the Bank's internal asset and liability management, proprietary
       trading in securities and derivatives, proprietary investment in security
       portfolios using the Bank's capital, and operation of overseas branches.

     - Credit card -- Activities within this segment include processing domestic
       credit and debit card operations. The credit card segment's assets and
       liabilities are mainly from transactions with individuals, corporate
       cardholders and card merchants.

     - Merchant banking -- Activities within this segment include project
       financing, mergers and acquisition advisory services, leasing, venture
       capital investments and structured finance.

     - Other banking services -- Activities within this segment consists of
       administration of the Bank's operations.

     Other operations of the Bank comprise activities of other subsidiaries,
such as Chohung Investment Trust Management Co., Ltd., none of which constitutes
a separately reportable segment.

     Operating revenues and expenses and interest income and expense, related to
both third party and intersegment transactions, are included in determining the
operating earnings of each respective segment. The provision for income tax is
comprised of corporate income tax and resident tax surcharges. The income tax
expenses are allocated to the respective segment based upon performance.

     Transactions between the business segments are reflected based on terms
established by management.

                                      F-170
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                           DECEMBER 31, 2001 AND 2002

     Information about reporting segments at December 31 and for the years then
ended are as follows:
<Table>
<Caption>
                                                                       2001
                         ------------------------------------------------------------------------------------------------
                                                           CHOHUNG BANK
                         ---------------------------------------------------------------------------------
                                                    TREASURY AND                                  OTHER
                           RETAIL      CORPORATE    INTERNATIONAL                  MERCHANT      BANKING        OTHER
                           BANKING      BANKING       BUSINESS      CREDIT CARD    BANKING      SERVICES     SUBSIDIARIES
                         -----------   ----------   -------------   -----------   ----------   -----------   ------------
                                                               (IN MILLIONS OF WON)
<S>                      <C>           <C>          <C>             <C>           <C>          <C>           <C>
Net interest income....  W   899,729   W  357,073    W   (9,120)    W  451,545    W   44,325   W       --     W   38,269
Noninterest income.....      196,141      181,517       591,999        210,744        57,532        4,283         55,617
                         -----------   ----------    ----------     ----------    ----------   ----------     ----------
    Total revenues.....    1,095,870      538,590       582,879        662,289       101,857        4,283         93,886
Provision for loan
  losses...............       98,915      397,307        25,886        175,200        28,538           --         30,995
Provision for
  guarantees and
  acceptances..........           --      (19,400)         (870)            --            --           --             --
Noninterest expense....      460,610      574,031       296,368        163,366        97,900      167,649         35,611
Depreciation and
  amortization.........       52,942        2,492           473          5,307           335      122,294          1,282
                         -----------   ----------    ----------     ----------    ----------   ----------     ----------
    Net income (loss)
      before tax.......      483,403     (415,840)      261,022        318,416       (24,916)    (285,660)        25,998
Income tax expense
  (benefit)............      148,888     (128,079)       80,395         98,072        (7,674)    (377,708)         9,910
                         -----------   ----------    ----------     ----------    ----------   ----------     ----------
    Net income
      (loss)...........      334,515     (287,761)      180,627        220,344       (17,242)      92,048         16,088
US GAAP adjustments....       72,010      478,882        49,378        (75,315)        9,696     (289,907)       (77,496)
Intersegment
  transactions.........           --        4,634         9,165             --            --           --         15,648
                         -----------   ----------    ----------     ----------    ----------   ----------     ----------
    Consolidated net
      income (loss)....      406,525      195,755       239,170        145,029        (7,546)    (197,859)       (45,760)
                         -----------   ----------    ----------     ----------    ----------   ----------     ----------
    Segments' total
      assets...........  W29,819,058   W7,389,279    W9,846,303     W4,000,343    W2,502,875   W3,965,170     W1,526,753
                         ===========   ==========    ==========     ==========    ==========   ==========     ==========

<Caption>
                                                    2001
                         ----------------------------------------------------------

                           SUBTOTAL
                            BEFORE        US GAAP      INTERSEGMENT
                         ELIMINATIONS   ADJUSTMENTS   TRANSACTIONS(1)      TOTAL
                         ------------   -----------   ---------------   -----------
                                            (IN MILLIONS OF WON)
<S>                      <C>            <C>           <C>               <C>
Net interest income....  W 1,781,821    W   (28,695)     W (90,571)     W 1,662,555
Noninterest income.....    1,297,833         59,382       (514,442)         842,773
                         -----------    -----------      ---------      -----------
    Total revenues.....    3,079,654         30,687       (605,013)       2,505,328
Provision for loan
  losses...............      756,841       (226,731)        22,506          552,616
Provision for
  guarantees and
  acceptances..........      (20,270)      (134,238)        20,270         (134,238)
Noninterest expense....    1,795,535       (209,836)      (664,909)         920,790
Depreciation and
  amortization.........      185,125       (116,372)            --           68,753
                         -----------    -----------      ---------      -----------
    Net income (loss)
      before tax.......      362,423        717,864         17,120        1,097,407
Income tax expense
  (benefit)............     (176,196)       550,616        (12,327)         362,093
                         -----------    -----------      ---------      -----------
    Net income
      (loss)...........      538,619        167,248         29,447          735,314
US GAAP adjustments....      167,248             --             --               --
Intersegment
  transactions.........       29,447             --             --               --
                         -----------    -----------      ---------      -----------
    Consolidated net
      income (loss)....      735,314             --             --               --
                         -----------    -----------      ---------      -----------
    Segments' total
      assets...........  W59,049,781    W(3,156,518)     W(994,642)     W54,898,621
                         ===========    ===========      =========      ===========
</Table>

- ---------------

Note:

(1) Includes eliminations for consolidation, intersegment transactions and
    certain differences in classification under management reporting system.

                                      F-171
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                           DECEMBER 31, 2001 AND 2002
<Table>
<Caption>
                                                                     2002
                       ------------------------------------------------------------------------------------------------
                                                         CHOHUNG BANK
                       ---------------------------------------------------------------------------------
                                                   TREASURY AND                                 OTHER
                         RETAIL       CORPORATE    INTERNATIONAL                  MERCHANT     BANKING        OTHER
                         BANKING       BANKING       BUSINESS      CREDIT CARD    BANKING      SERVICES    SUBSIDIARIES
                       -----------   -----------   -------------   -----------   ----------   ----------   ------------
                                                             (IN MILLIONS OF WON)
<S>                    <C>           <C>           <C>             <C>           <C>          <C>          <C>
Net interest
  income.............  W 1,165,925   W   308,301    W   (52,945)   W  542,176    W   40,406   W       --    W   14,193
Non interest
  income.............      225,376       182,869        650,324       257,245        44,955       12,840       107,904
                       -----------   -----------    -----------    ----------    ----------   ----------    ----------
    Total revenues...    1,391,301       491,170        597,379       799,421        85,361       12,840       122,097
Provision for loan
  losses.............      277,200       584,621          5,473       659,200        30,400           --       (20,750)
Provision for
  guarantees and
  acceptances........           --        74,829             --            --            --           --            --
Noninterest
  expense............      533,002       773,830        438,771       128,224        55,278      238,013        49,756
Depreciation and
  amortization.......       65,405         4,679          1,246         7,209           390      110,862         1,106
                       -----------   -----------    -----------    ----------    ----------   ----------    ----------
    Net income (loss)
      before tax.....      515,694      (946,789)       151,889         4,788          (707)    (336,035)       91,985
Income tax expense
  (benefit)..........      153,161      (281,196)        45,111         1,422          (210)      56,596         8,814
                       -----------   -----------    -----------    ----------    ----------   ----------    ----------
    Net income
      (loss).........      362,533      (665,593)       106,778         3,366          (497)    (392,631)       83,171
US GAAP adjustments..       74,431       410,963        289,056      (348,436)       41,323      175,205        11,600
Intersegment
  transactions.......           --        (5,661)       (45,723)           --            --           --        53,687
                       -----------   -----------    -----------    ----------    ----------   ----------    ----------
    Consolidated net
      income
      (loss).........      436,964      (260,291)       350,111      (345,070)       40,826     (217,426)      148,458
                       -----------   -----------    -----------    ----------    ----------   ----------    ----------
  Segments' total
    assets...........  W34,600,911   W10,186,293    W11,281,298    W5,927,760    W2,542,716   W4,185,757    W1,342,736
                       ===========   ===========    ===========    ==========    ==========   ==========    ==========

<Caption>
                                                  2002
                       ----------------------------------------------------------

                         SUBTOTAL
                          BEFORE        US GAAP      INTERSEGMENT
                       ELIMINATIONS   ADJUSTMENTS   TRANSACTIONS(1)      TOTAL
                       ------------   -----------   ---------------   -----------
                                          (IN MILLIONS OF WON)
<S>                    <C>            <C>           <C>               <C>
Net interest
  income.............  W 2,018,056    W    32,895      W  (4,660)     W 2,046,291
Non interest
  income.............    1,481,513       (181,745)      (527,493)         772,275
                       -----------    -----------      ---------      -----------
    Total revenues...    3,499,569       (148,850)      (532,153)       2,818,566
Provision for loan
  losses.............    1,536,144       (427,648)       276,253        1,384,749
Provision for
  guarantees and
  acceptances........       74,829        (55,296)       (74,829)         (55,296)
Noninterest
  expense............    2,216,874       (259,813)      (771,469)       1,185,592
Depreciation and
  amortization.......      190,897       (115,719)            --           75,178
                       -----------    -----------      ---------      -----------
    Net income (loss)
      before tax.....     (519,175)       709,626         37,892          228,343
Income tax expense
  (benefit)..........      (16,302)        55,484         35,589           74,771
                       -----------    -----------      ---------      -----------
    Net income
      (loss).........     (502,873)       654,142          2,303          153,572
US GAAP adjustments..      654,142             --             --               --
Intersegment
  transactions.......        2,303             --             --               --
                       -----------    -----------      ---------      -----------
    Consolidated net
      income
      (loss).........      153,572             --             --               --
                       -----------    -----------      ---------      -----------
  Segments' total
    assets...........  W70,067,471    W(5,387,498)     W(678,170)     W64,001,803
                       ===========    ===========      =========      ===========
</Table>

- ---------------

Note:

(1) Includes eliminations for consolidation, intersegment transactions and
    certain differences in classification under management reporting system.

                                      F-172
<PAGE>

                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The reconciliation of the business segments' total assets to the
consolidated total assets at December 31 is as follows:

<Table>
<Caption>
                                                                 2001          2002
                                                              -----------   -----------
                                                                (IN MILLIONS OF WON)
<S>                                                           <C>           <C>
Segments' total assets......................................  W59,049,781   W70,067,471
US GAAP adjustments.........................................   (3,156,518)   (5,387,498)
Intersegment transactions...................................     (994,642)     (678,170)
                                                              -----------   -----------
  Consolidated total assets.................................  W54,898,621   W64,001,803
                                                              ===========   ===========
</Table>

     The reconciliation of the business segments' total revenues to the
consolidated total revenues for the years ended December 31 is as follows:

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
                                                               (IN MILLIONS OF WON)
<S>                                                           <C>          <C>
Segments' total revenues....................................  W3,079,654   W3,499,569
US GAAP adjustments.........................................      30,687     (148,850)
Intersegment transactions...................................    (605,013)    (532,153)
                                                              ----------   ----------
  Consolidated total revenues...............................  W2,505,328   W2,818,566
                                                              ==========   ==========
</Table>

     The adjustments presented in the tables above represent consolidated total
assets and consolidated total revenues not specifically allocated to individual
business segments.

     Geographic segment disclosures have been excluded as assets and revenues
attributable to external customers in foreign countries are not significant.

31.  TRUST ACCOUNTS

     In accordance with the Trust Law and the Trust Business Act, the Bank acts
as the trustee for the trust accounts of its customers. In a trust management
capacity, the Bank is required to exercise due care in managing and preserving
the trust principal. Trust accounts are recorded separately from the Bank's
other banking related accounts and not included in the consolidated financial
statements. The Bank has both guaranteed and nonguaranteed trust accounts. For
the guaranteed trust accounts, the Bank guarantees the trust principal or for
certain trust accounts, a certain percentage of return at maturity on the trust
principal deposited by the customers. The Bank accrued a payable related to such
guarantees in the amount of 20,946 million Won and 57,675 million Won for the
years ended December 31, 2001 and 2002, respectively, included in net trust
management fees. For a further discussion on the consolidation scope of the
guaranteed trusts, see Note 32. For the nonguaranteed trusts, the Bank receives
periodic trust management fees based on a certain percentage of the trust
principal under management.

32.  VARIABLE INTEREST ENTITIES

     In January 2003, the FASB issued FIN 46 which addresses consolidation of
VIEs. An entity is a VIE if it has (i) equity that is insufficient to permit the
entity to finance its activities without additional subordinated financial
support from other parties, or (ii) equity investors that cannot make
significant decisions about the entity's operations, or that do not absorb the
expected losses or receive the expected residual returns of the entity. A VIE is
consolidated by its primary beneficiary, which is the party involved with the
VIE that has a majority of the expected losses, expected residual returns or
both. As discussed in Note 1 and listed in Note 29, the Bank transfers certain
loans to its SPEs and such SPEs are consolidated by the Bank under the current
accounting guidance. The Bank does not consolidate CKH Securitization Specialty
Co., Ltd. ("CKH") because the Bank is not the sponsor of, and does not retain
any risks and rewards, except for

                                      F-173
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

market based servicing fees, related to the loans held by CKH. At December 31,
2002, the assets of consolidated SPEs were approximately 588 billion Won. The
maximum exposure of the Bank to these SPEs is 606 billion Won at December 31,
2002.

     In connection with the Bank's guaranteed trusts as more fully discussed in
Note 31, it is likely that such VIEs will be consolidated because the Bank is
deemed the primary beneficiary. These trusts are structured by the Bank. In all
cases, the Bank absorbs the majority of the entity's expected losses by
guaranteeing the principal amount invested by the Bank's customers, as well as a
certain level of return on the principal amount in some trusts. The assets held
in such guaranteed trusts amounted to 1,069,658 million Won at December 31,
2002. At December 31, 2002, the Bank's maximum exposure to loss related to such
trusts amounted to 1,145,938 million Won.

33.  OTHER COMPREHENSIVE INCOME

     The components of other comprehensive income and related tax effects for
the years ended December 31 are as follows:

<Table>
<Caption>
                                                        FOREIGN       NET UNREALIZED      ACCUMULATED
                                                       CURRENCY          GAIN ON             OTHER
                                                      TRANSLATION   AVAILABLE-FOR-SALE   COMPREHENSIVE
                                                      ADJUSTMENTS       SECURITIES          INCOME
                                                      -----------   ------------------   -------------
                                                                    (IN MILLIONS OF WON)
<S>                                                   <C>           <C>                  <C>
BALANCE AT JANUARY 1, 2001..........................    W25,867          W194,665          W220,532
Foreign currency translation adjustment, net of
  taxes of W1,708...................................      5,429                --             5,429
Net change in unrealized losses on
  available-for-sale securities, net of taxes of
  W5,684............................................         --            (3,035)           (3,035)
                                                        -------          --------          --------
BALANCE AT DECEMBER 31, 2001........................    W31,296          W191,630          W222,926
                                                        -------          --------          --------
Foreign currency translation adjustment, net of
  taxes of W3,565...................................     (8,438)               --            (8,438)
Net change in unrealized losses on
  available-for-sale securities, net of taxes of
  W14,348...........................................         --           (33,962)          (33,962)
                                                        -------          --------          --------
BALANCE AT DECEMBER 31, 2002........................    W22,858          W157,668          W180,526
                                                        =======          ========          ========
</Table>

34.  SUBSEQUENT EVENTS

     In the first quarter of 2003, accounting irregularities were discovered at
SK Global to which most commercial banks in Korea, including the Bank, have
substantial exposure. These irregularities concealed the weak financial
condition of SK Global over a period of several years. In March 2003, the
principal creditor banks of SK Global acknowledged that SK Global is a troubled
company subject to formal workout procedures under the Corporate Restructuring
Promotion Act of Korea and agreed to postpone the maturity of all domestic
credits of SK Global until June 18, 2003.

     In June 2003, the domestic creditors of SK Global agreed to a workout
program under which the creditors participating in this program will buy out the
outstanding credits of the dissenting creditors by providing cash in the amount
of approximately 30% of the outstanding loans. In addition, in July 2003, the
domestic creditors' committee and the steering committee of the overseas
creditors of SK Global agreed to a workout program under which the domestic
creditors will buy out the outstanding credits of the dissenting foreign
creditors by providing cash in the amount of 43% of the outstanding loans as
well as incentives which will be in the form of bonds with warrants. The cash
payment shall be repaid in four installments of 40% on December 31, 2003, 30% on
March 31, 2004, 20% on June 30, 2004 and 10% on September 30,

                                      F-174
<PAGE>
                         CHOHUNG BANK AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2004. Depending on whether the approval rate of all the foreign creditors is 95%
or more, between 90 to 95% or between 80 to 90%, the amount of the incentives
will be 5%, 4% or 3% of the total outstanding credit as of March 11, 2003. The
bonds with warrants, which can be exercised in 2005, will be due in 2007,
without any interest, and will be repaid in a one-time payment.

     The agreement, which has been endorsed by the steering committee of
overseas creditors, remains subject to each overseas creditor's approval. The
steering committee of overseas creditors was originally required to obtain the
approval from each overseas creditor and present a written statement of consent
to the domestic creditors by mid-august 2003. The domestic creditors have since
extended this deadline to September 17, 2003. At a shareholders' meeting held on
September 9, 2003, SK Global changed its legal name to SK Networks.

     Once finally approved by the overseas creditors, domestic creditors are
expected to finalize the detailed terms of the workout program, which will among
other things, require SK Corporation, the major shareholder of SK Global and the
creditors of SK Global participating in the workout program to convert
approximately W2.4 trillion in principal amount of total debt into equity
securities, consisting of common shares, redeemable preferred shares and
convertible bonds, of SK Global, after writing off substantially all of the pre-
existing equity securities. While the workout program may also call for
additional restructuring of survival debt, including extension of maturities and
reduction of interest rates, the detailed terms are expected to be finalized by
the end of 2003.

     On January 23, 2003, the Public Fund Oversight Committee (the "PFOC"), a
unit within Korea's Ministry of Finance and Economy, which determined the
preferred bidders related to government disposition of public funds, chose
Shinhan Financial Group ("SFG") as the preferred bidder to become the purchaser
of the government's interest held by KDIC in the Bank.

     On July 9, 2003, as a result of the bid negotiations with the PFOC, SFG
entered into a Stock Purchase Agreement ("Agreement") with KDIC to purchase from
KDIC 543,570,144 shares of the Bank's common stock, which constitutes 80.04% of
the issued and outstanding common stock of the Bank. The closing date of the
acquisition will be no later than September 30, 2003 (the "Closing Date"). The
purchase price is approximately 2,446 billion Won. In addition, the Agreement
stipulates that SFG will pay the KDIC certain contingent consideration through
2006, the amount of which cannot be determined at the Closing Date.

                                      F-175
<PAGE>

                                  CHOHUNG BANK

          UNAUDITED NON-CONSOLIDATED SEMI-ANNUAL FINANCIAL STATEMENTS
                          AS OF JUNE 30, 2002 AND 2003
                          PREPARED IN ACCORDANCE WITH
                                  KOREAN GAAP

                                      F-176
<PAGE>

                                  CHOHUNG BANK

                   UNAUDITED NON-CONSOLIDATED BALANCE SHEETS
                      DECEMBER 31, 2002 AND JUNE 30, 2003

<Table>
<Caption>
                                                                                 TRANSLATION INTO
                                                                                    US DOLLARS
                                                            KOREAN WON               (NOTE 2)
                                                     -------------------------   ----------------
                                                        2002          2003             2003
                                                     -----------   -----------   ----------------
                                                           (IN MILLIONS)          (IN THOUSANDS)
<S>                                                  <C>           <C>           <C>
ASSETS
Cash and due from banks (Notes 3, 4, 26, 28 and
  29)..............................................  W 2,698,816   W 3,013,725     $ 2,525,962
Securities (Notes 5, 11, 28 and 29)................   11,072,577     9,458,554       7,927,713
Loans (Notes 6, 7, 8, 26, 27, 28 and 29)...........   45,328,520    46,389,567      38,881,541
Fixed assets (Notes 9, 11, 12 and 29)..............    1,415,312     1,333,390       1,117,584
Other assets (Notes 10, 25 and 29).................    5,681,063     6,089,021       5,103,530
                                                     -----------   -----------     -----------
     Total assets..................................  W66,196,288   W66,284,257     $55,556,330
                                                     ===========   ===========     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
  Deposits (Notes 13, 26, 28 and 29)...............  W45,125,839   W43,190,924      36,200,590
  Borrowings (Notes 14, 26, 28 and 29).............    6,843,721     6,816,326       5,713,122
  Debentures (Notes 15, 28 and 29).................    5,672,349     7,379,624       6,185,252
  Other liabilities (Notes 16, 17, 18, 28 and
     29)...........................................    6,262,081     6,645,539       5,569,977
                                                     -----------   -----------     -----------
     Total liabilities.............................   63,903,990    64,032,413      53,668,941
                                                     -----------   -----------     -----------
SHAREHOLDERS' EQUITY (NOTES 19, 29 AND 33):
  Common stock.....................................    3,395,592     3,395,592       2,846,025
  Capital surplus..................................       45,179            --              --
  Other reserves...................................       10,619        10,639           8,917
  Accumulated deficit (net loss of W(-)586,045
     million in 2002 and net loss of W(-)419,282
     million for the six-month period ended June
     30, 2003).....................................     (976,541)   (1,350,640)     (1,132,043)
  Capital adjustments..............................     (182,551)      196,253         164,490
                                                     -----------   -----------     -----------
     Total shareholders' equity....................    2,292,298     2,251,844       1,887,389
                                                     -----------   -----------     -----------
     Total liabilities and shareholders' equity....  W66,196,288   W66,284,257     $55,556,330
                                                     ===========   ===========     ===========
</Table>

        See accompanying notes to non-consolidated financial statements.
                                      F-177
<PAGE>

                                  CHOHUNG BANK

              UNAUDITED NON-CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND 2003

<Table>
<Caption>
                                                                                               TRANSLATION INTO
                                                                                                  US DOLLARS
                                                             KOREAN WON                            (NOTE 2)
                                           ----------------------------------------------   -----------------------
                                              QUARTER ENDED          SIX MONTHS ENDED        QUARTER     SIX MONTHS
                                                 JUNE 30,                JUNE 30,             ENDED        ENDED
                                           --------------------   -----------------------    JUNE 30,     JUNE 30,
                                             2002       2003         2002         2003         2003         2003
                                           --------   ---------   ----------   ----------   ----------   ----------
                                                           (IN MILLIONS)                        (IN THOUSANDS)
<S>                                        <C>        <C>         <C>          <C>          <C>          <C>
Interest income and dividends (Note 26):
  Interest on due from banks.............  W 11,512   W   1,833   W   18,001   W    2,969   $    1,536   $    2,488
  Interest and dividends on securities...   213,846     132,690      415,347      292,795      111,214      245,407
  Interest on loans (Note 20)............   724,847     833,208    1,398,346    1,652,481      698,356    1,385,031
  Other interest income..................     6,849       5,362       21,559       14,696        4,494       12,318
                                           --------   ---------   ----------   ----------   ----------   ----------
                                            957,054     973,093    1,853,253    1,962,941      815,601    1,645,244
                                           --------   ---------   ----------   ----------   ----------   ----------
Interest expense (Note 26):
  Interest on deposits...................   367,394     357,391      725,611      742,976      299,548      622,727
  Interest on borrowings.................    72,466      49,590      140,890       98,718       41,564       82,740
  Interest on debentures.................    58,002      93,735      104,588      183,396       78,564      153,714
  Other interest expense.................    25,851      37,844       42,553       41,639       31,719       34,900
                                           --------   ---------   ----------   ----------   ----------   ----------
                                            523,713     538,560    1,013,642    1,066,729      451,396      894,081
                                           --------   ---------   ----------   ----------   ----------   ----------
Net interest income......................   433,341     434,533      839,611      896,212      364,205      751,163
Provision for possible loan losses.......   317,061     707,822      641,711    1,183,444      593,263      991,907
                                           --------   ---------   ----------   ----------   ----------   ----------
Net interest income (expense) after
  provision for possible loan losses.....   116,280    (273,289)     197,900     (287,232)    (229,058)    (240,744)
Non-interest income:
  Fees and commissions (Note 21).........   196,225     175,189      371,168      349,020      146,835      292,532
  Gain on sale of trading securities.....       916       7,873       15,763       15,874        6,599       13,305
  Gain on valuation of trading
    securities...........................     2,251          --        7,176          244           --          205
  Gain on foreign currency trading.......    19,946      18,752       43,217       74,075       15,717       62,086
  Gain on derivatives trading............   209,591     141,485      251,593      277,020      118,586      232,185
  Fees and commissions from trust
    accounts (Note 2)....................    16,958      31,367       35,967       41,094       26,290       34,443
  Gain on available-for-sale
    securities...........................     9,579      64,699       16,327      141,205       54,228      118,351
  Other non-interest income (Note 22)....    31,607      64,718       73,116      153,342       54,244      128,524
                                           --------   ---------   ----------   ----------   ----------   ----------
                                            487,073     504,083      814,327    1,051,874      422,499      881,631
                                           --------   ---------   ----------   ----------   ----------   ----------
Non-Interest expenses:
    Commissions..........................    37,143      39,409       72,192       72,604       33,031       60,853
    General and administrative expenses
      (Note 23)..........................   220,959     219,367      407,783      421,571      183,863      353,340
    Loss on foreign currency trading.....    32,423      24,821       44,048       53,111       20,804       44,515
    Loss on derivatives trading..........   173,556     120,637      214,442      264,501      101,112      221,692
    Contribution to Credit Guarantee
      Fund...............................    11,040      13,866       20,490       26,797       11,622       22,460
    Loss on sale of loans................        --          --        3,003           --           --           --
    Loss on sale of trading securities...       103       2,186          726        5,010        1,832        4,199
    Loss on valuation of trading
      securities.........................        --         988          175        2,327          828        1,951
    Loss on sale of available-for-sale
      securities.........................    22,103       6,236       43,935        7,109        5,227        5,959
    Loss on impairment of
      available-for-sale securities......     1,574     178,170       48,020      179,105      149,334      150,118
    Other non-interest expenses (Note
      24)................................    64,944      92,323       91,857      126,561       77,381      106,077
                                           --------   ---------   ----------   ----------   ----------   ----------
                                            563,845     698,003      946,671    1,158,696      585,033      971,164
                                           --------   ---------   ----------   ----------   ----------   ----------
Ordinary income (loss)...................    39,508    (467,209)      65,556     (394,054)    (391,592)    (330,277)
Extraordinary item.......................        --          --           --           --           --           --
                                           --------   ---------   ----------   ----------   ----------   ----------
Income (loss) before income tax
  expense................................    39,508    (467,209)      65,556     (394,054)    (391,592)    (330,277)
Income tax expense (Note 25).............     5,980      14,477       11,611       25,228       12,134       21,145
                                           --------   ---------   ----------   ----------   ----------   ----------
Net income (loss)........................  W 33,528   W(481,686)  W   53,945   W (419,282)  $ (403,726)  $ (351,422)
                                           ========   =========   ==========   ==========   ==========   ==========
Net income (loss) per common share (in
  Currency Units) (Note 2)...............  W     50   W    (709)  W       81   W     (617)  $    (0.59)  $    (0.52)
                                           ========   =========   ==========   ==========   ==========   ==========
</Table>

        See accompanying notes to non-consolidated financial statements.
                                      F-178
<PAGE>

                                  CHOHUNG BANK

                       UNAUDITED STATEMENTS OF CASH FLOWS
                  FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003

<Table>
<Caption>
                                                                              TRANSLATION INTO
                                                                                 US DOLLARS
                                                               KOREAN WON         (NOTE 2)
                                                              -------------   ----------------
                                                                  2003              2003
                                                              -------------   ----------------
                                                              (IN MILLIONS)    (IN THOUSANDS)
<S>                                                           <C>             <C>
Cash flows from operating activities:
Net loss....................................................   W  (419,282)     $  (351,422)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
  Depreciation and amortization.............................        99,900           83,731
  Provision for possible loan losses........................     1,183,444          991,907
  Provision for severance benefits..........................        19,639           16,461
  Loss on disposal of fixed assets, net.....................         2,443            2,048
  Loss on impairment of available-for-sale securities.......       161,687          135,518
  Gain on disposal of available-for-sale securities.........      (134,096)        (112,393)
  Gain on sale of trading securities, net...................       (10,864)          (9,106)
  Loss on valuation of trading securities, net..............         2,083            1,746
  Payment of severance benefits.............................          (451)            (378)
  Other, net................................................       (71,592)         (60,005)
                                                               -----------      -----------
          Net cash provided by operating activities.........       832,911          698,107
                                                               -----------      -----------
Cash flows from investing activities:
  Net increase in loans.....................................    (3,258,437)      (2,731,068)
  Proceeds on sale of fixed assets..........................        37,901           31,767
  Purchase of fixed assets..................................       (58,417)         (48,962)
  Net increase in trading securities........................      (470,558)        (394,399)
  Net decrease in available-for-sale securities.............       215,417          180,552
  Net decrease in held-to-maturity securities...............     2,388,190        2,001,668
  Other, net................................................        51,694           43,327
                                                               -----------      -----------
  Net cash used in investing activities.....................    (1,094,210)        (917,115)
                                                               -----------      -----------
Cash flows from financing activities:
  Net decrease in deposits..................................    (1,934,915)      (1,621,754)
  Net increase in borrowings................................       821,039          688,156
  Net increase in debentures................................     1,716,782        1,438,925
  Other, net................................................       (26,698)         (22,377)
                                                               -----------      -----------
  Net cash provided by financing activities.................       576,208          482,950
                                                               -----------      -----------
Net increase in cash........................................       314,909          263,942
Cash, beginning of period...................................     2,698,816        2,262,020
                                                               -----------      -----------
Cash, end of period (Note 30)...............................   W 3,013,725      $ 2,525,962
                                                               ===========      ===========
</Table>

        See accompanying notes to non-consolidated financial statements.
                                      F-179
<PAGE>

                                  CHOHUNG BANK

            NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2003

1.  GENERAL

     Chohung Bank (the "Bank") was established on October 1, 1943 under the
Korean Banking Law as a result of the merger of Han Sung Bank, which was
established on February 19, 1897, and Dong Il Bank, which was established on
August 8, 1906, to engage in commercial banking and trust operations. In
addition to the head office in Seoul, the Bank operates 468 domestic branches,
and 91 depositary offices throughout the Republic of Korea and 6 overseas
branches as of June 30, 2003. The shares of the Bank were listed on the Korea
Stock Exchange on March 3, 1956 and on the London Stock Exchange for Global
Depositary Receipts (GDRs) on December 5, 1996. The Bank acquired Chungbuk Bank
and Kangwon Bank on April 30, 1999 and September 11, 1999, respectively.
     The capital of the Bank was decreased by W723,913 million on February 12,
1999 from W930,429 million as of December 31, 1998 in accordance with the
shareholders' decision on January 27, 1999. As of June 30, 2003, the Bank's
capital amounts to W3,395,592 million (US$2,846,025 thousand) through the merger
with other banks and capital injections by Korea Deposit Insurance
Corporation(KDIC). As explained in Note 32, 80.04% of the total shares of the
Bank is owned by KDIC, however, on July 9, 2003, KDIC entered into an agreement
with Shinhan Financial Group to dispose its entire shares. The disposition
process is presently in progress as of the date of this report and is to be
finalized by September 30, 2003. Once the disposition is finalized, the Bank
will become a subsidiary of Shinhan Financial Group.

     In response to general unstable economic conditions, the Korean government
and the private sector have been implementing structural reforms to historical
business practices. Implementation of these reforms is progressing slowly,
particularly in the areas of restructuring private enterprises and reforming the
banking industry. The Korean government continues to apply pressure to Korean
companies to restructure into more efficient and profitable firms. The Bank may
be either directly or indirectly affected by these general unstable economic
conditions and the reform program described above. The accompanying financial
statements reflect management's assessment of the impact to date of the economic
situation on the financial position of the Bank. Actual results may differ
materially from management's current assessment.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BASIS OF NON-CONSOLIDATED FINANCIAL STATEMENT PRESENTATION

     The Bank maintains its official accounting records in Korean won and
prepares statutory non-consolidated financial statements in the Korean language
(Hangul) in conformity with financial 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 for use
by those who are informed about Korean accounting principles and practices. The
accompanying financial statements have been condensed, restructured and
translated into English (with certain expanded descriptions) from the Korean
language financial statements. Certain information attached to the Korean
language financial statements, but not required for a fair presentation of the
Bank's financial position or results of operations, is not presented in the
accompanying financial statements.

     The U.S. dollar amounts presented in these financial statements were
computed by translating the Korean Won into U.S. dollars based on the Bank of
Korea (BOK) Basic Rate of W1,193.10 to U.S.$1.00 at June 30, 2003, solely for
the convenience of the reader. The convenience translations into U.S. dollars
should not be construed as a representation that the Korean Won amounts have
been, could have been, or could in the future be, converted at this or any other
rate of exchange.

                                      F-180
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The significant accounting policies followed by the Bank in preparing the
accompanying non-consolidated financial statements are summarized below.

  ALLOWANCE FOR POSSIBLE LOAN LOSSES AND OTHER LOSSES

     The Supervisory Regulation of Banking Business (the "Supervisory
Regulation") legislated by the Korean Financial Supervisory Commission (FSC)
requires the Bank to classify all credits into five categories as normal,
precautionary, substandard, doubtful, or estimated loss based on borrowers'
repayment capability and historical financial transaction records. The
Supervisory Regulation also requires providing the minimum rate of loss
provision for each category as described in the next paragraph. In accordance
with the Supervisory Regulation and the Accounting Standards for the Banking
Industry applied from January 1, 1999, the Bank classifies loans to corporate
borrowers, including the securities that have credit attributes such as
commercial paper, privately placed bonds and financing lease receivables, into
ten categories according to past repayment history including any overdue period,
the bankruptcy status of the borrower, and future debt repayment capability
based on the borrower's business performance, financial status, cash flows,
collateral, industry characteristics and evaluation of the management. Loans to
individual business operations and households are also classified into ten
categories based only on the past repayment history.

     As required by the FSC, the loans to enterprises are classified as of the
balance sheet dates as normal, precautionary, substandard, doubtful, or
estimated loss. The allowance for possible loan losses is then calculated on the
category balances using the prescribed minimum percentages of 0.5 percent or
more, 2 percent or more, 20 percent or more, 50 percent or more and 100 percent,
respectively. However, the Bank does not provide allowances for the loans to the
Korean government and local government entities, call loans, bonds bought under
resale agreements, inter-bank loans, and inter-bank loans in foreign currencies,
which are classified as normal, as it is not required by the Accounting
Standards for the Banking Industry. The loans to households and the credit card
receivables are also classified as of the balance sheet dates as normal,
precautionary, substandard, doubtful, or estimated loss. Beginning in 2002, the
Bank increased the allowance ratio for the loans to households to 0.75 percent
or more, 8 percent or more and 55 percent or more classified as normal,
precautionary and doubtful, respectively. Also, the allowance ratios for credit
card receivables were raised to 1 percent or more, 12 percent or more, and 60
percent or more classified as normal, precautionary and doubtful, respectively.
In addition, for the secured household loans newly placed after September 9,
2002, if the ratio of loans to collateral value (loan to value; LTV) exceeds 60
percent, the Bank provides the allowance for possible loan losses of 1 percent
or more for the normal and 10 percent or more for the precautionary instead of
providing 0.5 percent or more for the normal and 2.0 percent or more for the
precautionary.

     As required by the FSC, the Bank also provides an allowance for possible
losses on confirmed acceptances and guarantees. Confirmed acceptances and
guarantees are classified as of the balance sheet dates using the same criteria
used for loan classification. An allowance is then calculated, using 20 percent
or more for confirmed acceptances and guarantees classified as substandard, 50
percent or more for doubtful and 100 percent for estimated loss. No allowance is
provided for those confirmed acceptances and guarantees classified as normal and
precautionary. Additionally, as prescribed in the debt restructuring accounting
standard, loans on companies that were applied for debt restructuring due to the
work-out, court receivership or composition and other restructuring process, an
allowance for possible loan losses is provided for the residual amount after
deducting the present value. The allowance for possible losses on confirmed
acceptances and guarantees is presented in other liabilities. This additional
provision is included in the non-interest expense.

     In addition, beginning in 2002, the Bank provides other allowance in other
liabilities, which includes (i) 1 percent for certain portion of unused cash
advance facility (75 percent of the facility less used balance) of active credit
card accounts having transaction records during the recent one year and, (ii)
for the expected

                                      F-181
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

future expenses due to the bonus point given to credit card users and, (iii)
expected losses from the recourse obligation provided to KAMCO in relation to
sales of non-performing loans and (iv) expected losses from the pending
lawsuits. The Bank accounts for these other bad debts expense in the caption of
non-interest expense.

  RESTRUCTURING OF LOANS

     A loan, whose contractual terms are modified in a troubled debt
restructuring through execution of workout plan, court receivership,
commencement of corporate reorganization and mutual agreement, is accounted for
at the present value of expected future cash flows, if the book value of the
loan differs from the present value. The difference between the book value and
present value is offset against the allowance for possible loan losses, and any
remaining amounts are charged to operations as bad debt expense. The difference
between the book value of a loan and its present value is recorded as present
value discount, which is presented as a deduction from the loan. The present
value discount is amortized over the remaining restructuring period using the
effective interest rate method, and the amortization is recorded as interest
income.

  RECOGNITION OF INTEREST INCOME

     The Bank recognizes the interest income earned on loans, call loans,
long-term deposits with other banks and securities on an accrual basis, except
for the interest income on loans having overdue interest, dishonored bills
bought in foreign currencies, and all credits to the customers that are
bankrupt, given a grace period or a reduction or exemption of interest payments,
or listed as watch list clients by the Korean Banking Authorities, where
interest income is recognized on a cash basis. As of June 30, 2002 and 2003, the
principal amount of loans of which the accrued interest income was not recorded
in the financial statements based on the stated criteria amounted to W6,683.0
billion (US$5,601 million) and W6,927.7 billion (US$5,806 million),
respectively, and the related accrued interest income not recognized amounted to
W69.9 billion (US$58.6 million) and W5.5 billion (US$71.7 million),
respectively.

  INVESTMENT IN SECURITIES OTHER THAN THOSE ACCOUNTED FOR USING THE EQUITY
  METHOD

  Classification of Securities

     At acquisition, The Bank classifies securities into one of the three
categories: trading, available-for-sale or held-to-maturity. Trading securities
are those that were acquired principally to generate profits from short-term
fluctuations in prices. Held-to-maturity securities are those with fixed and
determinable payments and fixed maturity that an enterprise has the positive
intent and ability to hold to maturity. Available-for-sale securities are those
not classified either as held-to-maturity or trading securities.

     If the objective and ability to held securities of the Bank change,
available-for-sale securities can be reclassified to held-to-maturity securities
and vice versa. Whereas, if the Bank sells held-to-maturity or exercises early
redemption right of securities to issuer in the current year and the proceeding
two years, and if it reclassifies held-to-maturity securities to
available-for-sale securities, all debt securities that are owned or purchased
cannot be classified as held-to-maturity securities. On the other hand, trading
securities cannot be reclassified to available-for-sale or held-to-maturity
securities and vice versa, except when certain trading securities lose their
marketability.

  Valuation of Securities

     (1) VALUATION OF TRADING SECURITIES

     Trading equity and debt securities are initially stated at acquisition cost
plus incidental expenses with the individual moving average method. When the
face value of trading debt securities differs from its acquisition cost, the
effective interest method is applied to amortize the difference over the
remaining term of the

                                      F-182
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

securities. Trading securities are stated at fair value, if the fair value of
trading securities differs from its acquisition cost. Its carrying value is
adjusted to the fair value and the resulting valuation gain or loss is charged
to current operations.

     (2) VALUATION OF AVAILABLE-FOR-SALE SECURITIES

     Available-for-sale securities are initially stated at acquisition cost plus
incidental expenses, determined by the individual moving average method. When
the face value of available-for-sale debt securities differs from its
acquisition cost, the effective interest method is applied to amortize the
difference between the face value and the acquisition cost over the remaining
term of the security. Available-for-sale securities are stated at fair value,
with the net unrealized gain or loss presented as gain or loss on valuation of
available-for-sale securities in capital adjustments. Accumulated capital
adjustment of securities is charged to current operations in lump-sum at the
time of disposal or impairment recognition. Non-marketable equity securities can
be stated at acquisition cost on the financial statement if the fair value of
the securities is not credibly determinable.

     For equity securities, if the decline in the fair value of equity
securities is below the acquisition cost and the pervasive evidence of
impairment exists, the carrying value is adjusted to fair value and the
resulting valuation loss is charged to current operations. For debt securities,
if the decline in the collectible value of debt securities is below the
amortized cost and the pervasive evidence of impairment exists, the carrying
value is adjusted to collectible value and the resulting valuation loss is
charged to current operations. With respect to impaired securities, any
unrealized valuation gain or loss of securities previously included in the
capital adjustment account should be reversed.

     (3) VALUATION OF HELD-TO-MATURITY SECURITIES

     Held-to-maturity securities are initially stated at acquisition cost plus
incidental expenses, determined by the individual moving average method. As
held-to-maturity securities are stated at amortized cost, the effective interest
method is applied to amortize the difference between the face value and the
acquisition cost over the remaining term of the securities. If collectible value
is below the acquisition cost and the pervasive evidence of impairment exists,
the carrying value is adjusted to fair value and the resulting valuation loss is
charged to current operations.

     (4) REVERSAL OF LOSS ON IMPAIRMENT OF AVAILABLE-FOR-SALE SECURITIES AND
HELD-TO-MATURITY SECURITIES

     For available-for-sale securities, the recovery is recorded in current
non-operations up to amount of the previously recognized impairment loss as
reversal of loss on impairment of available-for-sale securities and any excess
is included in capital adjustment as gain on valuation of available-for-sale
securities. However, if the increases in the fair value of the impaired
securities are not regarded as the recovery of the impairment, the increases in
the fair value are recorded on gain or loss on valuation of available-for-sale
securities in capital adjustments. For non-marketable equity securities, which
were impaired based on the net asset fair value, the recovery is recorded up to
their acquisition cost. For held-to-maturity securities, the recovery is
recorded in current non-operations up to amount of the previously recognized
impairment loss as reversal of loss on impairment of held-to-maturity
securities.

     (5) RECLASSIFICATION OF SECURITIES

     When held-to-maturity securities are reclassified to available-for-sale
securities, those securities are stated at the fair value on the
reclassification date and the difference between the fair value and book value
are accounted on capital adjustment as gain or loss on valuation of
available-for-sale securities. When available-for-sale securities are
reclassified to held-to-maturity securities, gain or loss on valuation of
available-for-sale securities, which had been recorded until the
reclassification date, continue to be stated on capital adjustment and will be
amortized using the effective interest rate and be charged to interest income or
expense upon
                                      F-183
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

maturity. The difference between the fair value on the reclassification date and
face value of the reclassified securities to held-to-maturity securities is
amortized using effective interest rate and charged to interest income or
expense.

     When the realization, expiration or sale of the right to obtain the
economic benefits arises and the control of securities loses from the sale of
the securities, the unrealized valuation gain or loss of securities included in
the capital adjustment account is added to or deducted from the gain or loss on
sale. The gain or loss amounts to the difference between the net proceeds
received or receivable and its carrying value. Whereas when securities are
transferred without losing its control, the transaction is recorded as secured
borrowing transaction.

  INVESTMENT IN SECURITIES USING THE EQUITY METHOD

     Equity Securities that are in companies in which the company is able to
exercise significant influence over the investees are accounted for using the
equity method. Under the Bank Law, investors with more than 15% ownership of
voting right are generally considered as significant influence. The Bank's share
in net income or net loss of investees is reflected in current operations.
Changes in the retained earnings of the investee are reflected in the retained
earnings of the investors. Changes in the capital surplus or other capital
accounts of the investee are reflected as gain or loss on valuation of
available-for-sale securities in capital adjustment account of the investor.

  TANGIBLE ASSETS AND DEPRECIATION

     Tangible assets included in fixed assets are stated at acquisition cost,
except for assets revalued upward in accordance with the Asset Revaluation Law
of Korea. Routine maintenance and repairs are expensed as incurred. Expenditures
that result in the enhancement of the value or the extension of the useful lives
of the facilities involved are capitalized as additions to tangible assets.

     Depreciation is computed using the declining-balance method (straight-line
method for buildings purchased since January 1, 1995 and leasehold improvements)
based on the estimated useful lives of the assets as follows:

<Table>
<Caption>
                                                               IN YEARS
                                                               --------
<S>                                                            <C>
Buildings...................................................    40 - 60
Equipment and furniture.....................................          5
Leasehold improvements......................................          5
</Table>

  INTANGIBLE ASSETS

     Intangible assets other than goodwill included in fixed assets are recorded
at the production costs or purchase costs plus incidental expenses less
accumulated amortization. Intangible assets are amortized using the
straight-line method over the estimated economic useful lives of the related
assets or the activity method.

     The excess of the consideration paid for business combinations over the net
assets transferred is classified as goodwill, which is amortized using the
straight-line method over 5 years. Goodwill was recognized from the acquisitions
of Chungbuk Bank and Kangwon Bank on April 30, 1999 and September 11, 1999,
respectively, and adjusted subsequently due to the revaluation of treasury
stocks acquired in relation to those business combinations. Accordingly, the
revaluation amounting to W100,716 million has been included in goodwill and
amortized over the useful life of the related assets.

                                      F-184
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  VALUATION OF RECEIVABLES AND PAYABLES AT PRESENT VALUE

     Receivables and payables arising from long-term installment transactions,
long-term borrowing and lending transactions and other similar transactions are
stated at the present value of expected future cash flows with the gain or loss
on valuation of the related receivables and payables reflected in current
operations, unless the difference between nominal value and present value is
immaterial. The present value discount or premium is amortized using the
effective interest rate method with the amortization recorded as interest income
or interest expense.

  VALUATION ALLOWANCE FOR NON-BUSINESS USE PROPERTY

     Non-business use property included in fixed assets is recorded when the
Bank acquires collateral on a foreclosed mortgage. No depreciation is provided
for this asset. However, if the auction price of the foreclosed asset is lower
than the book value, the difference is provided as a valuation allowance with
the valuation loss charged to current operations.

  AMORTIZATION OF DISCOUNT (PREMIUM) ON DEBENTURES

     Discount or premium on debentures issued is amortized over the period from
issuance to maturity using the effective interest rate method. Amortization of
discount or premium is recognized as interest expense or interest income on the
debentures.

  ACCRUED SEVERANCE BENEFITS

     Employees and directors with more than one year of service are entitled to
receive a lump-sum payment upon termination of their service with the Bank,
based on their length of service and rate of pay at the time of termination. The
accrued severance indemnities that would be payable assuming all eligible
employees were to resign are W51,560 million and W70,748 million (US$59,298
thousand) as of December 31, 2002 and June 30, 2003, respectively. Actual
payments of severance indemnities amounted to W100 million and W1,351 million
(US$1,132 thousand) (including the severance payment accounted for as
non-operating expense amounting to W900 million (US$754 thousand)) in the
six-month periods ended June 30, 2002 and 2003, respectively.

     Funding of the severance liability is not required. However, in order to
obtain a tax deduction, the Bank has purchased an employee retirement trust,
which meets the funding requirements for tax purposes, and made deposits with
Korea Exchange Bank as of June 30, 2003. The deposits amounting to W30,000
million (US$25,145 thousand) as of June 30, 2003 are presented as a deduction
from accrued severance benefits.

  BONDS UNDER RESALE OR REPURCHASE AGREEMENTS

     Bonds purchased under resale agreements are recorded as loans and bonds
sold under repurchase agreements are recorded as borrowings, when the Bank
purchases or sells securities under resale or repurchase agreements.

  ACCOUNTING FOR FINANCIAL DERIVATIVES

     The Bank accounts for financial derivative instruments pursuant to the
Interpretations on Financial Accounting Standards 53-70 on accounting for
financial derivative instruments. Derivative instruments are classified as used
for trading activities or for hedging activities according to their transaction
purposes. All derivative instruments are accounted for at fair value with the
valuation gain or loss recorded as an asset or a liability. Hedge accounting is
classified into fair value hedges and cash flow hedges. Fair value hedge
accounting and cash flow hedge accounting are applied only to the financial
derivative instruments that meet certain criteria for hedge accounting of
financial derivative instruments used for hedging activities. Fair value
                                      F-185
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

hedge accounting is applied to a financial derivative instrument designated to
hedge the exposure to the changes in the fair value of an asset or a liability
or a firm commitment (a hedged item) that is attributable to a particular risk.
The gain or loss both on the hedging derivative instruments and on the hedged
items attributable to the hedged risk is reflected in current operations. Cash
flow hedge accounting is applied to a derivative instrument designated to hedge
the exposure to variability in expected future cash flows of an asset or a
liability or a forecasted transaction that is attributable to a particular risk.
The effective portion of gain or loss on a derivative instrument designated as a
cash flow hedge is recorded as a capital adjustment, and the ineffective portion
is reflected in current operations. The effective portion of gain or loss
recorded as capital adjustment is reclassified into current earnings in the same
period during which the hedged expected transaction actually affects earnings.
If the hedged transaction results in the acquisition of an asset or the
incurrence of a liability, the gain or loss in capital adjustment is added to or
deducted from the asset or the liability.

  ACCOUNTING FOR STOCK OPTIONS

     Stock options are valued at fair value pursuant to the Interpretations on
Financial Accounting Standards 39-35 on accounting for stock options. The fair
value of stock options is charged to general and administrative expenses in the
statement of operations and credited to capital adjustments as stock option cost
over the contract term of the services provided.

  PAYMENTS TO GUARANTEED RETURN TRUST ACCOUNTS

     With respect to certain trust account products, the Bank guarantees the
repayment of the principal and, in certain cases, a fixed rate of return. If
income from such trust accounts is insufficient to pay the guaranteed amount,
such a deficiency is satisfied by using special reserves maintained in the trust
accounts, offsetting trust fee payable to bank accounts and receiving
compensation contributions from the bank accounts of the Bank. For the six-month
periods ended June 30, 2002 and 2003, the Bank recorded trust management fees of
W35,967 million and W41,094 million (US$34,443 thousand), respectively, and
trust cancellation charge income of W225 million and W132 million (US$111
thousand), respectively. For the six-month periods ended June 30, 2002 and 2003,
the Bank paid no compensating contributions to guaranteed return trusts and as a
result, the Bank recorded a gain from the operation of trust business of W36,192
million and W41,226 million (US$34,554 thousand), respectively.

  INCOME TAX EXPENSE

     Income tax expense is the amount currently payable for the period added to
or deducted from the changes in the deferred income taxes. The difference
between the amount currently payable for the period and the income tax expense
is accounted for as deferred income tax assets or liabilities and offset against
income tax assets and liabilities in future periods.

  ACCOUNTING FOR FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION

     The Bank maintains its accounts in Korean Won. Transactions in foreign
currencies are recorded in Korean Won based on the prevailing rate of exchange
on the transaction date. The Korean Won equivalent of assets and liabilities
denominated in foreign currencies are translated in these financial statements
based on the BOK Basic Rate (W1,200.40 and W1,193.10 to US$1.00 at December 31,
2002 and June 30, 2003, respectively) or cross rates for other currencies as of
the balance sheet dates. Translation gains and losses are credited or charged to
operations. Financial statements of overseas branches and subsidiaries in which
investments are accounted for using the equity method are translated based on
BOK Basic Rate at the balance sheet dates.

                                      F-186
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  EARNINGS (LOSS) PER SHARE

     Ordinary income (loss) per common share and net income (loss) per common
share are computed by dividing ordinary income (loss) (after deducting the tax
effect) and net income (loss), respectively, by the weighted average number of
common shares outstanding during the year. The number of shares used in
computing earnings per share was 669 million and 679 million in June 30, 2002
and 2003, respectively. Ordinary income (loss) and net income (loss) on common
shares in June 30, 2002 and 2003 were as follows:

<Table>
<Caption>
                                                                        TRANSLATION INTO
                                                                           US DOLLARS
                                                      KOREAN WON            (NOTE 2)
                                                  -------------------   ----------------
                                                   2002       2003            2003
                                                  -------   ---------   ----------------
                                                     (IN MILLIONS)       (IN THOUSAND)
<S>                                               <C>       <C>         <C>
Net income (loss)...............................  W53,945   W(419,282)     $(351,422)
Extraordinary gain..............................       --          --             --
Income tax on extraordinary gain................       --          --             --
                                                  -------   ---------      ---------
Ordinary income (loss)..........................  W53,945   W(419,282)     $(351,422)
                                                  =======   =========      =========
</Table>

     Diluted ordinary income (loss) per common share and net income (loss) per
common share represent the ordinary income (loss) and net income (loss) divided
by the number of common shares and diluted securities. The average stock prices
of the Bank's common shares for the six-month periods ended June 30, 2003 are
both below the exercise prices of the stock options, and thereby there is no
dilution effect from stock options.

     The dilutive securities as of June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                          EXERCISE    COMMON STOCKS
ITEM                      FACE VALUE       PERIOD      TO BE ISSUED                 REMARKS
- ----                     -------------   ----------   --------------                -------
                         (IN MILLIONS)
<S>                      <C>             <C>          <C>              <C>
Stock options (see Note
  19)..................        --        2003.3.28-   211,645 shares   W5,000 paid in cash upon exercise
                                         2006.3.27
Stock options (see Note
  19)..................        --        2004.3.10-   664,000 shares   W5,000 paid in cash upon exercise
                                         2007.3.9
Stock options (see Note
  19)..................        --        2004.3.30-   312,000 shares   W5,657 paid in cash upon exercise
                                         2007.3.29
Stock options (see Note
  19)..................        --        2005.3.29-   312,000 shares   W5,000 paid in cash upon exercise
                                         2008.3.28
</Table>

 APPLICATION OF THE STATEMENT OF KOREA ACCOUNTING STANDARDS

     The Korea Accounting Standard Board (KASB) under the Korea Accounting
Institute (KAI) issued the Statement of Korea Accounting Standards (SKAS) for
achieving a set of Korean accounting standards that should be internationally
acceptable and comparable. The Bank has implemented SKAS No. 1 "Accounting
Changes and Correction of Errors" since January 1, 2002 and adopted the rest of
SKAS, from No. 2 -- "Interim Financial Statements" through No. 9 -- "Convertible
Securities", since January 1, 2003. The Bank restated the retained earnings of
2002 financial statements from appropriated retained earnings into
unappropriated retained earnings in accordance with SKAS No. 6 -- "Events
Occurring after the Balance Sheet Date". In addition, in accordance with SKAS
No. 8 -- "Securities", all accounts relating to securities in 2002 financial
statements provided for comparative purposes were restated, and it has no
effects on the Bank's total assets, retained earnings and net income.

                                      F-187
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3.  CASH AND DUE FROM BANKS

     Cash and due from banks as of December 31, 2002 and June 30, 2003 are
summarized as follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                               -----------------------   ----------------
                                                  2002         2003            2003
                                               ----------   ----------   ----------------
                                                    (IN MILLIONS)         (IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Cash and checks..............................  W1,174,976   W1,819,952      $1,525,398
Foreign currencies...........................      76,065       71,025          59,530
Due from banks in local currency.............   1,255,581      930,792         780,146
Due from banks in foreign currencies.........     192,194      191,956         160,888
                                               ----------   ----------      ----------
                                               W2,698,816   W3,013,725      $2,525,962
                                               ==========   ==========      ==========
</Table>

4.  RESTRICTED DUE FROM BANKS

     Restricted due from banks as of December 31, 2002 and June 30, 2003 are
summarized as follows:

<Table>
<Caption>
                                               TRANSLATION INTO
                                                  US DOLLARS
                            KOREAN WON             (NOTE 2)
                       ---------------------   ----------------
                          2002        2003           2003                 REFERENCE
                       ----------   --------   ----------------           ---------
                           (IN MILLIONS)        (IN THOUSANDS)
<S>                    <C>          <C>        <C>                <C>
Reserve deposits with
  the Bank of
  Korea..............  W1,224,944   W809,501       $678,485       Required under the Banking
                                                                  Law
Due from banks in
  local currency.....          --         --             --       Required under the
                                                                  Subordinated Borrowings
Due from banks in
  foreign
  currencies.........      46,094     45,321         37,986       Required under the Banking
                                                                  Law, borrowings and
                                                                  derivative transactions
                       ----------   --------       --------
                       W1,271,038   W854,822       $716,471
                       ==========   ========       ========
</Table>

5.  SECURITIES

     (1) Securities as of December 31, 2002 and June 30, 2003 are summarized as
follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                              ------------------------   ----------------
                                                 2002          2003            2003
                                              -----------   ----------   ----------------
                                                   (IN MILLIONS)          (IN THOUSANDS)
<S>                                           <C>           <C>          <C>
Trading securities..........................  W   990,179   W1,469,518      $1,231,681
Available-for-sale securities...............    2,684,844    7,760,382       6,504,385
Held-to-maturity securities.................    7,165,994           --              --
Investment equity securities accounted for
  using the equity method...................      231,560      228,654         191,647
                                              -----------   ----------      ----------
                                              W11,072,577   W9,458,554      $7,927,713
                                              ===========   ==========      ==========
</Table>

                                      F-188
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (2) Trading securities as of December 31, 2002 and June 30, 2003 are
summarized as follows:

<Table>
<Caption>
                                                                        TRANSLATION INTO
                                                                           US DOLLARS
                                                     KOREAN WON             (NOTE 2)
                                                ---------------------   ----------------
                                                  2002        2003            2003
                                                --------   ----------   ----------------
                                                    (IN MILLIONS)        (IN THOUSANDS)
<S>                                             <C>        <C>          <C>
Government bonds..............................  W174,802   W  173,667      $  145,560
Finance debentures............................        --      531,041         445,093
Corporate bonds...............................   308,086      405,725         340,060
Trading securities in foreign currencies......   100,108       49,651          41,615
Other.........................................   407,183      309,434         259,353
                                                --------   ----------      ----------
                                                W990,179   W1,469,518      $1,231,681
                                                ========   ==========      ==========
</Table>

     (3) The details of valuation of trading securities as of June 30, 2003 are
as follows (in millions of Won):

<Table>
<Caption>
                                                               ADJUSTED BY
                                              ACQUISITION   EFFECTIVE INTEREST    FAIR VALUE
                                 FACE VALUE      COST             METHOD         (BOOK VALUE)
                                 ----------   -----------   ------------------   ------------
<S>                              <C>          <C>           <C>                  <C>
Government bonds...............  W  170,000   W  174,234        W  174,172        W  173,667
Finance debentures.............     540,000      527,657           530,463           531,041
Corporate bonds................     400,000      405,198           404,899           405,725
Trading securities in foreign
  currencies...................      39,372       49,169            49,169            49,651
Other..........................     312,614      307,914           309,312           309,434
                                 ----------   ----------        ----------        ----------
                                 W1,461,986   W1,464,172        W1,468,015        W1,469,518
                                 ==========   ==========        ==========        ==========
</Table>

     The details of valuation of trading securities as of December 31, 2002 are
as follows (in millions of Won):

<Table>
<Caption>
                                                                   ADJUSTED BY
                                                  ACQUISITION   EFFECTIVE INTEREST    FAIR VALUE
                                     FACE VALUE      COST             METHOD         (BOOK VALUE)
                                     ----------   -----------   ------------------   ------------
<S>                                  <C>          <C>           <C>                  <C>
Government bonds...................   W170,000     W173,177          W173,079          W174,802
Corporate bonds....................    298,387      305,353           305,353           308,086
Trading securities in foreign
  currencies.......................     85,326       94,848            94,848           100,108
Other..............................    410,613      405,184           407,065           407,183
                                      --------     --------          --------          --------
                                      W964,326     W978,562          W980,345          W990,179
                                      ========     ========          ========          ========
</Table>

     Beginning in 2003, the fair values of trading debt securities in local
currency were determined by the prices of the latest trading day from the
balance sheet date, provided by Korea Bond Pricing and KIS Bond Pricing, while
in 2002, they were valued at the prices provided by Korea Bond Pricing & KMCC
Co. and NICE Co., Ltd. The fair values of trading securities in foreign
currencies are determined by the latest market prices provided by reputable
market price information providers or by the yields provided by professional
dealers. Acquisition costs of trading securities in foreign currencies are
Korean Won equivalents of foreign currencies denominated acquisition costs based
on BOK Basic Rate at December 31, 2002 and June 30, 2003.

                                      F-189
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (4) Available-for-sale securities as of December 31, 2002 and June 30, 2003
are summarized as follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                               -----------------------   ----------------
                                                  2002         2003            2003
                                               ----------   ----------   ----------------
                                                    (IN MILLIONS)         (IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Equity securities
  Investment stock...........................  W  583,276   W  671,368      $  562,709
  Equity investments.........................      26,779       26,994          22,625
Debt securities
  Government bonds...........................      10,966      835,911         700,621
  Finance debentures.........................     903,070    1,375,504       1,152,882
  Corporate bonds............................   1,033,424    4,605,471       3,860,088
Beneficiary certificates.....................      60,399       59,262          49,671
Investment securities in foreign
  currencies.................................      65,624       82,173          68,873
Other........................................       1,306      103,699          86,916
                                               ----------   ----------      ----------
                                               W2,684,844   W7,760,382      $6,504,385
                                               ==========   ==========      ==========
</Table>

     (5) Held-to-maturity securities as of December 31, 2002 and June 30, 2003
are summarized as follows:

<Table>
<Caption>
                                                                          TRANSLATION INTO
                                                                             US DOLLARS
                                                         KOREAN WON           (NOTE 2)
                                                     ------------------   ----------------
                                                        2002      2003          2003
                                                     ----------   -----   ----------------
                                                       (IN MILLIONS)       (IN THOUSANDS)
<S>                                                  <C>          <C>     <C>
Debt securities....................................  W6,929,043   W  --        $  --
Investment securities in foreign currencies........     186,322      --           --
Other..............................................      50,629      --           --
                                                     ----------   -----        -----
                                                     W7,165,994   W  --        $  --
                                                     ==========   =====        =====
</Table>

     There is no held-to-maturity security as of June 30, 2003 as the entire
amounts were reclassified into available-for-sale securities during the
six-month period ended June 30, 2003.

     (6) Investment equity securities accounted for using the equity method as
of June 30, 2003 are summarized as follows (in millions of Won):

<Table>
<Caption>
                                            PERCENTAGE
                                                OF
                                BALANCE     OWNERSHIP    ACQUISITION   NET ASSET
                               SHEET DATE      (%)          COST         VALUE     BOOK VALUE
                               ----------   ----------   -----------   ---------   ----------
<S>                            <C>          <C>          <C>           <C>         <C>
Chohung Investment Trust
  Management Co., Ltd........  2003.3.31       79.77      W 58,862     W 55,217     W 55,049
Chohung Finance Ltd., Hong
  Kong.......................  2003.6.30       99.99         7,158       42,920       42,920
Chohung Bank of America......  2003.6.30      100.00        72,568       89,061       89,061
Chohung Bank (Deutschland)
  GmbH.......................  2003.6.30      100.00        16,147       32,355       32,355
Chohung Vina Bank............  2003.6.30       50.00         7,182        9,629        9,269
                                                          --------     --------     --------
                                                          W161,917     W229,182     W228,654
                                                          ========     ========     ========
</Table>

                                      F-190
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On March 24, 2003, Chohung Bank of New York and California Chohung Bank
entered into a merger and established Chohung Bank of America.

     Investment equity securities accounted for using the equity method as of
December 31, 2002 are summarized as follows (in millions of Won):

<Table>
<Caption>
                                             PERCENTAGE
                                                 OF
                             BALANCE SHEET   OWNERSHIP    ACQUISITION   NET ASSET     BOOK
                                 DATE           (%)          COST         VALUE      VALUE
                             -------------   ----------   -----------   ---------   --------
<S>                          <C>             <C>          <C>           <C>         <C>
Chohung Investment Trust
  Management Co., Ltd. ....    2002.9.30        79.77      W 50,761     W 54,300    W 58,862
Chohung Finance Ltd., Hong
  Kong.....................   2002.12.31        99.99         7,202       46,510      46,510
Chohung Bank of New York...   2002.12.31       100.00        30,610       36,167      36,167
Chohung Bank (Deutschland)
  GmbH.....................   2002.12.31       100.00        16,246       28,614      28,614
California Chohung Bank....   2002.12.31       100.00        42,402       52,435      52,435
Chohung Vina Bank..........   2002.12.31        50.00         7,226        9,388       8,972
                                                           --------     --------    --------
                                                           W154,447     W227,414    W231,560
                                                           ========     ========    ========
</Table>

     (7) The valuation of debt securities among available-for-sale securities in
local currency, by type, as of June 30, 2003 is summarized as follows (in
millions of Won):

<Table>
<Caption>
                                                                   ADJUSTED BY
                                                                EFFECTIVE INTEREST    FAIR VALUE
                                FACE VALUE   ACQUISITION COST         METHOD         (BOOK VALUE)
                                ----------   ----------------   ------------------   ------------
<S>                             <C>          <C>                <C>                  <C>
Available-for-sale:
  Government bonds............  W  754,915      W  773,434          W  786,169        W  835,911
  Finance debentures..........   1,375,399       1,355,946           1,344,004         1,375,504
  Corporate bonds.............   4,842,249       4,532,062           4,540,483         4,605,471
                                ----------      ----------          ----------        ----------
                                W6,972,563      W6,661,442          W6,670,656        W6,816,886
                                ==========      ==========          ==========        ==========
</Table>

                                      F-191
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The valuation of debt securities among available-for-sale securities and
held-to-maturity securities in local currency, by type, as of December 31, 2002
is summarized as follows (in millions of Won):

<Table>
<Caption>
                                                                   ADJUSTED BY
                                                                EFFECTIVE INTEREST    FAIR VALUE
                                FACE VALUE   ACQUISITION COST         METHOD         (BOOK VALUE)
                                ----------   ----------------   ------------------   ------------
<S>                             <C>          <C>                <C>                  <C>
Available-for-sale:
  Government bonds............  W   10,000      W   10,789          W   10,707        W   10,966
  Finance debentures..........     910,000         889,434             900,249           903,070
  Corporate bonds.............   1,440,119       1,110,635           1,264,698         1,033,424
                                ----------      ----------          ----------        ----------
                                 2,360,119       2,010,858           2,175,654         1,947,460
                                ----------      ----------          ----------        ----------
Held-to-maturity:
  Government bonds............   1,719,671       1,689,882           1,722,945         1,722,945
  Finance debentures..........     610,033         613,394             614,239           614,239
  Corporate bonds.............   4,552,043       4,612,444           4,591,859         4,591,859
                                ----------      ----------          ----------        ----------
                                 6,881,747       6,915,720           6,929,043         6,929,043
                                ----------      ----------          ----------        ----------
                                W9,241,866      W8,926,578          W9,104,697        W8,876,503
                                ==========      ==========          ==========        ==========
</Table>

     The outstanding balance of government bonds, finance debentures and
corporate bonds is the sum of the fair value of available-for-sale investment
debt securities and the book value of held-to-maturity investment debt
securities, which was adjusted using the effective interest method.

     Beginning in 2003, the fair values of trading debt securities in local
currency were determined by the prices of the latest trading day from the
balance sheet date, provided by Korea Bond Pricing and KIS Bond Pricing, while
in 2002, they were valued at the prices provided by Korea Bond Pricing & KMCC
Co. and NICE Co., Ltd. The fair values of trading securities in foreign
currencies are determined by the latest market prices provided by reputable
market price information providers or by the yields provided by professional
dealers. Acquisition costs of trading securities in foreign currencies are
Korean Won equivalents of foreign currencies denominated acquisition costs based
on BOK Basic Rate at December 31, 2002 and June 30, 2003.

                                      F-192
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (8) The portfolio of securities, by country, as of December 31, 2002 and
June 30, 2003 is summarized as follows:

<Table>
<Caption>
                                                        TRANSLATION INTO
                                                           US DOLLARS
                                    KOREAN WON              (NOTE 2)        PERCENTAGE(%)
                             ------------------------   ----------------   ---------------
                                2002          2003            2003          2002     2003
                             -----------   ----------   ----------------   ------   ------
                                  (IN MILLIONS)          (IN THOUSANDS)
<S>                          <C>           <C>          <C>                <C>      <C>
Investment securities in
  local currency:
  Korea....................  W10,547,825   W9,153,126      $7,671,718       95.26    96.77
                             -----------   ----------      ----------      ------   ------
Investment securities in
  foreign currencies:
  United States............      244,024      103,629          86,857        2.20     1.10
  Korea....................      161,678       98,099          82,222        1.46     1.04
  Hong Kong................       46,510       42,920          35,973        0.42     0.45
  Germany..................       28,614       32,355          27,118        0.26     0.34
  Vietnam..................        8,972       12,155          10,188        0.08     0.13
  India....................       11,768        9,268           7,768        0.11     0.10
  Philippines..............        5,981        3,461           2,901        0.05     0.04
  Bermuda..................          951        1,193           1,000        0.01     0.01
  Other....................       16,254        2,348           1,968        0.15     0.02
                             -----------   ----------      ----------      ------   ------
                                 524,752      305,428         255,995        4.74     3.23
                             -----------   ----------      ----------      ------   ------
                             W11,072,577   W9,458,554      $7,927,713      100.00   100.00
                             ===========   ==========      ==========      ======   ======
</Table>

     (9) The portfolio of securities, by type, as of December 31, 2002 and June
30, 2003 is summarized as follows (in millions of Won):

<Table>
<Caption>
                                                        TRANSLATION INTO
                                                           US DOLLARS
                                    KOREAN WON              (NOTE 2)        PERCENTAGE(%)
                             ------------------------   ----------------   ---------------
TYPE                            2002          2003            2003          2002     2003
- ----                         -----------   ----------   ----------------   ------   ------
                                  (IN MILLIONS)          (IN THOUSANDS)
<S>                          <C>           <C>          <C>                <C>      <C>
Fixed rate notes...........  W 5,629,120   W4,372,519      $3,664,839       50.84    46.23
Floating rate notes........    3,943,111    3,590,315       3,009,232       35.61    37.96
Convertible bonds..........      213,652      179,418         150,380        1.93     1.90
Stocks and equity..........      842,441      927,836         777,668        7.61     9.81
Other......................      444,253      388,466         325,594        4.01     4.10
                             -----------   ----------      ----------      ------   ------
                             W11,072,577   W9,458,554      $7,927,713      100.00   100.00
                             ===========   ==========      ==========      ======   ======
</Table>

     The outstanding balance of government bonds, finance debentures and
corporate bonds is the sum of the fair value of available-for-sale investment
debt securities and the book value of held-to-maturity investment debt
securities, which was adjusted using the effective interest method.

     (10) Conversion of loans for debt to equity swap of Hynix Semiconductor
Inc. into equity:

     As determined by the Financial Institutional Creditors' meeting held on
October 31, 2001, the Bank acquired mandatory convertible bonds issued by Hynix
Semiconductor Inc. amounting to W423,481 million of face value, which were
recorded as loans to be swapped into equity before the actual swap occurs. As of

                                      F-193
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

June 1, 2002, the Bank converted all of such convertible bonds into equity at
the conversion price of W708 and acquired 598,137,005 shares. As a result of
this conversion, the Bank recorded W127,044 million of investment securities
based on the book value of the loans swapped into equity, which was W212 per
share. The shares of Hynix Semiconductor Inc. are traded on the Korea Stock
Exchange, but most of the converted shares are held by the Financial
Institutional Creditors including the Bank and restricted in disposal until the
end of 2006. The Bank recorded the equity securities at their fair values, the
price quoted on the Korea Stock Exchange. Additionally, on April 14, 2003, Hynix
Semiconductor Inc reduced its shares to 28,494,281 shares through
non-compensatory capital reduction with the ratio of twenty one shares into one
share, and as of the same date, loans amounting to W160,108 million (US$134,195
thousand) and convertible bonds amounting to W896 million (US$751 thousand) were
converted to common stock amounting to 16,830,442 shares and 94,174 shares,
respectively.

     (11) As of June 30, 2003, debt securities (available-for-sale) issued by
foreign governments amount to W11,253 million (US$9,432 thousand) and debt
securities with collaterals (corporate bonds) amount to W89,606 million
(US$75,104 thousand).

     (12) Loss on impairment of debt securities due to the increase in credit
risk and other reasons amounts to W179,105 million (US$150,117 thousand) and the
reversal of impairment loss previously accounted for prior to December 31, 2002
amounting to W17,418 million (US$14,599 thousand) was accounted by the Bank for
the six-month period ended June 30, 2003. The entire amount of interest
receivables pertaining to the debt securities considered impaired was not
reflected in the financial statements.

     (13) The Bank reclassified all of its held-to-maturity securities to
available-for-sale securities depending on their carrying intention and purpose
on February 25, 2003. The Bank disposed such securities amounting to W2,109,779
million (US$1,768,317 thousand) and recorded gain on disposal of securities
available-for-sale amounting to W96,169 million (US$80,604 thousand). The book
value of the reclassified remaining securities prior to the assessment amounting
to W4,777,804 million (US$4,004,529 thousand) was adjusted to the fair market
value of W4,855,947 million (US$4,070,025 thousand) with a resulting gain on
valuation of securities of W78,143 million (US$65,496 thousand) recorded as
capital adjustment.

     (14) Gain and loss on valuation of securities (capital adjustment) for the
six-month period ended June 30, 2003 are as follows (millions in Won):

<Table>
<Caption>
                                                                    DISPOSITION
                                   DECEMBER 31, 2002   GAIN/LOSS   (REALIZATION)   JUNE 30, 2003
                                   -----------------   ---------   -------------   -------------
<S>                                <C>                 <C>         <C>             <C>
Investment equity securities
  accounted for using the equity
  method.........................      W  23,386       W   (193)      W   --         W 23,193
Available-for-sale securities....       (208,393)       377,829        1,452          170,888
                                       ---------       --------       ------         --------
                                       W(185,007)      W377,636       W1,452         W194,081
                                       =========       ========       ======         ========
</Table>

                                      F-194
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  LOANS

     (1) Loans as of December 31, 2002 and June 30,2003 are summarized as
follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                    KOREAN WON               (NOTE 2)
                                             -------------------------   ----------------
                                                2002          2003             2003
                                             -----------   -----------   ----------------
                                                   (IN MILLIONS)          (IN THOUSANDS)
<S>                                          <C>           <C>           <C>
Loans in local currency....................  W30,924,206   W33,073,801     $27,720,896
Loans in foreign currencies................    3,480,755     3,104,829       2,602,321
Bills bought in local currency.............    1,903,887     1,583,238       1,326,995
Bills bought in foreign currencies.........    1,775,599     1,820,287       1,525,678
Advances for customers.....................       79,682        77,754          65,170
Factoring receivables......................      121,681       126,416         105,956
Loan for debt-equity swap..................      129,384       187,250         156,944
Credit card accounts.......................    5,898,452     4,648,324       3,896,005
Loans purchased under repurchase
  agreement................................           --     1,000,000         838,153
Call loans.................................      655,798       575,148         482,062
Bills discounted...........................    1,481,776     1,330,385       1,115,066
Cash management accounts...................      134,609       180,146         150,990
Privately placed bonds.....................      185,168       255,914         214,495
Financing lease receivables................      182,596       146,027         122,393
                                             -----------   -----------     -----------
                                              46,953,593    48,109,519      40,323,124
Allowance for possible loan losses.........   (1,604,607)   (1,697,591)     (1,422,841)
Present value discounts (See Note 8).......      (20,466)      (22,361)        (18,742)
                                             -----------   -----------     -----------
                                             W45,328,520   W46,389,567     $38,881,541
                                             ===========   ===========     ===========
</Table>

     (2) Loans in local currency and foreign currencies as of December 31, 2002
and June 30, 2003 classified by borrower type are summarized as follows (in
millions of Won):

<Table>
<Caption>
                                           2002                       2003
                                 ------------------------   ------------------------
                                    LOANS        LOANS         LOANS        LOANS
                                  IN LOCAL     IN FOREIGN    IN LOCAL     IN FOREIGN
TYPE                              CURRENCY     CURRENCIES    CURRENCY     CURRENCIES
- ----                             -----------   ----------   -----------   ----------
<S>                              <C>           <C>          <C>           <C>
Loans to enterprises:
  Loans for operations.........  W15,415,596   W2,254,793   W16,406,166   W2,016,123
  Loans for equipment..........    1,539,906      901,764     1,674,636      689,418
                                 -----------   ----------   -----------   ----------
                                  16,955,502    3,156,557    18,080,802    2,705,541
                                 -----------   ----------   -----------   ----------
Loans to households............   15,456,478           --    16,084,915           --
                                 -----------   ----------   -----------   ----------
</Table>

                                      F-195
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                           2002                       2003
                                 ------------------------   ------------------------
                                    LOANS        LOANS         LOANS        LOANS
                                  IN LOCAL     IN FOREIGN    IN LOCAL     IN FOREIGN
TYPE                              CURRENCY     CURRENCIES    CURRENCY     CURRENCIES
- ----                             -----------   ----------   -----------   ----------
<S>                              <C>           <C>          <C>           <C>
Loans to the public sector and
  others:
  Loans for operations.........      254,016      151,416       351,047      141,686
  Loans for equipment..........       99,147           --       100,295           --
  Inter-bank loans.............       16,745      172,782        15,505      257,602
                                 -----------   ----------   -----------   ----------
                                     369,908      324,198       466,847      399,288
                                 -----------   ----------   -----------   ----------
                                 W32,781,888   W3,480,755   W34,629,564   W3,104,829
                                 ===========   ==========   ===========   ==========
</Table>

<Table>
<Caption>
                                               TOTAL
                             ------------------------------------------
                                                          TRANSLATION
                                                              INTO
                                                           US DOLLARS
                                    KOREAN WON              (NOTE 2)      PERCENTAGE (%)
                             -------------------------   --------------   ---------------
TYPE                            2002          2003            2003         2002     2003
- ----                         -----------   -----------   --------------   ------   ------
                                   (IN MILLIONS)         (IN THOUSANDS)
<S>                          <C>           <C>           <C>              <C>      <C>
Loans to enterprises:
  Loans for operations.....  W17,670,389   W18,422,289    $15,440,692      48.73    48.82
  Loans for equipment......    2,441,670     2,364,054      1,981,438       6.73     6.26
                             -----------   -----------    -----------     ------   ------
                              20,112,059    20,786,343     17,422,130      55.46    55.08
                             -----------   -----------    -----------     ------   ------
Loans to households........   15,456,478    16,084,915     13,481,615      42.62    42.62
                             -----------   -----------    -----------     ------   ------
Loans to the public sector
  and others:
  Loans for operations.....      405,432       492,733        412,985       1.12     1.31
  Loans for equipment......       99,147       100,295         84,063       0.28     0.27
  Inter-bank loans.........      189,527       273,107        228,905       0.52     0.72
                             -----------   -----------    -----------     ------   ------
                                 694,106       866,135        725,953       1.92     2.30
                             -----------   -----------    -----------     ------   ------
                             W36,262,643   W37,737,393    $31,629,698     100.00   100.00
                             ===========   ===========    ===========     ======   ======
</Table>

     Discounted notes of W1,857.7 billion and W1,555.8 billion (US$1,304.0
million) were included in the loans in local currency as of December 31, 2002
and June 30, 2003, respectively, represented in (2) above, and (3) and (4)
below.

                                      F-196
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (3) Loans in local currency and foreign currencies, by industry, as of
December 31, 2002 and June 30, 2003 are summarized as follows (in millions of
Won):

<Table>
<Caption>
                                           2002                       2003
                                 ------------------------   ------------------------
                                    LOANS        LOANS         LOANS        LOANS
                                  IN LOCAL     IN FOREIGN    IN LOCAL     IN FOREIGN
INDUSTRY                          CURRENCY     CURRENCIES    CURRENCY     CURRENCIES
- --------                         -----------   ----------   -----------   ----------
<S>                              <C>           <C>          <C>           <C>
Manufacturing..................  W 7,669,058   W  851,447   W 7,687,761   W1,233,636
Finance and insurance..........      300,429      483,463       251,873      537,759
Wholesale and retail...........    2,991,310      790,015     3,163,298      712,648
Construction...................    1,559,255       19,790     1,813,689       11,016
Others.........................   20,261,836    1,336,040    21,712,943      609,770
                                 -----------   ----------   -----------   ----------
                                 W32,781,888   W3,480,755   W34,629,564   W3,104,829
                                 ===========   ==========   ===========   ==========
</Table>

<Table>
<Caption>
                                               TOTAL
                             ------------------------------------------
                                                          TRANSLATION
                                                              INTO
                                                           US DOLLARS
                                    KOREAN WON              (NOTE 2)      PERCENTAGE (%)
                             -------------------------   --------------   ---------------
INDUSTRY                        2002          2003            2003         2002     2003
- --------                     -----------   -----------   --------------   ------   ------
                                   (IN MILLIONS)         (IN THOUSANDS)
<S>                          <C>           <C>           <C>              <C>      <C>
Manufacturing..............  W 8,520,505   W 8,921,397    $ 7,477,493      23.50    23.64
Finance and insurance......      783,892       789,632        661,832       2.16     2.09
Wholesale and retail.......    3,781,325     3,875,946      3,248,635      10.43    10.27
Construction...............    1,579,045     1,824,705      1,529,381       4.35     4.84
Others.....................   21,597,876    22,322,713     18,709,843      59.56    59.16
                             -----------   -----------    -----------     ------   ------
                             W36,262,643   W37,734,393    $31,627,184     100.00   100.00
                             ===========   ===========    ===========     ======   ======
</Table>

     (4) Loans in local currency and foreign currencies, by country, as of
December 31, 2002 and June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                                        TRANSLATION INTO
                                                           US DOLLARS
                                   KOREAN WON               (NOTE 2)       PERCENTAGE (%)
                            -------------------------   ----------------   ---------------
                               2002          2003             2003          2002     2003
                            -----------   -----------   ----------------   ------   ------
                                  (IN MILLIONS)          (IN THOUSANDS)
<S>                         <C>           <C>           <C>                <C>      <C>
Loans in local currency:
  Korea...................  W32,781,888   W34,629,564     $29,024,863       90.40    91.77
                            -----------   -----------     -----------      ------   ------
Loans in foreign
  currencies:
  Korea...................    3,098,678     2,634,935       2,208,478        8.55     6.98
  United States...........      133,396       242,763         203,473        0.37     0.64
  Japan...................       84,232       103,393          86,659        0.23     0.28
  Russia..................      118,840        99,000          82,977        0.33     0.26
  Indonesia...............       22,281        13,858          11,615        0.06     0.04
  Hong Kong...............           --         1,509           1,265          --       --
  Others..................       23,328         9,371           7,854        0.06     0.03
                            -----------   -----------     -----------      ------   ------
                              3,480,755     3,104,829       2,602,321        9.60     8.23
                            -----------   -----------     -----------      ------   ------
                            W36,262,643   W37,734,393     $31,627,184      100.00   100.00
                            ===========   ===========     ===========      ======   ======
</Table>

                                      F-197
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (5) Loans to financial institutions, excluding call loans and inter-bank
balances, as of June 30, 2003 and December 31, 2002 are summarized as follows:

<Table>
<Caption>
                                                          2003
                             --------------------------------------------------------------
                                        KOREAN WON               TRANSLATION
                             --------------------------------        INTO
                              LOCAL      FOREIGN                  US DOLLARS     PERCENTAGE
                             CURRENCY   CURRENCIES    TOTAL        (NOTE 2)         (%)
                             --------   ----------   --------   --------------   ----------
                                      (IN MILLIONS)             (IN THOUSANDS)
<S>                          <C>        <C>          <C>        <C>              <C>
Banks......................  W     --    W257,602    W257,602      $215,910         32.62
Leasing companies..........        --      38,579      38,579        32,335          4.89
Credit cards and
  installment financing
  companies................    34,176          --      34,176        28,645          4.33
Investment financing
  companies................   115,636     193,052     308,688       258,727         39.09
Others.....................   102,061      48,526     150,587       126,215         19.07
                             --------    --------    --------      --------        ------
                             W251,873    W537,759    W789,632      $661,832        100.00
                             ========    ========    ========      ========        ======
</Table>

<Table>
<Caption>
                                                                2002
                                          ------------------------------------------------
                                                      KOREAN WON
                                          -----------------------------------
                                           LOCAL        FOREIGN                 PERCENTAGE
                                          CURRENCY    CURRENCIES      TOTAL        (%)
                                          --------   -------------   --------   ----------
                                                     (IN MILLIONS)
<S>                                       <C>        <C>             <C>        <C>
Banks...................................  W     --     W172,782      W172,782      22.04
Leasing companies.......................        --       63,820        63,820       8.14
Credit cards and installment financing
  companies.............................   208,907           --       208,907      26.65
Investment financing companies..........    20,990      198,413       219,403      27.99
Others..................................    70,532       48,448       118,980      15.18
                                          --------     --------      --------     ------
                                          W300,429     W483,463      W783,892     100.00
                                          ========     ========      ========     ======
</Table>

     (6) Loans to Daewoo Group Companies:

     Daewoo Group Companies were placed under workout programs in August 1999
due to liquidity problems and are undergoing workout programs or court
receivership as of June 30, 2003. As of June 30, 2003, the amounts owed by
Daewoo Group Companies (including confirmed acceptances and guarantees and loans
in guaranteed return trust accounts) are W106,180 million (US$88,995 thousand),
and an allowance for possible loan losses (including allowance for possible
losses on acceptances and guarantees and allowance for valuation of receivable
in trust accounts) of W6,587 million (US$5,521 thousand) has been provided based
on prescribed loan classifications.

     (7) Restructured loans to the companies under workout programs:

     As of June 30, 2003, the amounts owed (including confirmed guarantees and
acceptances and loans in guaranteed return trust accounts) by companies other
than Daewoo Group Companies and Ssangyong Group Companies under workout programs
amounted to W130,547 million (US$109,418 thousand). The Bank has provided an
allowance for possible loan losses (including confirmed acceptances and
guarantees and those in guaranteed return trust accounts) of W21,126 million
(US$17,707 thousand).

     (8) As of June 30, 2003, the total credits of the bank to SK Global amounts
to W351,700 million (US$294,778 thousand), including bills bought in foreign
currency classified as normal of W47,988 million (US$40,221 thousand), and in
connection with these credits, the Bank provided provision for possible loan
losses accrued allowance for doubtful account amounting to W149,059 million
(US$124,934 thousand). As of

                                      F-198
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the date of this, SK Global will either be in a collaborative management with
creditors' association committee or under court receivership, and thereby
going-concern of the company will highly depend on the future progress of
company's rescue plan and effective support of financial creditors. Therefore,
actual credit loss from this credit exposure may differ materially from
management's current assessment. The accompanying financial statements do not
include any possible adjustments that may result from this uncertainty.

     (9) Loans to Hynix Semiconductor Inc., Hyundai Merchant Marine Co., Ltd.,
Ssangyong Corporation, and Ssangyong Cement Industrial Co., Ltd.:

          As of June 30, 2003, the amounts of loans, payment guarantee and
     others owed by Hynix Semiconductor Inc., Hyundai Merchant Marine Co., Ltd.,
     Hyundai Corporation including the related overseas branch corporations,
     amounted to W105,922 million (US$88,779 thousand) and W176,208 million
     (US$147,689 thousand) and W16,808 million (US$14,088 thousand),
     respectively, and the Bank has provided an allowance for possible loan
     losses amounting to W126,781 million (US$106,262 thousand). In addition,
     the amounts owed by Ssangyong Corporation and Ssangyong Cement Industrial
     Co., Ltd., which include loans, payment guarantee and others, amounted to
     W436,044 million (US$365,471 thousand) and W143,883 million (US$120,596
     thousand), respectively, and the Bank has provided an allowance for
     possible loan losses amounting to W238,158 million (US$199,613 thousand).
     These companies are under joint control of financial institute creditors'
     committee due to their uncertainty in future operation, and the potential
     impact on the Bank's operations cannot presently be determined.

     (10) Details of loans restructured for the six-month period ended June 30,
2003 including swaps of debts to equity or mandatory convertible bonds are
summarized as follows (in millions of Won):

<Table>
<Caption>
                                                           LOANS                     LOANS TO BE      LOANS        OTHER
                         STATUS OF        DATE OF         BEFORE        PRINCIPAL      SWAPPED       SWAPPED     CHANGES IN
BORROWERS                BORROWERS     RESTRUCTURING   RESTRUCTURING   FORGIVENESS   INTO EQUITY   INTO EQUITY     TERMS
- ---------              -------------   -------------   -------------   -----------   -----------   -----------   ----------
<S>                    <C>             <C>             <C>             <C>           <C>           <C>           <C>
Inchon Oil Refinery    Court             2003.3.25       W 78,000         W --         W    --       W   --       W78,000
  Co., Ltd.            receivership
Ssangyong Corporation  Restructuring     2003.2.10         57,866           --          57,866           --            --
                       Promotion Law
Other (7 borrowers)                                        11,482          792              --        3,834         6,856
                                                         --------         ----         -------       ------       -------
                                                         W147,348         W792         W57,866       W3,834       W84,856
                                                         ========         ====         =======       ======       =======
</Table>

     Loans to be swapped into equity are the receivables that were committed for
swaps against equity securities in the future. As of June 30, 2003, loans to be
swapped into equity in the balance sheet include W128,220 million (US$107,468
thousand) with Ssangyong Corporation, which was committed in 2002, and W1,164
million (US$976 thousand) with Kukje Corporation, which has been under court
receivership since 2001.

                                      F-199
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Details of loans restructured for the year ended December 31, 2002
including swaps of debts to equity or mandatory convertible bonds are summarized
as follows (in millions of Won):

<Table>
<Caption>
                                                           LOANS                     LOANS TO BE      LOANS        OTHER
                         STATUS OF        DATE OF         BEFORE        PRINCIPAL      SWAPPED       SWAPPED     CHANGES IN
BORROWERS                BORROWERS     RESTRUCTURING   RESTRUCTURING   FORGIVENESS   INTO EQUITY   INTO EQUITY     TERMS
- ---------              -------------   -------------   -------------   -----------   -----------   -----------   ----------
<S>                    <C>             <C>             <C>             <C>           <C>           <C>           <C>
Ssangyong Corporation  Restructuring      2002.2.8       W470,627        W   --       W128,220      W 10,000      W332,407
                       Promotion Law
Hynix Semiconductor    Restructuring    2002.12.30        160,108            --             --       160,108            --
  Inc.                 Promotion Law
Ssangyong Corporation  Restructuring    2002.12.24         57,866            --             --        57,866            --
                       Promotion Law
Dongbang Textile &     Others            2002.3.23         39,783            --             --            --        39,783
  Mart Co., Ltd.
DAEWOO Electronics     Work-Out         2002.11.18         28,973            --             --        28,973            --
  Corp.
Dongsu Industrial      Court             2002.1.23         17,025            --             --         2,769        14,256
  Co., Ltd.            receivership
Bumyang Shipping Co.,  Court              2002.2.6         10,700            --             --        10,700            --
  Ltd.                 receivership
Other (7 borrowers)                                        25,182         8,975             --        15,020         1,187
                                                         --------        ------       --------      --------      --------
                                                         W810,264        W8,975       W128,220      W285,436      W387,633
                                                         ========        ======       ========      ========      ========
</Table>

     Loans to be swapped into equity are the receivables that were committed for
swaps against equity securities in the future. As of June 30, 2003, loans to be
swapped into equity in the balance sheet include W128,220 million with Ssangyong
Corporation, which was committed in 2002, and W1,164 million with Kukje
Corporation, which has been under court receivership since 2001.

7.  ALLOWANCE FOR POSSIBLE LOAN LOSSES:

     (1) As of December 31, 2002 and June 30, 2003, the Bank complied with the
minimum regulatory guideline for loan loss provision, as described in Note 2,
announced by the Korean Financial Supervisory Commission (FSC). The allowance
for possible loan losses as of December 31, 2002 and June 30, 2003 is summarized
as follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                       KOREAN WON            (NOTE 2)
                                                   -------------------   ----------------
                                                     2002       2003           2003
                                                   --------   --------   ----------------
                                                      (IN BILLIONS)       (IN MILLIONS)
<S>                                                <C>        <C>        <C>
Loans in local currency..........................  W  797.8   W  784.6       $  657.6
Loans in foreign currencies......................      81.1      123.1          103.2
Bills bought in foreign currencies...............     126.7      154.3          129.3
Advances for customers on payment guarantees.....      26.0       15.8           13.2
Credit card accounts.............................     465.6      477.5          400.2
Privately placed bonds...........................       9.4       37.7           31.6
Financing lease receivables......................       9.7        2.8            2.4
Other............................................      88.3      101.8           85.3
                                                   --------   --------       --------
                                                   W1,604.6   W1,697.6       $1.422.8
                                                   ========   ========       ========
</Table>

                                      F-200
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (2) The changes in allowance for possible loan losses in 2002 and 2003 were
as follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                       KOREAN WON            (NOTE 2)
                                                   -------------------   ----------------
                                                     2002       2003           2003
                                                   --------   --------   ----------------
                                                      (IN BILLIONS)       (IN MILLIONS)
<S>                                                <C>        <C>        <C>
Beginning balance................................  W1,030.7   W1,604.6       $1,344.9
Provision for allowance..........................   1,542.9    1,183.4          991.8
Write-offs.......................................    (907.1)  (1,037.2)        (869.3)
Other changes (Note).............................     (61.9)     (53.2)         (44.6)
                                                   --------   --------       --------
Ending balance...................................  W1,604.6   W1,697.6       $1,422.8
                                                   ========   ========       ========
</Table>

     (Note) Other changes are due to equity swaps, sales of loans, repurchases
of loans sold by recourse obligation and collection of loan written offs.

     (3) The allowance for possible loan losses compared to total credits in
bank accounts as of December 31, 2000, 2001, 2002 and June 30, 2003 is
summarized as follows:

<Table>
<Caption>
                                                                    ALLOWANCE FOR
                                 TOTAL CREDITS                   POSSIBLE LOAN LOSSES
                        --------------------------------   --------------------------------
                                        TRANSLATION INTO                   TRANSLATION INTO
                                           US DOLLARS                         US DOLLARS      COVERAGE
                         KOREAN WON         (NOTE 2)        KOREAN WON         (NOTE 2)       RATIO (%)
                        -------------   ----------------   -------------   ----------------   ---------
                        (IN BILLIONS)    (IN MILLIONS)     (IN BILLIONS)    (IN MILLIONS)
<S>                     <C>             <C>                <C>             <C>                <C>
June 30, 2003.........     W46,249.5       $38,764.1          W1,697.6         $1,422.8         3.67
December 31, 2002.....      46,093.1        38,398.1           1,604.6          1,336.7         3.48
December 31, 2001.....      34,262.7        25,837.2           1,030.7            777.2         3.01
December 31, 2000.....      30,218.5        23,988.6           1,669.7          1,325.5         5.53
</Table>

     (4) The following tables set forth the classification of total credits in
bank accounts as of June 30, 2003 and December 31, 2002 (in billion of Won):

<Table>
<Caption>
                                                                      2003
                                 -------------------------------------------------------------------------------
                                  NORMAL     PRECAUTIONARY   SUBSTANDARD   DOUBTFUL   ESTIMATED LOSS     TOTAL
                                 ---------   -------------   -----------   --------   --------------   ---------
<S>                              <C>         <C>             <C>           <C>        <C>              <C>
Loans in local currency........  W34,297.9     W  956.6        W366.8      W  450.1       W155.3       W36,226.7
Loans in foreign currencies....    2,431.7        243.0         160.0          11.2          1.4         2,847.3
Bills bought in foreign
  currencies...................    1,601.1         62.8         115.3            --         68.5         1,847.7
Advances for customers on
  payment guarantees...........       10.7         22.0          28.8          11.6          3.8            76.9
Credit card accounts...........    3,663.1        371.5           0.9         541.6         71.2         4,648.3
Privately placed bonds.........      217.7         18.9          17.3           2.0           --           255.9
Financing lease receivables....      142.5           --            --           2.9          0.6           146.0
Others.........................        4.7        186.2           1.0           0.4          8.4           200.7
                                 ---------     --------        ------      --------       ------       ---------
                                 W42,369.4     W1,861.0        W690.1      W1,019.8       W309.2       W46,249.5
                                 =========     ========        ======      ========       ======       =========
</Table>

     Total credits described above present the amount after deducting the
present value discounts of W20.4 billion (US$17.1 million), excluding W15.5
billion (US$13.0 million) of inter-bank loans in local currency, W257.6 billion
(US$215.9 million) of inter-bank loans in foreign currencies, W57.52 billion
(US$482.1 million) of call loans and W1,000.0 billion (US$838.2 million) of
bonds bought under resale agreements. Accounts receivable and suspense
receivables that have credit attribution and subject to asset classification
amounting to W8.7 billion (US$7.3 million) is included above.

                                      F-201
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Bank provides more than the minimum rate of loan loss provision
required by the FSC for certain loans with restructuring companies under the
Restructuring Promotion Law after the approvals of the executive directors
committee and board of directors. As of June 30, 2003, the Bank provided more
than 20 percent of allowance for possible loan losses amounting to W237.6
billion (US$199.1 million) for W475.3 billion (US$398.4 million) of credits as
precautionary.

<Table>
<Caption>
                                                                      2002
                                 -------------------------------------------------------------------------------
                                  NORMAL     PRECAUTIONARY   SUBSTANDARD   DOUBTFUL   ESTIMATED LOSS     TOTAL
                                 ---------   -------------   -----------   --------   --------------   ---------
<S>                              <C>         <C>             <C>           <C>        <C>              <C>
Loans in local currency........  W31,163.2     W  719.4        W310.2      W  488.4       W 65.6       W32,746.8
Loans in foreign currencies....    2,970.1        273.1          37.1          18.0          9.6         3,307.9
Bills bought in foreign
  currencies...................    1,622.9        110.5           0.6          87.6          0.2         1,821.8
Advances for customers on
  payment guarantees...........       11.3         20.3          29.4          16.1          0.7            77.8
Credit card accounts...........    4,969.4        407.0           0.6         386.1        135.4         5,898.5
Privately placed bonds.........      136.0         24.9          24.2           0.1           --           185.2
Financing lease receivables....      167.6           --           2.1          12.9           --           182.6
Others.........................    1,676.9        185.2           3.5           0.2          6.7         1,872.5
                                 ---------     --------        ------      --------       ------       ---------
                                 W42,717.4     W1,740.4        W407.7      W1,009.4       W218.2       W46,093.1
                                 =========     ========        ======      ========       ======       =========
</Table>

     Total credits above present the amounts after deducting the present value
discounts of W18.5 billion, excluding W16.7 billion of inter-bank loans in local
currency and W172.8 billion of inter-bank loans in foreign currencies and W655.8
billion of call loans. Accounts receivable and suspense receivables that have
credit attribution and subject to asset classification amounting to W3.3 billion
is included above.

     The Bank provides more than the minimum rate of loan loss provision
required by the FSC for certain loans with restructuring companies under the
Restructuring Promotion Law after the approvals of the executive directors
committee and board of directors. As of December 31, 2002, the Bank provided
more than 20 percent of allowance for possible loan losses amounting to W516.1
billion for W258.1 billion of credit exposures as precautionary.

8.  PRESENT VALUE DISCOUNTS

     (1) Present value discounts in relation to the restructured loans as of
June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                                                                                  UNAMORTIZED PRESENT
                                           FACE VALUE                                               VALUE DISCOUNTS
                                --------------------------------                           ---------------------------------
                                                TRANSLATION INTO                                            TRANSLATION INTO
                                                   US DOLLARS      DISCOUNT    MATURITY                        US DOLLARS
BORROWER                         KOREAN WON         (NOTE 2)       RATE (%)      DATE        KOREAN WON         (NOTE 2)
- --------                        -------------   ----------------   --------   ----------   --------------   ----------------
                                (IN MILLIONS)    (IN THOUSANDS)                            (IN MILLIONS)     (IN THOUSANDS)
<S>                             <C>             <C>                <C>        <C>          <C>              <C>
Inchon Oil Refinery Co.,
  Ltd. .......................    W 66,300          $55,569          5.00     2011.12.31      W13,505           $11,319
Hanjin Shipping Co., Ltd. ....       4,809            4,031         11.50      2017.10.1        3,670             3,076
Renault Samsung Motors Co.,
  Ltd. .......................       4,242            3,555         10.00      2015.3.31        1,924             1,613
Korea Industry Development
  Co., Ltd. ..................       8,976            7,523         12.40     2011.12.31          887               743
Korean Air Lines Co., Ltd. ...       2,349            1,969         11.50      2017.10.1          788               660
Doosung Sbtech Co., Ltd. .....       2,797            2,344         16.50      2011.3.31          582               488
Hanjin Transportation Co.,
  Ltd. .......................         880              738         11.50      2017.10.1          298               250
Hanjin Heavy Industries &
  Construction Co., Ltd. .....         880              738         11.50      2008.4.20          298               250
</Table>

                                      F-202
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                                                  UNAMORTIZED PRESENT
                                           FACE VALUE                                               VALUE DISCOUNTS
                                --------------------------------                           ---------------------------------
                                                TRANSLATION INTO                                            TRANSLATION INTO
                                                   US DOLLARS      DISCOUNT    MATURITY                        US DOLLARS
BORROWER                         KOREAN WON         (NOTE 2)       RATE (%)      DATE        KOREAN WON         (NOTE 2)
- --------                        -------------   ----------------   --------   ----------   --------------   ----------------
                                (IN MILLIONS)    (IN THOUSANDS)                            (IN MILLIONS)     (IN THOUSANDS)
<S>                             <C>             <C>                <C>        <C>          <C>              <C>
Jungseok Enterprise Co.,
  Ltd. .......................         589              494         11.50      2017.10.1          204               171
Korean Airport Service Co.,
  Ltd. .......................         805              675         11.50      2017.10.1          122               102
Others (3 companies)..........      20,827           17,456                                        83                70
                                  --------          -------                                   -------           -------
                                  W113,454          $95,092                                   W22,361           $18,742
                                  ========          =======                                   =======           =======
</Table>

     (2) Present value discounts in relation to the restructured loans as of
December 31, 2002 are summarized as follows:

<Table>
<Caption>
                                                                                                  UNAMORTIZED PRESENT
                                                 FACE VALUE                                         VALUE DISCOUNTS
                                 -------------------------------------------                --------------------------------
                                                 TRANSLATION INTO                                           TRANSLATION INTO
                                                    US DOLLARS      DISCOUNT    MATURITY                       US DOLLARS
BORROWER                          KOREAN WON         (NOTE 2)       RATE (%)      DATE       KOREAN WON         (NOTE 2)
- --------                         -------------   ----------------   --------   ----------   -------------   ----------------
                                 (IN MILLIONS)    (IN THOUSANDS)                            (IN MILLIONS)    (IN THOUSANDS)
<S>                              <C>             <C>                <C>        <C>          <C>             <C>
Daelim Industrial Co., Ltd. ...    W 75,380          $ 62,796        11.50       2008.9.8      W10,906          $ 9,085
Hanjin Shipping Co., Ltd. .....       4,809             4,006        11.50      2017.10.1        3,797            3,163
Renault Samsung Motors Co.,
  Ltd. ........................       4,243             3,534        10.00      2015.3.13        2,034            1,695
Korea Industry Development Co.,
  Ltd. ........................       8,976             7,478        12.40     2011.12.31        1,147              956
Korean Air Lines Co., Ltd. ....       2,349             1,957        10.00     2009.12.31          815              679
Doosung Sbtech Co., Ltd. ......       2,797             2,330        16.50      2011.3.31          659              549
Hanjin Transportation Co.,
  Ltd. ........................         880               733        11.50      2017.10.1          309              257
Hanjin Heavy Industries &
  Construction Co., Ltd. ......         880               733        11.50      2008.4.20          309              257
Jungseok Enterprise Co.,
  Ltd. ........................         589               491        11.50      2017.10.1          210              175
Korean Airport Service Co.,
  Ltd. ........................         805               671        11.50      2017.10.1          126              105
Others (11 companies)..........      21,210            17,669                                      154              128
                                   --------          --------                                  -------          -------
                                   W122,918          $102,398                                  W20,466          $17,049
                                   ========          ========                                  =======          =======
</Table>

     (3) Changes in present value discounts for the six-month period ended June
30, 2003 are summarized as follows (in millions of Won):

<Table>
<Caption>
                                             BEGINNING                         ENDING
CONDITIONS OF BORROWERS                       BALANCE    INCREASE   DECREASE   BALANCE
- -----------------------                      ---------   --------   --------   -------
<S>                                          <C>         <C>        <C>        <C>
Work-out programs..........................   W   154    W    --    W    71    W    83
Industrial rationalization.................    16,472         --     11,091      5,381
Court receivership.........................     3,181     14,505      1,371     16,315
Composition................................       659         --         77        582
                                              -------    -------    -------    -------
                                              W20,466    W14,505    W12,610    W22,361
                                              =======    =======    =======    =======
</Table>

                                      F-203
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9.  FIXED ASSETS

     Fixed assets as of December 31, 2002 and June 30, 2003 are summarized as
follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                               -----------------------   ----------------
                                                  2002         2003            2003
                                               ----------   ----------   ----------------
                                                    (IN MILLIONS)         (IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Land.........................................  W  846,517   W  812,032      $  680,607
Buildings....................................     394,438      392,843         329,262
Leasehold improvements.......................      45,465       48,830          40,927
Furniture and equipment......................     485,598      483,340         405,113
Construction in progress.....................         817          881             738
                                               ----------   ----------      ----------
  Total tangible assets......................   1,772,835    1,737,926       1,456,647
Accumulated depreciation.....................    (474,016)    (464,696)       (389,486)
Goodwill.....................................     112,020       56,010          46,945
Intangible assets............................       4,300        3,977           3,333
Non-business use properties..................         173          173             145
                                               ----------   ----------      ----------
                                               W1,415,312   W1,333,390      $1,117,584
                                               ==========   ==========      ==========
</Table>

     As of December 31, 2002 and June 30, 2003, the published value of land was
W624,995 million and W599,562 million (US$502,525 thousand), respectively, using
the disclosed public land price announced annually by the Government pursuant to
the Laws on Disclosure of Land Price and Valuation of Land.

10.  OTHER ASSETS

     Other assets as of December 31, 2002 and June 30, 2003 are summarized as
follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                               -----------------------   ----------------
                                                  2002         2003            2003
                                               ----------   ----------   ----------------
                                                    (IN MILLIONS)         (IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Guarantee deposits...........................  W  460,949   W  475,202      $  398,292
Accounts receivable..........................   1,528,507    1,344,262       1,126,697
Accrued income...............................     336,856      277,422         232,522
Prepaid expenses.............................       6,286        9,052           7,587
Deferred income tax assets (see Note 25).....     227,067      203,024         170,165
Domestic exchange settlement account -
  debit......................................   2,533,003    3,210,657       2,691,021
Adjustment for valuation of financial
  derivatives................................     139,933      176,069         147,573
Properties leased under operating leases, net
  of depreciation and allowance for loss on
  disposal of properties.....................     152,121      138,198         115,831
Loans to trust accounts......................     145,400      102,000          85,491
Accounts receivables - other.................      25,129       31,862          26,705
Other........................................     125,812      121,273         101,646
                                               ----------   ----------      ----------
                                               W5,681,063   W6,089,021      $5,103,530
                                               ==========   ==========      ==========
</Table>

                                      F-204
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  COLLATERALIZED ASSETS

     Collateralized assets as of December 31, 2002 and June 30, 2003 are
summarized as follows:

<Table>
<Caption>
                                                   KOREAN WON          TRANSLATION INTO
COLLATERALIZED                               -----------------------      US DOLLARS
ASSETS                     PROVIDED TO          2002         2003       (NOTE 2) 2003         PROVIDED FOR
- --------------         -------------------   ----------   ----------   ----------------   ---------------------
                                                  (IN MILLIONS)         (IN THOUSANDS)
<S>                    <C>                   <C>          <C>          <C>                <C>
Securities...........
                       Bank of Korea         W1,400,000   W1,401,240      $1,174,453      RP of Bank of Korea
                                                                                          (BOK)
Securities...........
                       Bank of Korea          1,050,000      720,000         603,470      Borrowings from BOK
Securities...........
                       Bank of Korea            735,000      735,000         616,042      Intra-day overdraft
                                                                                          from BOK
Securities...........
                       Bank of Korea            146,700      213,500         178,945      Settlement risk
Securities...........
                       Development Bank of
                       Singapore and
                       others                   857,700    1,257,050       1,053,600      Borrowings in foreign
                                                                                          currencies
Securities...........
                       Customer RP              695,000      365,000         305,926      Customer RP
Securities...........
                       Korea Securities
                       Finance Corporation       65,000           --              --      Fund of government
                                                                                          bonds
Securities...........
                       Samsung Futures
                       Inc. and other            19,500       30,500          25,564      Futures transaction
Securities...........
                       KAMCO                     25,988       25,988          21,782      Settlement of sales
                                                                                          of non-performing
                                                                                          loans
Securities...........
                       CHB NPL 1st SPC           40,000       40,000          33,526      Collateral regarding
                                                                                          the issuance of ABS
Securities...........
                       Seoul Guarantee
                       Insurance Co. and
                       other                     78,802       75,412          63,207      Securities lent
Real estate for
business purpose.....
                       Lessees                   12,015       12,479          10,459      Key money deposit for
                                                                                          rent
                                             ----------   ----------      ----------
                                             W5,125,705   W4,876,169      $4,086,974
                                             ==========   ==========      ==========
</Table>

12.  INSURED ASSETS

     Assets insured as of December 31, 2002 and June 30, 2003 are as follows (in
millions of Won):

<Table>
<Caption>
                                                        BOOK VALUE          INSURED AMOUNT
                                                    -------------------   -------------------
TYPE OF INSURANCE                 ASSETS              2002       2003       2002       2003
- -----------------         -----------------------   --------   --------   --------   --------
<S>                       <C>                       <C>        <C>        <C>        <C>
Fire....................  Buildings                 W319,173   W312,795   W312,958   W312,817
                          Furniture and equipment    132,312    147,522    143,824    146,659
                                                    --------   --------   --------   --------
                                                    W451,485   W460,317   W456,782   W459,476
                                                    ========   ========   ========   ========
</Table>

                                      F-205
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13.  DEPOSITS

     (1) Deposits as of December 31, 2002 and June 30, 2003 are summarized as
follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                    KOREAN WON               (NOTE 2)
                                             -------------------------   ----------------
                                                2002          2003             2003
                                             -----------   -----------   ----------------
                                                   (IN MILLIONS)          (IN THOUSANDS)
<S>                                          <C>           <C>           <C>
Deposits in local currency.................  W38,538,270   W35,762,082     $29,974,086
Deposits in foreign currencies.............    1,195,292     1,293,353       1,084,027
Negotiable certificates of deposits........    4,151,898     3,562,364       2,985,805
Deposits in bills issued...................    1,106,525     2,396,288       2,008,455
Trust of cash management accounts..........      133,854       176,837         148,217
                                             -----------   -----------     -----------
                                             W45,125,839   W43,190,924     $36,200,590
                                             ===========   ===========     ===========
</Table>

     (2) Deposits in local currency and foreign currencies from other banks and
financial institutions as of December 31, 2002 and June 30, 2003 are summarized
as follows:

<Table>
<Caption>
                                                        TRANSLATION INTO
                                                           US DOLLARS
                                    KOREAN WON              (NOTE 2)       PERCENTAGE (%)
                              -----------------------   ----------------   ---------------
                                 2002         2003            2003          2002     2003
                              ----------   ----------   ----------------   ------   ------
                                   (IN MILLIONS)         (IN THOUSANDS)
<S>                           <C>          <C>          <C>                <C>      <C>
Commercial banks............  W1,415,175   W  895,187      $  750,304       45.50    33.21
Securities companies........     471,969      489,781         410,511       15.18    18.17
Insurance companies.........     247,007      269,645         226,004        7.94    10.00
Savings institutions........     696,889      695,419         582,867       22.41    25.79
Other financial
  institutions..............     279,113      345,802         289,835        8.97    12.83
                              ----------   ----------      ----------      ------   ------
                              W3,110,153   W2,695,834      $2,259,521      100.00   100.00
                              ==========   ==========      ==========      ======   ======
</Table>

14.  BORROWINGS

     Borrowings as of December 31, 2002 and June 30, 2003 are summarized as
follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                               -----------------------   ----------------
                                                  2002         2003            2003
                                               ----------   ----------   ----------------
                                                    (IN MILLIONS)         (IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Borrowings in local currency:
  General borrowings.........................  W1,288,124   W1,435,939      $1,203,536
  Subordinated borrowings....................      15,000           --              --
                                               ----------   ----------      ----------
                                                1,303,124    1,435,939       1,203,536
Borrowings in foreign currencies.............   3,536,020    2,961,342       2,482,057
Bonds sold under repurchase agreements.......     995,311    1,273,563       1,067,440
Bills sold...................................     900,459      792,599         664,319
Due to Bank of Korea in foreign currencies...      14,372        8,018           6,720
Call money...................................      94,435      344,865         289,050
                                               ----------   ----------      ----------
                                               W6,843,721   W6,816,326      $5,713,122
                                               ==========   ==========      ==========
</Table>

                                      F-206
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15.  DEBENTURES

     (1) Debentures as of December 31, 2002 and June 30, 2003 are summarized as
follows:

<Table>
<Caption>
                                                                            TRANSLATION INTO
                                                                               US DOLLARS
                                                        KOREAN WON              (NOTE 2)
                               INTEREST RATE PER  -----------------------   ----------------
                                     ANNUM           2002         2003            2003
                               -----------------  ----------   ----------   ----------------
                                                       (IN MILLIONS)         (IN THOUSANDS)
<S>                            <C>                <C>          <C>          <C>
Debentures in local currency:
General debentures...........  4.30-6.97%
                               CD+0.24-0.35       W4,108,792   W5,526,777      $4,632,283
Subordinated debentures......  6.00-18.00%         1,002,000    1,100,000         921,968
Hybrid debts (Note)..........                             --      272,564         228,450
                                                  ----------   ----------      ----------
                                                   5,110,792    6,899,341       5,782,701
Discounts on debentures......                        (84,399)    (155,271)       (130,141)
                                                  ----------   ----------      ----------
                                                   5,026,393    6,744,070       5,652,560
                                                  ----------   ----------      ----------
Debentures in foreign
  currencies:
Subordinated debentures......  6M Libor + 4.95%,
                               11.50-11.88%          653,834      643,231         539,126
                                                  ----------   ----------      ----------
                                                     653,834      643,231         539,126
Discounts on debentures......                         (7,878)      (7,677)         (6,435)
                                                  ----------   ----------      ----------
                                                     645,956      635,554         532,691
                                                  ----------   ----------      ----------
                                                  W5,672,349   W7,379,624      $6,185,252
                                                  ==========   ==========      ==========
</Table>

- ---------------
(Note) The Bank issued Hybrid debts amounting to W272,564 million by filing at
Korea Securities Depository in order to raise BIS ratio during the six-month
period ended June 30, 2003, and the details are as follows:

<Table>
<Caption>
                                                 DETAILS
                                                 -------
<S>                    <C>
1. Repurchase claim    Repurchase claim option is owned by the issuer, and after 5
   (call option)       years from the issue date, a call option can be exercised
                       for a repurchase under the approval of the chief of the FSS.
2. Interest rate       Annual interest rate of 7.80% for 10 years from the issue
                       date and after 10 years annual interest rate of 7.80% +
                       (7.80% -- interest rate for 5-year maturity public bond
                       issued on the same date) X 50% is applied.
3. Conditions for      Interests are paid at the end of every 3-month period,
   interest payments   calculated on a monthly basis.
4. Date of maturity    Matured in 30 years from the issue date but the date of
                       maturity can be extended by the Bank at any time.
</Table>

                                      F-207
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16.  ALLOWANCE FOR POSSIBLE LOSSES ON CONFIRMED ACCEPTANCES AND GUARANTEES

     (1) The classifications of confirmed acceptances and guarantees as of
December 31, 2002 and June 30, 2003 are summarized as follows (in billions of
Won):

<Table>
<Caption>
                                                              2003
                           ---------------------------------------------------------------------------
                           NORMAL   PRECAUTIONARY   SUBSTANDARD   DOUBTFUL   ESTIMATED LOSS    TOTAL
                           ------   -------------   -----------   --------   --------------   --------
<S>                        <C>      <C>             <C>           <C>        <C>              <C>
Confirmed acceptances and
  guarantees.............  W999.2      W128.5          W35.2        W0.2          W2.2        W1,165.3
Required ratio of
  allowance for credit
  losses to credit
  balances...............       0%          0%            20%         50%          100%
Minimum required
  allowance for credit
  losses.................  W   --      W   --          W 7.0        W0.1          W2.2        W    9.3
Allowance for credit
  losses recorded........  W   --      W 59.7          W16.9        W0.1          W2.2        W   78.9
</Table>

<Table>
<Caption>
                                                              2002
                           ---------------------------------------------------------------------------
                           NORMAL   PRECAUTIONARY   SUBSTANDARD   DOUBTFUL   ESTIMATED LOSS    TOTAL
                           ------   -------------   -----------   --------   --------------   --------
<S>                        <C>      <C>             <C>           <C>        <C>              <C>
Confirmed acceptances and
  guarantees.............  W960.4      W134.2          W2.2        W140.1         W0.7        W1,237.6
Required ratio of
  allowance for credit
  losses to credit
  balances...............       0%          0%           20%           50%         100%
Minimum required
  allowance for credit
  losses.................  W   --      W   --          W0.4        W 70.1         W0.7        W   71.2
Allowance for credit
  losses recorded........  W   --      W 54.7          W0.4        W 70.1         W0.7        W  125.9
</Table>

     (2) Percentages of allowances for acceptances and guarantees outstanding on
the aggregate amount of acceptances and guarantees outstanding as of December
31, 2000, 2001, 2002 and June 30, 2003 are summarized as follows (in billions of
Won):

<Table>
<Caption>
                                       AS OF               AS OF               AS OF             AS OF
                                 DECEMBER 31, 2000   DECEMBER 31, 2001   DECEMBER 31, 2002   JUNE 30, 2003
                                 -----------------   -----------------   -----------------   -------------
<S>                              <C>                 <C>                 <C>                 <C>
Aggregate amount of acceptances
  and guarantees confirmed.....      W2,782.0            W2,190.7            W1,237.6          W1,165.3
Allowances for acceptances and
  guarantees confirmed.........      W   63.8            W   51.6            W  125.9          W   78.9
Coverage ratio (%).............          2.29%               2.36%              10.17%             6.77%
</Table>

                                      F-208
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17.  OTHER ALLOWANCES

     Other allowances as of December 31, 2002 and June 30, 2003 are as follows:

<Table>
<Caption>
                                                                        TRANSLATION INTO
                                                                           US DOLLARS
                                                       KOREAN WON           (NOTE 2)
                                                    -----------------   ----------------
                                                     2002      2003           2003
                                                    -------   -------   ----------------
                                                      (IN MILLIONS)      (IN THOUSANDS)
<S>                                                 <C>       <C>       <C>
Additional loss expected on sale of non-performing
  loans with the right of recourse (Note 1).......  W10,000   W25,000       $20,954
Allowance on unused cash advance service limit
  (Note 2)........................................      863     4,379         3,670
Allowance on credit card points accumulated (Note
  3)..............................................    2,494     3,273         2,743
Additional loss expected due to pending lawsuits
  (Note 4)........................................    2,000     2,000         1,677
                                                    -------   -------       -------
                                                    W15,357   W34,652       $29,044
                                                    =======   =======       =======
</Table>

- ---------------

     (Note 1) Additional loss expected from the non-performing loans with the
right of recourse sold to KAMCO.

     (Note 2) 1% of allowance on the amount calculated by deducting the cash
advances used by the credit card holders from the 75% of the total cash advance
service limits.

     (Note 3) Expected future expenses due to the credit card points accumulated
and unused by the credit card holders of the Bank as of June 30, 2003.

     (Note 4) Additional loss expected from the pending lawsuit filed by
Janghang Mutual Savings Bank claiming a refund of deposits.

18.  OTHER LIABILITIES

     Other liabilities as of December 31, 2002 and June 30, 2003 are summarized
as follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                               -----------------------   ----------------
                                                  2002         2003            2003
                                               ----------   ----------   ----------------
                                                    (IN MILLIONS)         (IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Accrued severance benefits (Note 2)..........  W   51,560   W   70,748      $   59,298
Deposits with employee retirement trust (Note
  2).........................................     (30,000)     (30,000)        (25,145)
Allowance for possible losses on acceptances
  and guarantees.............................     125,923       78,885          66,118
Other allowance for bad debts................      15,357       34,652          29,044
Borrowings from trust accounts...............     446,698      450,743         377,791
Foreign exchange remittances pending.........      57,879       27,136          22,744
Accounts payable.............................   1,444,027    1,317,908       1,104,608
</Table>

                                      F-209
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                               -----------------------   ----------------
                                                  2002         2003            2003
                                               ----------   ----------   ----------------
                                                    (IN MILLIONS)         (IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Accrued expenses.............................     889,362      906,237         759,565
Unearned revenues............................      99,788       96,900          81,217
Deposits for letters of guarantees and
  other......................................      63,133       66,917          56,087
Domestic exchange settlement
  account -- credit..........................   2,318,345    2,521,635       2,113,515
Accounts payable -- other....................     168,580      379,200         317,828
Adjustment for valuation of financial
  derivatives................................      80,986      113,467          95,103
Others.......................................     530,443      611,111         512,204
                                               ----------   ----------      ----------
                                               W6,262,081   W6,645,539      $5,569,977
                                               ==========   ==========      ==========
</Table>

19.  SHAREHOLDERS' EQUITY

     (1) Common stock:

          The Bank has 2,000,000,000 authorized shares of common stock, W5,000
     par value, of which 679,118,429 common shares were issued and outstanding
     as of June 30, 2003.

          In accordance with the general shareholders' meeting held on January
     27, 1999, the Bank reduced its outstanding shares at the rate of 4.5045
     shares to one share under a capital reduction without consideration. The
     capital reduction resulted in a decrease of W723.9 billion in the common
     stock and a gain for the same amount, which was offset against accumulated
     deficit in 1999. On February 19, 1999, May 7, 1999 and September 30, 1999,
     the Bank increased its common stock by a total of W2,717.9 billion by
     issuing 544 million shares to Korea Deposit Insurance Corporation (KDIC) at
     par value. In addition, the Bank increased its common stock as a result of
     the acquisitions of Chungbuk Bank and Kangwon Bank. On November 23, 1999,
     the Bank increased its common stock by W275.0 billion through an offering
     of 55,000,000 shares of common stock for an aggregate offer price of
     approximately W302.5 billion. For the year ended December 31, 2002, the
     Bank increased its common stock by 40,314 shares amounting to W201 million
     through the exercise of stock warrants, and as of June 30, 2003, the common
     stock of the Bank amounts to W3,395,592 million (US$2,846,025 thousand).

     (2) Disposition of accumulated deficit:

          To dispose of the accumulated deficit, on February 28, 1998, the Bank
     transferred voluntary reserves amounting to W279.3 billion and on February
     18, 1999, capital surplus, statutory reserves and other voluntary reserves
     totaling to W1,196.0 billion were also transferred. On February 12, 1999,
     the Bank disposed of its accumulated deficits using the gain on reduction
     of capital stock of W723.9 billion, which was recognized by resolution in a
     temporary general meeting of shareholders held on January 27, 1999. In
     2002, the Bank disposed of its accumulated deficits using capital in excess
     of par value of W24 million (US$20 thousand) derived from the execution of
     the stock warrants and gains on disposal of treasury stock (classified as
     other capital surplus) of W45,155 million (US$37,617 thousand).

     (3) Other reserves:

          Other reserves were appropriated in the branches located in Tokyo and
     Mumbai according to the banking laws of Japan and India, respectively, and
     may be used to offset a deficit incurred in those branches exclusively. The
     beginning balance of other reserves for the current period was W10,619

                                      F-210
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     million (US$8,900 thousand) and ending balance was W10,639 million
     (US$8,917 thousand), reflecting W20 million (US$17 thousand) of foreign
     currency translation gain.

     (4) Capital adjustments:

     Capital adjustments as of December 31, 2002 and June 30, 2003 are
summarized as follows:

<Table>
<Caption>
                                                                        TRANSLATION INTO
                                                                           US DOLLARS
                                                      KOREAN WON            (NOTE 2)
                                                 --------------------   ----------------
                                                   2002        2003           2003
                                                 ---------   --------   ----------------
                                                    (IN MILLIONS)        (IN THOUSANDS)
<S>                                              <C>         <C>        <C>
Stock option cost..............................  W   2,456   W  2,172       $  1,820
Loss on valuation of securities, net...........   (185,007)   194,081        162,670
                                                 ---------   --------       --------
                                                 W(182,551)  W196,253       $164,490
                                                 =========   ========       ========
</Table>

             1) Stock option costs:

                On March 27, 2000, March 9, 2001, March 29, 2002 and March 28,
           2003, the Bank granted stock options, which give the grantee the
           right to buy the Bank's shares, to the management of the Bank
           including the president and deputy-president. The number of stock
           options granted will be determined depending on the relative stock
           price increase rate of the Bank over the banking industry's stock
           price increase rate, the Bank's non-performing loans ratio, and BIS
           capital ratio. If the stock options are exercised, the Bank has the
           option either to issue new shares or shares held as treasury stock,
           or to pay the difference between the market price and the exercise
           price in cash or with treasury stocks.

                The summary of stock options granted as of June 30, 2003 is
           summarized as follows:

<Table>
<Caption>
                             FIRST             SECOND              THIRD             FOURTH
DESCRIPTION                  GRANT              GRANT              GRANT              GRANT
- -----------                  -----             ------              -----             ------
<S>                    <C>                <C>                <C>                <C>
Exercisable number of
  shares.............  969,200 shares     664,000 shares     312,000 shares     312,000 shares
Type.................  Share issue        Share issue        Share issue        Share issue
Exercise price.......  W5,000 per share   W5,000 per share   W5,657 per share   W5,000 per share
Exercisable period...  2003.3.28-         2004.3.10-         2004.3.30-         2005.3.29-
                       2006.3.27          2007.3.9           2007.3.29          2008.3.28
Valuation method.....  Fair value         Fair value         Fair value         Fair value
                       approach           approach           approach           approach
</Table>

                As the number of stock options to be exercised was previously
           settled on March 27, 2000, the stock option cost amounting to W773
           million (US$ 648 thousand) pertaining to the non-exercised stock
           options paid by the Bank was presented as deduction from stock
           options and expensed during the current operation.

                                      F-211
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                The summary of stock option costs over the exercisable period is
           summarized as follows (in millions of Won):

<Table>
<Caption>
                                           FIRST    SECOND    THIRD    FOURTH
DESCRIPTION                                GRANT    GRANT     GRANT    GRANT     TOTAL
- -----------                                ------   ------   -------   ------   -------
<S>                                        <C>      <C>      <C>       <C>      <C>
Total stock option costs.................  W  989   W 912    W 1,451   W 460    W 3,812
Amortized in prior periods...............     989     862        605      --      2,456
Amortized for the six-month period ended
  June 30, 2003..........................    (773)     50        363      78       (282)
To be amortized after current period.....      --      --        483     382        865
</Table>

                The Bank estimated stock option costs using the Black/Scholes
           Pricing Model as follows:

<Table>
<Caption>
DESCRIPTION                                                APPLICATION
- -----------                                                -----------
<S>                                         <C>
Risk free rate...........................   Yield of 3 year treasury bond (9.07% for
                                            the
                                            first, 5.99% for the second, 6.39% for
                                            the
                                            third and 4.68% for the fourth grant)
Expected exercising period...............   4.5 years for the first and second, 3.5
                                            years
                                            for the third and fourth
Expected variable of stock price.........   81% for the first, 95% for the second,
                                            93%
                                            for the third and 83% for the fourth,
                                            which
                                            are the annualized standard deviation of
                                            expected stock investment yield based on
                                            continuous compounding method
Weight average of exercise price.........   W5,000 per share (for the first, second
                                            and
                                            fourth) and W5,657 (for the third)
Weight average of fair value.............   W989 million (for the first), W912
                                            million
                                            (for the second), W1,451 million (for the
                                            third) and W460 million (for the fourth)
</Table>

             2) Loss on valuation of securities, net:

                Loss on valuation of securities as of December 31, 2002 and June
           30, 2003 consisted of:

<Table>
<Caption>
                                                                          TRANSLATION INTO
                                                                             US DOLLARS
                                                       KOREAN WON             (NOTE 2)
                                                 ----------------------   ----------------
                                                    2002        2003            2003
                                                 ----------   ---------   ----------------
                                                     (IN MILLIONS)         (IN THOUSANDS)
<S>                                              <C>          <C>         <C>
Valuation of investment securities of
  subsidiaries using the equity method.........  W   23,386   W  23,193       $ 19,439
Loss on valuation of available-for-sale
  securities of overseas branches..............        (451)       (332)          (278)
Loss on valuation of available-for-sale
  securities of headquarters...................    (207,942)    171,220        143,509
                                                 ----------   ---------       --------
                                                 W (185,007)  W 194,081       $162,670
                                                 ==========   =========       ========
</Table>

                                      F-212
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20.  INTEREST ON LOANS

     For the quarters ended June 30, 2002 and 2003, the interest on loans
included income from credit card cash advances and card loans amounting to
W138.8 billion and W116.5 billion (US$97.6 million), respectively. For the
six-month periods ended June 30, 2002 and 2003, the interest on loans included
income from credit card cash advances and card loans amounting to W276.2 billion
and W234.8 billion (US$196.8 million), respectively.

21.  FEES AND COMMISSIONS

     Fees and commissions for the quarters and six-month periods ended June 30,
2002 and 2003 are summarized as follows:

<Table>
<Caption>
                                                                          TRANSLATION INTO
                                                                             US DOLLARS
                                           KOREAN WON                         (NOTE 2)
                            -----------------------------------------   ---------------------
                               QUARTER ENDED       SIX MONTHS ENDED     QUARTER    SIX MONTHS
                                 JUNE 30,              JUNE 30,          ENDED       ENDED
                            -------------------   -------------------   JUNE 30,    JUNE 30,
                              2002       2003       2002       2003       2003        2003
                            --------   --------   --------   --------   --------   ----------
                                          (IN MILLIONS)                    (IN THOUSANDS)
<S>                         <C>        <C>        <C>        <C>        <C>        <C>
Guarantee fees............  W  2,159   W  4,026   W  4,615   W  6,032   $  3,374    $  5,056
Fees and Commission on
  credit card accounts....   144,893    118,772    275,309    240,977     99,549     201,975
Commissions received from
  early termination of
  trust accounts..........        90         70        225        132         59         111
Service charges on other
  financial services......    49,083     52,321     91,019    101,879     43,853      85,390
                            --------   --------   --------   --------   --------    --------
                            W196,225   W175,189   W371,168   W349,020   $146,835    $292,532
                            ========   ========   ========   ========   ========    ========
</Table>

     Fees and commissions included income from credit card purchases and
installment payments.

22.  OTHER NON-INTEREST INCOME

     Other income of non-interest income for the quarters and six-month periods
ended June 30, 2002 and 2003 are summarized as follows:

<Table>
<Caption>
                                                                           TRANSLATION INTO
                                                                              US DOLLARS
                                              KOREAN WON                       (NOTE 2)
                                --------------------------------------   ---------------------
                                  QUARTER ENDED      SIX MONTHS ENDED    QUARTER    SIX MONTHS
                                    JUNE 30,             JUNE 30,         ENDED       ENDED
                                -----------------   ------------------   JUNE 30,    JUNE 30,
                                 2002      2003      2002       2003       2003        2003
                                -------   -------   -------   --------   --------   ----------
                                            (IN MILLIONS)                   (IN THOUSANDS)
<S>                             <C>       <C>       <C>       <C>        <C>        <C>
Reversal of allowance for
  possible losses of
  acceptances and
  guarantees..................  W   730   W    --   W 9,170   W 47,038   $    --     $ 39,425
Gain on disposal of fixed
  assets......................    4,868        16     5,297      5,006        13        4,196
Recovery of available-for-sale
  securities impairment
  loss........................       --    17,418        --     17,418    14,599       14,599
Other.........................   26,009    47,284    58,649     83,880    39,631       70,304
                                -------   -------   -------   --------   -------     --------
                                W31,607   W64,718   W73,116   W153,342   $54,244     $128,524
                                =======   =======   =======   ========   =======     ========
</Table>

                                      F-213
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

23.  GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses for the quarters and six-month periods
ended June 30, 2002 and 2003 are summarized as follows:

<Table>
<Caption>
                                                                          TRANSLATION INTO
                                                                             US DOLLARS
                                         KOREAN WON                           (NOTE 2)
                        ---------------------------------------------   ---------------------
                            QUARTER ENDED         SIX MONTHS ENDED      QUARTER    SIX MONTHS
                              JUNE 30,                JUNE 30,           ENDED       ENDED
                        ---------------------   ---------------------   JUNE 30,    JUNE 30,
                          2002        2003        2002        2003        2003        2003
                        ---------   ---------   ---------   ---------   --------   ----------
                                        (IN MILLIONS)                      (IN THOUSANDS)
<S>                     <C>         <C>         <C>         <C>         <C>        <C>
Salaries..............  W  96,449   W  85,496   W 167,391   W 155,208   $ 71,659    $130,088
Provision for
  severance
  benefits............      7,898       5,059      17,475      19,639      4,240      16,459
Other employee
  benefits............     17,584      25,137      32,173      42,134     21,069      35,315
Rent..................      5,950       7,720      11,404      15,120      6,471      12,673
Entertainment.........      1,895       1,778       3,730       3,520      1,490       2,950
Depreciation..........     16,346      22,875      30,900      43,567     19,173      36,516
Amortization of
  intangible assets...     28,206      28,167      56,403      56,333     23,608      47,216
Taxes and dues........      9,355       7,500      16,476      16,898      6,286      14,163
Advertising...........      4,611       1,530       7,579       3,332      1,282       2,793
Other.................     32,665      34,105      64,252      65,820     28,585      55,167
                        ---------   ---------   ---------   ---------   --------    --------
                        W 220,959   W 219,367   W 407,783   W 421,571   $183,863    $353,340
                        =========   =========   =========   =========   ========    ========
</Table>

24.  OTHER NON-INTEREST EXPENSES

     Other expenses of non-interest expenses for the quarters and six-month
periods ended June 30, 2002 and 2003 are summarized as follows:

<Table>
<Caption>
                                                                           TRANSLATION INTO
                                                                              US DOLLARS
                                            KOREAN WON                         (NOTE 2)
                            ------------------------------------------   ---------------------
                               QUARTER ENDED        SIX MONTHS ENDED     QUARTER    SIX MONTHS
                                 JUNE 30,               JUNE 30,          ENDED       ENDED
                            -------------------   --------------------   JUNE 30,    JUNE 30,
                              2002       2003       2002       2003        2003        2003
                            --------   --------   --------   ---------   --------   ----------
                                          (IN MILLIONS)                     (IN THOUSANDS)
<S>                         <C>        <C>        <C>        <C>         <C>        <C>
Loss on disposal of fixed
  assets..................  W 16,636   W     17   W 17,543   W   7,450   $    14     $  6,244
Insurance.................     8,243     17,640     16,102      35,094    14,785       29,414
Allowance for possible
  losses..................        --     25,068         --      27,856    21,011       23,348
Other.....................    40,065     49,598     58,212      56,161    41,571       47,071
                            --------   --------   --------   ---------   -------     --------
                            W 64,944   W 92,323   W 91,857   W 126,561   $77,381     $106,077
                            ========   ========   ========   =========   =======     ========
</Table>

25.  INCOME TAX EXPENSE:

     The annual tax charge takes into account current income tax on taxable
income and expenses for the period, and deferred taxes resulting from timing
differences and loss carryforward. Deferred taxes are calculated according to
the liability method for the timing differences added or deducted during the
year and

                                      F-214
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

loss carryforward using the future year's estimated tax rate. The Bank is
subject to a number of taxes based on earnings, which result in the normal tax
rate of 30.8 percent in 2002. Beginning 2002, it decreased to 29.7 percent.

     (1) Income tax expense for the six-month periods ended June 30, 2002 and
2003 consisted of the following:

<Table>
<Caption>
                                                                        TRANSLATION INTO
                                                                           US DOLLARS
                                                      KOREAN WON            (NOTE 2)
                                                  -------------------   ----------------
                                                    2002       2003           2003
                                                  --------   --------   ----------------
                                                     (IN MILLIONS)       (IN THOUSANDS)
<S>                                               <C>        <C>        <C>
Domestic offices:
  Income tax to be paid.........................  W     48   W     --       $     --
  Tax effect on changes in cumulative temporary
     differences................................   (13,044)   (28,757)       (24,103)
  Tax effect on changes in tax loss
     carryforward...............................    23,044     52,757         44,219
                                                  --------   --------       --------
                                                  W 10,048   W 24,000       $(20,116)
                                                  --------   --------       --------
Overseas offices:
  Income tax to be paid.........................  W    605   W  1,271       $  1,065
  Tax effect on changes in cumulative temporary
     differences................................       958        (43)           (36)
                                                  --------   --------       --------
                                                     1,563      1,228          1,029
                                                  --------   --------       --------
Income tax expense..............................  W 11,611   W 25,228       $ 21,145
                                                  ========   ========       ========
</Table>

     (2) For the six-month periods ended June 30, 2002 and 2003, the differences
between the income before income tax in financial accounting and the taxable
income pursuant to Corporate Income Tax Law of Korea are summarized as follows:

<Table>
<Caption>
                                                                                 TRANSLATION INTO
                                                                                    US DOLLARS
                                                          KOREAN WON                 (NOTE 2)
                                                 -----------------------------   ----------------
                                                     2002            2003              2003
                                                 -------------   -------------   ----------------
                                                 (IN MILLIONS)   (IN MILLIONS)    (IN THOUSANDS)
<S>                                              <C>             <C>             <C>
Income (loss) before income tax................    W 65,556        W(394,054)       $(330,277)
Permanent differences..........................      (2,350)          (4,314)          (3,616)
Temporary differences..........................      78,402          (52,057)         (43,632)
                                                   --------        ---------        ---------
                                                    141,608         (450,425)        (377,525)
Tax loss carryforward..........................     141,608               --               --
                                                   --------        ---------        ---------
Taxable income (Tax loss)......................    W     --        W(450,425)       $(377,525)
                                                   ========        =========        =========
</Table>

                                      F-215
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (3) Details of cumulative temporary differences and loss carryforward,
including their increase and decrease, for the current period are summarized as
follows (in millions of Won):

<Table>
<Caption>
                                     BEGINNING                             ENDING
ACCOUNTS                              BALANCE     INCREASE   DECREASE     BALANCE
- --------                             ----------   --------   ---------   ----------
<S>                                  <C>          <C>        <C>         <C>
Allowance for possible loan
  losses...........................  W  388,134   W270,312   W 388,134   W  270,312
  Goodwill.........................    (112,021)        --     (56,010)     (56,011)
  Accrued interest.................    (184,142)   (67,170)   (122,691)    (128,621)
  Allowance for possible losses of
     confirmed acceptances and
     guarantees....................     125,923    106,853     125,923      106,853
  Gain on valuation of
     derivatives...................     (58,946)        --          --      (58,946)
  Impairment loss on
     available-for-sale
     securities....................     542,999      2,169     155,905      389,263
  Loans for debt-equity swap.......     272,568    113,202      10,511      375,259
  Other............................     107,887     48,363      24,014      132,236
                                     ----------   --------   ---------   ----------
                                      1,082,402    473,729     525,786    1,030,345
  Tax loss carryforward............   2,522,575         --          --    2,522,575
                                     ----------   --------   ---------   ----------
                                     W3,604,977   W473,729   W 525,786   W3,552,920
                                     ==========   ========   =========   ==========
</Table>

     Some of the estimated amounts of cumulative temporary differences as of
December 31, 2002 were differently finalized in filing its tax return. These
differences reflected and accounted for prospectively and the beginning balance
of cumulative temporary differences of the six-month period ended June 30, 2003
are based on the actual tax return file of prior year.

     (4) Deferred income tax assets as of June 30, 2003 are summarized as
follows (in millions of Won):

<Table>
<Caption>
                                                       AS OF                     AS OF
                                                    DECEMBER 31,    INCREASE    JUNE 30,
                                                        2002       (DECREASE)     2003
                                                    ------------   ----------   --------
<S>                                                 <C>            <C>          <C>
Domestic offices..................................    W220,029      W(24,000)   W196,029
Overseas offices..................................       7,038           (43)      6,995
                                                      --------      --------    --------
                                                      W227,067      W(24,043)   W203,024
                                                      ========      ========    ========
</Table>

     The Bank recognized the deferred income tax assets resulting from temporary
difference and loss carryforward as of December 31, 2002 due to the likelihood
of its realization. Although the Bank incurred net loss in 2003, the Bank has
projected that results will continue to improve and the Bank has recognized the
deferred income tax assets resulting from temporary differences and loss
carryforwards.

                                      F-216
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (5) Tax loss carryforwards are subject to a five-year carryforward period.
The details of tax loss carryforwards together with their effective period as of
June 30, 2003 are summarized as follows (in millions of Won):

<Table>
<Caption>
                                    AS OF                        REMAINING BALANCE
                                 DECEMBER 31,       USE IN        AS OF JUNE 30,       PERIOD
YEAR INCURRED                        2002       CURRENT PERIOD         2003          DEDUCTIBLE
- -------------                    ------------   --------------   -----------------   ----------
<S>                              <C>            <C>              <C>                 <C>
1998...........................   W1,644,564        W  --           W1,644,564        By 2003
1999...........................      712,840           --              712,840        By 2004
2000...........................      165,171           --              165,171        By 2005
                                  ----------        -----           ----------
                                  W2,522,575        W  --           W2,522,575
                                  ==========        =====           ==========
</Table>

     The tax loss carryforwards incurred in 1999 were taken over from Kangwon
Bank and Chungbuk Bank through the merger. However, for taxation purposes, this
loss carryforward is separately maintained and deductible only when the related
business division reports taxable income.

26.  TRANSACTIONS WITH AFFILIATED COMPANIES:

     (1) Subsidiaries as of June 30, 2003 are summarized as follows (in millions
         of Won):

<Table>
<Caption>
                                            CAPITAL                               EQUITY
SUBSIDIARIES                                 STOCK        NUMBER OF SHARES     OWNERSHIP (%)
- ------------                             -------------   -------------------   -------------
<S>                                      <C>             <C>                   <C>
In Korea:
  Chohung Investment Trust Management       45,000       7,179,678                 79.77
     Co., Ltd. ........................
Outside of Korea:
  Chohung Finance Ltd., Hong Kong......     17,897       149,999                   99.99
  Chohung Bank of America..............     53,309       400,000                  100.00
  Chohung Bank (Deutschland) GmbH......     20,897       Limited partnership      100.00
  Chohung Vina Bank....................     23,862       Limited partnership       50.00
</Table>

     Chohung Bank of New York and California Chohung Bank entered into a merger
agreement on March 24, 2003 establishing Chohung Bank of America.

     (2) Significant balances with related parties as of June 30, 2003 are
summarized as follows (in millions of Won):

  ASSETS

<Table>
<Caption>
                                                  DUE FROM
                                              BANKS IN FOREIGN   LOANS IN FOREIGN    CALL
                                                 CURRENCIES         CURRENCIES       LOANS
                                              ----------------   ----------------   -------
<S>                                           <C>                <C>                <C>
Chohung Finance Ltd., Hong Kong.............        W --             W 48,917       W    --
Chohung Bank of America.....................          59                   --            --
Chohung Bank (Deutschland) GmbH.............         850               93,820         9,692
Chohung Vina Bank...........................          --                   --         9,545
                                                    ----             --------       -------
                                                    W909             W142,737       W19,237
                                                    ====             ========       =======
</Table>

                                      F-217
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  LIABILITIES

<Table>
<Caption>
                                            DEPOSITS    DEPOSITS    BORROWINGS
                                            IN LOCAL   IN FOREIGN   IN FOREIGN    CALL
                                            CURRENCY   CURRENCIES   CURRENCIES    MONEY
                                            --------   ----------   ----------   -------
<S>                                         <C>        <C>          <C>          <C>
Chohung Investment Trust Management Co.,
  Ltd. ...................................  W59,428       W --       W     --    W    --
Chohung Finance Ltd., Hong Kong...........       --        195         49,058      5,519
Chohung Bank (Deutschland) GmbH...........       --         --        111,572     20,435
Chohung Vina Bank.........................       --         --         26,248         --
                                            -------       ----       --------    -------
                                            W59,428       W195       W186,878    W25,954
                                            =======       ====       ========    =======
</Table>

     Significant transactions with related parties for the six-month periods
ended June 30, 2003 are summarized as follows (in millions of Won):

<Table>
<Caption>
                                                              INTEREST   INTEREST
                                                               INCOME    EXPENSE
                                                              --------   --------
<S>                                                           <C>        <C>
Chohung Investment Trust Management Co., Ltd. ..............   W    1     W1,450
Chohung Finance Ltd., Hong Kong.............................      172        240
Chohung Bank of America.....................................       12         --
Chohung Bank (Deutschland) GmbH.............................      868      2,090
Chohung Vina Bank...........................................       30        427
                                                               ------     ------
                                                               W1,083     W4,207
                                                               ======     ======
</Table>

     (3) Significant balances with related parties as of December 31, 2002 are
summarized as follows (in millions of Won):

  ASSETS

<Table>
<Caption>
                                                   DUE FROM BANKS     LOANS IN
                                                     IN FOREIGN       FOREIGN      CALL
                                                     CURRENCIES      CURRENCIES    LOANS
                                                  ----------------   ----------   -------
<S>                                               <C>                <C>          <C>
Chohung Finance Ltd., Hong Kong.................       W   --         W 69,623    W    --
Chohung Bank of New York........................        1,154           10,804         --
Chohung Bank (Deutschland) GmbH.................        2,834          104,150      8,517
California Chohung Bank.........................          847               --         --
Chohung Vina Bank...............................           --               --      3,001
                                                       ------         --------    -------
                                                       W4,835         W184,577    W11,518
                                                       ======         ========    =======
</Table>

  LIABILITIES

<Table>
<Caption>
                                            DEPOSITS    DEPOSITS    BORROWINGS
                                            IN LOCAL   IN FOREIGN   IN FOREIGN    CALL
                                            CURRENCY   CURRENCIES   CURRENCIES    MONEY
                                            --------   ----------   ----------   -------
<S>                                         <C>        <C>          <C>          <C>
Chohung Investment Trust Management Co.,
  Ltd. ...................................  W55,939       W --       W     --    W    --
Chohung Finance Ltd., Hong Kong...........       --        372         77,370      3,082
Chohung Bank (Deutschland) GmbH...........       --         --        136,141     14,495
Chohung Vina Bank.........................       --         --         54,018         --
                                            -------       ----       --------    -------
                                            W55,939       W372       W267,529    W17,577
                                            =======       ====       ========    =======
</Table>

                                      F-218
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Significant transactions with related parties for the six-month period
ended June 30, 2002 are summarized as follows (in millions of Won):

<Table>
<Caption>
                                                              INTEREST   INTEREST
                                                               INCOME    EXPENSE
                                                              --------   --------
<S>                                                           <C>        <C>
Chohung Investment Trust Management Co., Ltd................   W   --     W2,448
Chohung Finance Ltd., Hong Kong.............................      269        443
Chohung Bank of New York....................................      265          7
Chohung Bank (Deutschland) GmbH.............................    3,027      4,239
Chohung Vina Bank...........................................        7      1,122
                                                               ------     ------
                                                               W3,568     W8,259
                                                               ======     ======
</Table>

     (4) Guarantees and acceptances provided by the Bank to affiliated companies
as of December 31, 2002 and June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                                     TRANSLATION INTO
                                                        US DOLLARS
                                     KOREAN WON          (NOTE 2)
                                  ----------------   ----------------
BENEFICIARY                        2002     2003           2003            DESCRIPTION
- -----------                       ------   -------   ----------------   ------------------
                                   (IN MILLIONS)      (IN THOUSANDS)
<S>                               <C>      <C>       <C>                <C>
Chohung Finance Ltd., Hong
  Kong..........................  W1,921   W   239        $  201        L/C guarantees
Chohung Bank of America.........      --    10,589         8,875        L/C guarantees
Chohung Bank....................                                        Guarantees for L/C
(Deutschland) GmbH..............     158        --            --        and borrowings
Chohung Bank of New York........   2,281        --            --        L/C guarantees
                                  ------   -------        ------
                                  W4,360   W10,828        $9,076
                                  ======   =======        ======
</Table>

27.  COMMITMENTS AND CONTINGENCIES:

     In the normal course of its commercial banking business, the Bank makes
various commitments and incurs certain contingent liabilities, which are not
recorded in the financial statements.

                                      F-219
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (1) Guarantees and acceptances provided by the Bank as of December 31, 2002
and June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                     KOREAN WON              (NOTE 2)
                                               -----------------------   ----------------
                                                  2002         2003            2003
                                               ----------   ----------   ----------------
                                                    (IN MILLIONS)         (IN THOUSANDS)
<S>                                            <C>          <C>          <C>
Confirmed:
  Local currency:
     Corporate debentures....................  W   27,169   W   23,990      $   20,107
     Financing...............................      94,516       82,524          69,168
     Other...................................     455,141      416,547         349,130
  Foreign currencies:
     Acceptance..............................     317,046      362,336         303,693
     Letters of guarantee -- trade finance...      61,592       42,944          35,993
     Other...................................     282,160      236,947         198,598
                                               ----------   ----------      ----------
                                               W1,237,624   W1,165,288      $  976,689
                                               ==========   ==========      ==========
Unconfirmed:
  Issuance of letters of credit..............  W1,199,663   W  933,224      $  782,184
  Other......................................     307,712      274,500         230,073
                                               ----------   ----------      ----------
                                               W1,507,375   W1,207,724      $1,012,257
                                               ==========   ==========      ==========
</Table>

     (2) Details, by industry sector, of acceptances and guarantees as of
December 31, 2002 and June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                                        TRANSLATION INTO
                                                           US DOLLARS
                                    KOREAN WON              (NOTE 2)       PERCENTAGE (%)
                              -----------------------   ----------------   ---------------
                                 2002         2003            2003          2002     2003
                              ----------   ----------   ----------------   ------   ------
                                   (IN MILLIONS)         (IN THOUSANDS)
<S>                           <C>          <C>          <C>                <C>      <C>
Manufacturing...............  W1,953,201   W1,566,456      $1,312,929       71.15    66.01
Wholesale/retail............     618,458      563,915         472,647       22.53    23.76
Finance/insurance...........      64,132       61,227          51,318        2.34     2.58
Construction................      19,352       19,864          16,649        0.71     0.84
Others......................      89,856      161,550         135,403        3.27     6.81
                              ----------   ----------      ----------      ------   ------
                              W2,744,999   W2,373,012      $1,988,946      100.00   100.00
                              ==========   ==========      ==========      ======   ======
</Table>

                                      F-220
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (3) Details, by borrower type, of acceptances and guarantees as of December
31, 2002 and June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                                        TRANSLATION INTO
                                                           US DOLLARS
                                    KOREAN WON              (NOTE 2)       PERCENTAGE (%)
                              -----------------------   ----------------   ---------------
                                 2002         2003            2003          2002     2003
                              ----------   ----------   ----------------   ------   ------
                                   (IN MILLIONS)         (IN THOUSANDS)
<S>                           <C>          <C>          <C>                <C>      <C>
Enterprises.................  W2,640,900   W2,200,541      $1,844,389       96.21    92.73
Households..................      14,243       10,921           9,153        0.52     0.46
Public sector and others....      89,856      161,550         135,404        3.27     6.81
                              ----------   ----------      ----------      ------   ------
                              W2,744,999   W2,373,012      $1,988,946      100.00   100.00
                              ==========   ==========      ==========      ======   ======
</Table>

     (4) The financial derivatives contracts as of June 30, 2003 are summarized
as follows:

          As of and for the six-month periods ended June 30, 2003, outstanding
     contract amount, gain or loss on valuation of financial derivative
     instruments in the statement of operations, and assets and liabilities for
     the accumulated gain or loss on valuation of derivative instruments in the
     balance sheets are summarized as follows (in millions of Won):

<Table>
<Caption>
                               OUTSTANDING CONTRACT     GAIN (LOSS) ON
                                   AMOUNT (NOTE)           VALUATION       ACCUMULATED
                               ---------------------   -----------------    VALUATION
TYPE                            TRADING     HEDGING    TRADING   HEDGING   GAIN (LOSS)
- ----                           ----------   --------   -------   -------   -----------
<S>                            <C>          <C>        <C>       <C>       <C>
Currency forwards............  W4,167,585   W245,687   W3,970    W 3,529     W11,379
Currency swaps...............     904,656         --     (905)        --      (4,987)
                               ----------   --------   ------    -------     -------
                                5,072,241    245,687    3,065      3,529       6,392
                               ----------   --------   ------    -------     -------
Interest rate futures........      63,486         --       --         --          --
Interest rate swaps..........   4,230,691    750,137     (867)    (6,306)     53,890
                               ----------   --------   ------    -------     -------
                                4,294,177    750,137     (867)    (6,306)     53,890
                               ----------   --------   ------    -------     -------
KOSPI 200 futures............         436         --       --         --          --
Stock option (Buy)...........      73,982         --      510         --       6,297
Stock option (Sell)..........      73,730         --       --         --      (3,977)
                               ----------   --------   ------    -------     -------
                                  148,148         --      510         --       2,320
                               ----------   --------   ------    -------     -------
                               W9,514,566   W955,824   W2,708    W(2,777)    W62,602
                               ==========   ========   ======    =======     =======
</Table>

          As of and for the year ended December 31, 2002, outstanding contract
     amount, gain or loss on valuation of financial derivative instruments in
     the statement of operations, and assets and liabilities for

                                      F-221
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     the accumulated gain or loss on valuation of derivative instruments in the
     balance sheets are summarized as follows (in millions of Won):

<Table>
<Caption>
                             OUTSTANDING CONTRACT      GAIN (LOSS) ON
                                 AMOUNT (NOTE)            VALUATION       ACCUMULATED
                            -----------------------   -----------------    VALUATION
TYPE                         TRADING      HEDGING     TRADING   HEDGING   GAIN (LOSS)
- ----                        ----------   ----------   -------   -------   -----------
<S>                         <C>          <C>          <C>       <C>       <C>
Currency forwards.........  W2,135,827   W  164,086   W 8,798   W(1,838)    W 4,417
Currency swaps............     243,969      148,690    (7,479)     (274)     (4,391)
Currency options (Buy)....           1           --        --        --          --
Currency options (Sell)...           1           --        --        (4)         --
                            ----------   ----------   -------   -------     -------
                             2,379,798      312,776     1,319    (2,116)         26
                            ----------   ----------   -------   -------     -------
Interest rate futures.....     340,916           --        --        --          --
Interest rate swaps.......   2,415,602      762,503    (4,068)   22,464      58,898
                            ----------   ----------   -------   -------     -------
                             2,756,518      762,503    (4,068)   22,464      58,898
                            ----------   ----------   -------   -------     -------
Stock option (Buy)........           5           --        14        --          22
Stock option (Sell).......           5           --        --        --          --
                            ----------   ----------   -------   -------     -------
                                    10           --        14        --          22
                            ----------   ----------   -------   -------     -------
                            W5,136,326   W1,075,279   W(2,735)  W20,348     W58,946
                            ==========   ==========   =======   =======     =======
</Table>

     (Note) Derivative contracts for Korean Won to foreign currency is
translated into Korean Won using market exchange rate against foreign currency
and the contracts for foreign currency to foreign currency is translated into
Korean Won using market exchange rate at the balance sheet date against
purchased foreign currency.

     The outstanding contract amount and the gain or loss on valuation for
hedging purpose as described in the table above, which include both the
derivative transactions accounted for using hedge accounting, pursuant to the
Interpretations on Financial Accounting Standards 53-70, and the derivative
transactions used for hedging activities but not accounted for as hedges. As of
June 30, 2003, the Bank does not have derivative transactions used for cash flow
hedging activities or accounted for as cash flow hedges. However, the Bank has
derivative instruments accounted for as fair value hedges. The hedged items, to
which the fair value hedge accounting was applied, consist of investment
securities and subordinated bonds issued. The hedging derivative instruments,
such as currency swaps and interest rate swaps, were used to cover exposures to
changes in fair value of hedged items resulting from the fluctuations in
interest rates.

     As a result of the valuation of hedged items accounted for using fair value
hedge accounting, the gain on valuation of available-for-sale securities
amounting to W1,480 million (US$1,240 thousand), the loss on valuation of
available-for-sale securities amounting to W127 million (US$106 thousand), the
gain on valuation of subordinated notes issued amounting to W6,990 million
(US$5,859 thousand) and the loss on valuation of subordinated notes issued
amounting to W895 million (US$750 thousand) for the six-month period ended June
30, 2003 were reflected in current operations. The gain or loss on valuation of
derivative instruments accounted for using fair value hedge accounting, which
amounted to the opposite corresponding amounts resulting from valuation of
hedged items, were also reflected in current operations.

     With regard to accounting for the stock index futures traded in Korea Stock
Exchange, the currency futures and the interest rate futures traded in Korea
Futures Exchange, the gain or loss on valuation accounted for as settlement
accounts in the balance sheet is subject to mark-to-market accounting. For the
derivative contracts cleared or carried forward to the subsequent year, the
difference between the purchase price (settlement price at the end of prior year
for the contracts carried over from prior year) and the clearing price

                                      F-222
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(market price for the contract carried forward to subsequent year without
clearing) was accounted for as gain or loss on futures trading. There were
unsettled interest rate futures and KOSPI 200 futures amounting to W63,486
million (US$53,211 thousand) and W436 million (US$365 thousand) as of June 30,
2003.

     (5) Other commitments as of December 31, 2002 and June 30, 2003 are
summarized as follows:

<Table>
<Caption>
                                                                         TRANSLATION INTO
                                                                            US DOLLARS
                                                    KOREAN WON               (NOTE 2)
                                             -------------------------   ----------------
                                                2002          2003             2003
                                             -----------   -----------   ----------------
                                                   (IN MILLIONS)          (IN THOUSANDS)
<S>                                          <C>           <C>           <C>
Commitments................................  W    47,196   W    43,196     $    36,205
Bills endorsed.............................   25,175,677    15,120,580      12,673,355
Loans charge-offs..........................    2,431,322     3,075,670       2,577,881
Loans sold under repurchase agreements.....      363,025       202,558         169,775
OTC government and public bonds sold.......        2,563         2,533           2,123
                                             -----------   -----------     -----------
                                             W28,019,783   W18,444,537     $15,459,339
                                             ===========   ===========     ===========
</Table>

     (6) Litigation:

          In the normal course of its business, the Bank files lawsuits and
     takes other legal actions in connection with its business, primarily with
     respect to the actions for collection of receivables.
          As of June 30, 2003, the Bank has filed 434 lawsuits as a plaintiff
     claiming W305,956 million (US$256,438 thousand), including the case related
     to collection of debts. The bank is a defendant in 76 lawsuits claiming
     W124,224 million (US$104,119 thousand) and USD 441,605 thousand. The
     outcomes of such lawsuits cannot presently be determined, however, the
     management of the Bank does not believe that the outcomes of these lawsuits
     will have a significant effect on the financial condition or operations of
     the Bank.

     (7) Sales of non-performing loans with the right of recourse:
          From December 15, 1997 to December 31, 2002, the Bank sold W3,894.6
     billion (US$3,264 million) of non-performing loans from the bank accounts
     and trust accounts to Korea Asset Management Corporation (KAMCO) for
     W2,124.5 billion, which included W2,451.2 billion (US$2,054 million) of
     special loans sold with recourse for W1,596.6 billion.

          Notwithstanding the sale and the elimination of these assets from the
     balance sheet as of June 30, 2003, the Bank remains liable to KAMCO for the
     sales of non-performing loans with recourse amounting to W112,558 million
     (US$94,341 thousand) at its sale price converted using the exchange rate at
     June 30, 2003.

          In addition, the Bank has granted the right of recourse for the sale
     of loans from bank accounts to special purpose companies (SPC) amounting to
     W90.0 billion (US$75,434 thousand) in 2001, which was intended to reinforce
     the credit of the asset-backed securities (ABS) issued by the SPC. The Bank
     estimated and reserved W25.0 billion (US$20,954 thousand) as allowance for
     possible losses for these obligations.

                                      F-223
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

28.  ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

     Assets and liabilities denominated in foreign currencies as of December 31,
2002 and June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                                                  TRANSLATION INTO
                                       US DOLLARS (NOTE 2)           KOREAN WON
                                     -----------------------   -----------------------
                                        2002         2003         2002         2003
                                     ----------   ----------   ----------   ----------
                                         (IN THOUSANDS)             (IN MILLIONS)
<S>                                  <C>          <C>          <C>          <C>
Assets:
  Cash and due from banks..........  $  223,474   $  220,418   W  268,259   W  262,981
  Securities.......................     437,148      255,996      524,752      305,429
  Loans............................   4,802,762    4,706,826    5,765,235    5,615,714
                                     ----------   ----------   ----------   ----------
                                     $5,463,384   $5,183,240   W6,558,246   W6,184,124
                                     ==========   ==========   ==========   ==========
Liabilities:
  Deposits.........................  $  995,745   $1,084,027   W1,195,292   W1,293,353
  Borrowings.......................   3,638,112    3,339,598    4,367,189    3,984,474
  Debentures.......................     544,680      539,126      653,834      643,231
  Other liabilities................      48,216       22,744       57,879       27,136
                                     ----------   ----------   ----------   ----------
                                     $5,226,753   $4,985,495   W6,274,194   W5,948,194
                                     ==========   ==========   ==========   ==========
</Table>

                                      F-224
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

29.  TERM STRUCTURE OF ASSETS AND LIABILITIES

     The term structure of assets and liabilities for disclosing purpose to
Financial Supervisory Service (FSS) as of June 30, 2003, which exclude merchant
accounts, is summarized as follows (in billions of Won):

<Table>
<Caption>
                                                                                   CLASSIFIED
                       LESS THAN   LESS THAN   LESS THAN   LESS THAN   MORE THAN   SUBSTANDARD
                       3 MONTHS    6 MONTHS     1 YEAR      3 YEARS     3 YEARS     AND BELOW      TOTAL
                       ---------   ---------   ---------   ---------   ---------   -----------   ---------
<S>                    <C>         <C>         <C>         <C>         <C>         <C>           <C>
Due from banks:
  Local currency.....  W  (249.1)  W  (249.1)  W  (248.0)  W  (248.0)  W 1,179.0    W     --     W   931.0
  Foreign
    currencies.......      181.3       192.0       192.0       192.0          --          --         192.0
Securities:
  Local currency.....    7,445.1     7,445.1     7,445.1     7,445.1     1,096.8       308.2       8,850.1
  Foreign
    currencies.......       74.6        75.1        75.1        97.7       199.6         5.9         303.2
Loans:
  Local currency.....    8,218.4    13,822.2    24,625.0    32,453.0     1,254.1       999.3      34,706.4
  Foreign
    currencies.......    2,859.0     3,610.5     3,887.0     4,293.6       401.2       359.0       5,053.8
Other Assets:
  Local currency.....    4,416.7     4,852.4     5,422.5     5,594.4     7,329.0       660.2      13,583.6
  Foreign
    currencies.......      586.9       648.3       770.4       780.9       (99.6)        2.8         684.1
                       ---------   ---------   ---------   ---------   ---------    --------     ---------
                       W23,532.9   W30,396.5   W42,169.1   W50,608.7   W11,360.1    W2,335.4     W64,304.2
                       =========   =========   =========   =========   =========    ========     =========
Deposits:
  Local currency.....  W12,611.5   W18,439.5   W24,909.6   W27,437.8   W11,886.8    W     --     W39,324.6
  Foreign
    currencies.......      836.0       917.0     1,287.2     1,293.4          --          --       1,293.4
Borrowings:
  Local currency.....      633.7       670.0       740.9       987.8       448.1          --       1,435.9
  Foreign
    currencies.......    2,494.6     3,290.6     3,581.8     4,563.9         1.3          --       4,565.2
Other Liabilities and
  Equity:
  Local currency.....    4,579.6     5,425.0     8,418.2     9,646.0     7,664.6          --      17,310.6
  Foreign
    currencies.......       54.8        54.8        54.8        54.8       319.7          --         374.5
                       ---------   ---------   ---------   ---------   ---------    --------     ---------
                       W21,210.2   W28,796.9   W38,992.5   W43,983.7   W20,320.5    W     --     W64,304.2
                       =========   =========   =========   =========   =========    ========     =========
</Table>

30.  STATEMENTS OF CASH FLOWS

     Cash flows from operating activities are presented by the indirect method.
Cash for the purposes of the cash flow statements is cash and due from banks.

                                      F-225
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Material transactions not involving cash inflows and outflows during the
six-month period ended June 30, 2003 are summarized as follows:

<Table>
<Caption>
                                                                            TRANSLATION INTO
                                                                               US DOLLARS
                                                             KOREAN WON         (NOTE 2)
                                                            -------------   ----------------
                                                                2003              2003
                                                            -------------   ----------------
                                                            (IN MILLIONS)    (IN THOUSANDS)
<S>                                                         <C>             <C>
Increase in profit on valuation of available-for-sale
  securities..............................................   W  380,634        $  319,030
Conversion of held-to-maturity securities to
  available-for-sale securities...........................    4,777,804         4,004,529
Conversion of debt equity swap loan to available-for-sale
  securities..............................................      160,108           134,195
                                                             ----------        ----------
                                                             W5,318,546        $4,457,754
                                                             ==========        ==========
</Table>

31.  AGREEMENT ON IMPLEMENTATION OF MANAGEMENT IMPROVEMENT PLAN

     On January 15, 1999, the Bank obtained approval from the Financial
Supervisory Commission (FSC) for its management improvement plan, and pursuant
to the approved plan, the Bank received a capital injection from the Korea
Deposit Insurance Corporation (KDIC) on February 19, 1999. As a result of the
capital injection by KDIC, the Bank entered into a compliance agreement with FSC
and KDIC for its management improvement plan dated November 12, 1999. Under the
agreement, the Bank has disposed of bad loans and non-performing tangible
assets, reduced the number of employees, and closed its unprofitable branches.
The Bank entered into a new agreement dated January 31, 2002 with KDIC, which
contains the conditions that the Bank is required to achieve the ratio of
non-performing loans below 4.0 percent and 3.5 percent in 2002 and 2003,
respectively, meet the BIS capital adequacy ratio of 10.0 percent by December
31, 2002 and 11.0 percent by December 31, 2003, meet the return on assets of 1.0
percent by December 31, 2002 and 2003, achieve W230 million (US$ 193 thousand)
of operating income before provisions for possible loan losses per employee and
other management index targets by the end of December 2002 and 2003. Whether or
not the revised management improvement plans are achieved, it may have a
significant impact on the Bank's operating, investing, and financing activities
including any capital increase or capital reduction and ownership structure. As
of June 30, 2003, the Bank has failed to achieve all of the management index
targets stipulated in the agreement except for the target operating income per
employee and the proportion of SG&A. The new agreement on compliance with the
revised management improvement plan will be terminated when KDIC is no longer
the largest stockholder unless there are special circumstances.

32.  CHANGE IN THE MAJOR SHAREHOLDER OF THE BANK

     On July 9, 2003, KDIC, which owned 80.04% of the shares of the Bank,
entered into an agreement with Shinhan Financial Group to dispose its entire
shares. The disposition process is presently in progress as of July 30, 2003 and
is to be finalized by September 30, 2003. Once the disposition is finalized, the
Bank will become a subsidiary of Shinhan Financial Group. The change in major
shareholder of the Bank might cause significant change in the Bank's management.

                                      F-226
<PAGE>
                                  CHOHUNG BANK

    NOTES TO UNAUDITED NON-CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

33.  DISPOSITION OF ACCUMULATED DEFICIT

     The details on the disposition of deficit for the 2002 as stipulated at the
shareholders' meeting on March 28, 2003 are as follows:

<Table>
<Caption>
                                                                    KOREAN WON
                                                              ----------------------
                                                                  (IN MILLIONS)
<S>                                                           <C>          <C>
ACCUMULATED DEFICIT BEFORE DISPOSITION......................               W(976,541)
  Balance at beginning of year..............................  W(388,792)
  Adjustment of retained earnings of subsidiaries valued
     using the equity method................................         36
  Other statutory reserves..................................     (1,740)
  Net loss..................................................   (586,045)
                                                              ---------
DISPOSITION.................................................                  45,179
  Disposition of capital in excess of par value.............         24
  Disposition of other capital surplus......................     45,155
                                                              ---------    ---------
UNDISPOSED ACCUMULATED DEFICIT TO BE CARRIED
FORWARD TO SUBSEQUENT YEAR..................................               W(931,362)
                                                                           =========
</Table>

     The balance sheet as of December 31, 2002 does not reflect the disposition
of accumulated deficit.

                                      F-227

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>3
<FILENAME>u98617exv1w1.txt
<DESCRIPTION>EX-1.1 ARTICLES OF INCORPORATION
<TEXT>
<PAGE>
                                                                     Exhibit 1.1

                                                                   [Translation]

                            ARTICLES OF INCORPORATION


                                    CHAPTER I
                               GENERAL PROVISIONS


ARTICLE 1     (CORPORATE NAME)

The name of this company shall be "Chusik Hoesa Shinhan-Kumyoong-Jijoo-Hoesa"
(the "Company"), which shall be "Shinhan Financial Group Co., Ltd." in English.


ARTICLE 2       (OBJECTIVE)

The objective of the Company shall be to engage in the following business
activities:

(1)  To control or manage a financial company or a company having close relation
     with the financial business;

(2)  To provide the financial support to its subsidiary, etc. (which expression
     shall include the subsidiary, sub-subsidiary, and the company under the
     control of sub-subsidiary; hereinafter the same shall apply);

(3)  To invest in the subsidiary or to raise the fund for financial support to
     its subsidiary, etc.;

(4)  To develop and sell the products jointly with its subsidiary, etc., and to
     provide the business support for joint use of facility, computer system,
     etc. with its subsidiary, etc.; and

(5)  To engage in the other business incidental or related to the foregoing.


ARTICLE 3     (LOCATION OF HEAD OFFICE AND ESTABLISHMENT OF BRANCH, ETC.)

(1)  The Company shall have its head office in Seoul.

(2)  The Company may establish branches, liaison offices, representative offices
     or subsidiaries within or outside Korea, by the resolution of the Board of
     Directors, when it deems necessary.


ARTICLE 4     (METHOD OF PUBLIC NOTICES)

Public notices of the Company shall be made in Hankuk Kyongje Shinmun and Maeil
Kyongje Shinmun, daily newspapers published in Seoul.



<PAGE>


                                   CHAPTER II
                                 SHARES OF STOCK


ARTICLE 5     (TOTAL NUMBER OF AUTHORIZED SHARES)

The total number of shares to be issued by the Company shall be 1,000,000,000
shares.


ARTICLE 6     (PAR VALUE PER SHARE)

The par value per share to be issued by the Company shall be five thousand
(5,000) Won.


ARTICLE 7     (NUMBER OF SHARES ISSUED AT THE TIME OF INCORPORATION)

The total number of shares issued at the time of incorporation of the Company
shall be _284,453,152 shares of common stock in registered form plus the number
of common shares in registered form to be issued and delivered upon the exercise
of warrant by the holders of the bonds with warrants issued by Shinhan Bank on
December 2, 1998 during the period from July 15, 2001 to August 31, 2001.


ARTICLE 8     (KIND OF SHARES)

(1)  The shares to be issued by the Company shall be common shares in registered
     form and preferred shares in registered form.

(2)  Registered preferred shares shall have preference over common shares in
     dividend distribution and liquidation of assets of the Company. The amount
     of distribution upon liquidation of the Company to preferred shares with
     liquidation preference shall be no greater than the sum of their initial
     issue price and accrued but unpaid dividend.


ARTICLE 9  (NUMBER AND DESCRIPTION OF PREFERRED SHARES)

(1)  Preferred shares to be issued by the Company shall be non-voting, and the
     number thereof shall not exceed one half (1/2) of the total number of
     issued and outstanding shares.

(2)  The dividends on non-voting preferred shares shall be no less than 1% per
     annum of the par value and the rate thereof shall be determined by the
     Board of Directors at the time of issuance.

(3)  Preferred shares to be issued by the Company may be participating or non-
     participating, and accumulating or non-accumulating by the resolution of
     the Board of Directors.

(4)  If a resolution not to distribute dividends on preferred shares is adopted,
     then the


                                       2
<PAGE>

     preferred shares shall be deemed to have voting rights from the next
     general meeting of shareholders immediately following the general meeting
     at which such resolution not to distribute dividends on preferred shares is
     adopted to the end of the general meeting of the shareholders at which a
     resolution to distribute dividends on such preferred shares is adopted.

(5)  In case the Company issues new shares by rights offering or bonus issue,
     then the new shares issued with respect to the preferred shares shall be
     (i) common shares in the case of rights offering and (ii) the shares of the
     same type in the case of bonus issue.

(6)  Whether or not to specify the duration of preferred shares shall be
     determined by the resolution of the Board of Directors. If there is any
     duration of preferred shares, such duration shall be no less than 1 year
     and no more than 10 years from the date of issuance, and such duration
     period shall be determined by the Board of Directors at the time of
     issuance. Preferred shares shall be converted into the common shares upon
     the expiration of the duration period. However, if the holders of the
     preferred shares do not receive dividends entitled to them during the
     duration period, then the duration period shall be extended until such
     holders receive dividends entitled to them in full. In such a case, Article
     15 shall apply mutatis mutandis with respect to the distribution of
     dividends for new shares issued upon conversion.


ARTICLE 10 (TYPES OF SHARE CERTIFICATES)

The share certificates of the Company shall be issued in the following eight (8)
denominations: one (1), five (5), ten (10), fifty (50), one hundred (100), five
hundred (500), one thousand (1,000) and ten thousand (10,000) shares.


ARTICLE 11 (CONVERTIBLE STOCK)

(1)  The Company may issue the stock which can be converted into the common
     stock or preferred stock, by the resolution of the Board of Directors.

(2)  Issue price of new shares to be issued upon conversion shall be the issue
     price of share prior to such conversion, and the number of shares to be
     issued upon conversion shall be the same number as that of common shares or
     preferred shares prior to such conversion.

(3)  The conversion period shall be no less than 1 year and no more than 10
     years from the date of issuance, and such conversion period shall be
     determined by the Board of Directors.

(4)  For the purpose of any distribution of dividends on the shares issued upon
     conversion, Article 15 hereof shall apply mutatis mutandis.


ARTICLE 12 (REDEEMABLE STOCK)

                                       3
<PAGE>

(1)  In case of issuance of preferred stock, the Company may, by the resolution
     of the Board of Directors, issue the redeemable one which can be redeemed
     with the profits at the discretion of the Company.

(2)  Redemption price of redeemable stock shall be calculated in accordance with
     the following formula: 'issue price + issue price x number of days that
     have elapsed from the first day of the fiscal year, during which the
     redemption is made, to the redemption date divided by 365 x applicable
     interest rate'. The applicable interest rate shall be that announced by the
     Commissioner of National Tax Service pursuant to Article 17, Paragraph (1)
     of the Enforcement Rules of the Inheritance Tax and Gift Tax Act, or, to
     the extent not exceeding more or less than 50% of such interest rate, shall
     be determined by the Board of Directors at the time of issuance.

(3)  Redemption period shall be determined by the Board of Directors within the
     period from the date immediately following the end of the Ordinary General
     Meeting of Shareholders convened in respect of the fiscal year, during
     which the shares are issued, to the date of 1 month following the end of
     the Ordinary General Meeting of Shareholders convened in respect of the
     fiscal year of the 10th anniversary of the issue date. However, in any of
     the following cases, the redemption period shall be extended until such
     case is terminated.

     1.   If the holders of the redeemable shares do not receive dividends
          entitled to them; or

     2.   If the redemption is not made within the redemption period due to
          insufficient profits of the Company.

(4)  The Company may redeem all of redeemable shares in lump sum or any portion
     thereof. Provided that, in case of partial redemption, the Company may
     determine the shares to be redeemed, by means of lottery or proportional
     allotment. Any fractional shares resulting from the proportional allotment
     shall not be redeemed.

(5)  If the Company intends to redeem the redeemable shares, the Company shall
     give the public notice of such intention, subject shares and the fact that
     the subject stock certificates must be submitted to the Company during the
     specified period, which shall be determined by the Company to the extent
     not less than one month. The Company shall give separate notice to the
     shareholders and pledgees recorded in the shareholders' registry and upon
     the expiry of such period, the subject shares shall be redeemed
     compulsorily.

(6)  The redeemable shares may, by the Board of Directors at the time of
     issuance, be issued as the convertible shares as set forth in Article 11.


ARTICLE 13 (PREEMPTIVE RIGHTS)

(1)  The shareholders of the Company shall have pre-emptive rights to subscribe
     for new shares to be issued by the Company in proportion to their
     respective


                                       4
<PAGE>

     shareholdings.

(2)  Notwithstanding the provision of Paragraph (1) above, the Company may
     allocate new shares to persons other than existing shareholders of the
     Company, in any of the following instances:

     1.   If the Company issues new shares by way of general public offering, to
          the extent not exceeding 50/100 of the total number of issued and
          outstanding shares of the Company, by a resolution of the Board of
          Directors in accordance with the provisions of the Securities Exchange
          Act ("SEA").

     2.   If the Company preferentially allocates new shares to members of the
          Employee Stock Ownership Association in accordance with the provisions
          of the SEA;

     3.   If the Company issues new shares for the issuance of depositary
          receipts ("DR"s), to the extent not exceeding 50/100 of the total
          number of issued and outstanding shares of the Company, in accordance
          with the provisions of the SEA;

     4.   If the Company issues new shares upon the exercise of stock options in
          accordance with the provisions of the SEA;

     5.   If the Company issues new shares to the securities investment company
          that runs exclusively the banking business, as set forth in the
          Finance Holding Company Act (the "FHCA"); or

     6.   If the Company issues new shares to foreign investors, foreign or
          domestic financial institutions, allied companies, etc. for the
          necessity of management, such as introduction of advanced technology,
          improvement of financial structure of or financial support to the
          Company or its subsidiary, strategic business alliance, etc., to the
          extent not exceeding 50/100 of the total number of issued and
          outstanding shares of the Company.

(3)  In case new shares are issued pursuant to Paragraph (2), type, number,
     issue price, etc. of shares to be issued shall be determined by a
     resolution of the Board of Directors, to the extent permitted by the
     relevant laws, such as the SEA, etc.

(4)  In the case of abandonment or loss of the pre-emptive right to subscribe
     for new shares by any shareholder, the forfeited shares resulting from such
     abandonment or loss of the pre-emptive right shall be disposed by a
     resolution of the Board of Directors. If fractional shares result from the
     allocation of new shares, such shares shall also be disposed of by a
     resolution of the Board of Directors.


ARTICLE 14 (STOCK OPTIONS)

(1)  The Company may grant stock options to its officers and employees pursuant
     to the provisions of the SEA, by a special resolution of the General
     Meeting of


                                       5
<PAGE>

     Shareholders, to the extent not exceeding 20/100 of the total number of
     issued and outstanding shares of the Company; provided that the Company may
     grant stock options by a resolution of the Board of Directors, to an extent
     permitted by the relevant laws, such as the SEA, etc.

(2)  The Company may impose the condition of achievement of detailed performance
     for the exercise of stock options, and may postpone or cancel the exercise
     of stock options if such condition is not satisfied.

(3)  The persons who are entitled to receive such stock options shall be
     officers and employees of the Company or its subsidiaries or
     sub-subsidiaries as prescribed in the relevant laws and ordinances
     including the SEA, etc. who have contributed, or is capable of
     contributing, to the establishment, management or technical innovation of
     the Company, except for officers or employees in any of the following
     cases:

     1.   The largest shareholder of the Company and Specially Related Persons
          thereof (as defined in the SEA and the Enforcement Decree of the SEA;
          hereinafter the same shall apply), except for such persons who have
          been regarded as Specially Related Persons by becoming officers of the
          Company (including an officer who is the non-executive officer of the
          affiliate);

     2.   Major Shareholders of the Company (as defined in the SEA; hereinafter
          the same shall apply), and Specially Related Persons thereof, except
          for such persons who have been regarded as Specially Related Persons
          by becoming officers of the Company (including an officer who is the
          non-executive officer of the affiliate); and

     3.   The persons who become the Major Shareholders of the Company by the
          exercise of stock option.

(4)  The shares to be issued upon the exercise of stock options (in case the
     Company pays the difference between the exercise price of stock options and
     the market price of such shares in cash or treasury shares, the shares
     which shall be the basis of the calculation of such differences) shall be
     common shares in registered form.

(5)  The total number of shares to be given to one (1) officer or employee
     pursuant to the stock option shall not exceed 1/100 of the total number of
     shares issued and outstanding.

(6)  The exercise price per share for the stock option shall be determined in
     accordance with the relevant laws, such as the SEA, etc.

(7)  Stock options may be exercised within seven (7) years commencing from two
     (2) years after the date specified in Paragraph (1) above at which a
     resolution to grant such stock options was adopted.

(8)  Stock option is exercisable by a person who has served for the Company two
     (2) years or more from the date specified in Paragraph (1) above at which a
     resolution to grant such stock option was adopted. If the grantee's
     continuous service


                                       6
<PAGE>

     terminates by reason of the grantee's death, attainment of mandatory
     retirement age, or for reasons other than by the fault of the grantee
     within two (2) years from the said date of resolution, the option may be
     exercisable within the exercise period.

(9)  Article 15 shall apply mutatis mutandis with respect to the distribution of
     dividends for new shares issued upon the exercise of stock options.

(10) In the following instances, the Company may, by a resolution of the Board
     of Directors, cancel the stock options granted to an officer or an
     employee:

     1.   When the relevant officer or employee voluntarily resigns or is
          removed from his or her position at the Company after receiving the
          stock option;

     2.   When the relevant officer or employee inflicts material damages or
          losses on the Company due to the willful conduct or negligence of such
          person;

     3.   When the Company cannot respond to the exercise of stock options due
          to its bankruptcy, dissolution, etc.; or

     4.   When there occurs any other event for cancellation of the stock option
          pursuant to the stock option agreement.


ARTICLE 15 (ISSUANCE DATE OF NEW SHARES FOR THE PURPOSE OF DIVIDENDS)

In case the Company issues new shares through rights offering, bonus issue and
stock dividend, the new shares shall be deemed to have been issued at the end of
the fiscal year immediately prior to the fiscal year during which the new shares
are issued for purpose of distribution of dividends for such new shares.


ARTICLE 16    (TRANSFER AGENT)

(1)  The Company may designate a transfer agent for its shares.

(2)  The transfer agent, its office and its duties shall be determined by a
     resolution of the Board of Directors of the Company and shall be notified
     to the public.

(3)  The Company's registry of shareholders or a copy of it shall be kept at the
     office of the transfer agent. The transfer agent shall handle the entries
     of alternations in the registry of shareholders, registering the creation
     and cancellation of pledges over shares, indication of trust assets and
     cancellation thereof with respect to shares, issuance of share
     certificates, receipt of reports and other related activities.

(4)  The relevant procedures for conducting activities referred to in Paragraph
     (3) above shall be carried out in accordance with the Regulation on the
     Securities Transfer Agency Business and other Regulations generally
     applicable to transfer agents.


ARTICLE 17 (REPORT OF ADDRESSES, NAMES AND SEALS OR SIGNATURES OF SHAREHOLDERS
           AND OTHERS)


                                       7
<PAGE>

(1)  Shareholders, registered pledgees and their respective representatives
     shall file their names, addresses, and seals or signatures with the
     transfer agent of Article 16.

(2)  A person referred to Paragraph (1) who reside in a foreign country should
     report to the Company appointed agents and the addresses in Korea to which
     notices are to be sent.

(3)  The same shall apply in case of any changes in the matters referred to in
     Paragraphs (1) and (2) above.


ARTICLE 18    (CLOSE OF SHAREHOLDERS' REGISTRY AND RECORD DATE)

(1)  The Company shall suspend entries of alteration with respect to its rights,
     from the 1st day of January of each year up to the closing date of the
     Ordinary General Meeting of Shareholders for the relevant fiscal year.

(2)  The shareholders registered in the shareholders' registry as of December 31
     of each fiscal year shall be entitled to exercise the rights as
     shareholders at the Ordinary General Meeting of Shareholders convened for
     such fiscal year.

(3)  The Company may, if necessary for convening of an Extraordinary General
     Meeting of Shareholders or any other necessary cases, suspend any entry
     into the shareholders' registry with respect to shareholders' rights for a
     period not exceeding three (3) months as determined by a resolution of the
     Board of Directors, or cause the shareholders whose names appear in the
     shareholders' registry on a record date set by a resolution of the Board of
     Directors to exercise the rights as shareholders. If the Board of Directors
     deems it necessary, the Company may suspend any entry into the
     shareholders' registry and set the record date at the same time. The
     Company shall give at least two (2) weeks prior notice to the public.

(4)  Notwithstanding the provision of Paragraph (3), if otherwise set forth in
     the FHCA or other relevant laws, the Company may follow such different
     provisions.


                                   CHAPTER III
                                      BONDS


ARTICLE 19    (ISSUANCE OF CONVERTIBLE BONDS)

(1)  The Company may issue to persons other than existing shareholders of the
     Company convertible bonds, by the resolution of the Board of Directors, to
     the extent that the total face value of the bonds shall not exceed 1
     trillion Won, in any of the following cases:

     1.   If the convertible bonds are issued through general public offering;


                                       8
<PAGE>

     2.   If the Company issues convertible bonds to the securities investment
          company that runs exclusively the banking business, as set forth in
          the FHCA;

     3.   If the Company issues convertible bonds to foreign investors, foreign
          or domestic financial institutions, allied companies, etc. for the
          necessity of management, such as introduction of advanced technology,
          improvement of financial structure of or financial support to the
          Company or its subsidiary, strategic business alliance, etc.; or

     4.   If the Company issues convertible bonds in foreign country, in
          accordance with the SEA.

(2)  The Board of Directors may determine that the convertible bonds referred to
     in Paragraph (1) may be issued on the condition that conversion rights will
     be attached to only a portion of the convertible bonds.

(3)  The shares to be issued upon conversion shall be common shares. The
     conversion price, which shall be equal to or more than the face value of
     the shares, shall be determined by the Board of Directors at the time of
     issuance of convertible bonds.

(4)  The conversion period shall commence on the date following three (3) months
     from the issue date of the convertible bonds and end on the date
     immediately preceding the redemption date thereof. However, the conversion
     period may be adjusted within the above period by a resolution of the Board
     of Directors.

(5)  For the purpose of any distribution of dividends on the shares issued upon
     conversion, and any payment of accrued interest on the convertible bonds,
     Article 15 hereof shall apply mutatis mutandis.


ARTICLE 20    (BONDS WITH WARRANTS)

(1)  The Company may issue to persons other than existing shareholders of the
     Company bonds with warrants, by the resolution of the Board of Directors,
     to the extent that the total face value of the bonds shall not exceed 1
     trillion Won, in any of the following cases:

     1.   If the bonds with warrants are issued through general public offering;

     2.   If the Company issues bonds with warrants to the securities investment
          company that runs exclusively the banking business, as set forth in
          the FHCA;

     3.   If the Company issues bonds with warrants to foreign investors,
          foreign or domestic financial institutions, allied companies, etc. for
          the necessity of management, such as introduction of advanced
          technology, improvement of financial structure of or financial support
          to the Company or its subsidiary, strategic business alliance, etc.;
          or


                                       9
<PAGE>

     4.   If the Company issues bonds with warrants in foreign country, in
          accordance with the SEA.

(2)  The amount of new shares which can be subscribed for by the holders of the
     bonds with warrants shall be determined by the Board of Directors to the
     extent that the maximum amount of such new shares shall not exceed the face
     value of the bonds with warrants.

(3)  The shares to be issued upon exercise of warrants shall be common shares.
     The issue price, which shall be equal to or more than the face value of the
     shares, shall be determined by the Board of Directors at the time of
     issuance of bonds with warrants.

(4)  The warrant exercise period shall commence on the date following three (3)
     months from the issue date of the relevant bonds and end on the date
     immediately preceding the redemption date thereof. However, the warrant
     period may be adjusted within the above period by a resolution of the Board
     of Directors.

(5)  For the purpose of any distribution of dividends on the shares issued upon
     exercise of warrants, Article 15 hereof shall apply mutatis mutandis.


ARTICLE 21    (ISSUANCE OF PARTICIPATING BONDS)

(1)  The Company may issue to persons other than existing shareholders of the
     Company participating bonds, by the resolution of the Board of Directors,
     to the extent that the total face value of the bonds shall not exceed 1
     trillion Won, in any of the following cases:

     1.   If the participating bonds are issued through general public offering;

     2.   If the Company issues participating bonds to foreign investors,
          foreign or domestic financial institutions, allied companies, etc. for
          the necessity of management, such as introduction of advanced
          technology, improvement of financial structure of or financial support
          to the Company or its subsidiary, strategic business alliance, etc.;
          or

     3.   If the Company issues participating bonds in foreign country, in
          accordance with the SEA.

(2)  Matters regarding the dividend participation of bonds issued pursuant to
     Paragraph (1) shall be determined by the resolution of the Board of
     Directors at the time of issuance, based on the dividend on common stock.


ARTICLE 22    (APPLICABLE PROVISIONS FOR THE ISSUANCE OF BONDS)

The provisions of Articles 16 and 17 hereof shall be applicable to the issuance
of bonds.


                                       10
<PAGE>

                                   CHAPTER IV
                        GENERAL MEETINGS OF SHAREHOLDERS


ARTICLE 23    (CONVENING OF GENERAL MEETINGS OF SHAREHOLDERS)

(1)  General Meetings of Shareholders of the Company shall be of two types: (i)
     Ordinary and (ii) Extraordinary.

(2)  The Ordinary General Meeting of Shareholders shall be held within three (3)
     months after the end of each fiscal year and the Extraordinary General
     Meeting of Shareholders may be convened whenever deemed to be necessary.


ARTICLE 24    (AUTHORITY TO CONVENE)

(1)  The Representative Director-President of the Company shall convene the
     General Meeting of Shareholders in accordance with a resolution of the
     Board of Directors, unless otherwise prescribed by other laws and
     ordinances.

(2)  If the Representative Director-President is unable to perform his/her
     duties, the General Meeting of Shareholders shall be convened by a Director
     designated by the Board of Directors.


ARTICLE 25 (PERSONAL OR PUBLIC NOTICES FOR CONVENING)

(1)  Written notice of the General Meeting of Shareholders of the Company shall
     state the date, time, place of the Meeting, the purposes for which the
     Meeting has been called, and other matters set forth in the relevant laws.
     The written notice shall be sent to all shareholders at least two (2) weeks
     prior to the date set for the Meeting.

(2)  The written notice of a General Meeting of Shareholders to be given to
     shareholders holding one-hundredth (1/100) or less of the total issued and
     outstanding voting shares may be substituted by giving public notice of the
     convening of the General Meeting of Shareholders in Hankuk Kyongje Shinmun
     and Maeil Kyongje Shinmun which are published in the city of Seoul, at
     least two (2) notices are made in the said publications two (2) weeks prior
     to the date set for such Meeting.

(3)  Notwithstanding the provisions of Paragraphs (1) and (2), if otherwise set
     forth in the FHCA or other relevant laws, the Company may follow such
     different provisions.


ARTICLE 26    (PLACE OF MEETING)

The General Meeting of Shareholders shall be held in the city where the head
office is located, or any other places adjacent thereto as required.


                                       11
<PAGE>

ARTICLE 27    (CHAIRMAN OF THE GENERAL MEETING OF SHAREHOLDERS)

The Chairman of the General Meetings of Shareholders shall be the person
entitled to convene the Meeting pursuant to Article 24.


ARTICLE 28    (CHAIRMAN'S AUTHORITY TO MAINTAIN ORDER)

(1)  The Chairman may order persons who purposely speaks or acts in a manner to
     prevent or disrupt the deliberations of the General Meeting of Shareholders
     or who disturb the public order of the General Meeting of Shareholders to
     stop or retract his/her remarks or to leave the place of meeting.

(2)  The Chairman may restrict the length and frequency of the speech of
     shareholders if it is necessary for the smooth deliberations of the General
     Meeting of Shareholders.


ARTICLE 29    (VOTING RIGHTS)

Each shareholder shall have one (1) vote for each share he/she owns.


ARTICLE 30    (SPLIT VOTING)

(1)  If any shareholder who holds two (2) or more votes wishes to split his/her
     votes, he/she shall notify in writing the Company of such intent and the
     reasons therefor no later than three (3) days before the date set for the
     General Meeting of Shareholders.

(2)  The Company may refuse to allow the shareholder to split his/her votes
     unless the shareholder acquired the shares in trust or otherwise holds the
     shares for and on behalf of some other person.


ARTICLE 31    (VOTING BY PROXY)

(1)  A shareholder may exercise his/her vote through a proxy.

(2)  In the case of Paragraph (1) above, the proxy holder shall file with the
     Company the documents evidencing the authority to act as a proxy before the
     General Meeting of Shareholders.


ARTICLE 32    (METHOD OF RESOLUTION)

Except as otherwise provided in the applicable laws and regulations or these
Articles of Incorporation, all resolutions of the General Meeting of
Shareholders shall be adopted by


                                       12
<PAGE>

the affirmative vote of a majority of the shareholders present; provided that
such votes shall, in any event, represent not less than one-fourth (1/4) of the
total number of issued and outstanding shares.


ARTICLE 33    (EXERCISE OF VOTING RIGHT IN WRITING)

(1)  If the method of resolution in writing at the General Meeting of
     Shareholders is adopted by the resolution of the Board of Directors, the
     shareholders may exercise their voting rights without participating the
     meeting.

(2)  In case of Paragraph (1), the Company shall attach the documents and
     references necessary for exercise of voting rights to the convening notice.

(3)  If a shareholder intends to exercise his/her voting rights in writing, the
     shareholder shall fill in and submit to the Company the documents referred
     to in Paragraph (2) by the date preceding the date set for the General
     Meeting of Shareholders.


ARTICLE 34    (MINUTES OF THE GENERAL MEETINGS OF SHAREHOLDERS)

The substance of the course of the proceedings of the General Meeting of
Shareholders and the results thereof shall be recorded in the minutes and shall
be preserved at the head office and branches of the Company, after being affixed
with the names and seal impressions or signatures of the Chairman and the
Directors present.


                                    CHAPTER V
                         OFFICERS AND BOARD OF DIRECTORS


ARTICLE 35    (OFFICERS)

The Company shall have not less than three (3) but not more than fifteen (15)
Directors, of which the number of the Outside Directors shall not be less than 3
persons and 50/100 of the total number of Directors.

ARTICLE 36    (ELECTION OF DIRECTOR)

(1)  The Directors shall be elected at the General Meeting of Shareholders.

(2)  The Outside Directors shall be recommended by the Operation Committee
     pursuant to Article 46 and elected at the General Meeting of Shareholders.


ARTICLE 37    (TERM OF DIRECTOR)

(1)  The term of office of the Director shall be determined at the General
     Meeting of Shareholders to the extent not exceeding three years, and the
     Director may be re-

                                       13
<PAGE>

     appointed. Provided that, the term of office of the Outside Director
     appointed as specialist at the General Meeting of Shareholders shall be one
     year.

(2)  If the term of office expires after the end of a fiscal year but before the
     Ordinary General Meeting of Shareholders convened in respect of such fiscal
     year, the term of office shall be extended up to the close of such General
     Meeting of Shareholders.


ARTICLE 38    (BY-ELECTION OF DIRECTORS)

(1)  In the event of any interim vacancy in the office of the Director, a
     substitute Director shall be elected at the General Meeting of
     Shareholders; provided, however, that the foregoing shall not apply if the
     number of remaining Directors satisfies the requirement of Article 35
     hereof and such vacancy does not cause any difficulties in the business
     operation of the Company.

(2)  If the number of Outside Directors does not satisfy the requirement
     referred to in Article 35 due to the death or resignation of Outside
     Directors or any other reason, the Outside Directors shall be elected to
     fill the vacancy at the Ordinary General Meeting of Shareholders to be held
     first after such cause so as for the number of Outside Directors to be such
     prescribed number.

(3)  The term of office of the Director appointed pursuant to Paragraphs (1) and
     (2) shall commence from the date of taking office.


ARTICLE 39    (APPOINTMENT OF REPRESENTATIVE DIRECTOR, ET AL.)

(1)  The Company may appoint one Representative Director-Chairman and one
     Representative Director-President, by a resolution of the Board of
     Directors.

(2)  The Company may appoint one Vice President from among the Directors, by a
     resolution of the Board of Directors.


ARTICLE 40    (DUTIES OF DIRECTORS)

(1)  The Representative Director-Chairman shall represent the Company and shall
     oversee the business operation of the Company.

(2)  The Representative Director-Presidents shall also represent the Company and
     shall perform the matters resolved by the Board of Directors and oversee
     the business of the Company as determined by the Board of Directors.

(3)  The Vice President and Directors shall assist the Representative Director,
     and perform their respective duties as may be delegated to them by the
     Board of Directors.


ARTICLE 41 (DIRECTOR'S OBLIGATIONS)


                                       14
<PAGE>

(1)  The Directors shall perform their respective duties faithfully for the
     benefits of the Company, in accordance with the laws and these Articles of
     Incorporation.

(2)  If any Director finds any facts which may cause substantial losses to the
     Company, such Director shall promptly report to the Audit Committee
     thereof.


ARTICLE 42    (COMPOSITION AND CONVENING OF THE MEETING OF BOARD OF DIRECTORS)

(1)  The Board of Directors shall consist of Directors, and shall resolve
     important matters regarding the business affairs of the Company.

(2)  The Meeting of the Board of Directors shall be of two types: (i) Ordinary
     and (ii) Extraordinary. The Ordinary Meeting of the Board of Directors
     shall be held at least once per fiscal quarter and the Extraordinary
     Meeting of the Board of Directors may be convened whenever deemed to be
     necessary.

(3)  The Meeting of the Board of Directors shall be convened by the
     Representative Director-Chairman of the Director designated by the Board of
     Directors (if any) by giving notice to each Director at least seven (7)
     days prior to the scheduled date of such Meeting. However, such period may
     be reduced upon occurrence of urgent events, and the said procedures may be
     omitted with the consent thereon of all Directors.


ARTICLE 43    (CHAIRMAN OF THE MEETING OF THE BOARD OF DIRECTORS)

The Chairman of the Meeting of the Board of Directors shall be the person
entitled to convene the Meeting pursuant to Article 42.


ARTICLE 44    (METHOD OF RESOLUTION)

(1)  The quorum for the Board of Directors shall be the presence of at least
     more than one half (1/2) of the Directors, and all resolutions of the Board
     of Directors shall require the affirmative votes of a majority of the
     Directors present at the meeting of the Board of Directors.

(2)  The Board meetings may be held by means of a video conference or other
     similar arrangement whereby all or part of the Directors may participate in
     the meeting and vote on matters at the same time. In such case, a Director
     participating in the meeting by such arrangement shall be considered
     present at the meeting.

(3)  Any Director who has a particular interest in the matters to be resolved at
     the Meeting of the Board of Directors shall not be entitled to vote at such
     Meeting.


ARTICLE 45    (MINUTES OF THE MEETING OF BOARD OF DIRECTORS)


                                       15
<PAGE>

(1)  The proceedings of a Board meeting shall be recorded in the minutes.

(2)  The agenda, proceedings, resolutions, dissenting director (if any) and
     his/her reasons for dissenting of a Board meeting shall be recorded in the
     minutes on which the names and seals of the Directors present at the
     meeting.


ARTICLE 46    (COMMITTEES)

(1)  The Company may have the following committees within the Board of
     Directors.

     1.   Operation Committee;

     2.   Audit Committee; and

     3.   Risk Management Committee.

(2)  Details regarding composition, power, operation, etc. of each committee
     shall be determined by the resolution of the Board of Directors. Provided
     that, the Operation Committee referred to in Paragraph (1), Subparagraph 1
     shall satisfy the composition requirements of the Outside Director
     Candidate Recommendation Committee as set forth in the FHCA.

(3)  Articles 42, 44 and 45 shall apply mutatis mutandis with respect to the
     committees.


ARTICLE 47     (REMUNERATION FOR DIRECTORS)

The remuneration for the Directors shall be determined by a resolution of the
General Meeting of Shareholders.


ARTICLE 48    (CONSULTANTS)

By a resolution of the Board of Directors, the Company may retain several
consultants, honorary directors and advisors.


                                   CHAPTER VI
                                 AUDIT COMMITTEE


ARTICLE 49    (CONSTITUTION OF AUDIT COMMITTEE)

(1)  The Company shall have the Audit Committee, as prescribed by the Commercial
     Code, the SEA and other laws, in stead of the Auditor.

(2)  The Audit Committee of the Company shall consist of three (3) or more
     Directors; provided that two-thirds (2/3) of the members of the Audit
     Committee shall be elected from the Outside Directors.

(3)  The chairman of the Audit Committee shall be elected among the outside


                                       16
<PAGE>

     directors by a resolution of the Audit Committee.


ARTICLE 50    (DUTIES OF AUDIT COMMITTEE)

(1)  The Audit Committee shall examine the operation and accounting of the
     Company.

(2)  The Audit Committee may request the Board of Directors to convene the
     Extraordinary General Meeting of Shareholders by submitting documents
     stating the agenda and reasons for convening such meeting.

(3)  The Audit Committee may request business reports from any subsidiary of the
     Company when it is necessary to perform its duties. In this case, if such
     subsidiary does not report to the Audit Committee immediately or the Audit
     Committee needs to verify the contents of the reports, it may investigate
     the status of business and the financial condition of the subsidiary.

(4)  The Audit Committee shall approve the appointment of the external auditor.

(5)  In addition to the matters referred to in Paragraphs (1) through (4), the
     Audit Committee shall dispose of the matters delegated by the Board of
     Directors.


ARTICLE 51    (AUDIT COMMITTEE'S RECORD)

The Audit Committee shall record the substance and results of its audit in the
Audit Committee's record, on which the name and seal of the Audit Committee(s)
who has performed such audit shall be affixed or shall be signed by such Audit
Committee.


                                   CHAPTER VII
                                   ACCOUNTING


ARTICLE 52    (FISCAL YEAR)

The fiscal year of the Company shall begin on January 1 and end on December 31
of each year.


ARTICLE 53    (PREPARATION AND MAINTENANCE OF FINANCIAL STATEMENTS AND BUSINESS
              REPORT)

(1)  The Representative Director-President of the Company shall prepare the
     following documents to be submitted to the Ordinary General Meeting of
     Shareholders, together with supplementary data and business reports, and
     have such documents audited by the Audit Committee no later than six (6)
     weeks before the date of the Ordinary General Meeting of Shareholders:

     (a)  balance sheet;


                                       17
<PAGE>

     (b)  statements of profit and loss; and

     (c)  statement of appropriation of retained earnings or statement of
          disposition of deficit.

(2)  The Audit Committee shall submit an audit report to the Representative
     Director-President no later than one (1) week before the date of the
     Ordinary General Meeting of Shareholders.

(3)  The Representative Director-President shall keep on file copies of the
     documents described in Paragraph (1) above, together with the business
     report and Audit Committee's audit report thereon, at the head office of
     the Company for five (5) years, and certified copies of all of such
     documents at the branches of the Company for three (3) years, beginning
     from one (1) week before the date of the Ordinary General Meeting of
     Shareholders.

(4)  Immediately upon obtaining approval for the documents mentioned in
     Paragraph (1) above from the General Meeting of Shareholders, the
     Representative Director-President shall make a public notice of the balance
     sheet, income statement, consolidated financial statements pursuant to the
     Act on External Audit of Stock Companies and the opinion of an external
     auditor.


ARTICLE 54 (APPOINTMENT OF EXTERNAL AUDITOR)

The Company shall appoint the external auditor with the approval of the Audit
Committee, and shall report such fact to the Ordinary General Meeting of
Shareholders to be held first after such appointment.


ARTICLE 55 (DISPOSAL OF PROFITS)

The Company shall dispose of the unappropriated retained earnings as of the end
of each fiscal year as follows:

     1.   earned surplus reserves;

     2.   other statutory reserves;

     3.   dividends;

     4.   temporary reserves; and

     5.   other appropriation of earned surplus.


ARTICLE 56    (RETIREMENT OF SHARES)

(1)  The Company may retire the shares within the scope of profits attributable
     to the shareholders, by the resolution of the Board of Directors.

(2)  In order to retire the shares pursuant to Paragraph (1), the Board of
     Directors shall adopt the following resolutions:

     1.   Types and the total number of shares to be retired;


                                       18
<PAGE>


     2.   The total amount of shares to be acquired for retirement; and

     3.   Acquisition period or retirement date (the acquisition period or
          retirement date shall be before the Ordinary General Meeting of
          Shareholders to be held first after the resolution of such
          retirement).

(3)  When the shares are retired pursuant to Paragraph (1), it shall be in
     accordance with the following criteria:

     1.   In case of acquisition of shares for the purpose of retirement, such
          acquisition shall be made in accordance with the acquisition method
          and criteria as prescribed in the relevant laws, such as the SEA, etc.

     2.   Total price of the shares to be acquired for the purpose of retirement
          shall be not more than the amount as prescribed in the relevant laws,
          such as the SEA, etc., within the scope available for dividend as at
          the end of such fiscal year pursuant to Article 462, Paragraph (1) of
          the Commercial Code.

(4)  When the shares are retired pursuant to Paragraph (1), the matters referred
     to in each Subparagraph of Paragraph (2) and the purpose of retirement
     shall be reported to the Ordinary General Meeting of Shareholders to be
     held first after the resolution of such retirement.


ARTICLE 57    (DIVIDENDS)

(1)  Dividends may be distributed in cash or stock.

(2)  In case the dividends are to be distributed in stock and the Company has
     several classes of shares, the stock dividend distribution may be made in
     shares of different classes by a resolution of the General Meeting of
     Shareholders.

(3)  Dividends of Paragraph (1) above shall be paid to the shareholders
     registered in the Company's registry of shareholders or the registered
     pledgees as of the last day of each fiscal year.


ARTICLE 57-2 (INTERIM DIVIDENDS)

(1)  The Company may distribute interim dividends to its shareholders as of
     00:00, July 1 in accordance with the relevant laws including the SEA. Such
     interim dividends shall be made in cash.

(2)  Interim dividends provided under Paragraph (1) shall be decided by
     resolution of the Board of Directors, which resolution shall be made within
     forty-five (45) days from the date specified in Paragraph (1).

(3)  The maximum amount to be paid as interim dividends shall be calculated by
     deducting the following amounts from the net asset amounts recorded in the
     balance sheet of the fiscal year immediately prior to the fiscal year
     concerned:


                                       19
<PAGE>

     1.   Capital of the company for the fiscal year immediately prior to the
          fiscal year concerned;

     2.   The aggregate amount of capital reserves and legal reserves which had
          been accumulated up until the fiscal year immediately prior to the
          fiscal year concerned;


     3.   The amount which was resolved to be distributed as dividends at an
          ordinary general meeting of shareholders of the fiscal year
          immediately prior to the fiscal year concerned;

     4.   Voluntary reserves which had been accumulated for specific purposes in
          accordance with the relevant provisions of the Articles of
          Incorporation or by resolution of a general meeting of shareholders
          until the fiscal year immediately prior to the fiscal year concerned;


     5.   Eared surplus reserves to be accumulated for the fiscal year concerned
          as a result of the interim dividends.

(4)  In the event the Company has issued new shares (including those shares
     issued by way of conversion of reserves into capital stock, stock
     dividends, request of conversion of convertible bonds or exercise of
     warrants) prior to the date set forth in Paragraph (1) above, but after the
     commencement date of the fiscal year concerned, the new shares shall be
     deemed to have been issued at the end of the fiscal year immediately prior
     to the fiscal year for the purpose of interim dividends.

(5)  When distributing interim dividends the same dividend rate as that of the
     common shares of the Company shall be applied to the preferred shares.
     However, if the Board of Directors had decided otherwise at the time of the
     issuance of such preferred shares, the dividend rate shall be in accordance
     with such decision by the Board of Directors.


ARTICLE 58    (EXPIRATION OF RIGHT TO PAYMENT OF DIVIDENDS)

(1)  The right to demand payment of dividends shall extinguish by prescription
     if not exercised within five (5) years.

(2)  The dividends, of which the right has been extinguished under Paragraph (1)
     above, shall be kept by the Company.


ARTICLE 59  (SUPPLEMENTARY PROVISION)

Matters not specified in these Articles of Incorporation shall be determined by
the resolution of the Board of Directors or the General Meeting of Shareholders,
or in accordance with the Commercial Code or other laws.



                                       20
<PAGE>

                                    ADDENDUM


ARTICLE 1     (EFFECTIVE DATE)

These Articles of Incorporation shall become effective from the date of
registration of incorporation.


ARTICLE 2     (INITIAL FISCAL YEAR AFTER INCORPORATION)

Notwithstanding the provisions of Article 52, the initial fiscal year of the
Company after incorporation shall be from the date of incorporation to December
31, 2001.


ARTICLE 3     (INITIAL TRANSFER AGENT AFTER INCORPORATION)

Notwithstanding the provisions of Article 16, Paragraph (2), the initial
transfer agent of the Company after incorporation shall be Korea Securities
Depository.


ARTICLE 4     (APPOINTMENT OF INITIAL REPRESENTATIVE DIRECTOR, ET AL. AFTER
INCORPORATION)

Notwithstanding the provisions of Article 39, the initial Representative
Director-Chairman and the initial Representative Director-Chairman of the
Company after incorporation shall be one person appointed at the General
Meetings of Shareholders of the Share Transferring Companies, at which the
resolution to approve the share transfer is adopted.


ARTICLE 5     (APPOINTMENT OF INITIAL OUTSIDE DIRECTOR AFTER INCORPORATION)

Notwithstanding the provisions of Article 36, Paragraph (2), the initial Outside
Director of the Company after incorporation shall be appointed at the General
Meetings of Shareholders of the Share Transferring Companies, at which the
resolution to approve the share transfer is adopted, without recommendation of
the Operation Committee.


ARTICLE 6     (APPOINTMENT OF INITIAL MEMBERS OF AUDIT COMMITTEE AFTER
INCORPORATION)

The initial members of Audit Committee shall be appointed at the General
Meetings of Shareholders of the Share Transferring Companies, at which the
resolution to approve the share transfer is adopted.


ARTICLE 7     (REMUNERATION OF DIRECTORS IN INITIAL FISCAL YEAR AFTER
INCORPORATION)

Notwithstanding the provisions of Article 47, the remuneration of Directors in
initial fiscal

                                       21
<PAGE>
year after incorporation shall be determined at the Board of Directors to be
held first after incorporation, to the extent not exceeding 1 billion Won.


ARTICLE 8     (SHARE TRANSFERRING COMPANIES)

In order to incorporate the Company, the following share transferring companies
prepare these Articles of Incorporation and affix their respective names and
seals hereon on August 10, 2001.


Shinhan Bank
120, Taepyongro 2ga, Jung-gu, Seoul
Representative Director, President  In Ho Lee

Shinhan Securities Co., Ltd.
24-4, Yoido-dong, Youngdeungpo-gu, Seoul
Representative Director, President  Yang Sang Yoo

Shinhan Capital Co., Ltd.
526-3, Kojan-dong, Ansan, Kyonggido
Representative Director, President  Shin Jung Kang

Shinhan Investment Trust Management Co., Ltd.
24-4, Yoido-dong, Youngdeungpo-gu, Seoul
Representative Director, President  Bo Gil Baek

                                   ADDENDA (1)


ARTICLE 1     (EFFECTIVE DATE)

These Articles of Incorporation shall become effective as of March 20, 2002.



                                   ADDENDA (2)


ARTICLE 1     (EFFECTIVE DATE)

These Articles of Incorporation shall become effective as of March 31, 2003.








                                       22

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>4
<FILENAME>u98617exv2w1.txt
<DESCRIPTION>EX-2.1 FORM OF COMMON STOCK CERTIFICATE
<TEXT>
<PAGE>
                                                                     Exhibit 2.1

                                                                   [TRANSLATION]
                                                                      [SPECIMEN]

             SHARE CERTIFICATE OF SHINHAN FINANCIAL GROUP CO., LTD.

                              One Share Certificate
                                FIVE THOUSAND WON

                                                                  The 24th Issue
                                                                  No.: Ka-000000


1. Name of the Company:                 o Shinhan Financial Group Co., Ltd.
1. Date of establishment:               o September 1, 2001
1. Number of authorized shares:         o 1,000,000,000 shares
1. Face value per share                 o Won 5,000
1. Type of share:                       o Common Shares in Registered form
1. Date of issuance:                    o September 1, 2001


This certificate has been delivered to the person whose name is stated on the
reverse of this certificate for the purpose of certifying that such person is
the holder of the Company's one share in accordance with the Company's Articles
of Incorporation.

                        SHINHAN FINANCIAL GROUP CO., LTD.
               Representative Director Eung Chan Ra (seal affixed)


<PAGE>


                                                           [REVERSE OF SPECIMEN]


<TABLE>
<CAPTION>
To: (shareholder)                                     Date of Delivery
- ------------------------------------------------      ----------------
Date of           Name of         Authentication      Date of             Name of        Authentication
Registration      Shareholder                         Registration        Shareholder
- ------------      -----------     --------------      ----------------    -----------    --------------

<S>               <C>             <C>                 <C>                 <C>            <C>
(1)                                                   (5)
(2)                                                   (6)
(3)                                                   (7)
(4)                                                   (8)
</TABLE>









</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.2
<SEQUENCE>5
<FILENAME>u98617exv2w2.txt
<DESCRIPTION>EX-2.2 FORM OF DEPOSIT AGREEMENT
<TEXT>
<PAGE>

                                                                     EXHIBIT 2.2

                                                PBW&T Draft of September 8, 2003
                                                    FOR DISCUSSION PURPOSES ONLY

- --------------------------------------------------------------------------------

                                DEPOSIT AGREEMENT

- --------------------------------------------------------------------------------

                                  by and among

                        SHINHAN FINANCIAL GROUP CO., LTD.

                                       and

                                 CITIBANK, N.A.,
                                 as Depositary,

                                       and

                       THE HOLDERS AND BENEFICIAL OWNERS
                   OF AMERICAN DEPOSITARY SHARES EVIDENCED BY
                 AMERICAN DEPOSITARY RECEIPTS ISSUED HEREUNDER

- --------------------------------------------------------------------------------

                            Dated as of [DATE], 2003

<PAGE>

                                DEPOSIT AGREEMENT

         DEPOSIT AGREEMENT, dated as of ________________, 2003, by and among (i)
SHINHAN FINANCIAL GROUP CO., LTD., a company organized under the laws of the
Republic of Korea, and its successors (the "Company"), (ii) CITIBANK, N.A., a
national banking association organized under the laws of the United States of
America acting in its capacity as depositary, and any successor depositary
hereunder (the "Depositary"), and (iii) all Holders and Beneficial Owners of
American Depositary Shares evidenced by American Depositary Receipts issued
hereunder (all such capitalized terms as hereinafter defined).

                         W I T N E S S E T H  T H A T:

         WHEREAS, the Company desires to establish with the Depositary an ADR
facility to provide inter alia for the deposit of the Shares (as hereinafter
defined) and the creation of American Depositary Shares representing the Shares
so deposited and for the execution and delivery of American Depositary Receipts
evidencing such American Depositary Shares; and

         WHEREAS, the Depositary is willing to act as the Depositary for such
ADR facility upon the terms set forth in this Deposit Agreement; and

         WHEREAS, the American Depositary Receipts evidencing the American
Depositary Shares issued pursuant to the terms of this Deposit Agreement are to
be substantially in the form of Exhibit A attached hereto, with appropriate
insertions, modifications and omissions, as hereinafter provided in this Deposit
Agreement; and

         WHEREAS, the Shares are listed on the Korea Stock Exchange and American
Depositary Shares to be issued pursuant to the terms of this Deposit Agreement
are to be listed for trading on The New York Stock Exchange, Inc. (the "NYSE");
and

         WHEREAS, the Board of Directors of the Company (or an authorized
committee thereof) has duly approved the establishment of an ADR facility upon
the terms set forth in this Deposit Agreement (as hereinafter defined), the
execution and delivery of this Deposit Agreement on behalf of the Company, and
the actions of the Company and the transactions contemplated herein.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

                                   ARTICLE I

                                  DEFINITIONS

         All capitalized terms used, but not otherwise defined, herein shall
have the meanings set forth below, unless otherwise clearly indicated:

         SECTION 1.1 "AFFILIATE" shall have the meaning assigned to such term by
the Commission (as hereinafter defined) under Regulation C promulgated under the
Securities Act (as hereinafter defined), or under any successor regulation
thereto.

<PAGE>

         SECTION 1.2 "ADS RECORD DATE" shall have the meaning given to such term
in Section 4.9.

         SECTION 1.3 "AMERICAN DEPOSITARY RECEIPT(s)", "ADR(s)" AND "RECEIPT(s)"
shall mean the certificate(s) issued by the Depositary to evidence the American
Depositary Shares issued under the terms of this Deposit Agreement, as such ADRs
may be amended from time to time in accordance with the provisions of this
Deposit Agreement. An ADR may evidence any number of ADSs and may, in the case
of ADSs held through a central depository such as DTC, be in the form of a
"Balance Certificate."

         SECTION 1.4 "AMERICAN DEPOSITARY SHARE(s)" AND "ADS(s)" shall mean the
rights and interests in the Deposited Securities granted to the Holders and
Beneficial Owners pursuant to the terms and conditions of this Deposit Agreement
and the ADRs issued hereunder to evidence such ADSs. Each ADS shall represent
two (2) Share(s) until there shall occur a distribution upon Deposited
Securities referred to in Section 4.2 or a change in Deposited Securities
referred to in Section 4.11 with respect to which additional ADSs are not
issued, and thereafter each ADS shall represent the Deposited Securities
determined in accordance with the terms of such Sections.

         SECTION 1.5 "APPLICANT" shall have the meaning given to such term in
Section 5.10.

         SECTION 1.6 "BENEFICIAL OWNER" shall mean, as to any ADS, any person or
entity having a beneficial interest deriving from the ownership of such ADS. A
Beneficial Owner of ADSs may or may not be the Holder of the ADR(s) evidencing
such ADSs. A Beneficial Owner shall be able to exercise any right or receive any
benefit hereunder solely through the person who is the Holder of the ADR(s)
evidencing the ADSs owned by such Beneficial Owner.

         SECTION 1.7 "COMMISSION" shall mean the Securities and Exchange
Commission of the United States or any successor governmental agency thereto in
the United States.

         SECTION 1.8 "COMPANY" shall mean Shinhan Financial Group Co., Ltd., a
company incorporated and existing under the laws of the Republic of Korea, and
its successors.

         SECTION 1.9 "CSD" shall mean any institution authorized under Korean
law to effect book-entry transfers of securities, which may include Korea
Securities Depository.

         SECTION 1.10 "CUSTODIAN" shall mean, as of the date hereof, Korea
Securities Depository, having its principal office at 33, Yoido-dong,
Youngdeungpo-gu, Seoul, Korea, as the custodian for the purposes of this Deposit
Agreement, and any other entity that may be appointed by the Depositary pursuant
to the terms of Section 5.5 as successor, substitute or additional custodian
hereunder. The term "Custodian" shall mean any Custodian individually or all
Custodians collectively, as the context requires.

         SECTION 1.11 "DELIVER" AND "DELIVERY" shall mean, when used in respect
of ADSs, Deposited Securities and Shares, either (i) the physical delivery of
the certificate(s) representing such securities which Delivery shall be made at
the Custodian's designated office, or (ii) the electronic delivery of such
securities by means of book-entry transfer, if available.

                                       2

<PAGE>

         SECTION 1.12 "DEPOSIT AGREEMENT" shall mean this Deposit Agreement and
all exhibits hereto, as the same may from time to time be amended and
supplemented from time to time in accordance with the terms hereof.

         SECTION 1.13 "DEPOSITARY" shall mean Citibank, N.A., a national banking
association organized under the laws of the United States, in its capacity as
depositary under the terms of this Deposit Agreement, and any successor
depositary hereunder.

         SECTION 1.14 "DEPOSITED SECURITIES" shall mean Shares at any time
deposited under this Deposit Agreement and any and all other securities,
property and cash held by the Depositary or the Custodian in respect thereof,
subject, in the case of cash, to the provisions of Section 4.8. The collateral
delivered in connection with Pre-Release Transactions described in Section 5.10
hereof shall not constitute Deposited Securities.

         SECTION 1.15 "DOLLARS" AND "$" shall refer to the lawful currency of
the United States.

         SECTION 1.16 "DTC" shall mean The Depository Trust Company, a national
clearinghouse and the central book-entry settlement system for securities traded
in the United States and, as such, the custodian for the securities of DTC
Participants (as hereinafter defined) maintained in DTC, and any successor
thereto.

         SECTION 1.17 "DTC PARTICIPANT" shall mean any financial institution (or
any nominee of such institution) having one or more participant accounts with
DTC for receiving, holding and delivering the securities and cash held in DTC.

         SECTION 1.18 "EXCHANGE ACT" shall mean the United States Securities
Exchange Act of 1934, as amended from time to time.

         SECTION 1.19 "FOREIGN CURRENCY" shall mean any currency other than
Dollars.

         SECTION 1.20 "FULL ENTITLEMENT ADR(s)", "FULL ENTITLEMENT ADS(s)" and
"FULL ENTITLEMENT SHARE(S)" shall have the respective meanings set forth in
Section 2.11.

         SECTION 1.21 "HOLDER(s)" shall mean the person(s) in whose name an ADR
is registered on the books of the Depositary (or the Registrar, if any)
maintained for such purpose. A Holder may or may not be a Beneficial Owner. If a
Holder is not the Beneficial Owner of the ADSs evidenced by the ADR registered
in its name, such person shall be deemed to have all requisite authority to act
on behalf of the Beneficial Owners of the ADSs evidenced by such ADR.

         SECTION 1.22 "KOREA" shall mean the Republic of Korea.

         SECTION 1.23 "KOREA STOCK EXCHANGE" shall mean the Korea Stock Exchange
in Korea on which the Shares are listed for trading.

         SECTION 1.24 "KOREA SECURITIES DEPOSITORY" shall mean the Korea
Securities Depository.

                                       3

<PAGE>

         SECTION 1.25 "PARTIAL ENTITLEMENT ADR(s)", "PARTIAL ENTITLEMENT
ADS(s)" and "PARTIAL ENTITLEMENT SHARE(s)" shall have the respective meanings
set forth in Section 2.11.

         SECTION 1.26 "PRE-RELEASE TRANSACTION" shall have the meaning set forth
in Section 5.10.

         SECTION 1.27 "PRINCIPAL OFFICE" shall mean, when used with respect to
the Depositary, the principal office of the Depositary at which at any
particular time its depositary receipts business shall be administered, which,
at the date of this Deposit Agreement, is located at 111 Wall Street, New York,
New York 10043, U.S.A.

         SECTION 1.28 "REGISTRAR" shall mean the Depositary or any bank or trust
company having an office in the Borough of Manhattan, The City of New York,
which shall be appointed by the Depositary to register issuances, transfers and
cancellations of ADRs as herein provided, and shall include any co-registrar
appointed by the Depositary for such purposes. Registrars (other than the
Depositary) may be removed and substitutes appointed by the Depositary. Each
Registrar (other than the Depositary) appointed pursuant to this Deposit
Agreement shall be required to give notice in writing to the Depositary
accepting such appointment and agreeing to be bound by the applicable terms of
this Deposit Agreement.

         SECTION 1.29 "RESTRICTED SECURITIES" shall mean Shares, Deposited
Securities or ADSs which (i) have been acquired directly or indirectly from the
Company or any of its Affiliates in a transaction or chain of transactions not
involving any public offering and are subject to resale limitations under the
Securities Act or the rules issued thereunder, or (ii) are held by an officer or
director (or persons performing similar functions) or other Affiliate of the
Company, or (iii) are subject to other restrictions on sale or deposit under the
laws of the United States, Korea, or under a shareholder agreement or the
Articles of Incorporation of the Company or under the regulations of an
applicable securities exchange unless, in each case, such Shares, Deposited
Securities or ADSs are being transferred or sold to persons other than an
Affiliate of the Company in a transaction (a) covered by an effective resale
registration statement, or (b) exempt from the registration requirements of the
Securities Act (as hereinafter defined), and the Shares, Deposited Securities or
ADSs are not, when held by such person(s), Restricted Securities.

         SECTION 1.30 "RESTRICTED ADR(s)", "RESTRICTED ADS(s)" and "RESTRICTED
SHARES" shall have the respective meanings set forth in Section 2.12.

         SECTION 1.31 "SECURITIES ACT" shall mean the United States Securities
Act of 1933, as amended from time to time.

         SECTION 1.32 "SHARE REGISTRAR" shall mean Korea Securities Depository
or any other institution organized under the laws of Korea appointed by the
Company to carry out the duties of registrar for the Shares, and any successor
thereto.

         SECTION 1.33 "SHARES" shall mean the Company's shares of common stock,
par value 5,000 Won per share, validly issued and outstanding and fully paid and
may, if the Depositary so agrees after consultation with the Company, include
evidence of the right to receive Shares; provided, further, however, that, if
there shall occur any change in par value, split-up, consolidation,
reclassification, exchange, conversion or any other event described in Section
4.11

                                       4

<PAGE>

in respect of the Shares of the Company, the term "Shares" shall thereafter, to
the maximum extent permitted by law, represent the successor securities
resulting from such event.

         SECTION 1.34 "UNITED STATES" and "U.S." shall have the meaning assigned
to it in Regulation S as promulgated by the Commission under the Securities Act.

         SECTION 1.35 "WON" and "W" shall refer to the lawful currency of Korea.

                                   ARTICLE II

                  APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS;
                   DEPOSIT OF SHARES; EXECUTION AND DELIVERY,
                       TRANSFER AND SURRENDER OF RECEIPTS

         SECTION 2.1 APPOINTMENT OF DEPOSITARY. The Company hereby appoints the
Depositary as depositary for the Deposited Securities and hereby authorizes and
directs the Depositary to act in accordance with the terms and conditions set
forth in this Deposit Agreement and the applicable ADRs. Each Holder and each
Beneficial Owner, upon acceptance of any ADSs (or any interest therein) issued
in accordance with the terms and conditions of this Deposit Agreement shall be
deemed for all purposes to (a) be a party to and bound by the terms of this
Deposit Agreement and the applicable ADR(s), and (b) appoint the Depositary its
attorney-in-fact, with full power to delegate, to act on its behalf and to take
any and all actions contemplated in this Deposit Agreement and the applicable
ADR(s), to adopt any and all procedures necessary to comply with applicable law
and to take such action as the Depositary in its sole discretion may deem
necessary or appropriate to carry out the purposes of this Deposit Agreement and
the applicable ADR(s), the taking of such actions to be the conclusive
determinant of the necessity and appropriateness thereof.

         SECTION 2.2 FORM AND TRANSFERABILITY OF ADRs.

         (a)      FORM. ADSs shall be evidenced by definitive ADRs which shall
be engraved, printed, lithographed or produced in such other manner as may be
agreed upon by the Company and the Depositary. ADRs may be issued under the
Deposit Agreement in denominations of any whole number of ADSs. The ADRs shall
be substantially in the form set forth in Exhibit A to the Deposit Agreement,
with any appropriate insertions, modifications and omissions, in each case as
otherwise contemplated in the Deposit Agreement or required by law. ADRs shall
be (i) dated, (ii) signed by the manual or facsimile signature of a duly
authorized signatory of the Depositary, (iii) countersigned by the manual or
facsimile signature of a duly authorized signatory of the Registrar, and (iv)
registered in the books maintained by the Registrar for the registration of
issuances and transfers of ADRs. No ADR and no ADS evidenced thereby shall be
entitled to any benefits under the Deposit Agreement or be valid or enforceable
for any purpose against the Depositary or the Company, unless such ADR shall
have been so dated, signed, countersigned and registered. ADRs bearing the
facsimile signature of a duly-authorized signatory of the Depositary or the
Registrar, who at the time of signature was a duly-authorized signatory of the
Depositary or the Registrar, as the case may be, shall bind the Depositary,
notwithstanding the fact that such signatory has ceased to be so authorized
prior to the delivery of such ADR by the Depositary. The ADRs shall bear a CUSIP
number that is different from

                                       5

<PAGE>

any CUSIP number that was, is or may be assigned to any depositary receipts
previously or subsequently issued pursuant to any other arrangement between the
Depositary (or any other depositary) and the Company and which are not ADRs
issued hereunder.

         (b)      LEGENDS. The ADRs may be endorsed with, or have incorporated
in the text thereof, such legends or recitals not inconsistent with the
provisions of the Deposit Agreement as (i) may be necessary to enable the
Depositary and the Company to perform their respective obligations hereunder,
(ii) may be required to comply with any applicable laws or regulations, or with
the rules and regulations of any securities exchange or market upon which ADSs
may be traded, listed or quoted, or to conform with any usage with respect
thereto, (iii) may be necessary to indicate any special limitations or
restrictions to which any particular ADRs or ADSs are subject by reason of the
date of issuance of the Deposited Securities or otherwise, or (iv) may be
required by any book-entry system in which the ADSs are held. Holders and
Beneficial Owners shall be deemed, for all purposes, to have notice of, and to
be bound by, the terms and conditions of the legends set forth, in the case of
Holders, on the ADR registered in the name of the applicable Holders or, in the
case of Beneficial Owners, on the ADR representing the ADSs owned by such
Beneficial Owners.

         (c)      TITLE. Subject to the limitations contained herein and in the
ADR, title to an ADR (and to each ADS evidenced thereby) shall be transferable
upon the same terms as a certificated security under the laws of the State of
New York, provided that such ADR has been properly endorsed or is accompanied by
proper instruments of transfer. Notwithstanding any notice to the contrary, the
Depositary and the Company may deem and treat the Holder of an ADR (that is, the
person in whose name an ADR is registered on the books of the Depositary) as the
absolute owner thereof for all purposes. Neither the Depositary nor the Company
shall have any obligation nor be subject to any liability under this Deposit
Agreement or any ADR to any holder of an ADR or any Beneficial Owner unless such
holder is the Holder of such ADR registered on the books of the Depositary or,
in the case of a Beneficial Owner, such Beneficial Owner, or the Beneficial
Owner's representative, is the Holder registered on the books of the Depositary.

         (d)      BOOK-ENTRY SYSTEMS. The Depositary shall make arrangements for
the acceptance of the ADSs into DTC. A single ADR in the form of a "Balance
Certificate" will evidence all ADSs held through DTC and will be registered in
the name of the nominee for DTC (currently "Cede & Co.") and will provide that
it represents the aggregate number of ADSs from time to time indicated in the
records of the Depositary as being issued hereunder and that the aggregate
number of ADSs represented thereby may from time to time be increased or
decreased by making adjustments on such records of the Depositary and of DTC or
its nominee as hereinafter provided. As such, the nominee for DTC will be the
only "Holder" of the ADR evidencing all ADSs held through DTC. Citibank, N.A.
(or such other entity as is appointed by DTC or its nominee) may hold the
"Balance Certificate" as custodian for DTC. Each Beneficial Owner of ADSs held
through DTC must rely upon the procedures of DTC and the DTC Participants to
exercise or be entitled to any rights attributable to such ADSs. The DTC
Participants shall for all purposes be deemed to have all requisite power and
authority to act on behalf of the Beneficial Owners of the ADSs held in the DTC
Participants' respective accounts in DTC and the Depositary shall for all
purposes be authorized to rely upon any instructions and information given to it
by DTC Participants on behalf of Beneficial Owners of ADSs. So long as ADSs are
held through DTC or unless otherwise required by law, ownership of beneficial

                                       6

<PAGE>

interests in the ADR registered in the name of the nominee for DTC will be shown
on, and transfers of such ownership will be effected only through, records
maintained by (i) DTC or its nominee (with respect to the interests of DTC
Participants), or (ii) DTC Participants or their nominees (with respect to the
interests of clients of DTC Participants).

         SECTION 2.3 DEPOSIT WITH CUSTODIAN. Subject to the terms and conditions
of this Deposit Agreement and applicable law, Shares (other than Restricted
Securities) may be deposited by any person (including the Depositary in its
individual capacity but subject, however, in the case of the Company or any
Affiliate of the Company, to Section 5.7 hereof) at any time, whether or not the
transfer books of the Company or the Share Registrar, if any, are closed, by
Delivery of the Shares to the Custodian. Every deposit of Shares shall be
accompanied by the following: (A) (i) in the case of Shares represented by
certificates issued in registered form, appropriate instruments of transfer or
endorsement, in a form satisfactory to the Custodian, and (ii) in the case of
Shares delivered by book-entry transfer, confirmation of such book-entry
transfer to the Custodian or that irrevocable instructions have been given to
cause such Shares to be so transferred, (B) such certifications and payments
(including, without limitation, the Depositary's fees and related charges) and
evidence of such payments (including, without limitation, stamping or otherwise
marking such Shares by way of receipt) as may be required by the Depositary or
the Custodian in accordance with the provisions of this Deposit Agreement and
applicable law, (C) if the Depositary so requires, a written order directing the
Depositary to execute and deliver to, or upon the written order of, the
person(s) stated in such order the ADR(s) for the number of ADSs representing
the Shares so deposited, (D) evidence satisfactory to the Depositary (which may
be an opinion of counsel) that all necessary approvals have been granted by, or
there has been compliance with the rules and regulations of, any applicable
governmental agency in Korea, and (E) if the Depositary so requires, (i) an
agreement, assignment or instrument satisfactory to the Depositary or the
Custodian which provides for the prompt transfer by any person in whose name the
Shares are or have been recorded to the Custodian of any distribution, or right
to subscribe for additional Shares or to receive other property in respect of
any such deposited Shares or, in lieu thereof, such indemnity or other agreement
as shall be satisfactory to the Depositary or the Custodian and (ii) if the
Shares are registered in the name of the person on whose behalf they are
presented for deposit, a proxy or proxies entitling the Custodian to exercise
voting rights in respect of the Shares for any and all purposes until the Shares
so deposited are registered in the name of the Depositary, the Custodian or any
nominee.

         Without limiting any other provision of this Deposit Agreement, the
Depositary shall instruct the Custodian not to, and the Depositary shall not
knowingly, accept for deposit (a) any Restricted Securities (except as
contemplated in Section 2.12) nor (b) any fractional Shares or fractional
Deposited Securities nor (c) a number of Shares or Deposited Securities which
upon application of the ADS to Shares ratio would give rise to fractional ADSs.
No Share shall be accepted for deposit unless accompanied by evidence, if any is
required by the Depositary, that is reasonably satisfactory to the Depositary or
the Custodian that all conditions to such deposit have been satisfied by the
person depositing such Shares under the laws and regulations of Korea and any
necessary approval has been granted by any applicable governmental body in
Korea, if any. The Depositary may issue ADSs against evidence of rights to
receive Shares from the Company, any agent of the Company or any custodian,
registrar, transfer agent, clearing agency or other entity involved in ownership
or transaction records in respect of the Shares. Such evidence of

                                       7

<PAGE>

rights shall consist of written blanket or specific guarantees of ownership of
Shares furnished by the Company or any such custodian, registrar, transfer
agent, clearing agency or other entity involved in ownership or transaction
records in respect of the Shares.

         Notwithstanding the foregoing, no Shares shall be accepted for deposit
as contemplated by this Section 2.3 (each such deposit, a "Proposed Deposit")
unless the Company shall have consented to such deposit. The Company hereby
consents to any Proposed Deposit to the extent that, after giving effect to such
Proposed Deposit, the number of Shares on deposit hereunder does not exceed the
aggregate of (i) the number of Shares deposited by the Company in connection
with the establishment of this ADR facility (including the exchange of
previously issued depositary shares for ADSs issued hereunder), (ii) the number
of Shares deposited by the Company in connection with all subsequent offerings
by the Company of ADSs and (iii) the number of Shares deposited by any person,
with the consent of the Company). The number of Shares on deposit with the
consent of the Company pursuant to this section 2.3 shall, subject to applicable
laws and regulations and without the further consent of the Company, be
increased by the number of Shares deposited by the Company from time to time in
connection with (x) offerings of rights to acquire additional ADSs, (y) Share
dividends and other free distributions of Shares made available to Holders in
the form of additional ADSs, and (z) a subdivision of Shares, if any, and,
subject to applicable law and the terms of this Deposit Agreement, as may be
adjusted as determined from time to time by the Company. The Depositary and the
Custodian shall not accept Shares for any Proposed Deposit hereunder if it has
been notified by the Company in writing that the Company has blocked such
Proposed Deposit to prevent a violation of applicable Korean laws or regulations
or a violation of the Articles of Incorporation of the Company. The Company
shall notify the Depositary and the Custodian with respect to any such
restrictions on transfer of its Shares presented for deposit hereunder.

         SECTION 2.4 REGISTRATION AND SAFEKEEPING OF DEPOSITED SECURITIES. The
Depositary shall instruct the Custodian upon each Delivery of certificates
representing registered Shares being deposited hereunder with the Custodian (or
other Deposited Securities pursuant to Article IV hereof), together with the
other documents above specified, to present such certificate(s), together with
the appropriate instrument(s) of transfer or endorsement, duly stamped, to the
Share Registrar for transfer and registration of the Shares (as soon as transfer
and registration can be accomplished and at the expense of the person for whom
the deposit is made) in the name of the Depositary, the Custodian or a nominee
of either. Deposited Securities shall be held by the Depositary or by a
Custodian for the account and to the order of the Depositary or a nominee in
each case on behalf of the Holders and Beneficial Owners, at such place or
places as the Depositary or the Custodian shall determine.

         Without limitation of the foregoing, the Depositary shall not knowingly
accept for deposit under this Deposit Agreement any Shares or other Deposited
Securities required to be registered under the provisions of the Securities Act,
unless a registration statement is in effect as to such Shares or other
Deposited Securities, or any Shares or other Deposited Securities the deposit of
which would violate any provisions of the Articles of Incorporation of the
Company.

         SECTION 2.5 ISSUANCE OF ADSs; EXECUTION AND DELIVERY OF ADRs. The
Depositary has made arrangements with the Custodian to confirm to the Depositary
(i) that a deposit of Shares has been made pursuant to Section 2.3 hereof, (ii)
that such Deposited Securities have

                                       8

<PAGE>

been recorded in the name of the Depositary, the Custodian or a nominee of
either on the shareholders' register maintained by or on behalf of the Company
by the Share Registrar if registered Shares have been deposited or, if deposit
is made by book-entry transfer, confirmation of such transfer in the books of
the CSD, (iii) that all required documents have been received, and (iv) the
person(s) to whom or upon whose order ADSs are deliverable in respect thereof
and the number of ADSs to be so delivered. Such notification may be made by
letter, cable, telex, SWIFT message or, at the risk and expense of the person
making the deposit, by facsimile or other means of electronic transmission. Upon
receiving such notice from the Custodian, the Depositary, subject to the terms
and conditions of this Deposit Agreement and applicable law, shall issue the
ADSs representing the Shares so deposited to or upon the order of the person(s)
named in the notice delivered to the Depositary and shall execute and deliver at
its Principal Office Receipt(s) registered in the name(s) requested by such
person(s) and evidencing the aggregate number of ADSs to which such person(s)
are entitled, but only upon payment to the Depositary of the charges of the
Depositary for accepting a deposit, issuing ADSs and executing and delivering
such ADR(s) (as set forth in Section 5.9 and Exhibit B hereto) and all taxes and
governmental charges and fees payable in connection with such deposit and the
transfer of the Shares and the issuance of the ADR(s). The Depositary shall only
issue ADSs in whole numbers and deliver ADR(s) evidencing whole numbers of ADSs.
Nothing herein shall prohibit any Pre-Release Transaction upon the terms set
forth in this Deposit Agreement.

         SECTION 2.6 TRANSFER, COMBINATION AND SPLIT-UP OF ADRs.

         (a)      TRANSFER. The Registrar shall register the transfer of ADRs
(and of the ADSs represented thereby) on the books maintained for such purpose
and the Depositary shall (x) cancel such ADRs and execute new ADRs evidencing
the same aggregate number of ADSs as those evidenced by the ADRs canceled by the
Depositary, (y) cause the Registrar to countersign such new ADRs and (z) Deliver
such new ADRs to or upon the order of the person entitled thereto, if each of
the following conditions has been satisfied: (i) the ADRs have been duly
Delivered by the Holder (or by a duly authorized attorney of the Holder) to the
Depositary at its Principal Office for the purpose of effecting a transfer
thereof, (ii) the surrendered ADRs have been properly endorsed or are
accompanied by proper instruments of transfer (including signature guarantees in
accordance with standard securities industry practice), (iii) the surrendered
ADRs have been duly stamped (if required by the laws of the State of New York or
of the United States), and (iv) all applicable fees and charges of, and expenses
incurred by, the Depositary and all applicable taxes and governmental charges
(as are set forth in Section 5.9 and Exhibit B hereto) have been paid, subject,
however, in each case, to the terms and conditions of the applicable ADRs, of
the Deposit Agreement and of applicable law, in each case as in effect at the
time thereof.

         (b)      COMBINATION & SPLIT UP. The Registrar shall register the
split-up or combination of ADRs (and of the ADSs represented thereby) on the
books maintained for such purpose and the Depositary shall (x) cancel such ADRs
and execute new ADRs for the number of ADSs requested, but in the aggregate not
exceeding the number of ADSs evidenced by the ADRs cancelled by the Depositary,
(y) cause the Registrar to countersign such new ADRs and (z) Deliver such new
ADRs to or upon the order of the Holder thereof, if each of the following
conditions has been satisfied: (i) the ADRs have been duly Delivered by the
Holder (or by a duly authorized attorney of the Holder) to the Depositary at its
Principal Office for the purpose

                                       9

<PAGE>

of effecting a split-up or combination thereof, and (ii) all applicable fees and
charges of, and expenses incurred by, the Depositary and all applicable taxes
and governmental charges (as are set forth in Section 5.9 and Exhibit B hereto)
have been paid, subject, however, in each case, to the terms and conditions of
the applicable ADRs, of the Deposit Agreement and of applicable law, in each
case as in effect at the time thereof.

         (c)      CO-TRANSFER AGENTS. The Depositary may appoint one or more
co-transfer agents for the purpose of effecting transfers, combinations and
split-ups of ADRs at designated transfer offices on behalf of the Depositary. In
carrying out its functions, a co-transfer agent may require evidence of
authority and compliance with applicable laws and other requirements by Holders
or persons entitled to such ADRs and will be entitled to protection and
indemnity to the same extent as the Depositary. Such co-transfer agents may be
removed and substitutes appointed by the Depositary. Each co-transfer agent
appointed under this Section 2.6 (other than the Depositary) shall give notice
in writing to the Depositary accepting such appointment and agreeing to be bound
by the applicable terms of this Deposit Agreement.

         SECTION 2.7 SURRENDER OF ADSs AND WITHDRAWAL OF DEPOSITED SECURITIES.
The Holder of ADSs shall be entitled to Delivery of the Deposited Securities at
the time represented by the ADSs upon satisfaction of each of the following
conditions: (i) the Holder (or a duly-authorized attorney of the Holder) has
duly Delivered ADSs to the Depositary at its Principal Office (and if
applicable, the ADRs evidencing such ADSs) for the purpose of withdrawal of the
Deposited Securities represented thereby, (ii) if so required by the Depositary,
the ADRs Delivered to the Depositary for such purpose have been properly
endorsed in blank or are accompanied by proper instruments of transfer in blank
(including signature guarantees in accordance with standard securities industry
practice), (iii) if so required by the Depositary, the Holder of the ADSs has
executed and delivered to the Depositary a written order directing the
Depositary to cause the Deposited Securities being withdrawn to be Delivered to
or upon the written order of the person(s) designated in such order, and (iv)
all applicable fees and charges of, and expenses incurred by, the Depositary and
all applicable taxes and governmental charges (as are set forth in Section 5.9
and Exhibit B hereof) have been paid, subject, however, in each case, to the
terms and conditions of the ADRs evidencing the surrendered ADSs, of the Deposit
Agreement, of the Company's Articles of Incorporation, of any applicable laws
and rules, and of any requirements of Korea Securities Depository, and to any
provisions of or governing the Deposited Securities, in each case as in effect
at the time thereof; provided, however, that, in the case of newly-issued
Shares, no such withdrawals will be permitted until receipt by the Depositary of
notice from the Company of the listing on the Korea Stock Exchange of such
newly-issued Shares.

         Upon satisfaction of each of the conditions specified above, the
Depositary shall (i) cancel the ADSs Delivered to it (and, if applicable, the
ADRs evidencing the ADSs so Delivered), (ii) direct the Registrar to record the
cancellation of the ADSs so Delivered, and (iii) direct the Custodian to Deliver
(without unreasonable delay) the Deposited Securities represented by the ADSs so
canceled together with any certificate or other document of title for the
Deposited Securities, or evidence of the electronic transfer thereof (if
available), as the case may be, to or upon the written order of the person(s)
designated in the order delivered to the Depositary for such purpose, subject
however, in each case, to the terms and conditions of this Deposit Agreement, of
the ADRs evidencing the ADSs so cancelled, of the Articles of

                                       10

<PAGE>

Incorporation of the Company, of any applicable laws and of the rules of the
Korea Securities Depository, and to the terms and conditions of or governing the
Deposited Securities, in each case as in effect at the time thereof.

         The Depositary shall not accept for surrender ADSs representing less
than one Share. In the case of the Delivery to it of ADSs representing a number
other than a whole number of Shares, the Depositary shall cause ownership of the
appropriate whole number of Shares to be Delivered in accordance with the terms
hereof, and shall, at the discretion of the Depositary, either (i) return to the
person surrendering such ADSs the number of ADSs representing any remaining
fractional Share, or (ii) sell or cause to be sold the fractional Share
represented by the ADSs so surrendered and remit the proceeds of such sale (net
of (a) applicable fees and charges of, and expenses incurred by, the Depositary
and (b) taxes withheld) to the person surrendering the ADSs.

         Notwithstanding anything else contained in any ADR or the Deposit
Agreement, the Depositary may make delivery at the Principal Office of the
Depositary of (i) any cash dividends or cash distributions, or (ii) any proceeds
from the sale of any distributions of shares or rights, which are at the time
held by the Depositary in respect of the Deposited Securities represented by the
ADSs surrendered for cancellation and withdrawal. At the request, risk and
expense of any Holder so surrendering ADSs, and for the account of such Holder,
the Depositary shall direct the Custodian to forward (to the extent permitted by
law) any cash or other property (other than securities) held by the Custodian in
respect of the Deposited Securities represented by such ADSs to the Depositary
for delivery at the Principal Office of the Depositary. Such direction shall be
given by letter or, at the request, risk and expense of such Holder, by cable,
telex or facsimile transmission.

         SECTION 2.8 LIMITATIONS ON EXECUTION AND DELIVERY, TRANSFER, ETC. OF
                     ADRS; SUSPENSION OF DELIVERY, TRANSFER, ETC.

         (a)      ADDITIONAL REQUIREMENTS. As a condition precedent to the
execution and delivery, registration of issuance, transfer, split-up,
combination or surrender, of any ADR, the delivery of any distribution thereon,
or the withdrawal of any Deposited Securities, the Depositary or the Custodian
may require (i) payment from the depositor of Shares or presenter of ADSs or of
an ADR of a sum sufficient to reimburse it for any tax or other governmental
charge and any stock transfer or registration fee with respect thereto
(including any such tax or charge and fee with respect to Shares being deposited
or withdrawn) and payment of any applicable fees and charges of the Depositary
as provided in Section 5.9 and Exhibit B hereof, (ii) the production of proof
satisfactory to it as to the identity and genuineness of any signature or any
other matter contemplated by Section 3.1 hereof, and (iii) compliance with (A)
any laws or governmental regulations relating to the execution and delivery of
ADRs or ADSs or to the withdrawal of Deposited Securities and (B) such
reasonable regulations as the Depositary and the Company may establish
consistent with the provisions of the applicable ADR, this Deposit Agreement and
applicable law.

         (b)      ADDITIONAL LIMITATIONS. The issuance of ADSs against deposits
of Shares generally or against deposits of particular Shares may be suspended,
or the deposit of particular Shares may be refused, or the registration of
transfer of ADRs in particular instances may be

                                       11

<PAGE>

refused, or the registration of transfers of ADRs generally may be suspended,
during any period when the transfer books of the Company, the Depositary, a
Registrar or the Share Registrar are closed or if any such action is deemed
necessary or advisable by the Depositary or the Company, in good faith, at any
time or from time to time because of any requirement of law, any government or
governmental body or commission or any securities exchange on which the ADSs or
Shares are listed, or under any provision of this Deposit Agreement or the
applicable ADR(s) or under any provision of, or governing, the Deposited
Securities, or because of a meeting of shareholders of the Company or for any
other reason, subject, in all cases, to Section 7.8 hereof.

         (c)      REGULATORY RESTRICTIONS. Notwithstanding any provision of this
Deposit Agreement or any ADR(s) to the contrary, Holders are entitled to
surrender outstanding ADSs to withdraw the Deposited Securities at any time
subject only to (i) temporary delays caused by closing the transfer books of the
Depositary or the Company or the deposit of Shares in connection with voting at
a shareholders' meeting or the payment of dividends, (ii) the payment of fees,
taxes and similar charges, (iii) compliance with any U.S. or foreign laws or
governmental regulations relating to the ADRs or to the withdrawal of the
Deposited Securities, and (iv) other circumstances specifically contemplated by
Instruction I.A.(l) of the General Instructions to Form F-6 (as such General
Instructions may be amended from time to time).

         SECTION 2.9 LOST ADRs, ETC. In case any ADR shall be mutilated,
destroyed, lost, or stolen, the Depositary shall execute and deliver a new ADR
of like tenor at the expense of the Holder (a) in the case of a mutilated ADR,
in exchange of and substitution for such mutilated ADR upon cancellation
thereof, or (b) in the case of a destroyed, lost or stolen ADR, in lieu of and
in substitution for such destroyed, lost, or stolen ADR, after the Holder
thereof (i) has submitted to the Depositary a written request for such exchange
and substitution before the Depositary has notice that the ADR has been acquired
by a bona fide purchaser, (ii) has provided such security or indemnity
(including an indemnity bond) as may be required by the Depositary to save it
and any of its agents harmless, and (iii) has satisfied any other reasonable
requirements imposed by the Depositary, including, without limitation, evidence
satisfactory to the Depositary of such destruction, loss or theft of such ADR,
the authenticity thereof and the Holder's ownership thereof.

         SECTION 2.10 CANCELLATION AND DESTRUCTION OF SURRENDERED ADRs;
MAINTENANCE OF RECORDS. All ADRs surrendered to the Depositary shall be canceled
by the Depositary. Canceled ADRs shall not be entitled to any benefits under
this Deposit Agreement or be valid or enforceable against the Depositary for any
purpose. The Depositary is authorized to destroy ADRs so canceled, provided the
Depositary maintains a record of all destroyed ADRs. Any ADSs held in book-entry
form (i.e., through accounts at DTC) shall be deemed canceled when the
Depositary causes the number of ADSs evidenced by the Balance Certificate to be
reduced by the number of ADSs surrendered (without the need to physically
destroy the Balance Certificate).

         SECTION 2.11 PARTIAL ENTITLEMENT ADSs. In the event any Shares are
deposited which entitle the holders thereof to receive a per-share distribution
or other entitlement in an amount different from the Shares then on deposit (the
Shares then on deposit collectively, "Full Entitlement Shares" and the Shares
with different entitlement, "Partial Entitlement Shares"), the Depositary shall
(i) cause the Custodian to hold Partial Entitlement Shares separate and distinct

                                       12

<PAGE>

from Full Entitlement Shares, and (ii) subject to the terms of this Deposit
Agreement, issue ADSs and deliver ADRs representing Partial Entitlement Shares
which are separate and distinct from the ADSs and ADRs representing Full
Entitlement Shares, by means of separate CUSIP numbering and legending (if
necessary) ("Partial Entitlement ADSs/ADRs" and "Full Entitlement ADSs/ADRs",
respectively). If and when Partial Entitlement Shares become Full Entitlement
Shares, the Depositary shall (a) give notice thereof to Holders of Partial
Entitlement ADSs and give Holders of Partial Entitlement ADRs the opportunity to
exchange such Partial Entitlement ADRs for Full Entitlement ADRs, (b) cause the
Custodian to transfer the Partial Entitlement Shares into the account of the
Full Entitlement Shares, and (c) take such actions as are necessary to remove
the distinctions between (i) the Partial Entitlement ADRs and ADSs, on the one
hand, and (ii) the Full Entitlement ADRs and ADSs on the other. Holders and
Beneficial Owners of Partial Entitlement ADSs shall only be entitled to the
entitlements of Partial Entitlement Shares. Holders and Beneficial Owners of
Full Entitlement ADSs shall be entitled only to the entitlements of Full
Entitlement Shares. All provisions and conditions of this Deposit Agreement
shall apply to Partial Entitlement ADRs and ADSs to the same extent as Full
Entitlement ADRs and ADSs, except as contemplated by this Section 2.11. The
Depositary is authorized to take any and all other actions as may be necessary
(including, without limitation, making the necessary notations on ADRs) to give
effect to the terms of this Section 2.11. The Company agrees to give timely
written notice to the Depositary if any Shares issued or to be issued are
Partial Entitlement Shares and shall assist the Depositary with the
establishment of procedures enabling the identification of Partial Entitlement
Shares upon Delivery to the Custodian.

         SECTION 2.12 RESTRICTED ADSs. The Depositary shall, at the request and
expense of the Company, establish procedures enabling the deposit hereunder of
Shares that are Restricted Securities in order to enable the holder of such
Shares to hold its ownership interests in such Restricted Shares in the form of
ADSs issued under the terms hereof (such Shares, "Restricted Shares"). Upon
receipt of a written request from the Company to accept Restricted Shares for
deposit hereunder, the Depositary agrees to establish procedures permitting the
deposit of such Restricted Shares and the issuance of ADSs representing such
deposited Restricted Shares (such ADSs, the "Restricted ADSs," and the ADRs
evidencing such Restricted ADSs, the "Restricted ADRs"). The Company shall
assist the Depositary in the establishment of such procedures and agrees that it
shall take all steps necessary and satisfactory to the Depositary to insure that
the establishment of such procedures does not violate the provisions of the
Securities Act or any other applicable laws. The depositors of such Restricted
Shares and the holders of the Restricted ADSs may be required prior to the
deposit of such Restricted Shares, the transfer of the Restricted ADRs and the
Restricted ADSs evidenced thereby or the withdrawal of the Restricted Shares
represented by Restricted ADSs to provide such written certifications or
agreements as the Depositary or the Company may require. The Company shall
provide to the Depositary in writing the legend(s) to be affixed to the
Restricted ADRs, which legends shall (i) be in a form reasonably satisfactory to
the Depositary and (ii) contain the specific circumstances under which the
Restricted ADRs and the Restricted ADSs represented thereby may be transferred
or the Restricted Shares withdrawn. The Restricted ADSs issued upon the deposit
of Restricted Shares shall be separately identified on the books of the
Depositary and the Restricted Shares so deposited shall be held separate and
distinct from the other Deposited Securities held hereunder. The Restricted
Shares and the Restricted ADSs shall not be eligible for Pre-Release
Transactions. The Restricted ADSs shall not be eligible for inclusion in any
book-entry

                                       13

<PAGE>

settlement system, including, without limitation, DTC, and shall not in any way
be fungible with the ADSs issued under the terms hereof that are not Restricted
ADSs. The Restricted ADRs and the Restricted ADSs evidenced thereby shall be
transferable only by the Holder thereof upon delivery to the Depositary of (i)
all documentation otherwise contemplated by this Deposit Agreement and (ii) an
opinion of counsel satisfactory to the Depositary setting forth, inter alia, the
conditions upon which the Restricted ADR presented is, and the Restricted ADSs
evidenced thereby are, transferable by the Holder thereof under applicable
securities laws and the transfer restrictions contained in the legend set forth
on the Restricted ADR presented for transfer. Except as set forth in this
Section 2.12 and except as required by applicable law, the Restricted ADRs and
the Restricted ADSs evidenced thereby shall be treated as ADRs and ADSs issued
and outstanding under the terms of the Deposit Agreement. In the event that, in
determining the rights and obligations of parties hereto with respect to any
Restricted ADSs, any conflict arises between (a) the terms of this Deposit
Agreement (other than this Section 2.12) and (b) the terms of (i) this Section
2.12 or (ii) the applicable Restricted ADR, the terms and conditions set forth
in this Section 2.12 and of the Restricted ADR shall be controlling and shall
govern the rights and obligations of the parties to this Deposit Agreement
pertaining to the deposited Restricted Shares, the Restricted ADSs and
Restricted ADRs.

         If the Restricted ADRs, the Restricted ADSs and the Restricted Shares
are no longer Restricted Securities, the Depositary, upon receipt of (x) an
opinion of counsel satisfactory to the Depositary setting forth, inter alia,
that the Restricted ADRs, the Restricted ADSs and the Restricted Shares are not
as of such time Restricted Securities, and (y) instructions from the Company to
remove the restrictions applicable to the Restricted ADRs, the Restricted ADSs
and the Restricted Shares, shall (i) eliminate the distinctions and separations
between the applicable Restricted Shares held on deposit under this Section 2.12
and the other Shares held on deposit under the terms of the Deposit Agreement
that are not Restricted Shares, (ii) treat the newly unrestricted ADRs and ADSs
on the same terms as, and fully fungible with, the other ADRs and ADSs issued
and outstanding under the terms of the Deposit Agreement that are not Restricted
ADRs or Restricted ADSs, (iii) take all actions necessary to remove any
distinctions, limitations and restrictions previously existing under this
Section 2.12 between the applicable Restricted ADRs and Restricted ADSs,
respectively, on the one hand, and the other ADRs and ADSs that are not
Restricted ADRs or Restricted ADSs, respectively, on the other hand, including,
without limitation, by making the newly-unrestricted ADSs eligible for
Pre-Release Transactions and for inclusion in the applicable book-entry
settlement systems.

                                  ARTICLE III

                         CERTAIN OBLIGATIONS OF HOLDERS
                          AND BENEFICIAL OWNERS OF ADSs

         SECTION 3.1 PROOFS, CERTIFICATES AND OTHER INFORMATION. Any person
presenting Shares for deposit, any Holder and any Beneficial Owner may be
required, and every Holder and Beneficial Owner agrees, from time to time to
provide to the Depositary and the Custodian such proof of citizenship or
residence, taxpayer status, payment of all applicable taxes or other
governmental charges, exchange control approval, legal or beneficial ownership
of ADSs and Deposited Securities, compliance with applicable laws, the terms of
this Deposit Agreement or the ADR(s) evidencing the ADSs and the provisions of,
or governing, the Deposited Securities,

                                       14

<PAGE>

to execute such certifications and to make such representations and warranties,
and to provide such other information and documentation (or, in the case of
Shares in registered form presented for deposit, such information relating to
the registration on the books of the Company or of the Share Registrar) as the
Depositary or the Custodian may deem necessary or proper or as the Company may
reasonably require by written request to the Depositary consistent with its
obligations under this Deposit Agreement and the applicable ADR(s). The
Depositary and the Registrar, as applicable, may withhold the execution or
delivery or registration of transfer of any ADR or the distribution or sale of
any dividend or distribution of rights or of the proceeds thereof or, to the
extent not limited by the terms of Section 7.8 hereof, the delivery of any
Deposited Securities until such proof or other information is filed or such
certifications are executed, or such representations are made, or such other
documentation or information provided, in each case to the Depositary's, the
Registrar's and the Company's satisfaction. The Depositary shall provide the
Company, in a timely manner, with copies or originals if necessary and
appropriate of (i) any such proofs of citizenship or residence, taxpayer status,
or exchange control approval which it receives from Holders and Beneficial
Owners, and (ii) any other information or documents which the Company may
reasonably request and which the Depositary shall request and receive from any
Holder or Beneficial Owner or any person presenting Shares for deposit or ADSs
for cancellation, transfer or withdrawal. Nothing herein shall obligate the
Depositary to (i) obtain any information for the Company if not provided by the
Holders or Beneficial Owners, or (ii) verify or vouch for the accuracy of the
information so provided by the Holders or Beneficial Owners.

         SECTION 3.2 LIABILITY FOR TAXES AND OTHER CHARGES. Any Korean or other
tax or other governmental charge payable by the Custodian or by the Depositary
with respect to any ADR or any Deposited Securities or ADSs shall be payable by
the Holders and Beneficial Owners to the Depositary. The Company, the Custodian
and/or the Depositary may withhold or deduct from any distributions made in
respect of Deposited Securities and may sell for the account of a Holder and/or
Beneficial Owner any or all of the Deposited Securities and apply such
distributions and sale proceeds in payment of such taxes (including applicable
interest and penalties) or charges, the Holder and the Beneficial Owner
remaining liable for any deficiency. The Custodian may refuse the deposit of
Shares and the Depositary may refuse to issue ADSs, to deliver ADRs, register
the transfer, split-up or combination of ADRs and (subject to Section 7.8) the
withdrawal of Deposited Securities until payment in full of such tax, charge,
penalty or interest is received. Every Holder and Beneficial Owner agrees to
indemnify the Depositary, the Company, the Custodian, and any of their agents,
officers, employees and Affiliates for, and to hold each of them harmless from,
any claims with respect to taxes (including applicable interest and penalties
thereon) arising from any tax benefit obtained for such Holder and/or Beneficial
Owner.

         SECTION 3.3 REPRESENTATIONS AND WARRANTIES ON DEPOSIT OF SHARES. Each
person depositing Shares under the Deposit Agreement shall be deemed thereby to
represent and warrant that (i) such Shares and the certificates therefor are
duly authorized, validly issued, fully paid, non-assessable and legally obtained
by such person, (ii) all preemptive (and similar) rights, if any, with respect
to such Shares have been validly waived or exercised, (iii) the person making
such deposit is duly authorized so to do, (iv) the Shares presented for deposit
are free and clear of any lien, encumbrance, security interest, charge, mortgage
or adverse claim, and (v) the Shares presented for deposit are not, and the ADSs
issuable upon such deposit will not be,

                                       15

<PAGE>

Restricted Securities (except as contemplated in Section 2.12), and (vi) the
Shares presented for deposit have not been stripped of any rights or
entitlements. Such representations and warranties shall survive the deposit and
withdrawal of Shares, the issuance and cancellation of ADSs in respect thereof
and the transfer of such ADSs. If any such representations or warranties are
false in any way, the Company and the Depositary shall be authorized, at the
cost and expense of the person depositing Shares, to take any and all actions
necessary to correct the consequences thereof.

         SECTION 3.4 COMPLIANCE WITH INFORMATION REQUESTS. Notwithstanding any
other provision of this Deposit Agreement or any ADR(s), each Holder and
Beneficial Owner agrees to comply with requests from the Company pursuant to
applicable law, the rules and requirements of the Korea Stock Exchange, the
NYSE, and any other stock exchange on which the Shares or ADSs are, or will be,
registered, traded or listed or the Article of Incorporation of the Company,
which are made to provide information, inter alia, as to the capacity in which
such Holder or Beneficial Owner owns ADSs (and Shares as the case may be) and
regarding the identity of any other person(s) interested in such ADSs and the
nature of such interest and various other matters, whether or not they are
Holders and/or Beneficial Owners at the time of such request. The Depositary
agrees to use its reasonable efforts to forward, upon the request of the Company
and at the Company's expense, any such request from the Company to the Holders
and to forward to the Company any such responses to such requests received by
the Depositary.

         SECTION 3.5 OWNERSHIP RESTRICTIONS. Notwithstanding any other provision
in this Deposit Agreement or any ADR, the Company may restrict transfers of the
Shares where such transfer might result in ownership of Shares exceeding limits
imposed by applicable law or the Articles of Incorporation of the Company. The
Company may also restrict, in such manner as it deems appropriate, transfers of
the ADSs where such transfer may result in the total number of Shares
represented by the ADSs owned by a single Holder or Beneficial Owner to exceed
any such limits. The Company may, in its sole discretion but subject to
applicable law, instruct the Depositary to take action with respect to the
ownership interest of any Holder or Beneficial Owner in excess of the limits set
forth in the preceding sentence, including, but not limited to, the imposition
of restrictions on the transfer of ADSs, the removal or limitation of voting
rights or mandatory sale or disposition on behalf of a Holder or Beneficial
Owner of the Shares represented by the ADSs held by such Holder or Beneficial
Owner in excess of such limitations, if and to the extent such disposition is
permitted by applicable law and the Articles of Incorporation of the Company.

         In addition, Korean laws and regulations may require beneficial owners
of the voting share capital of Korean companies, including Beneficial Owners of
ADSs, to satisfy certain reporting requirements or obtain regulatory approval in
certain circumstances. Beneficial Owners are solely responsible or complying
with such requirements. Neither the Depositary nor the Custodian nor any of
their respective agents or affiliates shall be required to take any actions
whatsoever on behalf of such Beneficial Owners.

                                       16

<PAGE>

                                   ARTICLE IV

                            THE DEPOSITED SECURITIES

         SECTION 4.1 CASH DISTRIBUTIONS. Whenever the Depositary receives
confirmation from the Custodian of the receipt of any cash dividend or other
cash distribution on any Deposited Securities, or receives proceeds from the
sale of any Deposited Securities or any other entitlements held in respect of
Deposited Securities under the terms hereof, the Depositary will (i) if at the
time of receipt thereof any amounts received in a Foreign Currency can in the
judgment of the Depositary (pursuant to Section 4.8) be converted on a
practicable basis into Dollars transferable to the United States, promptly
convert or cause to be converted such cash dividend, distribution or proceeds
into Dollars (on the terms described in Section 4.8), (ii) if applicable,
establish the ADS Record Date upon the terms described in Section 4.9, and (iii)
distribute promptly the amount thus received (net of (a) the applicable fees and
charges of, and expenses incurred by, the Depositary and (b) taxes withheld) to
the Holders entitled thereto as of the ADS Record Date in proportion to the
number of ADSs held as of the ADS Record Date. The Depositary shall distribute
only such amount, however, as can be distributed without attributing to any
Holder a fraction of one cent, and any balance not so distributed shall be held
by the Depositary (without liability for interest thereon) and shall be added to
and become part of the next sum received by the Depositary for distribution to
Holders of ADSs outstanding at the time of the next distribution. If the
Company, the Custodian or the Depositary is required to withhold and does
withhold from any cash dividend or other cash distribution in respect of any
Deposited Securities an amount on account of taxes, duties or other governmental
charges, the amount distributed to Holders on the ADSs representing such
Deposited Securities shall be reduced accordingly. Such withheld amounts shall
be forwarded by the Company, the Custodian or the Depositary to the relevant
governmental authority. Evidence of payment thereof by the Company shall be
forwarded by the Company to the Depositary upon request.

         SECTION 4.2 DISTRIBUTION IN SHARES. If any distribution upon any
Deposited Securities consists of a dividend in, or free distribution of, Shares,
the Company shall cause such Shares to be deposited with the Custodian and
registered, as the case may be, in the name of the Depositary, the Custodian or
their respective nominees. Upon receipt of confirmation of such deposit from the
Custodian, the Depositary shall establish the ADS Record Date upon the terms
described in Section 4.9 and either (i) the Depositary shall, subject to Section
5.9 hereof, distribute to the Holders as of the ADS Record Date in proportion to
the number of ADSs held as of the ADS Record Date, additional ADSs, which
represent in the aggregate the number of Shares received as such dividend, or
free distribution, subject to the other terms of this Deposit Agreement
(including, without limitation, (a) the applicable fees and charges of, and
expenses incurred by, the Depositary and (b) taxes), or (ii) if additional ADSs
are not so distributed, each ADS issued and outstanding after the ADS Record
Date shall, to the extent permissible by law, thenceforth also represent rights
and interests in the additional integral number of Shares distributed upon the
Deposited Securities represented thereby (net of (a) the applicable fees and
charges of, and expenses incurred by, the Depositary and (b) taxes). In lieu of
delivering fractional ADSs, the Depositary shall sell the number of Shares or
ADSs, as the case may be, represented by the aggregate of such fractions and
distribute the net proceeds upon the terms described in Section 4.1. In the
event that the Depositary determines that any distribution in property
(including Shares) is subject to any tax or other governmental charges which the

                                       17

<PAGE>
Depositary is obligated to withhold, or, if the Company in the fulfillment of
its obligation under Section 5.7 hereof, has furnished an opinion of U.S.
counsel determining that Shares must be registered under the Securities Act or
other laws in order to be distributed to Holders (and no such registration
statement has been declared effective), the Depositary may, after consultation
with the Company, dispose of all or a portion of such property (including Shares
and rights to subscribe therefor) in such amounts and in such manner, including
by public or private sale, as the Depositary deems necessary and practicable,
and the Depositary shall distribute the net proceeds of any such sale (after
deduction of (a) taxes and (b) fees and charges of, and expenses incurred by,
the Depositary) to Holders entitled thereto upon the terms described in Section
4.1. The Depositary shall hold and/or distribute any unsold balance of such
property in accordance with the provisions of this Deposit Agreement.

         SECTION 4.3 ELECTIVE DISTRIBUTIONS IN CASH OR SHARES. Subject to
applicable Korean law, whenever the Company intends to make a distribution
payable at the election of the holders of Shares in cash or in additional
Shares, the Company shall give notice thereof to the Depositary at least
forty-five (45) days prior to the proposed distribution stating whether or not
it wishes such elective distribution to be made available to Holders of ADSs.
Upon timely receipt of notice indicating that the Company wishes such elective
distribution to be made available to Holders of ADSs, the Depositary shall
consult with the Company to determine, and the Company shall assist the
Depositary in its determination, whether it is lawful and reasonably practicable
to make such elective distribution available to the Holders of ADSs. The
Depositary shall make such elective distribution available to Holders only if
(i) the Company shall have timely requested that the elective distribution be
made available to Holders, (ii) the Depositary shall have determined that such
distribution is reasonably practicable and (iii) the Depositary shall have
received satisfactory documentation within the terms of Section 5.7. If the
above conditions are not satisfied, the Depositary shall, to the extent
permitted by law, distribute to the Holders, on the basis of the same
determination as is made in Korea in respect of the Shares for which no election
is made, either (X) cash upon the terms described in Section 4.1 or (Y)
additional ADSs representing such additional Shares upon the terms described in
Section 4.2. If the above conditions are satisfied, the Depositary shall
establish an ADS Record Date (on the terms described in Section 4.9) and
establish procedures to enable Holders to elect the receipt of the proposed
distribution in cash or in additional ADSs. The Company shall assist the
Depositary in establishing such procedures to the extent necessary. If a Holder
elects to receive the proposed distribution (X) in cash, the distribution shall
be made upon the terms described in Section 4.1, or (Y) in ADSs, the
distribution shall be made upon the terms described in Section 4.2. Nothing
herein shall obligate the Depositary to make available to Holders a method to
receive the elective distribution in Shares (rather than ADSs). There can be no
assurance that Holders generally, or any Holder in particular, will be given the
opportunity to receive elective distributions on the same terms and conditions
as the holders of Shares.

         SECTION 4.4 DISTRIBUTION OF RIGHTS TO PURCHASE ADDITIONAL ADSs.

         (a)      DISTRIBUTION TO ADS HOLDERS. Whenever the Company intends to

distribute to the holders of the Deposited Securities rights to subscribe for
additional Shares, the Company shall give notice thereof to the Depositary at
least forty-five (45) days prior to the proposed distribution stating whether or
not it wishes such rights to be made available to Holders of ADSs. Upon timely
receipt of a notice indicating that the Company wishes such rights to be made

                                       18

<PAGE>

available to Holders of ADSs, the Depositary shall consult with the Company to
determine, and the Company shall assist the Depositary in its determination,
whether it is lawful and reasonably practicable to make such rights available to
the Holders. The Depositary shall make such rights available to Holders only if
(i) the Company shall have timely requested that such rights be made available
to Holders, (ii) the Depositary shall have received satisfactory documentation
within the terms of Section 5.7, and (iii) the Depositary shall have determined
that such distribution of rights is reasonably practicable. In the event any of
the conditions set forth above are not satisfied or if the Company requests that
the rights not be made available to Holders of ADSs, the Depositary shall
proceed with the sale of the rights as contemplated in Section 4.4(b) below. In
the event all conditions set forth above are satisfied, the Depositary shall fix
an ADS Record Date (upon the terms described in Section 4.9) and establish
procedures to (x) distribute rights to purchase additional ADSs (by means of
warrants or otherwise), (y) to enable the Holders to exercise such rights (upon
payment of the subscription price and of the applicable (a) fees and charges of,
and expenses incurred by, the Depositary and (b) taxes), and (z) to deliver ADSs
upon the valid exercise of such rights. The Company shall assist the Depositary
to the extent necessary in establishing such procedures. Nothing herein shall
obligate the Depositary to make available to the Holders a method to exercise
rights to subscribe for Shares (rather than ADSs).

         (b)      SALE OF RIGHTS. If (i) the Company does not timely request the
Depositary to make the rights available to Holders or requests that the rights
not be made available to Holders, (ii) the Depositary fails to receive
satisfactory documentation within the terms of Section 5.7 or determines it is
not reasonably practicable to make the rights available to Holders, or (iii) any
rights made available are not exercised and appear to be about to lapse, the
Depositary shall determine whether it is lawful and reasonably practicable to
sell such rights, in a riskless principal capacity, at such place and upon such
terms (including public or private sale) as it may deem practicable. The Company
shall assist the Depositary to the extent necessary to determine such legality
and practicability. The Depositary shall, upon such sale, convert and distribute
proceeds of such sale (net of applicable (a) fees and charges of, and expenses
incurred by, the Depositary and (b) taxes) upon the terms set forth in Section
4.1.

         (c)      LAPSE OF RIGHTS. If the Depositary is unable to make any
rights available to Holders upon the terms described in Section 4.4(a) or to
arrange for the sale of the rights upon the terms described in Section 4.4(b),
the Depositary shall allow such rights to lapse.

         The Depositary shall not be responsible for (i) any failure to
determine that it may be lawful or practicable to make such rights available to
Holders in general or any Holders in particular, (ii) any foreign exchange
exposure or loss incurred in connection with such sale, or exercise, or (iii)
the content of any materials forwarded to the Holders on behalf of the Company
in connection with the rights distribution.

         Notwithstanding anything to the contrary in this Section 4.4, if
registration (under the Securities Act or any other applicable law) of the
rights or the securities to which any rights relate may be required in order for
the Company to offer such rights or such securities to Holders and to sell the
securities represented by such rights, the Depositary will not distribute such
rights to the Holders (i) unless and until a registration statement under the
Securities Act (or other applicable law) covering such offering is in effect or
(ii) unless the Company furnishes the Depositary opinion(s) of counsel for the
Company in the United States and counsel to the

                                       19

<PAGE>

Company in any other applicable country in which rights would be distributed, in
each case satisfactory to the Depositary, to the effect that the offering and
sale of such securities to Holders and Beneficial Owners are exempt from, or do
not require registration under, the provisions of the Securities Act or any
other applicable laws. If Korean law requires the Depositary to make any filing
or obtain approval or license from any governmental agency to effect a sale of
rights, the Depositary may take any action to file such materials or apply for
such approval or license as it may deem desirable, in good faith. Such
requirements may adversely affect (1) the ability of the Depositary to dispose
of such rights or (2) the costs and expenses of the Depositary associated with
disposal of rights.

         In the event that the Company, the Depositary or the Custodian shall be
required to withhold and does withhold from any distribution of property
(including rights) an amount on account of taxes or other governmental charges,
the amount distributed to the Holders of ADSs representing such Deposited
Securities shall be reduced accordingly. In the event that the Depositary
determines that any distribution in property (including Shares and rights to
subscribe therefor) is subject to any tax or other governmental charges which
the Depositary is obligated to withhold, the Depositary may dispose of all or a
portion of such property (including Shares and rights to subscribe therefor) in
such amounts and in such manner, including by public or private sale, as the
Depositary deems necessary and practicable to pay any such taxes or charges.

         There can be no assurance that Holders generally, or any Holder in
particular, will be given the opportunity to receive or exercise rights on the
same terms and conditions as the holders of Shares or be able to exercise such
rights. Nothing herein shall obligate the Company to file any registration
statement in respect of any rights or Shares or other securities to be acquired
upon the exercise of such rights.

         SECTION 4.5 DISTRIBUTIONS OTHER THAN CASH, SHARES OR RIGHTS TO PURCHASE
                     SHARES.

         (a)      Whenever the Company intends to distribute to the holders of
Deposited Securities property other than cash, Shares or rights to purchase
additional Shares, the Company shall give timely notice thereof to the
Depositary and shall indicate whether or not it wishes such distribution to be
made to Holders of ADSs. Upon receipt of a notice indicating that the Company
wishes such distribution be made to Holders of ADSs, the Depositary shall
consult with the Company, and the Company shall assist the Depositary, to
determine whether such distribution to Holders is lawful and reasonably
practicable. The Depositary shall not make such distribution unless (i) the
Company shall have requested the Depositary to make such distribution to
Holders, (ii) the Depositary shall have received satisfactory documentation
within the terms of Section 5.7, and (iii) the Depositary shall have determined
that such distribution is reasonably practicable.

         (b)      Upon receipt of satisfactory documentation and the request of
the Company to distribute property to Holders of ADSs and after making the
requisite determinations set forth in (a) above, the Depositary shall distribute
the property so received to the Holders of record, as of the ADS Record Date
(upon the terms described in Section 4.9), in proportion to the number of ADSs
held by them respectively and in such manner as the Depositary may deem
practicable for accomplishing such distribution (i) upon receipt of payment or
net of the applicable fees and charges of, and expenses incurred by, the
Depositary, and (ii) net of any taxes withheld. The

                                       20

<PAGE>

Depositary may dispose of all or a portion of the property so distributed and
deposited, in such amounts and in such manner (including public or private sale)
as the Depositary may deem practicable or necessary to satisfy any taxes
(including applicable interest and penalties) or other governmental charges
applicable to the distribution.

         (c)      If (i) the Company does not request the Depositary to make
such distribution to Holders or requests not to make such distribution to
Holders, (ii) the Depositary does not receive satisfactory documentation within
the terms of Section 5.7, or (iii) the Depositary determines that all or a
portion of such distribution is not reasonably practicable, the Depositary shall
sell or cause such property to be sold in a public or private sale, at such
place or places and upon such terms as it may deem practicable and shall (i)
cause the proceeds of such sale, if any, to be converted into Dollars and (ii)
distribute the proceeds of such conversion received by the Depositary (net of
applicable (a) fees and charges of, and expenses incurred by, the Depositary and
(b) taxes) to the Holders as of the ADS Record Date upon the terms of Section
4.1. If the Depositary is unable to sell such property, the Depositary may
dispose of such property for the account of the Holders in any way it deems
reasonably practicable under the circumstances.

         SECTION 4.6 Intentionally Omitted.

         SECTION 4.7 Intentionally Omitted.

         SECTION 4.8 CONVERSION OF FOREIGN CURRENCY. Whenever the Depositary or
the Custodian shall receive Foreign Currency, by way of dividends or other
distributions or the net proceeds from the sale of securities, property or
rights, which in the judgment of the Depositary can at such time be converted on
a practicable basis, by sale or in any other manner that it may determine in
accordance with applicable law, into Dollars transferable to the United States
and distributable to the Holders entitled thereto, the Depositary shall convert
or cause to be converted, by sale or in any other manner that it may determine,
such Foreign Currency into Dollars, and shall distribute such Dollars (net of
any applicable fees, any reasonable and customary expenses incurred in such
conversion and any expenses incurred on behalf of the Holders in complying with
currency exchange control or other governmental requirements) in accordance with
the terms of the applicable sections of this Deposit Agreement. If the
Depositary shall have distributed warrants or other instruments that entitle the
holders thereof to such Dollars, the Depositary shall distribute such Dollars to
the holders of such warrants and/or instruments upon surrender thereof for
cancellation, in either case without liability for interest thereon. Such
distribution may be made upon an averaged or other practicable basis without
regard to any distinctions among Holders on account of any application of
exchange restrictions or otherwise.

         If such conversion or distribution generally or with regard to a
particular Holder can be effected only with the approval or license of any
government or agency thereof, the Depositary shall have authority to file such
application for approval or license, if any, as it may deem desirable. In no
event, however, shall the Depositary be obligated to make such a filing.

         If at any time the Depositary shall determine that in its judgment the
conversion of any Foreign Currency and the transfer and distribution of proceeds
of such conversion received by the Depositary is not practicable or lawful, or
if any approval or license of any governmental

                                       21

<PAGE>

authority or agency thereof that is required for such conversion, transfer and
distribution is denied or, in the opinion of the Depositary, not obtainable at a
reasonable cost or within a reasonable period, the Depositary may, in its
discretion, (i) make such conversion and distribution in Dollars to the Holders
for whom such conversion, transfer and distribution is lawful and practicable,
(ii) distribute the Foreign Currency (or an appropriate document evidencing the
right to receive such Foreign Currency) to Holders for whom this is lawful and
practicable or (iii) hold (or cause the Custodian to hold) such Foreign Currency
(without liability for interest thereon) for the respective accounts of the
Holders entitled to receive the same.

         SECTION 4.9 FIXING OF ADS RECORD DATE. Whenever the Depositary shall
receive notice of the fixing of a record date by the Company for the
determination of holders of Deposited Securities entitled to receive any
distribution (whether in cash, Shares, rights, or other distribution), or
whenever for any reason the Depositary causes a change in the number of Shares
that are represented by each ADS, or whenever the Depositary shall receive
notice of any meeting of, or solicitation of consents or proxies of, holders of
Shares or other Deposited Securities, or whenever the Depositary shall find it
necessary or convenient in connection with the giving of any notice,
solicitation of any consent or any other matter, the Depositary shall fix a
record date (the "ADS Record Date") for the determination of the Holders of ADRs
who shall be entitled to receive such distribution, to give instructions for the
exercise of voting rights at any such meeting, to give or withhold such consent,
to receive such notice or solicitation or to otherwise take action, or to
exercise the rights of Holders with respect to such changed number of Shares
represented by each ADS. The Depositary shall to the extent practicable
establish the ADS Record Date as the corresponding Record Date for Company, or,
if that is not practicable, shall be as near as practicable to the corresponding
Record Date for Shares set by the Company. Subject to applicable law and the
provisions of Section 4.1 through 4.8 and to the other terms and conditions of
this Deposit Agreement, only the Holders of ADRs at the close of business in New
York on such ADS Record Date shall be entitled to receive such distribution, to
give such voting instructions, to receive such notice or solicitation, or
otherwise take action.

         SECTION 4.10 VOTING OF DEPOSITED SECURITIES. As soon as practicable
after receipt of notice of any meeting at which the holders of Deposited
Securities are entitled to vote, or of solicitation of consents or proxies from
holders of Deposited Securities, the Depositary shall fix the ADS Record Date in
respect of such meeting or solicitation of consent or proxy in accordance with
Section 4.9. The Depositary shall, if requested by the Company in writing in a
timely manner (the Depositary having no obligation to take any further action if
the request shall not have been received by the Depositary at least thirty (30)
days prior to the date of such vote or meeting), at the Company's expense and
provided no U.S. legal prohibitions exist, distribute to Holders as of the ADS
Record Date: (a) such notice of meeting or solicitation of consent or proxy, (b)
a statement that the Holders at the close of business on the ADS Record Date
will be entitled, subject to any applicable law, the provisions of this Deposit
Agreement, the Articles of Incorporation of the Company and the provisions of or
governing the Deposited Securities (which provisions, if any, shall be
summarized in pertinent part by the Company), to instruct the Depositary as to
the exercise of the voting rights, if any, pertaining to the Deposited
Securities represented by such Holder's ADSs, and (c) a brief statement as to
the manner in which such voting instructions may be given. Voting instructions
may be given only in respect of a number

                                       22

<PAGE>

of ADSs representing an integral number of Deposited Securities. Upon the timely
receipt from a Holder of ADSs as of the ADS Record Date of voting instructions
in the manner specified by the Depositary, the Depositary shall endeavor,
insofar as practicable and permitted under applicable law, the provisions of
this Deposit Agreement, Articles of Incorporation of the Company and the
provisions of the Deposited Securities, to vote, or cause the Custodian to vote,
the Deposited Securities (in person or by proxy) represented by such Holder's
ADSs in accordance with such voting instructions.

         Neither the Depositary nor the Custodian shall under any circumstances
exercise any discretion as to voting and neither the Depositary nor the
Custodian shall vote, attempt to exercise the right to vote, or in any way make
use of for purposes of establishing a quorum or otherwise, the Deposited
Securities represented by ADSs, except pursuant to and in accordance with the
voting instructions timely received from Holders or as otherwise contemplated
herein. If the Depositary timely receives voting instructions from a Holder
which fail to specify the manner in which the Depositary is to vote the
Deposited Securities represented by such Holder's ADSs, the Depositary will deem
such Holder (unless otherwise specified in the notice distributed to Holders) to
have instructed the Depositary to vote in favor of the items set forth in such
voting instructions. Deposited Securities represented by ADSs for which no
timely voting instructions are received by the Depositary from the Holder shall
not be voted.

         Holders acknowledge that the Company may not notify the Depositary
sufficiently in advance of the scheduled date of a meeting or solicitation of
consents or proxies to enable the Depositary to make a timely mailing of such
notices to the Holders of ADRs, and that the Holders of ADRs may not receive
such notices sufficiently in advance of a meeting or solicitation of consents or
proxies to give instructions to the Depositary.

         Subject to applicable laws or rules of any securities exchange on which
the Deposited Securities are listed or traded, at least three (3) days prior to
the date of such meeting the Depositary shall deliver to the Company a
tabulation of the voting instructions received from Holders of ADRs, if any, and
the Depositary shall vote, or cause to be voted, the Deposited Securities
represented by such Holders' ADSs in accordance with such instructions.

         Notwithstanding anything else contained in this Deposit Agreement or
any Receipt, the Depositary shall not have any obligation to take any action
with respect to any meeting, or solicitation of consents or proxies, of holders
of Deposited Securities if the taking of such action would violate U.S. laws.
The Company agrees to take any and all actions reasonably necessary to enable
Holders and Beneficial Owners to exercise the voting rights accruing to the
Deposited Securities and to deliver to the Depositary an opinion of U.S. counsel
addressing any actions requested to be taken if so requested by the Depositary.

         There can be no assurance that Holders generally or any Holder in
particular will receive the notice described above with sufficient time to
enable the Holder to return voting instructions to the Depositary in a timely
manner.

         SECTION 4.11 CHANGES AFFECTING DEPOSITED SECURITIES. Upon any change in
nominal or par value, split-up, cancellation, consolidation or any other
reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets

                                       23

<PAGE>

affecting the Company or to which it is a party, any securities which shall be
received by the Depositary or the Custodian in exchange for, or in conversion of
or replacement of or otherwise in respect of, such Deposited Securities shall,
to the extent permitted by law, be treated as new Deposited Securities under
this Deposit Agreement, and the ADRs shall, subject to the provisions of this
Deposit Agreement and applicable law, evidence ADSs representing the right to
receive such additional securities. The Depositary may, with the Company's
approval, and shall, if the Company shall so request, subject to the terms of
the Deposit Agreement and receipt of an opinion of counsel to the Company
satisfactory to the Depositary that such distributions are not in violation of
any applicable laws or regulations, execute and deliver additional ADRs as in
the case of a stock dividend on the Shares, or call for the surrender of
outstanding ADRs to be exchanged for new ADRs, in either case, as well as in the
event of newly deposited Shares, with necessary modifications to the form of ADR
contained in Exhibit A hereto, specifically describing such new Deposited
Securities or corporate change. The Company agrees to, jointly with the
Depositary, amend the Registration Statement on Form F-6 as filed with the
Commission to permit the issuance of such new form of ADRs. Notwithstanding the
foregoing, in the event that any security so received may not be lawfully
distributed to some or all Holders, the Depositary may, with the Company's
approval, and shall, if the Company requests, subject to receipt of an opinion
of Company's counsel satisfactory to the Depositary that such action is not in
violation of any applicable laws or regulations, sell such securities at public
or private sale, at such place or places and upon such terms as it may deem
proper and may allocate the net proceeds of such sales (net of (a) fees and
charges of, and expenses incurred by, the Depositary and (b) taxes) for the
account of the Holders otherwise entitled to such securities upon an averaged or
other practicable basis without regard to any distinctions among such Holders
and distribute the net proceeds so allocated to the extent practicable as in the
case of a distribution received in cash pursuant to Section 4.1. The Depositary
shall not be responsible for (i) any failure to determine that it may be lawful
or feasible to make such securities available to Holders in general or to any
Holder in particular, (ii) any foreign exchange exposure or loss incurred in
connection with such sale, or (iii) any liability to the purchaser of such
securities.

         SECTION 4.12 AVAILABLE INFORMATION. The Company is subject to the
periodic reporting requirements of the Exchange Act and accordingly files
certain information with the Commission. These reports and documents can be
inspected and copied at the public reference facilities maintained by the
Commission located at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C.
20549.

         SECTION 4.13 REPORTS. The Depositary shall make available for
inspection by Holders at its Principal Office any reports and communications,
including any proxy soliciting materials, received from the Company which are
both (a) received by the Depositary, the Custodian, or the nominee of either of
them as the holder of the Deposited Securities and (b) made generally available
to the holders of such Deposited Securities by the Company. The Depositary shall
also provide to Holders copies of such reports when furnished by the Company
pursuant to Section 5.6.

         SECTION 4.14 LIST OF HOLDERS. Promptly upon written request by the
Company, the Depositary shall furnish to it a list, as of a recent date, of the
names, addresses and holdings of ADSs of all Holders.

                                       24
<PAGE>

         SECTION 4.15 TAXATION. The Depositary will, and will instruct the
Custodian to, forward to the Company or its agents such information from its
records as the Company may reasonably request to enable the Company or its
agents to file the necessary tax reports with governmental authorities or
agencies. The Depositary, the Custodian or the Company and its agents may file
such reports as are necessary to reduce or eliminate applicable taxes on
dividends and on other distributions in respect of Deposited Securities under
applicable tax treaties or laws for the Holders and Beneficial Owners. In
accordance with instructions from the Company and to the extent practicable, the
Depositary or the Custodian will take reasonable administrative actions to
obtain tax refunds, reduced withholding of tax at source on dividends and other
benefits under applicable tax treaties or laws with respect to dividends and
other distributions on the Deposited Securities. As a condition to receiving
such benefits, Holders and Beneficial Owners of ADSs may be required from time
to time, and in a timely manner, to file such proof of taxpayer status,
residence and beneficial ownership (as applicable), to execute such certificates
and to make such representations and warranties, or to provide any other
information or documents, as the Depositary or the Custodian may deem necessary
or proper to fulfill the Depositary's or the Custodian's obligations under
applicable law. The Depositary and the Company shall have no obligations or
liability to any person if any Holder or Beneficial Owner fails to provide such
information or if such information does not reach relevant tax authorities in
time for any Holder or Beneficial Owner to obtain the benefit of any tax treaty.
The Holders and Beneficial Owners shall indemnify the Depositary, the Company,
the Custodian and any of their respective directors, employees, agents and
Affiliates against, and hold each of them harmless from, any claims by any
governmental authority with respect to taxes, additions to tax, penalties or
interest arising out of any refund of taxes, reduced rate of withholding at
source or other tax benefit obtained.

         If the Company (or any of its agents) withholds from any distribution
any amount on account of taxes or governmental charges, or pays any other tax in
respect of such distribution (i.e., stamp duty tax, capital gains or other
similar tax), the Company shall (and shall cause such agent to) remit promptly
to the Depositary information about such taxes or governmental charges withheld
or paid, and, if so requested, the tax receipt (or other proof of payment to the
applicable governmental authority) therefor, in each case, in a form
satisfactory to the Depositary. The Depositary shall, to the extent required by
U.S. law, report to Holders any taxes withheld by it or the Custodian, and, if
such information is provided to it by the Company, any taxes withheld by the
Company. The Depositary and the Custodian shall not be required to provide the
Holders with any evidence of the remittance by the Company (or its agents) of
any taxes withheld, or of the payment of taxes by the Company, except to the
extent the evidence is provided by the Company to the Depositary or the
Custodian, as applicable. Absent gross negligence, bad faith or willful
misconduct of the Depositary or the Custodian, neither the Depositary nor the
Custodian shall be liable for the failure by any Holder or Beneficial Owner to
obtain the benefits of credits on the basis of non-U.S. tax paid against such
Holder's or Beneficial Owner's income tax liability.

         The Depositary is under no obligation to provide the Holders and
Beneficial Owners with any information about the tax status of the Company. The
Depositary shall not incur any liability for any tax consequences that may be
incurred by Holders and Beneficial Owners on account of their ownership of the
ADSs, including without limitation, tax consequences resulting

                                       25

<PAGE>

from the Company (or any of its subsidiaries) being treated as a "Foreign
Personal Holding Company," or as a "Passive Foreign Investment Company" (in each
case as defined in the U.S. Internal Revenue Code and the regulations issued
thereunder) or otherwise.

                                   ARTICLE V

                  THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY

         SECTION 5.1 MAINTENANCE OF OFFICE AND TRANSFER BOOKS BY THE REGISTRAR.
Until termination of this Deposit Agreement in accordance with its terms, the
Registrar shall maintain in the Borough of Manhattan, the City of New York, an
office and facilities for the execution and delivery, registration of issuances,
registration of transfers, combination and split-up of ADRs, and the surrender
of ADRs for the purpose of withdrawal of Deposited Securities in accordance with
the provisions of this Deposit Agreement.

         The Registrar shall keep books for the registration of issuances and
transfers of ADRs which at all reasonable times shall be open for inspection by
the Company and by the Holders of such ADRs, provided that such inspection shall
not be, to the Registrar's knowledge, for the purpose of communicating with
Holders of such ADRs in the interest of a business or object other than the
business of the Company or other than a matter related to this Deposit Agreement
or the ADRs.

         The Registrar may close the transfer books with respect to the ADRs, at
any time or from time to time, when deemed necessary or advisable by it in good
faith in connection with the performance of its duties hereunder, or at the
reasonable written request of the Company subject, in all cases, to Section 7.8
hereof.

         If any ADRs or the ADSs evidenced thereby are listed on one or more
stock exchanges or automated quotation systems in the United States, the
Depositary shall act as Registrar or appoint a Registrar or one or more
co-registrars for registration of ADRs and transfers, combinations and
split-ups, and to countersign such ADRs in accordance with any requirements of
such exchanges or systems. Such Registrar or co-registrars may be removed and a
substitute or substitutes appointed by the Depositary.

         SECTION 5.2 EXONERATION. Neither the Depositary nor the Company shall
be obligated to do or perform any act which is inconsistent with the provisions
of this Deposit Agreement or incur any liability (i) if the Depositary or the
Company shall be prevented or forbidden from, or delayed in, doing or performing
any act or thing required by the terms of this Deposit Agreement, by reason of
any provision of any present or future law or regulation of the United States,
Korea or any other country, or of any other governmental authority or regulatory
authority or stock exchange, or on account of the possible criminal or civil
penalties or restraint, or by reason of any provision, present or future, of the
Articles of Incorporation of the Company or any provision of or governing any
Deposited Securities, or by reason of any act of God or war or other
circumstances beyond its control (including, without limitation,
nationalization, expropriation, currency restrictions, work stoppage, strikes,
civil unrest, acts of terrorism, revolutions, rebellions, explosions and
computer failure), (ii) by reason of any exercise of, or failure to exercise,
any discretion provided for in this Deposit Agreement or in the Articles of

                                       26

<PAGE>

Incorporation of the Company or provisions of or governing Deposited Securities,
(iii) for any action or inaction in reliance upon the advice of or information
from legal counsel, accountants, any person presenting Shares for deposit, any
Holder, any Beneficial Owner or authorized representative thereof, or any other
person believed by it in good faith to be competent to give such advice or
information, (iv) for the inability by a Holder or Beneficial Owner to benefit
from any distribution, offering, right or other benefit which is made available
to holders of Deposited Securities but is not, under the terms of this Deposit
Agreement, made available to Holders of ADSs, or (v) for any consequential or
punitive damages for any breach of the terms of this Deposit Agreement.

         The Depositary, its controlling persons, its agents, any Custodian and
the Company, its controlling persons and its agents may rely and shall be
protected in acting upon any written notice, request or other document believed
by it to be genuine and to have been signed or presented by the proper party or
parties.

         No disclaimer of liability under the Securities Act is intended by any
provision of this Deposit Agreement.

         SECTION 5.3 STANDARD OF CARE. The Company and the Depositary assume no
obligation and shall not be subject to any liability under this Deposit
Agreement or any ADRs to any Holder(s) or Beneficial Owner(s), except that the
Company and the Depositary agree to perform their respective obligations
specifically set forth in this Deposit Agreement or the applicable ADRs without
negligence or bad faith.

         Without limitation of the foregoing, neither the Depositary, nor the
Company, nor any of their respective controlling persons, or agents, shall be
under any obligation to appear in, prosecute or defend any action, suit or other
proceeding in respect of any Deposited Securities or in respect of the ADRs,
which in its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense (including fees and disbursements of
counsel) and liability be furnished as often as may be required (and no
Custodian shall be under any obligation whatsoever with respect to such
proceedings, the responsibility of the Custodian being solely to the
Depositary).

         The Depositary and its agents shall not be liable for any failure to
carry out any instructions to vote any of the Deposited Securities, or for the
manner in which any vote is cast or the effect of any vote, provided that any
such action or omission is in good faith and in accordance with the terms of
this Deposit Agreement. The Depositary shall not incur any liability for any
failure to determine that any distribution or action may be lawful or reasonably
practicable, for the content of any information submitted to it by the Company
for distribution to the Holders or for any inaccuracy of any translation
thereof, for any investment risk associated with acquiring an interest in the
Deposited Securities, for the validity or worth of the Deposited Securities or
for any tax consequences that may result from the ownership of ADSs, Shares or
Deposited Securities, for the credit-worthiness of any third party, for allowing
any rights to lapse upon the terms of this Deposit Agreement or for the failure
or timeliness of any notice from the Company.

                                       27

<PAGE>
         SECTION 5.4 RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF
SUCCESSOR DEPOSITARY. The Depositary may at any time resign as Depositary
hereunder by written notice of resignation delivered to the Company, such
resignation to be effective on the earlier of (i) the sixtieth (60th) after
delivery thereof to the Company (whereupon the Depositary shall be entitled to
take the actions contemplated in Section 6.2 hereof), or (ii) the appointment by
the Company of a successor depositary and its acceptance of such appointment as
hereinafter provided.

         The Depositary may at any time be removed by the Company by written
notice of such removal, which removal shall be effective on the later of (i) the
sixtieth (60th) day after delivery thereof to the Depositary (whereupon the
Depositary shall be entitled to take the actions contemplated in Section 6.2
hereof), or (ii) upon the appointment by the Company of a successor depositary
and its acceptance of such appointment as hereinafter provided.

         In case at any time the Depositary acting hereunder shall resign or be
removed, the Company shall use its best efforts to appoint a successor
depositary, which shall be a bank or trust company having an office in the
Borough of Manhattan, the City of New York. Every successor depositary shall be
required by the Company to execute and deliver to its predecessor and to the
Company an instrument in writing accepting its appointment hereunder, and
thereupon such successor depositary, without any further act or deed (except as
required by applicable law), shall become fully vested with all the rights,
powers, duties and obligations of its predecessor (other than as contemplated in
Sections 5.8 and 5.9). The predecessor depositary, upon payment of all sums due
it and on the written request of the Company shall, (i) execute and deliver an
instrument transferring to such successor all rights and powers of such
predecessor hereunder (other than as contemplated in Sections 5.8 and 5.9), (ii)
duly assign, transfer and deliver all right, title and interest to the Deposited
Securities to such successor, and (iii) deliver to such successor a list of the
Holders of all outstanding ADRs and such other information relating to ADRs and
Holders thereof as the successor may reasonably request. Any such successor
depositary shall promptly provide notice of its appointment to such Holders.

         Any corporation into or with which the Depositary may be merged or
consolidated shall be the successor of the Depositary without the execution or
filing of any document or any further act.

         SECTION 5.5 THE CUSTODIAN. The Depositary has initially appointed Korea
Securities Depository as Custodian for the purpose of this Deposit Agreement.
The Custodian or its successors in acting hereunder shall be subject at all
times and in all respects to the direction of the Depositary for the Shares for
which the Custodian acts as custodian and shall be responsible solely to it. If
any Custodian resigns or is discharged from its duties hereunder with respect to
any Deposited Securities and no other Custodian has previously been appointed
hereunder, the Depositary shall, after consultation with the Company, promptly
appoint a substitute custodian that is organized under the laws of Korea. The
Depositary shall require such resigning or discharged Custodian to deliver the
Deposited Securities held by it, together with all such records maintained by it
as Custodian with respect to such Deposited Securities as the Depositary may
request, to the Custodian designated by the Depositary. Whenever the Depositary
determines, in its discretion, that it is appropriate to do so, it may appoint
an additional custodian with respect to any

                                       28

<PAGE>

Deposited Securities, or discharge the Custodian with respect to any Deposited
Securities and appoint a substitute custodian, which shall thereafter be
Custodian hereunder with respect to the Deposited Securities. Immediately upon
any such change, the Depositary shall give notice thereof in writing to all
Holders of ADRs, each other Custodian and the Company.

         Upon the appointment of any successor depositary, any Custodian then
acting hereunder shall, unless otherwise instructed by the Depositary, continue
to be the Custodian of the Deposited Securities without any further act or
writing, and shall be subject to the direction of the successor depositary. The
successor depositary so appointed shall, nevertheless, on the written request of
any Custodian, execute and deliver to such Custodian all such instruments as may
be proper to give to such Custodian full and complete power and authority to act
on the direction of such successor depositary.

         SECTION 5.6 NOTICES AND REPORTS. On or before the first date on which
the Company gives notice, by publication or otherwise, of any meeting of holders
of Shares or other Deposited Securities, or of any adjourned meeting of such
holders, or of the taking of any action by such holders other than at a meeting,
or of the taking of any action in respect of any cash or other distributions or
the offering of any rights in respect of Deposited Securities, the Company shall
transmit to the Depositary and the Custodian a copy of the notice thereof in the
English language but otherwise in the form given or to be given to holders of
Shares or other Deposited Securities. The Company shall also furnish to the
Custodian and the Depositary a summary, in English, of any applicable provisions
or proposed provisions of the Articles of Incorporation of the Company that may
be relevant or pertain to such notice of meeting or be the subject of a vote
thereat.

         The Company will also transmit to the Depositary (a) an English
language version of the other notices, reports and communications which are made
generally available by the Company to holders of its Shares or other Deposited
Securities and (b) the English-language versions of the Company's annual and
semi-annual reports prepared in accordance with the applicable requirements of
the Commission. The Depositary shall arrange, at the request of the Company and
at the Company's expense, to provide copies thereof to all Holders or make such
notices, reports and other communications available to all Holders on a basis
similar to that for holders of Shares or other Deposited Securities or on such
other basis as the Company may advise the Depositary or as may be required by
any applicable law, regulation or stock exchange requirement. The Company has
delivered to the Depositary and the Custodian a copy of the Company's Articles
of Incorporation along with the provisions of or governing the Shares and any
other Deposited Securities issued by the Company in connection with such Shares,
and promptly upon any amendment thereto or change therein, the Company shall
deliver to the Depositary and the Custodian a copy of such amendment thereto or
change therein. The Depositary may rely upon such copy for all purposes of this
Deposit Agreement.

         The Depositary will, at the expense of the Company, make available a
copy of any such notices, reports or communications issued by the Company and
delivered to the Depositary for inspection by the Holders of the ADRs at the
Depositary's Principal Office, at the office of the Custodian and at any other
designated transfer office.

                                       29

<PAGE>

         SECTION 5.7 ISSUANCE OF ADDITIONAL SHARES, ADSs ETC. The Company agrees
that in the event it or any of its Affiliates proposes (i) an issuance, sale or
distribution of additional Shares, (ii) an offering of rights to subscribe for
Shares or other Deposited Securities, (iii) an issuance of securities
convertible into or exchangeable for Shares, (iv) an issuance of rights to
subscribe for securities convertible into or exchangeable for Shares, (v) an
elective dividend of cash or Shares, (vi) a redemption of Deposited Securities,
(vii) a meeting of holders of Deposited Securities, or solicitation of consents
or proxies, relating to any reclassification of securities, merger or
consolidation or transfer of assets, or (viii) any reclassification,
recapitalization, reorganization, merger, consolidation or sale of assets which
affects the Deposited Securities, it will obtain U.S. legal advice and take all
steps necessary to ensure that the proposed transaction does not violate the
registration provisions of the Securities Act, or any other applicable laws
(including, without limitation, the Investment Company Act of 1940, as amended,
the Exchange Act and the securities laws of the states of the U.S.). In support
of the foregoing, the Company will furnish to the Depositary (a) a written
opinion of U.S. counsel (reasonably satisfactory to the Depositary) stating
whether such transaction (1) requires a registration statement under the
Securities Act to be in effect or (2) is exempt from the registration
requirements of the Securities Act and (b) an opinion of Korean counsel stating
that (1) making the transaction available to Holders and Beneficial Owners does
not violate the laws or regulations of Korea and (2) all requisite regulatory
consents and approvals have been obtained in Korea. If the filing of a
registration statement is required, the Depositary shall not have any obligation
to proceed with the transaction unless it shall have received evidence
reasonably satisfactory to it that such registration statement has been declared
effective. If, being advised by counsel, the Company determines that a
transaction is required to be registered under the Securities Act, the Company
will either (i) register such transaction to the extent necessary, (ii) alter
the terms of the transaction to avoid the registration requirements of the
Securities Act or (iii) direct the Depositary to take specific measures, in each
case as contemplated in this Deposit Agreement, to prevent such transaction from
violating the registration requirements of the Securities Act. The Company
agrees with the Depositary that neither the Company nor any of its Affiliates
will at any time (i) deposit any Shares or other Deposited Securities, either
upon original issuance or upon a sale of Shares or other Deposited Securities
previously issued and reacquired by the Company or by any such Affiliate, or
(ii) issue additional Shares, rights to subscribe for such Shares, securities
convertible into or exchangeable for Shares or rights to subscribe for such
securities, unless such transaction and the securities issuable in such
transaction are exempt from registration under the Securities Act and, if
applicable, the Exchange Act or have been registered under the Securities Act
and, if applicable, the Exchange Act (and such registration statement has been
declared effective).

         Notwithstanding anything else contained in this Deposit Agreement,
nothing in this Deposit Agreement shall be deemed to obligate the Company to
file any registration statement in respect of any proposed transaction.

         SECTION 5.8 INDEMNIFICATION. The Depositary agrees to indemnify the
Company and its directors, officers, employees, agents and Affiliates against,
and hold each of them harmless from, any direct loss, liability, tax, charge or
expense of any kind whatsoever (including, but not limited to, the reasonable
fees and expenses of counsel) which may arise out of acts performed or omitted
by the Depositary under the terms hereof due to the negligence or bad faith of
the Depositary.

                                       30

<PAGE>

         The Company agrees to indemnify the Depositary, the Custodian and any
of their respective directors, officers, employees, agents and Affiliates
against, and hold each of them harmless from, any direct loss, liability, tax,
charge or expense of any kind whatsoever (including, but not limited to, the
reasonable fees and expenses of counsel) that may arise (a) out of or in
connection with any offer, issuance, sale, resale, transfer, deposit or
withdrawal of ADRs, ADSs, the Shares, or other Deposited Securities, as the case
may be, (b) out of or as a result of any offering documents in respect thereof
or (c) out of acts performed or omitted, including, but not limited to, any
delivery by the Depositary on behalf of the Company of information regarding the
Company in connection with this Deposit Agreement, the ADRs, the ADSs, the
Shares, or any Deposited Securities, in any such case (i) by the Depositary, the
Custodian or any of their respective directors, officers, employees, agents and
Affiliates, except to the extent such loss, liability, tax, charge or expense is
due to the negligence or bad faith of any of them, or (ii) by the Company or any
of its directors, officers, employees, agents and Affiliates.

         The obligations set forth in this Section shall survive the termination
of this Deposit Agreement and the succession or substitution of any party
hereto.

         Any person seeking indemnification hereunder (an "indemnified person")
shall notify the person from whom it is seeking indemnification (the
"indemnifying person") of the commencement of any indemnifiable action or claim
promptly after such indemnified person becomes aware of such commencement
(provided that the failure to make such notification shall not affect such
indemnified person's rights to seek indemnification except to the extent the
indemnifying person is materially prejudiced by such failure) and shall consult
in good faith with the indemnifying person as to the conduct of the defense of
such action or claim that may give rise to an indemnity hereunder, which defense
shall be reasonable in the circumstances. No indemnified person shall compromise
or settle any action or claim that may give rise to an indemnity hereunder
without the consent of the indemnifying person, which consent shall not be
unreasonably withheld.

         SECTION 5.9 FEES AND CHARGES OF DEPOSITARY. The Company, the Holders,
the Beneficial Owners, and persons depositing Shares or surrendering ADSs for
cancellation and withdrawal of Deposited Securities shall be required to pay to
the Depositary the Depositary's fees and related charges identified as payable
by them respectively in the Fee Schedule attached hereto as Exhibit B. All fees
and charges so payable may, at any time and from time to time, be changed by
agreement between the Depositary and the Company, but, in the case of fees and
charges payable by Holders and Beneficial Owners, only in the manner
contemplated in Section 6.1. The Depositary shall provide, without charge, a
copy of its latest fee schedule to anyone upon request.

         The Company agrees to promptly pay to the Depositary such other fees
and charges and to reimburse the Depositary for such out-of-pocket expenses as
the Depositary and the Company may agree to in writing from time to time.
Responsibility for payment of such charges may at any time and from time to time
be changed by agreement between the Company and the Depositary. Unless otherwise
agreed, the Depositary shall present its statement for such expenses and fees or
charges to the Company once every three months. The charges and expenses of the
Custodian are for the sole account of the Depositary.

                                       31

<PAGE>

         The right of the Depositary to receive payment of fees, charges and
expenses as provided above shall survive the termination of this Deposit
Agreement. As to any Depositary, upon the resignation or removal of such
Depositary as described in Section 5.4 hereof, such right shall extend for those
fees, charges and expenses incurred prior to the effectiveness of such
resignation or removal.

         SECTION 5.10 PRE-RELEASE TRANSACTIONS. Subject to the further terms and
provisions of this Section 5.10, the Depositary, its Affiliates and their
agents, on their own behalf, may own and deal in any class of securities of the
Company and its Affiliates and in ADSs. In its capacity as Depositary, the
Depositary shall not lend Shares or ADSs; provided, however, that to the extent
permitted by Korean law, the Depositary may (i) issue ADSs prior to the receipt
of Shares pursuant to Section 2.3 and (ii) deliver Shares prior to the receipt
of ADSs for withdrawal of Deposited Securities pursuant to Section 2.7,
including ADSs which were issued under (i) above but for which Shares may not
have been received (each such transaction a "Pre-Release Transaction"). The
Depositary may receive ADSs in lieu of Shares under (i) above and receive Shares
in lieu of ADSs under (ii) above. Each such Pre-Release Transaction will be (a)
subject to a written agreement whereby the person or entity (the "Applicant") to
whom ADSs or Shares are to be delivered (w) represents that at the time of the
Pre-Release Transaction the Applicant or its customer owns the Shares or ADSs
that are to be delivered by the Applicant under such Pre-Release Transaction,
(x) agrees to indicate the Depositary as owner of such Shares or ADSs in its
records and to hold such Shares or ADSs in trust for the Depositary until such
Shares or ADSs are delivered to the Depositary or the Custodian, (y)
unconditionally guarantees to deliver to the Depositary or the Custodian, as
applicable, such Shares or ADSs, and (z) agrees to any additional restrictions
or requirements that the Depositary deems appropriate, (b) at all times fully
collateralized with cash, U.S. government securities or such other collateral as
the Depositary deems appropriate, (c) terminable by the Depositary on not more
than five (5) business days' notice and (d) subject to such further indemnities
and credit regulations as the Depositary deems appropriate. The Depositary will
normally limit the number of ADSs and Shares involved in such Pre-Release
Transactions at any one time to thirty percent (30%) of the ADSs outstanding
(without giving effect to ADSs outstanding under (i) above), provided, however,
that the Depositary reserves the right to change or disregard such limit from
time to time as it deems appropriate.

         The Depositary may also set limits with respect to the number of ADSs
and Shares involved in Pre-Release Transactions with any one person on a
case-by-case basis as it deems appropriate. The Depositary may retain for its
own account any compensation received by it in conjunction with the foregoing.
Collateral provided pursuant to (b) above, but not the earnings thereon, shall
be held for the benefit of the Holders (other than the Applicant).

         SECTION 5.11 RESTRICTED SECURITIES OWNERS. The Company agrees to advise
in writing each of the persons or entities who, to the knowledge of the Company,
holds Restricted Securities that such Restricted Securities are ineligible for
deposit hereunder (except under the circumstances contemplated in Section 2.12)
and, to the extent practicable, shall require each of such persons to represent
in writing that such person will not deposit Restricted Securities hereunder
(except under the circumstances contemplated in Section 2.12).

                                       32

<PAGE>

                                   ARTICLE VI

                            AMENDMENT AND TERMINATION

         SECTION 6.1 AMENDMENT/SUPPLEMENT. Subject to the terms and conditions
of this Section 6.1 and applicable law, the ADRs outstanding at any time, the
provisions of this Deposit Agreement and the form of ADR attached hereto and to
be issued under the terms hereof may at any time and from time to time be
amended or supplemented by written agreement between the Company and the
Depositary in any respect which they may deem necessary or desirable without the
prior written consent of the Holders or Beneficial Owners. Any amendment or
supplement which shall impose or increase any fees or charges (other than
charges in connection with foreign exchange control regulations, and taxes and
other governmental charges, delivery and other such expenses), or which shall
otherwise materially prejudice any substantial existing right of Holders or
Beneficial Owners, shall not, however, become effective as to outstanding ADRs
until the expiration of thirty (30) days after notice of such amendment or
supplement shall have been given to the Holders of outstanding ADRs. The parties
hereto agree that any amendments or supplements which (i) are reasonably
necessary (as agreed by the Company and the Depositary) in order for (a) the
ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs to be
traded solely in electronic book-entry form and (ii) do not in either such case
impose or increase any fees or charges to be borne by Holders, shall be deemed
not to materially prejudice any substantial rights of Holders or Beneficial
Owners. Every Holder and Beneficial Owner at the time any amendment or
supplement so becomes effective shall be deemed, by continuing to hold such
ADSs, to consent and agree to such amendment or supplement and to be bound by
the Deposit Agreement and the ADR as amended or supplemented thereby. In no
event shall any amendment or supplement impair the right of the Holder to
surrender such ADR and receive therefor the Deposited Securities represented
thereby, except in order to comply with mandatory provisions of applicable law.
Notwithstanding the foregoing, if any governmental body should adopt new laws,
rules or regulations which would require an amendment of, or supplement to, the
Deposit Agreement to ensure compliance therewith, the Company and the Depositary
may amend or supplement the Deposit Agreement and the ADRs at any time in
accordance with such changed laws, rules or regulations. Such amendment or
supplement to the Deposit Agreement and the ADRs in such circumstances may
become effective before a notice of such amendment or supplement is given to
Holders or within any other period of time as required for compliance with such
laws, rules or regulations.

         SECTION 6.2 TERMINATION. The Depositary shall, at any time at the
written direction of the Company, terminate this Deposit Agreement by providing
notice of such termination to the Holders of all ADRs then outstanding at least
thirty (30) days prior to the date fixed in such notice for such termination. If
(i) sixty (60) days shall have expired after the (i) Depositary shall have
delivered to the Company a written notice of its election to resign, or (ii) the
Company shall have delivered to the Depositary a written notice of the removal
of the Depositary, and in either case a successor depositary shall not have been
appointed and accepted its appointment as provided in Section 5.4, the
Depositary may terminate this Deposit Agreement by providing notice of such
termination to the Holders of all ADRs then outstanding at least thirty (30)
days prior to the date fixed for such termination. On and after the date of
termination of this Deposit Agreement, the Holder of an ADR will, upon surrender
of such ADR at the Principal Office of the Depositary, upon the payment of the
charges of the

                                       33

<PAGE>

Depositary for the surrender of ADRs referred to in Section 2.7 and subject to
the conditions and restrictions therein set forth, and upon payment of any
applicable taxes or governmental charges, be entitled to Delivery, to him or
upon his order, of the amount of Deposited Securities represented by such ADR.
If any ADRs shall remain outstanding after the date of termination of this
Deposit Agreement, the Registrar thereafter shall discontinue the registration
of transfers of ADRs, and the Depositary shall suspend the distribution of
dividends to the Holders thereof, and shall not give any further notices or
perform any further acts under this Deposit Agreement, except that the
Depositary shall continue to collect dividends and other distributions
pertaining to Deposited Securities, shall sell rights as provided in this
Deposit Agreement, and shall continue to deliver Deposited Securities, subject
to the conditions and restrictions set forth in Section 2.7, together with any
dividends or other distributions received with respect thereto and the net
proceeds of the sale of any rights or other property, in exchange for ADRs
surrendered to the Depositary (after deducting, or charging, as the case may be,
in each case, the charges of the Depositary for the surrender of a ADR, any
expenses for the account of the Holder in accordance with the terms and
conditions of this Deposit Agreement and any applicable taxes or governmental
charges or assessments). At any time after the expiration of six months from the
date of termination of this Deposit Agreement, the Depositary may sell the
Deposited Securities then held hereunder and may thereafter hold uninvested the
net proceeds of any such sale, together with any other cash then held by it
hereunder, in an unsegregated account, without liability for interest for the
pro rata benefit of the Holders whose ADRs have not theretofore been
surrendered. After making such sale, the Depositary shall be discharged from all
obligations under this Deposit Agreement with respect to the ADRs, the Deposited
Securities and the ADSs, except to account for such net proceeds and other cash
(after deducting, or charging, as the case may be, in each case, the charges of
the Depositary for the surrender of an ADR, any expenses for the account of the
Holder in accordance with the terms and conditions of this Deposit Agreement and
any applicable taxes or governmental charges or assessments). Upon the
termination of this Deposit Agreement, the Company shall be discharged from all
obligations under this Deposit Agreement except for its obligations to the
Depositary under Sections 5.8, 5.9 and 7.6 hereof.

                                  ARTICLE VII

                                 MISCELLANEOUS

         SECTION 7.1 COUNTERPARTS. This Deposit Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
such counterparts together shall constitute one and the same agreement. Copies
of this Deposit Agreement shall be maintained with the Depositary and shall be
open to inspection by any Holder during business hours.

         SECTION 7.2 NO THIRD-PARTY BENEFICIARIES. This Deposit Agreement is for
the exclusive benefit of the parties hereto (and their successors) and shall not
be deemed to give any legal or equitable right, remedy or claim whatsoever to
any other person, except to the extent specifically set forth in this Deposit
Agreement. Nothing in this Deposit Agreement shall be deemed to give rise to a
partnership or joint venture among the parties nor establish a fiduciary or
similar relationship among the parties. The parties hereto acknowledge and agree
that (i) the Depositary and its Affiliates may at any time have multiple banking
relationships with the

                                       34

<PAGE>

Company and its Affiliates, (ii) the Depositary and its Affiliates may be
engaged at any time in transactions in which parties adverse to the Company or
the Holders or Beneficial Owners may have interests and (iii) nothing contained
in this Deposit Agreement shall (a) preclude the Depositary or any of its
Affiliates from engaging in such transactions or establishing or maintaining
such relationships, or (b) obligate the Depositary or any of its Affiliates to
disclose such transactions or relationships or to account for any profit made or
payment received in such transactions or relationships.

         SECTION 7.3 SEVERABILITY. In case any one or more of the provisions
contained in this Deposit Agreement or in the ADRs should be or become invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall in
no way be affected, prejudiced or disturbed thereby.

         SECTION 7.4 HOLDERS AND BENEFICIAL OWNERS AS PARTIES; BINDING EFFECT.
The Holders and Beneficial Owners from time to time of ADSs shall be parties to
this Deposit Agreement and shall be bound by all of the terms and conditions
hereof and of any ADR by acceptance thereof or any beneficial interest therein.

         SECTION 7.5 NOTICES. Any and all notices to be given to the Company
shall be deemed to have been duly given if personally delivered or sent by mail,
air courier or cable, telex or facsimile transmission, confirmed by letter
personally delivered or sent by mail or air courier, addressed to Shinhan
Financial Group Co., Ltd., 120, 2-Ka. Taepyung-Ro, ChungKu. Seoul 100-102,
Korea, ATTENTION: I.C. Park, Deputy General Manager / S.J. Han, Assistant
General Manager (facsimile number: (822) 777-1883), or to any other address
which the Company may specify in writing to the Depositary.

         Any and all notices to be given to the Depositary shall be deemed to
have been duly given if personally delivered or sent by mail, air courier or
cable, telex or facsimile transmission, confirmed by letter personally delivered
or sent by mail or air courier, addressed to Citibank, N.A., 111 Wall Street,
New York, New York 10043, U.S.A., Attention: Depositary Receipts Department, or
to any other address which the Depositary may specify in writing to the Company.

         Any and all notices to be given to any Holder shall be deemed to have
been duly given if (a) personally delivered or sent by mail or cable, telex or
facsimile transmission, confirmed by letter, addressed to such Holder at the
address of such Holder as it appears on the books of the Depositary or, if such
Holder shall have filed with the Depositary a request that notices intended for
such Holder be mailed to some other address, at the address specified in such
request, or (b) if a Holder shall have designated such means of notification as
an acceptable means of notification under the terms of this Deposit Agreement,
by means of electronic messaging addressed for delivery to the e-mail address
designated by the Holder for such purpose. Notice to Holders shall be deemed to
be notice to Beneficial Owners for all purposes of this Deposit Agreement.
Failure to notify a Holder or any defect in the notification to a Holder shall
not affect the sufficiency of notification to other Holders or to the Beneficial
Owners of ADSs held by such other Holders.

                                       35

<PAGE>

         Delivery of a notice sent by mail, air courier or cable, telex or
facsimile transmission shall be deemed to be effective at the time when a duly
addressed letter containing the same (or a confirmation thereof in the case of a
cable, telex or facsimile transmission) is deposited, postage prepaid, in a
post-office letter box or delivered to an air courier service, without regard
for the actual receipt or time of actual receipt thereof by a Holder. The
Depositary or the Company may, however, act upon any cable, telex or facsimile
transmission received by it from any Holder, the Custodian, the Depositary, or
the Company, notwithstanding that such cable, telex or facsimile transmission
shall not be subsequently confirmed by letter.

         Delivery of a notice by means of electronic messaging shall be deemed
to be effective at the time of the initiation of the transmission by the sender
(as shown on the sender's records), notwithstanding that the intended recipient
retrieves the message at a later date, fails to retrieve such message, or fails
to receive such notice on account of its failure to maintain the designated
e-mail address, its failure to designate a substitute e-mail address or for any
other reason.

         SECTION 7.6 GOVERNING LAW AND JURISDICTION. This Deposit Agreement and
the ADRs shall be interpreted in accordance with, and all rights hereunder and
thereunder and provisions hereof and thereof shall be governed by, the laws of
the State of New York without reference to the principles of choice of law
thereof. Notwithstanding anything contained in this Deposit Agreement, any ADR
or any present or future provisions of the laws of the State of New York, the
rights of holders of Shares and of any other Deposited Securities and the
obligations and duties of the Company in respect of the holders of Shares and
other Deposited Securities, as such, shall be governed by the laws of Korea (or,
if applicable, such other laws as may govern the Deposited Securities).

         Except as set forth in the following paragraph of this Section 7.6, the
Company and the Depositary agree that the federal or state courts in the City of
New York shall have jurisdiction to hear and determine any suit, action or
proceeding and to settle any dispute between them that may arise out of or in
connection with this Deposit Agreement and, for such purposes, each irrevocably
submits to the non-exclusive jurisdiction of such courts. The Company hereby
irrevocably designates, appoints and empowers Shinhan Bank, New York York
Branch, 800 Third Avenue, 32nd Floor, New York, New York 10022 as its authorized
agent to receive and accept for and on its behalf, and on behalf of its
properties, assets and revenues, service by mail of any and all legal process,
summons, notices and documents that may be served in any suit, action or
proceeding brought against the Company in any federal or state court as
described in the preceding sentence or in the next paragraph of this Section
7.6. If for any reason the Agent shall cease to be available to act as such, the
Company agrees to designate a new agent in New York on the terms and for the
purposes of this Section 7.6 reasonably satisfactory to the Depositary. The
Company further hereby irrevocably consents and agrees to the service of any and
all legal process, summons, notices and documents in any suit, action or
proceeding against the Company, by service by mail of a copy thereof upon the
Agent (whether or not the appointment of such Agent shall for any reason prove
to be ineffective or such Agent shall fail to accept or acknowledge such
service), with a copy mailed to the Company by registered or certified air mail,
postage prepaid, to its address provided in Section 7.5 hereof. The Company
agrees that the failure of the Agent to give any notice of such service to it
shall not impair or affect in any way the validity of such service or any
judgment rendered in any action or proceeding based thereon.

                                       36

<PAGE>

         Notwithstanding the foregoing, the Depositary and the Company
unconditionally agree that in the event that a Holder or Beneficial Owner brings
a suit, action or proceeding against (a) the Company, (b) the Depositary in its
capacity as Depositary under this Deposit Agreement or (c) against both the
Company and the Depositary, in any such case, in any state or federal court of
the United States, and the Depositary or the Company have any claim, for
indemnification or otherwise, against each other arising out of the subject
matter of such suit, action or proceeding, then the Company and the Depositary
may pursue such claim against each other in the state or federal court in the
United States in which such suit, action, or proceeding is pending and, for such
purposes, the Company and the Depositary irrevocably submit to the non-exclusive
jurisdiction of such courts. The Company agrees that service of process upon the
Agent in the manner set forth in the preceding paragraph shall be effective
service upon it for any suit, action or proceeding brought against it as
described in this paragraph.

         The Company irrevocably and unconditionally waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of venue of any actions, suits or proceedings brought in any court as
provided in this Section 7.6, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.

         The Company irrevocably and unconditionally waives, to the fullest
extent permitted by law, and agrees not to plead or claim, any right of immunity
from legal action, suit or proceeding, from setoff or counterclaim, from the
jurisdiction of any court, from service of process, from attachment upon or
prior to judgment, from attachment in aid of execution or judgment, from
execution of judgment, or from any other legal process or proceeding for the
giving of any relief or for the enforcement of any judgment, and consents to
such relief and enforcement against it, its assets and its revenues in any
jurisdiction, in each case with respect to any matter arising out of, or in
connection with, the Deposit Agreement, any ADR or the Deposited Securities.

         No disclaimer of liability under the Securities Act is intended by any
provision of the Deposit Agreement. The provisions of this Section 7.6 shall
survive any termination of this Deposit Agreement, in whole or in part.

         SECTION 7.7 ASSIGNMENT. Subject to the provisions of Section 5.4
hereof, this Deposit Agreement may not be assigned by either the Company or the
Depositary.

         SECTION 7.8 COMPLIANCE WITH U.S. SECURITIES LAWS. Notwithstanding
anything in this Deposit Agreement to the contrary, the withdrawal or delivery
of Deposited Securities will not be suspended by the Company or the Depositary
except as would be permitted by Instruction I.A.(1) of the General Instructions
to Form F-6 Registration Statement, as amended from time to time, under the
Securities Act.

         SECTION 7.9 KOREAN LAW REFERENCES. Any summary of Korean laws and
regulations and of the terms of the Company's Articles of Incorporation set
forth in this Deposit Agreement have been provided by the Company solely for the
convenience of Holders, Beneficial Owners and the Depositary. While such
summaries are believed by the Company to be accurate as of the

                                       37

<PAGE>

date of this Deposit Agreement, (i) they are summaries and as such may not
include all aspects of the materials summarized applicable to a Holder or
Beneficial Owner, and (ii) these laws and regulations and the Company's Articles
of Incorporation may change after the date of this Deposit Agreement. Neither
the Depositary nor the Company has any obligation under the terms of this
Deposit Agreement to update any such summaries.

         SECTION 7.10 TITLES AND REFERENCES. All references in this Deposit
Agreement to exhibits, articles, sections, subsections, and other subdivisions
refer to the exhibits, articles, sections, subsections and other subdivisions of
this Deposit Agreement unless expressly provided otherwise. The words "this
Deposit Agreement", "herein", "hereof", "hereby", "hereunder", and words of
similar import refer to the Deposit Agreement as a whole as in effect between
the Company, the Depositary and the Holders and Beneficial Owners of ADSs and
not to any particular subdivision unless expressly so limited. Pronouns in
masculine, feminine and neuter gender shall be construed to include any other
gender, and words in the singular form shall be construed to include the plural
and vice versa unless the context otherwise requires. Titles to sections of this
Deposit Agreement are included for convenience only and shall be disregarded in
construing the language contained in this Deposit Agreement. References to
"applicable laws and regulations" shall refer to laws and regulations applicable
to ADRs, ADSs or Deposited Securities as in effect at the relevant time of
determination, unless otherwise required by law or regulation.

                                       38

<PAGE>

         IN WITNESS WHEREOF, SHINHAN FINANCIAL GROUP CO., LTD. and CITIBANK,
N.A. have duly executed this Deposit Agreement as of the day and year first
above set forth and all Holders and Beneficial Owners shall become parties
hereto upon acceptance by them of ADSs evidenced by ADRs issued in accordance
with the terms hereof, or upon acquisition of any beneficial interest therein.

                                               SHINHAN FINANCIAL GROUP CO., LTD.

                                               By:______________________________
                                                  Name:
                                                  Title:

                                               CITIBANK, N.A.

                                               By:______________________________
                                                  Name:
                                                  Title:

                                       39

<PAGE>

                                    EXHIBIT A

                                  [FORM OF ADR]

Number SHG                                             CUSIP NUMBER: 824596 10 0

___________

                                          American Depositary Shares (each
                                          American Depositary Share representing
                                          two (2) fully paid shares of common
                                          stock, par value 5,000 Won per share)

                           AMERICAN DEPOSITARY RECEIPT

                                       for

                           AMERICAN DEPOSITARY SHARES

                                  representing

                        DEPOSITED SHARES OF COMMON STOCK

                                       of

                        SHINHAN FINANCIAL GROUP CO., LTD.

             (Incorporated under the laws of the Republic of Korea)

         CITIBANK, N.A., a national banking association organized and existing
under the laws of the United States of America, as depositary (the
"Depositary"), hereby certifies that ____________________ is the owner of
______________ American Depositary Shares (hereinafter "ADS"), representing
deposited shares of common stock, par value 5,000 won per share, including
evidence of rights to receive such shares (the "Shares"), of Shinhan Financial
Group Co., Ltd., a corporation incorporated under the laws of the Republic of
Korea (the "Company"). As of the date of the Deposit Agreement (as hereinafter
defined), each ADS represents two (2) Shares deposited under the Deposit
Agreement with the Custodian, which at the date of execution of the Deposit
Agreement is Korea Securities Depository (the "Custodian"). The
ADS(s)-to-Share(s) ratio is subject to amendment as provided in Articles IV and
VI of the Deposit Agreement. The Depositary's Principal Office is located at 111
Wall Street, New York, New York 10043, U.S.A.

         (1)      THE DEPOSIT AGREEMENT. This American Depositary Receipt is one
of an issue of American Depositary Receipts ("ADRs"), all issued and to be
issued upon the terms and conditions set forth in the Deposit Agreement, dated
as of [DATE], 2003 (as amended and supplemented from time to time, the "Deposit
Agreement"), by and among the Company, the

                                       A-1

<PAGE>

Depositary, and all Holders and Beneficial Owners from time to time of ADSs
evidenced by ADRs issued thereunder. The Deposit Agreement sets forth the rights
and obligations of Holders and Beneficial Owners of ADRs and the rights and
duties of the Depositary in respect of the Shares deposited thereunder and any
and all other securities, property and cash from time to time received in
respect of such Shares and held thereunder (such Shares, securities, property
and cash are herein called "Deposited Securities"). Copies of the Deposit
Agreement are on file at the Principal Office of the Depositary and with the
Custodian. Each Holder and each Beneficial Owner, upon acceptance of any ADSs
(or any interest therein) issued in accordance with the terms and conditions of
the Deposit Agreement, shall be deemed for all purposes to (a) be a party to and
bound by the terms of the Deposit Agreement and applicable ADR(s), and (b)
appoint the Depositary its attorney-in-fact, with full power to delegate, to act
on its behalf and to take any and all actions contemplated in the Deposit
Agreement and the applicable ADR(s), to adopt any and all procedures necessary
to comply with applicable law and to take such action as the Depositary in its
sole discretion may deem necessary or appropriate to carry out the purposes of
the Deposit Agreement and the applicable ADR(s), the taking of such actions to
be the conclusive determinant of the necessity and appropriateness thereof.

         The statements made on the face and reverse of this ADR are summaries
of certain provisions of the Deposit Agreement and the Articles of Incorporation
of the Company (as in effect on the date of the signing of the Deposit
Agreement) and are qualified by and subject to the detailed provisions of the
Deposit Agreement and the Articles of Incorporation, to which reference is
hereby made. All capitalized terms used herein which are not otherwise defined
herein shall have the meanings ascribed thereto in the Deposit Agreement. The
Depositary makes no representation or warranty as to the validity or worth of
the Deposited Securities. The Depositary has made arrangements for the
acceptance of the ADSs into DTC. Each Beneficial Owner of ADSs held through DTC
must rely on the procedures of DTC and the DTC Participants to exercise and be
entitled to any rights attributable to such ADSs.

         (2)      WITHDRAWAL OF DEPOSITED SECURITIES. The Holder of this ADR
(and of the ADSs evidenced hereby) shall be entitled to Delivery of the
Deposited Securities at the time represented by the ADSs evidenced hereby upon
satisfaction of each of the following conditions: (i) the Holder (or a duly
authorized attorney of the Holder) has duly Delivered to the Depositary at its
Principal Office the ADSs evidenced hereby (and, if applicable, this ADR) for
the purpose of withdrawal of the Deposited Securities represented thereby, (ii)
if so required by the Depositary, this ADR has been properly endorsed in blank
or is accompanied by proper instruments of transfer in blank (including
signature guarantees in accordance with standard securities industry practice),
(iii) if so required by the Depositary, the Holder of the ADSs has executed and
delivered to the Depositary a written order directing the Depositary to cause
the Deposited Securities being withdrawn to be Delivered to or upon the written
order of the person(s) designated in such order, and (iv) all applicable fees
and charges of, and expenses incurred by, the Depositary and all applicable
taxes and governmental charges (as are set forth in Section 5.9 of, and Exhibit
B to, the Deposit Agreement) have been paid, subject, however, in each case, to
the terms and conditions of this ADR, of the Deposit Agreement, of the Company's
Articles of Incorporation, of any applicable laws and the rules, and of any
requirements of the CSD, and to any provisions of or governing the Deposited
Securities, in each case as in effect at the time thereof; provided, however,
that, in the case of newly-issued Shares, no such

                                      A-2

<PAGE>

withdrawals will be permitted until receipt by the Depositary of notice from the
Company of the listing on the Korea Stock Exchange of such newly-issued Shares.

         Upon satisfaction of each of the conditions specified above, the
Depositary shall (i) cancel the ADSs Delivered to it (and, if applicable, the
ADR(s) evidencing the ADSs so Delivered), (ii) direct the Registrar to record
the cancellation of the ADSs so Delivered on the books maintained for such
purpose, and (iii) direct the Custodian to Deliver (without unreasonable delay)
the Deposited Securities represented by the ADSs so canceled together with any
certificate or other document of title for the Deposited Securities, or evidence
of the electronic transfer thereof (if available), as the case may be, to or
upon the written order of the person(s) designated in the order delivered to the
Depositary for such purpose, subject however, in each case, to the terms and
conditions of the Deposit Agreement, of this ADR, of the Articles of
Incorporation of the Company, of any applicable laws and the rules of the CSD,
and to the terms and conditions of or governing the Deposited Securities, in
each case as in effect at the time thereof.

         The Depositary shall not accept for surrender ADSs representing less
than one Share. In the case of Delivery to it of ADSs representing a number
other than a whole number of Shares, the Depositary shall cause ownership of the
appropriate whole number of Shares to be Delivered in accordance with the terms
hereof, and shall, at the discretion of the Depositary, either (i) return to the
person surrendering such ADSs the number of ADSs representing any remaining
fractional Share, or (ii) sell or cause to be sold the fractional Share
represented by the ADSs so surrendered and remit the proceeds of such sale (net
of (a) applicable fees and charges of, and expenses incurred by, the Depositary
and (b) taxes withheld) to the person surrendering the ADSs. Notwithstanding
anything else contained in this ADR or the Deposit Agreement, the Depositary may
make delivery at the Principal Office of the Depositary of (i) any cash
dividends or cash distributions, or (ii) any proceeds from the sale of any
distributions of shares or rights, which are at the time held by the Depositary
in respect of the Deposited Securities represented by the ADSs surrendered for
cancellation and withdrawal. At the request, risk and expense of any Holder so
surrendering ADSs represented by this ADR, and for the account of such Holder,
the Depositary shall direct the Custodian to forward (to the extent permitted by
law) any cash or other property (other than securities) held by the Custodian in
respect of the Deposited Securities represented by such ADSs to the Depositary
for delivery at the Principal Office of the Depositary. Such direction shall be
given by letter or, at the request, risk and expense of such Holder, by cable,
telex or facsimile transmission.

         (3)      TRANSFER, COMBINATION AND SPLIT-UP OF ADRs. The Registrar
shall register the transfer of this ADR (and of the ADSs represented hereby) on
the books maintained for such purpose and the Depositary shall (x) cancel this
ADR and execute new ADRs evidencing the same aggregate number of ADSs as those
evidenced by this ADR when canceled, (y) cause the Registrar to countersign such
new ADRs, and (z) Deliver such new ADRs to or upon the order of the person
entitled thereto, if each of the following conditions has been satisfied: (i)
this ADR has been duly Delivered by the Holder (or by a duly authorized attorney
of the Holder) to the Depositary at its Principal Office for the purpose of
effecting a transfer thereof, (ii) this ADR has been properly endorsed or is
accompanied by proper instruments of transfer (including signature guarantees in
accordance with standard securities industry practice), (iii) this ADR has been
duly

                                      A-3

<PAGE>

stamped (if required by the laws of the State of New York or of the United
States), and (iv) all applicable fees and charges of, and expenses incurred by,
the Depositary and all applicable taxes and governmental charges (as are set
forth in Section 5.9 of, and Exhibit B to, the Deposit Agreement) have been
paid, subject, however, in each case, to the terms and conditions of this ADR,
of the Deposit Agreement and of applicable law, in each case as in effect at the
time thereof.

         The Registrar shall register the split-up or combination of this ADR
(and of the ADSs represented hereby) on the books maintained for such purpose
and the Depositary shall (x) cancel this ADR and execute new ADRs for the number
of ADSs requested, but in the aggregate not exceeding the number of ADSs
evidenced by this ADR (when canceled), (y) cause the Registrar to countersign
such new ADRs, and (z) Deliver such new ADRs to or upon the order of the Holder
thereof, if each of the following conditions has been satisfied: (i) this ADR
has been duly Delivered by the Holder (or by a duly authorized attorney of the
Holder) to the Depositary at its Principal Office for the purpose of effecting a
split-up or combination hereof, and (ii) all applicable fees and charges of, and
expenses incurred by, the Depositary and all applicable taxes and government
charges (as are set forth in Section 5.9 of, and Exhibit B to, the Deposit
Agreement) have been paid, subject, however, in each case, to the terms and
conditions of this ADR, of the Deposit Agreement and of applicable law, in each
case as in effect at the time thereof.

         (4)      PRE-CONDITIONS TO REGISTRATION, TRANSFER, ETC. As a condition
precedent to the execution and delivery, the registration of issuance, transfer,
split-up, combination or surrender, of any ADR, the delivery of any distribution
thereon, or the withdrawal of any Deposited Securities, the Depositary or the
Custodian may require (i) payment from the depositor of Shares or presenter of
ADSs or of an ADR of a sum sufficient to reimburse it for any tax or other
governmental charge and any stock transfer or registration fee with respect
thereto (including any such tax or charge and fee with respect to Shares being
deposited or withdrawn) and payment of any applicable fees and charges of the
Depositary as provided in the Deposit Agreement and in this ADR, (ii) the
production of proof satisfactory to it as to the identity and genuineness of any
signature or any other matters contemplated in the Deposit Agreement, and (iii)
compliance with (A) any laws or governmental regulations relating to the
execution and delivery of ADRs or ADSs or to the withdrawal of Deposited
Securities and (B) such reasonable regulations as the Depositary or the Company
may establish consistent with the provisions of this ADR and the Deposit
Agreement and applicable law.

         The issuance of ADSs against deposits of Shares generally or against
deposits of particular Shares may be suspended, or the deposit of particular
Shares may be refused, or the registration of transfer of ADRs in particular
instances may be refused, or the registration of transfer of ADRs generally may
be suspended, during any period when the transfer books of the Company, the
Depositary, a Registrar or the Share Registrar are closed or if any such action
is deemed necessary or advisable by the Depositary or the Company, in good
faith, at any time or from time to time because of any requirement of law, any
government or governmental body or commission or any securities exchange upon
which the Shares or ADSs are listed, or under any provision of the Deposit
Agreement or this ADR, or under any provision of, or governing, the Deposited
Securities, or because of a meeting of shareholders of the Company or for any
other

                                      A-4

<PAGE>

reason, subject in all cases to paragraph (24) hereof. Notwithstanding any
provision of the Deposit Agreement or this ADR to the contrary, Holders are
entitled to surrender outstanding ADSs to withdraw the Deposited Securities at
any time subject only to (i) temporary delays caused by closing the transfer
books of the Depositary or the Company or the deposit of Shares in connection
with voting at a shareholders' meeting or the payment of dividends, (ii) the
payment of fees, taxes and similar charges, (iii) compliance with any U.S. or
foreign laws or governmental regulations relating to the ADRs or to the
withdrawal of the Deposited Securities, and (iv) other circumstances
specifically contemplated by Instruction I.A.(l) of the General Instructions to
Form F-6 (as such General Instructions may be amended from time to time).

         (5)      COMPLIANCE WITH INFORMATION REQUESTS. Notwithstanding any
other provision of the Deposit Agreement or this ADR, each Holder and Beneficial
Owner of the ADSs represented hereby agrees to comply with requests from the
Company pursuant to applicable Korean law, the rules and requirements of the
Korea Stock Exchange, and of any other stock exchange on which Shares or ADSs
are, or will be, registered, traded or listed, or the Articles of Incorporation
of the Company, which are made to provide information, inter alia, as to the
capacity in which such Holder or Beneficial Owner owns ADSs (and Shares, as the
case may be) and regarding the identity of any other person(s) interested in
such ADSs and the nature of such interest and various other matters, whether or
not they are Holders and/or Beneficial Owners at the time of such request.

         (6)      OWNERSHIP RESTRICTIONS. Notwithstanding any provision of this
ADR or of the Deposit Agreement, the Company may restrict transfers of the
Shares where such transfer might result in ownership of Shares exceeding limits
imposed by applicable law or the Articles of Incorporation of the Company. The
Company may also restrict, in such manner as it deems appropriate, transfers of
ADSs where such transfer may result in the total number of Shares represented by
the ADSs owned by a single Holder or Beneficial Owner to exceed any such limits.
The Company may, in its sole discretion but subject to applicable law, instruct
the Depositary to take action with respect to the ownership interest of any
Holder or Beneficial Owner in excess of the limits set forth in the preceding
sentence, including but not limited to, the imposition of restrictions on the
transfer of ADSs, the removal or limitation of voting rights or a mandatory sale
or disposition on behalf of a Holder or Beneficial Owner of the Shares
represented by the ADSs held by such Holder or Beneficial Owner in excess of
such limitations, if and to the extent such disposition is permitted by
applicable law and the Articles of Incorporation of the Company.

         In addition, Korean laws and regulations may require beneficial owners
of the voting share capital of Korean companies, including beneficial owners of
ADSs, to satisfy certain reporting requirements or obtain regulatory approval in
certain circumstances. Beneficial Owners are solely responsible or complying
with such requirements. Neither the Depositary nor the Custodian nor any of
their respective agents or affiliates shall be required to take any actions
whatsoever on behalf of such Beneficial Owners.

         (7)      LIABILITY OF HOLDER FOR TAXES AND OTHER CHARGES. Any tax or
other governmental charge payable with respect to any ADR or any Deposited
Securities or ADSs shall be payable by the Holders and Beneficial Owners to the
Depositary. The Company, the

                                      A-5

<PAGE>

Custodian and/or Depositary may withhold or deduct from any distributions made
in respect of Deposited Securities and may sell for the account of a Holder
and/or Beneficial Owner any or all of the Deposited Securities and apply such
distributions and sale proceeds in payment of such taxes (including applicable
interest and penalties) or charges, the Holder and the Beneficial Owner hereof
remaining liable for any deficiency. The Custodian may refuse the deposit of
Shares and the Depositary may refuse to issue ADSs, to deliver ADRs, register
the transfer, split-up or combination of ADRs and (subject to paragraph (24)
hereof) the withdrawal of Deposited Securities until payment in full of such
tax, charge, penalty or interest is received. Every Holder and Beneficial Owner
agrees to indemnify the Depositary, the Company, the Custodian, and any of their
agents, officers, employees and Affiliates for, and hold each of them harmless
from, any claims with respect to taxes (including applicable interest and
penalties thereon) arising from any tax benefit obtained for such Holder and/or
Beneficial Owner.

         (8)      REPRESENTATIONS AND WARRANTIES OF DEPOSITORS. Each person
depositing Shares under the Deposit Agreement shall be deemed thereby to
represent and warrant that (i) such Shares and the certificates therefor are
duly authorized, validly issued, fully paid, non-assessable and legally obtained
by such person, (ii) all preemptive (and similar) rights, if any, with respect
to such Shares have been validly waived or exercised, (iii) the person making
such deposit is duly authorized so to do, (iv) the Shares presented for deposit
are free and clear of any lien, encumbrance, security interest, charge, mortgage
or adverse claim, (v) the Shares presented for deposit are not, and the ADSs
issuable upon such deposit will not be, Restricted Securities (except as
contemplated in Section 2.12 of the Deposit Agreement), and (vi) the Shares
presented for deposit have not been stripped of any rights or entitlements. Such
representations and warranties shall survive the deposit and withdrawal of
Shares, the issuance and cancellation of ADSs in respect thereof and the
transfer of such ADSs. If any such representations or warranties are false in
any way, the Company and the Depositary shall be authorized, at the cost and
expense of the person depositing Shares, to take any and all actions necessary
to correct the consequences thereof.

         (9)      FILING PROOFS, CERTIFICATES AND OTHER INFORMATION. Any person
presenting Shares for deposit, and any Holder and any Beneficial Owner may be
required, and every Holder and Beneficial Owner agrees, from time to time to
provide to the Depositary and the Custodian such proof of citizenship or
residence, taxpayer status, payment of all applicable taxes or other
governmental charges, exchange control approval, legal or beneficial ownership
of ADSs and Deposited Securities, compliance with applicable laws and the terms
of the Deposit Agreement and the provisions of, or governing, the Deposited
Securities, to execute such certifications and to make such representations and
warranties, and to provide such other information and documentation (or, in the
case of Shares in registered form presented for deposit, such information
relating to the registration of Shares on the books of the Shares Registrar) as
the Depositary or the Custodian may deem necessary or proper or as the Company
may reasonably require by written request to the Depositary consistent with its
obligations under the Deposit Agreement. The Depositary and the Registrar, as
applicable, may withhold the execution or delivery or registration of transfer
of any ADR or the distribution or sale of any dividend or other distribution of
rights or of the proceeds thereof or, to the extent not limited by paragraph
(24) hereof, the delivery of any Deposited Securities until such proof or other
information is filed or such certifications are executed, or such
representations are made or such information and

                                      A-6

<PAGE>

documentation are provided, in each case to the Depositary's, the Registrar's
and the Company's satisfaction.

         (10)     CHARGES OF DEPOSITARY. The Depositary shall charge the
following fees:

                  (i)      Issuance Fee: to any person depositing Shares or to
                           whom ADSs are issued upon the deposit of Shares, a
                           fee not in excess of U.S. $5.00 per 100 ADSs (or
                           portion thereof) so issued under the terms of the
                           Deposit Agreement (excluding issuances pursuant to
                           paragraphs (iii) and (v) below);

                  (ii)     Cancellation Fee: to any person surrendering ADSs for
                           cancellation and withdrawal of Deposited Securities,
                           a fee not in excess of U.S. $5.00 per 100 ADSs (or
                           portion thereof) so surrendered;

                  (iii)    Dividend Fee: No Fee shall be payable upon
                           distribution of (a) cash dividends or (b) ADSs
                           pursuant to stock dividends (or other free
                           distributions of stock) so long as the charging of
                           such fee is prohibited by the exchange upon which the
                           ADSs are listed. If charging of such fees is not
                           prohibited, the fees specified in (iv) below shall be
                           payable;

                  (iv)     Cash Distribution Fee: to any Holder of ADRs, a fee
                           not in excess of U.S. $2.00 per 100 ADSs (or portion
                           thereof) held for the distribution of (a) cash
                           proceeds (i.e., upon the sale of rights and other
                           entitlements) or (b) free shares in the form of ADSs
                           (not constituting a stock dividend);

                  (v)      Rights Exercise Fee: to any Holder of ADRs, a fee not
                           in the excess of U.S. $2.00 per 100 ADSs (or portion
                           thereof) held upon the exercise of rights to purchase
                           additional ADSs;

                  (vi)     Other Distribution Fee: to any Holder of ADRs
                           receiving a distribution of securities other than
                           ADSs or rights to purchase additional ADSs, a fee not
                           in excess of U.S. $5.00 per unit of 100 securities
                           (or fraction thereof) distributed;

                  (vii)    Annual Depositary Services Fee: to any Holder of
                           ADRs, a fee not in excess of U.S. $2.00 per 100 ADSs
                           (or fraction thereof) held on the last day of each
                           calendar year, except to the extent of any cash
                           dividend fee(s) charged under paragraph (iii) above
                           during that calendar year, unless prohibited by the
                           exchange on which the ADSs are listed.

         In addition, Holders, Beneficial Owners, persons depositing Shares and
persons surrendering ADSs for cancellation and withdrawal of Deposited
Securities will be required to pay the following charges:

                  (i)      taxes (including applicable interest and penalties)
                           and other governmental charges;

                                      A-7

<PAGE>

                  (ii)     such registration fees as may from time to time be in
                           effect for the registration of Shares or other
                           Deposited Securities on the share register and
                           applicable to transfers of Shares or other Deposited
                           Securities to or from the name of the Custodian, the
                           Depositary or any nominees upon the making of
                           deposits and withdrawals, respectively;

                  (iii)    such cable, telex and facsimile transmission and
                           delivery expenses as are expressly provided in the
                           Deposit Agreement to be at the expense of the person
                           depositing or withdrawing Shares or Holders and
                           Beneficial Owners of ADSs;

                  (iv)     the expenses and charges incurred by the Depositary
                           in the conversion of foreign currency;

                  (v)      such fees and expenses as are incurred by the
                           Depositary in connection with compliance with
                           exchange control regulations and other regulatory
                           requirements applicable to Shares, Deposited
                           Securities, ADSs and ADRs; and

                  (vi)     the fees and expenses incurred by the Depositary, the
                           Custodian, or any nominee in connection with the
                           delivery or servicing of Deposited Securities.

         Any other charges and expenses of the Depositary under the Deposit
Agreement will be paid by the Company upon agreement between the Depositary and
the Company. All fees and charges may, at any time and from time to time, be
changed by agreement between the Depositary and Company but, in the case of fees
and charges payable by Holders or Beneficial Owners, only in the manner
contemplated by paragraph (22) of this ADR. The Depositary will provide, without
charge, a copy of its latest fee schedule to anyone upon request. The charges
and expenses of the Custodian are for the sole account of the Depositary.

         (11)     TITLE TO ADRs. It is a condition of this ADR, and every
successive Holder of this ADR by accepting or holding the same consents and
agrees, that title to this ADR (and to each ADS evidenced hereby) shall be
transferable upon the same terms as a certificated security under the laws of
the State of New York, provided that the ADR has been properly endorsed or is
accompanied by proper instruments of transfer. Notwithstanding any notice to the
contrary, the Depositary and the Company may deem and treat the Holder of this
ADR (that is, the person in whose name this ADR is registered on the books of
the Depositary) as the absolute owner thereof for all purposes. Neither the
Depositary nor the Company shall have any obligation nor be subject to any
liability under the Deposit Agreement or this ADR to any holder of this ADR or
any Beneficial Owner unless such holder is the Holder of this ADR registered on
the books of the Depositary or, in the case of a Beneficial Owner, such
Beneficial Owner or the Beneficial Owner's representative is the Holder
registered on the books of the Depositary.

         (12)     VALIDITY OF ADR. The Holder(s) of this ADR (and the ADSs
represented hereby) shall not be entitled to any benefits under the Deposit
Agreement or be valid or enforceable for

                                      A-8

<PAGE>

any purpose against the Depositary or the Company unless this ADR has been (i)
dated, (ii) signed by the manual or facsimile signature of a duly-authorized
signatory of the Depositary, (iii) countersigned by the manual or facsimile
signature of a duly-authorized signatory of the Registrar, and (iv) registered
in the books maintained by the Registrar for the registration of issuances and
transfers of ADRs. ADRs bearing the facsimile signature of a duly-authorized
signatory of the Depositary or the Registrar, who at the time of signature was a
duly authorized signatory of the Depositary or the Registrar, as the case may
be, shall bind the Depositary, notwithstanding the fact that such signatory has
ceased to be so authorized prior to the delivery of such ADR by the Depositary.

         (13)     AVAILABLE INFORMATION; REPORTS; INSPECTION OF TRANSFER BOOKS.
The Company is subject to the periodic reporting requirements of the Exchange
Act and accordingly files certain information with the Commission. These reports
and documents can be inspected and copied at the public reference facilities
maintained by the Commission located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549. The Depositary shall make available for inspection by
Holders at its Principal Office any reports and communications, including any
proxy soliciting materials, received from the Company which are both (a)
received by the Depositary, the Custodian, or the nominee of either of them as
the holder of the Deposited Securities and (b) made generally available to the
holders of such Deposited Securities by the Company.

         The Registrar shall keep books for the registration of issuances and
transfers of ADRs which at all reasonable times shall be open for inspection by
the Company and by the Holders of such ADRs, provided that such inspection shall
not be, to the Registrar's knowledge, for the purpose of communicating with
Holders of such ADRs in the interest of a business or object other than the
business of the Company or other than a matter related to the Deposit Agreement
or the ADRs.

         The Registrar may close the transfer books with respect to the ADRs, at
any time or from time to time, when deemed necessary or advisable by it in good
faith in connection with the performance of its duties hereunder, or at the
reasonable written request of the Company subject, in all cases, to paragraph
(24) hereof.

Dated:

CITIBANK, N.A.                           CITIBANK, N.A.
Transfer Agent and Registrar             as Depositary

By: ________________________________     By: ___________________________________
    Authorized Signatory                     Authorized Signatory

         The address of the Principal Office of the Depositary is 111 Wall
Street, New York, New York 10043, U.S.A.

                                      A-9

<PAGE>

                            [FORM OF REVERSE OF ADR]

                    SUMMARY OF CERTAIN ADDITIONAL PROVISIONS

                            OF THE DEPOSIT AGREEMENT

         (14)     DIVIDENDS AND DISTRIBUTIONS IN CASH, SHARES, ETC. Whenever the
Depositary receives confirmation from the Custodian of receipt of any cash
dividend or other cash distribution on any Deposited Securities, or receives
proceeds from the sale of any Deposited Securities or of any entitlements held
in respect of Deposited Securities under the terms of the Deposit Agreement, the
Depositary will (i) if at the time of receipt thereof any amounts received in a
Foreign Currency can, in the judgment of the Depositary (upon the terms of the
Deposit Agreement), be converted on a practicable basis into Dollars
transferable to the United States, promptly convert or cause to be converted
such cash dividend, distribution or proceeds into Dollars (upon the terms of the
Deposit Agreement), (ii) if applicable, establish the ADS Record Date upon the
terms described in Section 4.9 of the Deposit Agreement, and (iii) distribute
promptly the amount thus received (net of (a) applicable fees and charges of,
and expenses incurred by, the Depositary and (b) taxes withheld) to the Holders
entitled thereto as of the ADS Record Date in proportion to the number of ADSs
held as of the ADS Record Date. The Depositary shall distribute only such
amount, however, as can be distributed without attributing to any Holder a
fraction of one cent, and any balance not so distributed shall be held by the
Depositary (without liability for interest thereon) and shall be added to and
become part of the next sum received by the Depositary for distribution to
Holders of ADSs then outstanding at the time of the next distribution. If the
Company, the Custodian or the Depositary is required to withhold and does
withhold from any cash dividend or other cash distribution in respect of any
Deposited Securities an amount on account of taxes, duties or other governmental
charges, the amount distributed to Holders on the ADSs representing such
Deposited Securities shall be reduced accordingly. Such withheld amounts shall
be forwarded by the Company, the Custodian or the Depositary to the relevant
governmental authority.

         If any distribution upon any Deposited Securities consists of a
dividend in, or free distribution of, Shares, the Company shall cause such
Shares to be deposited with the Custodian and registered, as the case may be, in
the name of the Depositary, the Custodian or their respective nominees. Upon
receipt of confirmation of the deposit from the Custodian, the Depositary shall,
subject to and in accordance with the Deposit Agreement, establish the ADS
Record Date and either (i) the Depositary shall distribute to the Holders as of
the ADS Record Date in proportion to the number of ADSs held as of the ADS
Record Date, additional ADSs, which represent in aggregate the number of Shares
received as such dividend, or free distribution, subject to the terms of the
Deposit Agreement (including, without limitation, (a) the applicable fees and
charges of, and expenses incurred by, the Depositary and (b) taxes), or (ii) if
additional ADSs are not so distributed, each ADS issued and outstanding after
the ADS Record Date shall, to the extent permissible by law, thenceforth also
represent rights and interest in the additional integral number of Shares
distributed upon the Deposited Securities represented thereby (net of (a) the
applicable fees and charges of, and expenses incurred by, the Depositary, and
(b) taxes). In lieu of delivering fractional ADSs, the Depositary shall sell the
number of

                                      A-10
<PAGE>

Shares or ADSs, as the case may be, represented by the aggregate of such
fractions and distribute the net proceeds upon the terms set forth in the
Deposit Agreement.

         In the event that the Depositary determines that any distribution in
property (including Shares) is subject to any tax or other governmental charges
which the Depositary is obligated to withhold, or, if the Company in the
fulfillment of its obligations under the Deposit Agreement, has furnished an
opinion of U.S. counsel determining that Shares must be registered under the
Securities Act or other laws in order to be distributed to Holders (and no such
registration statement has been declared effective), the Depositary may after
consultation with the Company, dispose of all or a portion of such property
(including Shares and rights to subscribe therefor) in such amounts and in such
manner, including by public or private sale, as the Depositary deems necessary
and practicable and the Depositary shall distribute the net proceeds of any such
sale (after deduction of (a) taxes and (b) fees and charges of, and the expenses
incurred by, the Depositary) to Holders entitled thereto upon the terms of the
Deposit Agreement. The Depositary shall hold and/or distribute any unsold
balance of such property in accordance with the provisions of the Deposit
Agreement.

         Upon timely receipt of a notice indicating that the Company wishes an
elective distribution to be made available to Holders of ADSs upon the terms
described in the Deposit Agreement, the Company and the Depositary shall
determine whether such distribution is lawful and reasonably practicable. If so,
the Depositary shall, subject to the terms and conditions of the Deposit
Agreement, establish an ADS Record Date according to paragraph (16) and
establish procedures to enable the Holder hereof to elect to receive the
proposed distribution in cash or in additional ADSs. If a Holder elects to
receive the distribution in cash, the distribution shall be made as in the case
of a distribution in cash. If the Holder hereof elects to receive the
distribution in additional ADSs, the distribution shall be made as in the case
of a distribution in Shares upon the terms described in the Deposit Agreement.
If such elective distribution is not reasonably practicable or if the Depositary
did not receive satisfactory documentation set forth in the Deposit Agreement,
the Depositary shall, to the extent permitted by law, distribute to Holders, on
the basis of the same determination as is made in Korea in respect of the Shares
for which no election is made, either (x) cash or (y) additional ADSs
representing such additional Shares, in each case, upon the terms described in
the Deposit Agreement. Nothing herein or in the Deposit Agreement shall obligate
the Depositary to make available to the Holder hereof a method to receive the
elective distribution in Shares (rather than ADSs). There can be no assurance
that the Holder hereof will be given the opportunity to receive elective
distributions on the same terms and conditions as the holders of Shares.

         Upon timely receipt by the Depositary of a notice indicating that the
Company wishes rights to subscribe for additional Shares to be made available to
Holders of ADSs, the Depositary upon consultation with the Company, shall
determine, whether it is lawful and reasonably practicable to make such rights
available to the Holders. The Depositary shall make such rights available to any
Holders only if (i) the Company shall have timely requested that such rights be
made available to Holders, (ii) the Depositary shall have received the
documentation contemplated in the Deposit Agreement, and (iii) the Depositary
shall have determined that such distribution of rights is reasonably
practicable. If such conditions are not satisfied, the Depositary shall sell the
rights as described below. In the event all conditions set forth above are

                                      A-11

<PAGE>

satisfied, the Depositary shall establish an ADS Record Date (upon the terms
described in the Deposit Agreement) and establish procedures (x) to distribute
rights to purchase additional ADSs (by means of warrants or otherwise), (y) to
enable the Holders to exercise the rights (upon payment of the subscription
price and of the applicable (a) fees and charges of, and expenses incurred by,
the Depositary and (b) taxes), and (z) to deliver ADSs upon the valid exercise
of such rights. Nothing herein or in the Deposit Agreement shall obligate the
Depositary to make available to the Holders a method to exercise rights to
subscribe for Shares (rather than ADSs). If (i) the Company does not timely
request the Depositary to make the rights available to Holders or if the Company
requests that the rights not be made available to Holders, (ii) the Depositary
fails to receive the documentation required by the Deposit Agreement or
determines it is not reasonably practicable to make the rights available to
Holders, or (iii) any rights made available are not exercised and appear to be
about to lapse, the Depositary shall determine whether it is lawful and
reasonably practicable to sell such rights, in a riskless principal capacity, at
such place and upon such terms (including public and private sale) as it may
deem practicable. The Depositary shall, upon such sale, convert and distribute
proceeds of such sale (net of applicable (a) fees and charges of, and expenses
incurred by, the Depositary and (b) taxes) upon the terms hereof and of the
Deposit Agreement. If the Depositary is unable to make any rights available to
Holders or to arrange for the sale of the rights upon the terms described above,
the Depositary shall allow such rights to lapse. The Depositary shall not be
responsible for (i) any failure to determine that it may be lawful or
practicable to make such rights available to Holders in general or any Holders
in particular, (ii) any foreign exchange exposure or loss incurred in connection
with such sale or exercise, or (iii) the content of any materials forwarded to
the ADR Holders on behalf of the Company in connection with the rights
distribution.

         Notwithstanding anything herein or in the Deposit Agreement to the
contrary, if registration (under the Securities Act or any other applicable law)
of the rights or the securities to which any rights relate may be required in
order for the Company to offer such rights or such securities to Holders and to
sell the securities represented by such rights, the Depositary will not
distribute such rights to the Holders (i) unless and until a registration
statement under the Securities Act (or other applicable law) covering such
offering is in effect or (ii) unless the Company furnishes the Depositary
opinion(s) of counsel for the Company in the United States and counsel to the
Company in any other applicable country in which rights would be distributed, in
each case satisfactory to the Depositary, to the effect that the offering and
sale of such securities to Holders and Beneficial Owners are exempt from, or do
not require registration under, the provisions of the Securities Act or any
other applicable laws. Because Korean law may require the Depositary to obtain
approval or license from a governmental agency to effect a sale of rights in
Korea, the Depositary may file an application of such approval or license as it
may deem desirable, in good faith. Such requirements may adversely affect (1)
the ability of the Depositary to dispose of such rights or (2) the costs and
expenses of the Depositary associated with disposal of rights. In the event that
the Company, the Depositary or the Custodian shall be required to withhold and
does withhold from any distribution of property (including rights) an amount on
account of taxes or other governmental charges, the amount distributed to the
Holders of ADSs representing such Deposited Securities shall be reduced
accordingly. In the event that the Depositary determines that any distribution
in property (including Shares and rights to subscribe therefor) is subject to
any tax or other governmental charges which the Depositary is obligated to
withhold, the Depositary may dispose of all or a portion of such property
(including

                                      A-12

<PAGE>

Shares and rights to subscribe therefor) in such amounts and in such manner,
including by public or private sale, as the Depositary deems necessary and
practicable to pay any such taxes or charges.

         There can be no assurance that Holders generally, or any Holder in
particular, will be given the opportunity to exercise rights on the same terms
and conditions as the holders of Shares or to exercise such rights. Nothing
herein or in the Deposit Agreement shall obligate the Company to file any
registration statement in respect of any rights or Shares or other securities to
be acquired upon the exercise of such rights.

         Upon receipt of a notice indicating that the Company wishes property
other than cash, Shares or rights to purchase additional Shares, to be made to
Holders of ADSs, the Depositary shall determine whether such distribution to
Holders is lawful and reasonably practicable. The Depositary shall not make such
distribution unless (i) the Company shall have requested the Depositary to make
such distribution to Holders, (ii) the Depositary shall have received the
documentation contemplated in the Deposit Agreement, and (iii) the Depositary
shall have determined that such distribution is reasonably practicable. Upon
satisfaction of such conditions, the Depositary shall distribute the property so
received to the Holders of record, as of the ADS Record Date, in proportion to
the number of ADSs held by them respectively and in such manner as the
Depositary may deem practicable for accomplishing such distribution (i) upon
receipt of payment or net of the applicable fees and charges of, and expenses
incurred by, the Depositary, and (ii) net of any taxes withheld. The Depositary
may dispose of all or a portion of the property so distributed and deposited, in
such amounts and in such manner (including public or private sale) as the
Depositary may deem practicable or necessary to satisfy any taxes (including
applicable interest and penalties) or other governmental charges applicable to
the distribution.

         If the conditions above are not satisfied, the Depositary shall sell or
cause such property to be sold in a public or private sale, at such place or
places and upon such terms as it may deem practicable and shall (i) cause the
proceeds of such sale, if any, to be converted into Dollars and (ii) distribute
the proceeds of such conversion received by the Depositary (net of applicable
(a) fees and charges of, and expenses incurred by, the Depositary and (b) taxes)
to the Holders as of the ADS Record Date upon the terms hereof and of the
Deposit Agreement. If the Depositary is unable to sell such property, the
Depositary may dispose of such property for the account of the Holders in any
way it deems reasonably practicable under the circumstances.

         (15)     Intentionally Omitted.

         (16)     FIXING OF ADS RECORD DATE. Whenever the Depositary shall
receive notice of the fixing of a record date by the Company for the
determination of holders of Deposited Securities entitled to receive any
distribution (whether in cash, Shares, rights or other distribution), or
whenever for any reason the Depositary causes a change in the number of Shares
that are represented by each ADS, or whenever the Depositary shall receive
notice of any meeting of, or solicitation of consents or proxies of, holders of
Shares or other Deposited Securities, or whenever the Depositary shall find it
necessary or convenient in connection with the giving of any notice,
solicitation of any consent or any other matter, the Depositary shall fix a
record date ("ADS Record Date") for the determination of the Holders of ADRs who
shall be

                                      A-13

<PAGE>

entitled to receive such distribution, to give instructions for the exercise of
voting rights at any such meeting, to give or withhold such consent, to receive
such notice or solicitation or to otherwise take action, or to exercise the
rights of Holders with respect to such changed number of Shares represented by
each ADS. Subject to applicable law and the terms and conditions of this ADR and
the Deposit Agreement, only the Holders of ADRs at the close of business in New
York on such ADS Record Date shall be entitled to receive such distributions, to
give such instructions, to receive such notice or solicitation, or otherwise
take action.

         (17)     VOTING OF DEPOSITED SECURITIES. As soon as practicable after
receipt of notice of any meeting at which the holders of Deposited Securities
are entitled to vote, or of solicitation of consents or proxies from holders of
Deposited Securities, the Depositary shall fix the ADS Record Date in respect of
such meeting or solicitation of such consent or proxy. The Depositary shall, if
requested by the Company in writing in a timely manner (the Depositary having no
obligation to take any further action if the request shall not have been
received by the Depositary at least thirty (30) days prior to the date of such
vote or meeting), at the Company's expense and provided no U.S. legal
prohibitions exist, distribute to Holders as of the ADS Record Date: (a) such
notice of meeting or solicitation of consent or proxies, (b) a statement that
the Holders at the close of business on the ADS Record Date will be entitled,
subject to any applicable law, the provisions of the Deposit Agreement, the
Company's Articles of Incorporation and the provisions of or governing Deposited
Securities (which provisions, if any, shall be summarized in pertinent part by
the Company), to instruct the Depositary as to the exercise of the voting
rights, if any, pertaining to the Deposited Securities represented by such
Holder's ADSs and (c) a brief statement as to the manner in which such voting
instructions may be given. Voting instructions may be given only in respect of a
number of ADSs representing an integral number of Deposited Securities. Upon the
timely receipt of voting instructions from a Holder of ADSs as of the ADS Record
Date in the manner specified by the Depositary, the Depositary shall endeavor,
insofar as practicable and permitted under applicable law and the provisions of
the Deposit Agreement, the Articles of Incorporation of the Company and the
provisions of the Deposited Securities, to vote, or cause the Custodian to vote,
the Deposited Securities represented by such Holder's ADSs in accordance with
such instructions.

         Neither the Depositary nor the Custodian shall under any circumstances
exercise any discretion as to voting and neither the Depositary nor the
Custodian shall vote, attempt to exercise the right to vote, or in any way make
use of, for purposes of establishing a quorum or otherwise the Deposited
Securities represented by ADSs, except pursuant to and in accordance with the
voting instructions timely received from Holders or as otherwise contemplated
herein. If the Depositary timely receives voting instructions from a Holder
which fail to specify the manner in which the Depositary is to vote the
Deposited Securities represented by such Holder's ADSs, the Depositary will deem
such Holder (unless otherwise specified in the notice distributed to Holders) to
have instructed the Depositary to vote in favor of the items set forth in such
instructions. Deposited Securities represented by ADSs for which no timely
voting instructions are received by the Depositary from the Holder shall not be
voted. Notwithstanding anything else contained in the Deposit Agreement or this
ADR, the Depositary shall not have any obligation to take any action with
respect to any meeting, or solicitation of consents or proxies, of holders of
Deposited Securities if the taking of such action would violate U.S. laws. The
Company agrees to take any and all actions reasonably necessary to enable
Holders and

                                      A-14

<PAGE>

Beneficial Owners to exercise the voting rights accruing to the Deposited
Securities and to deliver to the Depositary an opinion of U.S. counsel
addressing any actions requested to be taken if so requested by the Depositary.
There can be no assurance that Holders generally or any Holder in particular
will receive the notice described above with sufficient time to enable the
Holder to return voting instructions to the Depositary in a timely manner.

         (18)     CHANGES AFFECTING DEPOSITED SECURITIES. Upon any change in
nominal or par value, split-up, cancellation, consolidation or any other
reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting the Company
or to which it is a party, any securities which shall be received by the
Depositary or the Custodian in exchange for, or in conversion of or replacement
of or otherwise in respect of, such Deposited Securities shall, to the extent
permitted by law, be treated as new Deposited Securities under the Deposit
Agreement, and the ADRs shall, subject to the provisions of the Deposit
Agreement and applicable law, evidence ADSs representing the right to receive
such additional securities. The Depositary may, with the Company's approval, and
shall, if the Company shall so request, subject to the terms of the Deposit
Agreement and receipt of satisfactory documentation contemplated by the Deposit
Agreement, execute and deliver additional ADRs as in the case of a stock
dividend on the Shares, or call for the surrender of outstanding ADRs to be
exchanged for new ADRs, in either case, as well as in the event of newly
deposited Shares, with necessary modifications to the form of ADR contained in
this Exhibit A to the Deposit Agreement, specifically describing such new
Deposited Securities or corporate change. Notwithstanding the foregoing, in the
event that any security so received may not be lawfully distributed to some or
all Holders, the Depositary may, with the Company's approval, and shall if the
Company requests, subject to receipt of satisfactory legal documentation
contemplated in the Deposit Agreement, sell such securities at public or private
sale, at such place or places and upon such terms as it may deem proper and may
allocate the net proceeds of such sales (net of (a) fees and charges of, and
expenses incurred by, the Depositary and (b) taxes) for the account of the
Holders otherwise entitled to such securities and distribute the net proceeds so
allocated to the extent practicable as in the case of a distribution received in
cash pursuant to the Deposit Agreement. The Depositary shall not be responsible
for (i) any failure to determine that it may be lawful or feasible to make such
securities available to Holders in general or any Holder in particular, (ii) any
foreign exchange exposure or loss incurred in connection with such sale, or
(iii) any liability to the purchaser of such securities.

         (19)     EXONERATION. Neither the Depositary nor the Company shall be
obligated to do or perform any act which is inconsistent with the provisions of
the Deposit Agreement or incur any liability (i) if the Depositary or the
Company shall be prevented or forbidden from, or subjected to any civil or
criminal penalty or restraint on account of, or delayed in, doing or performing
any act or thing required by the terms of the Deposit Agreement and this ADR, by
reason of any provision of any present or future law or regulation of the United
States, Korea or any other country, or of any other governmental authority or
regulatory authority or stock exchange, or on account of possible criminal or
civil penalties or restraint, or by reason of any provision, present or future,
of the Articles of Incorporation of the Company or any provision of or governing
any Deposited Securities, or by reason of any act of God or war or other
circumstances beyond its control (including, without limitation,
nationalization, expropriation, currency restrictions, work stoppage, strikes,
civil unrest, acts of terrorism, revolutions, rebellions, explosions and
computer

                                      A-15

<PAGE>

failure), (ii) by reason of any exercise of, or failure to exercise, any
discretion provided for in the Deposit Agreement or in the Articles of
Incorporation of the Company or provisions of or governing Deposited Securities,
(iii) for any action or inaction in reliance upon the advice of or information
from legal counsel, accountants, any person presenting Shares for deposit, any
Holder, any Beneficial Owner or authorized representative thereof, or any other
person believed by it in good faith to be competent to give such advice or
information, (iv) for the inability by a Holder or Beneficial Owner to benefit
from any distribution, offering, right or other benefit which is made available
to holders of Deposited Securities but is not, under the terms of the Deposit
Agreement, made available to Holders of ADSs or (v) for any consequential or
punitive damages for any breach of the terms of the Deposit Agreement. The
Depositary, its controlling persons, its agents, any Custodian and the Company,
its controlling persons and its agents may rely and shall be protected in acting
upon any written notice, request or other document believed by it to be genuine
and to have been signed or presented by the proper party or parties. No
disclaimer of liability under the Securities Act is intended by any provision of
the Deposit Agreement or this ADR.

         (20)     STANDARD OF CARE. The Company and the Depositary assume no
obligation and shall not be subject to any liability under the Deposit Agreement
or this ADR to any Holder(s) or Beneficial Owner(s), except that the Company and
Depositary agree to perform their respective obligations specifically set forth
in the Deposit Agreement and this ADR without negligence or bad faith. The
Depositary and its agents shall not be liable for any failure to carry out any
instructions to vote any of the Deposited Securities, or for the manner in which
any vote is cast or the effect of any vote, provided that any such action or
omission is in good faith and in accordance with the terms of this Deposit
Agreement. The Depositary shall not incur any liability for any failure to
determine that any distribution or action may be lawful or reasonably
practicable, for the content of any information submitted to it by the Company
for distribution to the Holders or for any inaccuracy of any translation
thereof, for any investment risk associated with acquiring an interest in the
Deposited Securities, for the validity or worth of the Deposited Securities or
for any tax consequences that may result from the ownership of ADSs, Shares or
Deposited Securities, for the credit-worthiness of any third party, for allowing
any rights to lapse upon the terms of the Deposit Agreement or for the failure
or timeliness of any notice from the Company.

         (21)     RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF
SUCCESSOR DEPOSITARY. The Depositary may at any time resign as Depositary under
the Deposit Agreement by written notice of resignation delivered to the Company,
such resignation to be effective on the earlier of (i) the [SIXTIETH (60TH)] day
after delivery thereof to the Company, or (ii) upon the appointment of a
successor depositary and its acceptance of such appointment as provided in the
Deposit Agreement. The Depositary may at any time be removed by the Company by
written notice of such removal, which removal shall be effective on the later of
(i) the sixtieth (60th) day after delivery thereof to the Depositary, or (ii)
upon the appointment of a successor depositary and its acceptance of such
appointment as provided in the Deposit Agreement. In case at any time the
Depositary acting hereunder shall resign or be removed, the Company shall use
its best efforts to appoint a successor depositary, which shall be a bank or
trust company having an office in the Borough of Manhattan, the City of New
York. Every successor depositary shall execute and deliver to its predecessor
and to the Company an instrument in

                                      A-16

<PAGE>

writing accepting its appointment hereunder, and thereupon such successor
depositary, without any further act or deed (except as required by applicable
law), shall become fully vested with all the rights, powers, duties and
obligations of its predecessor. The predecessor depositary, upon payment of all
sums due it and on the written request of the Company, shall (i) execute and
deliver an instrument transferring to such successor all rights and powers of
such predecessor hereunder (other than as contemplated in the Deposit
Agreement), (ii) duly assign, transfer and deliver all right, title and interest
to the Deposited Securities to such successor, and (iii) deliver to such
successor a list of the Holders of all outstanding ADRs and such other
information relating to ADRs and Holders thereof as the successor may reasonably
request. Any such successor depositary shall promptly provide notice of its
appointment to such Holders. Any corporation into or with which the Depositary
may be merged or consolidated shall be the successor of the Depositary without
the execution or filing of any document or any further act.

         (22)     AMENDMENT/SUPPLEMENT. Subject to the terms and conditions of
this paragraph 22, the Deposit Agreement and applicable law, this ADR and any
provisions of the Deposit Agreement may at any time and from time to time be
amended or supplemented by written agreement between the Company and the
Depositary in any respect which they may deem necessary or desirable without the
prior written consent of the Holders or Beneficial Owners. Any amendment or
supplement which shall impose or increase any fees or charges (other than the
charges in connection with foreign exchange control regulations, and taxes and
other governmental charges, delivery and other such expenses), or which shall
otherwise materially prejudice any substantial existing right of Holders or
Beneficial Owners, shall not, however, become effective as to outstanding ADRs
until the expiration of thirty (30) days after notice of such amendment or
supplement shall have been given to the Holders of outstanding ADRs. The parties
hereto agree that any amendments or supplements which (i) are reasonably
necessary (as agreed by the Company and the Depositary) in order for (a) the
ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs to be
traded solely in electronic book-entry form and (ii) do not in either such case
impose or increase any fees or charges to be borne by Holders, shall be deemed
not to materially prejudice any substantial rights of Holders or Beneficial
Owners. Every Holder and Beneficial Owner at the time any amendment or
supplement so becomes effective shall be deemed, by continuing to hold such
ADS(s), to consent and agree to such amendment or supplement and to be bound by
the Deposit Agreement and this ADR as amended or supplemented thereby. In no
event shall any amendment or supplement impair the right of the Holder to
surrender such ADR and receive therefor the Deposited Securities represented
thereby, except in order to comply with mandatory provisions of applicable law.
Notwithstanding the foregoing, if any governmental body should adopt new laws,
rules or regulations which would require an amendment of, or supplement to, the
Deposit Agreement to ensure compliance therewith, the Company and the Depositary
may amend or supplement the Deposit Agreement and this ADR at any time in
accordance with such changed laws, rules or regulations. Such amendment or
supplement to the Deposit Agreement in such circumstances may become effective
before a notice of such amendment or supplement is given to Holders or within
any other period of time as required for compliance with such laws, or rules or
regulations.

         (23)     TERMINATION. The Depositary shall, at any time at the written
direction of the Company, terminate the Deposit Agreement by providing notice of
such termination to the

                                      A-17

<PAGE>
Holders of all ADRs then outstanding at least thirty (30) days prior to the date
fixed in such notice for such termination. If sixty (60) days shall have expired
after the (i) Depositary shall have delivered to the Company a written notice of
its election to resign, or (ii) the Company shall have delivered to the
Depositary a written notice of the removal of the Depositary, and in either case
a successor depositary shall not have been appointed and accepted its
appointment as provided herein and in the Deposit Agreement, the Depositary may
terminate the Deposit Agreement by providing notice of such termination to the
Holders of all ADRs then outstanding at least thirty (30) days prior to the date
fixed for such termination. On and after the date of termination of the Deposit
Agreement, the Holder will, upon surrender of such Holders' ADR(s) at the
Principal Office of the Depositary, upon the payment of the charges of the
Depositary for the surrender of ADSs referred to in paragraph (2) hereof and in
the Deposit Agreement and subject to the conditions and restrictions therein set
forth, and upon payment of any applicable taxes or governmental charges, be
entitled to Delivery, to him or upon his order, of the amount of Deposited
Securities represented by such ADR. If any ADRs shall remain outstanding after
the date of termination of the Deposit Agreement, the Registrar thereafter shall
discontinue the registration of transfers of ADRs, and the Depositary shall
suspend the distribution of dividends to the Holders thereof, and shall not give
any further notices or perform any further acts under the Deposit Agreement,
except that the Depositary shall continue to collect dividends and other
distributions pertaining to Deposited Securities, shall sell rights as provided
in the Deposit Agreement, and shall continue to deliver Deposited Securities,
subject to the conditions and restrictions set forth in the Deposit Agreement,
together with any dividends or other distributions received with respect thereto
and the net proceeds of the sale of any rights or other property, in exchange
for ADRs surrendered to the Depositary (after deducting, or charging, as the
case may be, in each case the charges of the Depositary for the surrender of a
ADR, any expenses for the account of the Holder in accordance with the terms and
conditions of the Deposit Agreement and any applicable taxes or governmental
charges or assessments). At any time after the expiration of six months from the
date of termination of the Deposit Agreement, the Depositary may sell the
Deposited Securities then held hereunder and may thereafter hold uninvested the
net proceeds of any such sale, together with any other cash then held by it
hereunder, in an unsegregated account, without liability for interest for the
pro rata benefit of the Holders whose ADRs have not theretofore been
surrendered. After making such sale, the Depositary shall be discharged from all
obligations under the Deposit Agreement with respect to the ADRs, the Deposited
Securities and the ADSs, except to account for such net proceeds and other cash
(after deducting, or charging, as the case may be, in each case, the charges of
the Depositary for the surrender of an ADR, any expenses for the account of the
Holder in accordance with the terms and conditions of the Deposit Agreement and
any applicable taxes or governmental charges or assessments). Upon the
termination of the Deposit Agreement, the Company shall be discharged from all
obligations under the Deposit Agreement except as set forth in the Deposit
Agreement.

         (24)     COMPLIANCE WITH U.S. SECURITIES LAWS. Notwithstanding any
provisions in this ADR or the Deposit Agreement to the contrary, the withdrawal
or delivery of Deposited Securities will not be suspended by the Company or the
Depositary except as would be permitted by Instruction I.A.(1) of the General
Instructions to the Form F-6 Registration Statement, as amended from time to
time, under the Securities Act.

                                      A-18

<PAGE>

         (25)     CERTAIN RIGHTS OF THE DEPOSITARY; LIMITATIONS. Subject to the
further terms and provisions of this paragraph (25), the Depositary, its
Affiliates and their agents, on their own behalf, may own and deal in any class
of securities of the Company and its Affiliates and in ADSs. The Depositary may
issue ADSs against evidence of rights to receive Shares from the Company, any
agent of the Company or any custodian, registrar, transfer agent, clearing
agency or other entity involved in ownership or transaction records in respect
of the Shares. Such evidence of rights shall consist of written blanket or
specific guarantees of ownership of Shares. In its capacity as Depositary, the
Depositary shall not lend Shares or ADSs; provided, however, that the Depositary
may (i) issue ADSs prior to the receipt of Shares pursuant to Section 2.3 of the
Deposit Agreement and (ii) deliver Shares prior to the receipt of ADSs for
withdrawal of Deposited Securities pursuant to Section 2.7 of the Deposit
Agreement, including ADSs which were issued under (i) above but for which Shares
may not have been received (each such transaction a "Pre-Release Transaction").
The Depositary may receive ADSs in lieu of Shares under (i) above and receive
Shares in lieu of ADSs under (ii) above. Each such Pre-Release Transaction will
be (a) subject to a written agreement whereby the person or entity (the
"Applicant") to whom ADSs or Shares are to be delivered (w) represents that at
the time of the Pre-Release Transaction the Applicant or its customer owns the
Shares or ADSs that are to be delivered by the Applicant under such Pre-Release
Transaction, (x) agrees to indicate the Depositary as owner of such Shares or
ADSs in its records and to hold such Shares or ADSs in trust for the Depositary
until such Shares or ADSs are delivered to the Depositary or the Custodian, (y)
unconditionally guarantees to deliver to the Depositary or the Custodian, as
applicable, such Shares or ADSs and (z) agrees to any additional restrictions or
requirements that the Depositary deems appropriate, (b) at all times fully
collateralized with cash, U.S. government securities or such other collateral as
the Depositary deems appropriate, (c) terminable by the Depositary on not more
than five (5) business days' notice and (d) subject to such further indemnities
and credit regulations as the Depositary deems appropriate. The Depositary will
normally limit the number of ADSs and Shares involved in such Pre-Release
Transactions at any one time to thirty percent (30%) of the ADSs outstanding
(without giving effect to ADSs outstanding under (i) above), provided, however,
that the Depositary reserves the right to change or disregard such limit from
time to time as it deems appropriate. The Depositary may also set limits with
respect to the number of ADSs and Shares involved in Pre-Release Transactions
with any one person on a case by case basis as it deems appropriate. The
Depositary may retain for its own account any compensation received by it in
conjunction with the foregoing. Collateral provided pursuant to (b) above, but
not earnings thereon, shall be held for the benefit of the Holders (other than
the Applicant).

                                      A-19

<PAGE>

                    (ASSIGNMENT AND TRANSFER SIGNATURE LINES)

FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and
transfer(s) unto ______________________________ whose taxpayer identification
number is ______________ and whose address including postal zip code is
_________, the within ADR and all rights thereunder, hereby irrevocably
constituting and appointing ________________________ attorney-in-fact to
transfer said ADR on the books of the Depositary with full power of substitution
in the premises.

Dated:                                Name: ____________________________________
                                            By:
                                            Title:

                                      NOTICE: The signature of the Holder to
                                      this assignment must correspond with the
                                      name as written upon the face of the
                                      within instrument in every particular,
                                      without alteration or enlargement or any
                                      change whatsoever.

                                      If the endorsement be executed by an
                                      attorney, executor, administrator, trustee
                                      or guardian, the person executing the
                                      endorsement must give his/her full title
                                      in such capacity and proper evidence of
                                      authority to act in such capacity, if not
                                      on file with the Depositary, must be
                                      forwarded with this ADR.

____________________
SIGNATURE GUARANTEED

                                      All endorsements or assignments of ADRs
                                      must be guaranteed by a member of a
                                      Medallion Signature Program approved by
                                      the Securities Transfer Association, Inc.

                                     LEGENDS

[THE ADRs ISSUED IN RESPECT OF PARTIAL ENTITLEMENT AMERICAN DEPOSITARY SHARES
SHALL BEAR THE FOLLOWING LEGEND ON THE FACE OF THE ADR: "THIS ADR EVIDENCES ADSs
REPRESENTING 'PARTIAL ENTITLEMENT' SHARES OF COMMON STOCK OF SHINHAN FINANCIAL
GROUP CO., LTD. AND AS SUCH DO NOT ENTITLE THE HOLDERS THEREOF TO THE SAME
PER-SHARE ENTITLEMENT AS OTHER SHARES (WHICH ARE 'FULL ENTITLEMENT' SHARES)
ISSUED AND OUTSTANDING AT SUCH TIME. THE ADSs REPRESENTED BY THIS ADR SHALL
ENTITLE HOLDERS TO DISTRIBUTIONS AND ENTITLEMENTS IDENTICAL TO OTHER ADSs WHEN
THE SHARES REPRESENTED BY SUCH ADSs BECOME 'FULL ENTITLEMENT' SHARES."]

                                      A-20

<PAGE>

                                    EXHIBIT B

                                  FEE SCHEDULE

                       DEPOSITARY FEES AND RELATED CHARGES

All capitalized terms used but not otherwise defined herein shall have the
meaning given to such terms in the Deposit Agreement.

I.       DEPOSITARY FEES

         The Company, the Holders, the Beneficial Owners and the persons
depositing Shares or surrendering ADSs for cancellation agree to pay the
following fees of the Depositary:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
                   SERVICE                               RATE                                 BY WHOM PAID
- -------------------------------------------------------------------------------------------------------------------------
<S>      <C>                                 <C>                                   <C>
(1)      ISSUANCE OF ADSs UPON DEPOSIT       UP TO U.S. $5.00 PER 100 ADSs (OR     PERSON DEPOSITING SHARES OR PERSON
         OF SHARES (EXCLUDING ISSUANCES      FRACTION THEREOF) ISSUED.             RECEIVING ADSs.
         CONTEMPLATED BY PARAGRAPHS (3)(b)
         AND (5) BELOW).
- -------------------------------------------------------------------------------------------------------------------------
(2)      DELIVERY OF DEPOSITED SECURITIES    UP TO U.S. $5.00 PER 100 ADSs (OR     PERSON SURRENDERING ADSs FOR PURPOSE
         AGAINST SURRENDER OF ADSs.          FRACTION THEREOF) SURRENDERED.        OF WITHDRAWAL OF DEPOSITED SECURITIES
                                                                                   OR PERSON TO WHOM DEPOSITED SECURITIES
                                                                                   ARE DELIVERED.
- -------------------------------------------------------------------------------------------------------------------------
(3)      DISTRIBUTION OF (a) CASH            NO FEE, TO THE EXTENT PROHIBITED BY   PERSON TO WHOM DISTRIBUTION IS MADE.
         DIVIDENDS OR (b) ADSs PURSUANT      THE EXCHANGE UPON WHICH THE ADSs
         TO STOCK DIVIDENDS.                 ARE LISTED. IF THE CHARGING OF
                                             SUCH FEE IS NOT PROHIBITED, THE
                                             FEES SPECIFIED IN (4) BELOW SHALL
                                             BE PAYABLE.
- -------------------------------------------------------------------------------------------------------------------------
(4)      DISTRIBUTION OF (a) CASH PROCEEDS   UP TO U.S. $2.00 PER 100 ADSs (OR     PERSON TO WHOM DISTRIBUTION IS MADE.
         (I.E., UPON SALE OF RIGHTS AND      FRACTION THEREOF) HELD.
         OTHER ENTITLEMENTS) OR (b) FREE
         SHARES IN THE FORM OF ADSs (NOT
         CONSTITUTING A STOCK DIVIDEND).
- -------------------------------------------------------------------------------------------------------------------------
(5)      DISTRIBUTION OF SECURITIES          UP TO U.S. $5.00 PER UNIT OF 100      PERSON TO WHOM DISTRIBUTION IS MADE.
         OTHER THAN ADSs OR RIGHTS TO        SECURITIES (OR FRACTION THEREOF)
         PURCHASE ADDITIONAL ADSs            DISTRIBUTED.
         (I.E., SPIN-OFF SHARES).
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      B-1

<PAGE>

<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
<S>      <C>                                 <C>                                   <C>
(6)      DEPOSITARY SERVICES.                UNLESS PROHIBITED BY THE EXCHANGE     PERSON HOLDING ADSs ON LAST DAY OF
                                             UPON WHICH THE ADSs ARE LISTED, UP    CALENDAR YEAR.
                                             TO U.S. $2.00 PER 100 ADSs (OR
                                             FRACTION THEREOF) HELD AS OF THE
                                             LAST DAY OF EACH CALENDAR YEAR,
                                             EXCEPT TO THE EXTENT OF ANY CASH
                                             DIVIDEND FEE(S) CHARGED UNDER
                                             PARAGRAPH (3)(a) ABOVE DURING THE
                                             APPLICABLE CALENDAR YEAR.
- -------------------------------------------------------------------------------------------------------------------------
(7)      DISTRIBUTION OF ADSs PURSUANT       UP TO U.S. $2.00 PER 100 ADSs (OR     PERSON WHO EXERCISES SUCH RIGHTS.
         TO EXERCISE OF RIGHTS TO            FRACTION THEREOF) HELD.
         PURCHASE ADDITIONAL ADSs.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

II.      CHARGES

         Holders, Beneficial Owners, persons depositing Shares for deposit and
persons surrendering ADSs for cancellation and for the purpose of withdrawing
Deposited Securities shall be responsible for the following charges:

(i)      taxes (including applicable interest and penalties) and other
         governmental charges;

(ii)     such registration fees as may from time to time be in effect for the
         registration of Shares or other Deposited Securities on the share
         register and applicable to transfers of Shares or other Deposited
         Securities to or from the name of the Custodian, the Depositary or any
         nominees upon the making of deposits and withdrawals, respectively;

(iii)    such cable, telex and facsimile transmission and delivery expenses as
         are expressly provided in the Deposit Agreement to be at the expense of
         the person depositing or withdrawing Shares or Holders and Beneficial
         Owners of ADSs;

(iv)     the expenses and charges incurred by the Depositary in the conversion
         of foreign currency;

(v)      such fees and expenses as are incurred by the Depositary in connection
         with compliance with exchange control regulations and other regulatory
         requirements applicable to Shares, Deposited Securities, ADSs and ADRs;
         and

(vi)     the fees and expenses incurred by the Depositary, the Custodian or any
         nominee in connection with the servicing or delivery of Deposited
         Securities.

                                      B-2

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
ARTICLE I             DEFINITIONS.............................................................................     1
         Section 1.1  "Affiliate".............................................................................     1
         Section 1.2  "ADS Record Date".......................................................................     2
         Section 1.3  "American Depositary Receipt(s)", "ADR(s)" and "Receipt(s)".............................     2
         Section 1.4  "American Depositary Share(s)" and "ADS(s)".............................................     2
         Section 1.5  "Applicant".............................................................................     2
         Section 1.6  "Beneficial Owner"......................................................................     2
         Section 1.7  "Commission"............................................................................     2
         Section 1.8  "Company"...............................................................................     2
         Section 1.9  "CSD"...................................................................................     2
         Section 1.10 "Custodian".............................................................................     2
         Section 1.11 "Deliver" and "Delivery"................................................................     2
         Section 1.12 "Deposit Agreement".....................................................................     3
         Section 1.13 "Depositary"............................................................................     3
         Section 1.14 "Deposited Securities"..................................................................     3
         Section 1.15 "Dollars" and "$".......................................................................     3
         Section 1.16 "DTC"...................................................................................     3
         Section 1.17 "DTC Participant".......................................................................     3
         Section 1.18 "Exchange Act"..........................................................................     3
         Section 1.19 "Foreign Currency"......................................................................     3
         Section 1.20 "Full Entitlement ADR(s)", "Full Entitlement ADS(s)" and "Full Entitlement Share(s)"....     3
         Section 1.21 "Holder(s)".............................................................................     3
         Section 1.22 "Korea".................................................................................     3
         Section 1.23 "Korea Stock Exchange"..................................................................     3
         Section 1.24 "Korea Securities Depository"...........................................................     3
         Section 1.25 "Partial Entitlement ADR(s)", "Partial Entitlement ADS(s)"
                           and "Partial Entitlement Share(s)".................................................     4
         Section 1.26 "Pre-Release Transaction"...............................................................     4
         Section 1.27 "Principal Office"......................................................................     4
         Section 1.28 "Registrar".............................................................................     4
         Section 1.29 "Restricted Securities".................................................................     4
         Section 1.30 "Restricted ADR(s)", "Restricted ADS(s)" and "Restricted
                           Shares"............................................................................     4
         Section 1.31 "Securities Act"........................................................................     4
         Section 1.32 "Share Registrar".......................................................................     4
         Section 1.33 "Shares"................................................................................     4
         Section 1.34 "United States" and "U.S."..............................................................     5
         Section 1.35 "Won" ..................................................................................     5
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                                                             <C>
ARTICLE II            APPOINTMENT OF DEPOSITARY; FORM OF RECEIPTS; DEPOSIT OF SHARES;
                      EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS..............................     5
         Section 2.1  Appointment of Depositary...............................................................     5
         Section 2.2  Form and Transferability of ADRs........................................................     5
         Section 2.3  Deposit with Custodian..................................................................     7
         Section 2.4  Registration and Safekeeping of Deposited Securities....................................     8
         Section 2.5  Issuance of ADSs; Execution and Delivery of ADRs........................................     8
         Section 2.6  Transfer, Combination and Split-up of ADRs..............................................     9
         Section 2.7  Surrender of ADSs and Withdrawal of Deposited Securities................................    10
         Section 2.8  Limitations on Execution and Delivery, Transfer, etc. of ADRs; Suspension of
                      Delivery, Transfer, etc.................................................................    11
         Section 2.9  Lost ADRs, etc..........................................................................    12
         Section 2.10 Cancellation and Destruction of Surrendered ADRs; Maintenance of Records................    12
         Section 2.11 Partial Entitlement ADSs................................................................    12
         Section 2.12 Restricted ADSs.........................................................................    13

ARTICLE III           CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF ADSs............................    14
         Section 3.1  Proofs, Certificates and Other Information..............................................    14
         Section 3.2  Liability for Taxes and Other Charges...................................................    15
         Section 3.3  Representations and Warranties on Deposit of Shares.....................................    15
         Section 3.4  Compliance with Information Requests....................................................    16
         Section 3.5  Ownership Restrictions..................................................................    16

ARTICLE IV            THE DEPOSITED SECURITIES................................................................    17
         Section 4.1  Cash Distributions......................................................................    17
         Section 4.2  Distribution in Shares..................................................................    17
         Section 4.3  Elective Distributions in Cash or Shares................................................    18
         Section 4.4  Distribution of Rights to Purchase Additional ADSs......................................    18
         Section 4.5  Distributions Other Than Cash, Shares or Rights to Purchase Shares......................    20
         Section 4.6  Intentionally Omitted...................................................................    21
         Section 4.7  Intentionally Omitted...................................................................    21
         Section 4.8  Conversion of Foreign Currency..........................................................    21
         Section 4.9  Fixing of ADS Record Date...............................................................    22
         Section 4.10 Voting of Deposited Securities..........................................................    22
         Section 4.11 Changes Affecting Deposited Securities..................................................    23
         Section 4.12 Available Information...................................................................    24
         Section 4.13 Reports.................................................................................    24
         Section 4.14 List of Holders.........................................................................    24
         Section 4.15 Taxation................................................................................    25

ARTICLE V             THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY...........................................    26
         Section 5.1  Maintenance of Office and Transfer Books by the Registrar...............................    26
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                             <C>
         Section 5.2  Exoneration.............................................................................    26
         Section 5.3  Standard of Care........................................................................    27
         Section 5.4  Resignation and Removal of the Depositary; Appointment of Successor Depositary..........    28
         Section 5.5  The Custodian...........................................................................    28
         Section 5.6  Notices and Reports.....................................................................    29
         Section 5.7  Issuance of Additional Shares, ADSs etc.................................................    30
         Section 5.8  Indemnification.........................................................................    30
         Section 5.9  Fees and Charges of Depositary..........................................................    31
         Section 5.10 Pre-Release Transactions................................................................    32
         Section 5.11 Restricted Securities Owners............................................................    32

ARTICLE VI            AMENDMENT AND TERMINATION...............................................................    33
         Section 6.1  Amendment/Supplement....................................................................    33
         Section 6.2  Termination.............................................................................    33

ARTICLE VII           MISCELLANEOUS...........................................................................    34
         Section 7.1  Counterparts............................................................................    34
         Section 7.2  No Third-Party Beneficiaries............................................................    34
         Section 7.3  Severability............................................................................    35
         Section 7.4  Holders and Beneficial Owners as Parties; Binding Effect................................    35
         Section 7.5  Notices.................................................................................    35
         Section 7.6  Governing Law and Jurisdiction..........................................................    36
         Section 7.7  Assignment..............................................................................    37
         Section 7.8  Compliance with U.S. Securities Laws....................................................    37
         Section 7.9  Korean Law References...................................................................    37
         Section 7.10 Titles and References...................................................................    38

EXHIBITS
         Exhibit A    Form of ADR.............................................................................   A-1
         Exhibit B    Fee Schedule............................................................................   B-1
</TABLE>

                                      iii

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>6
<FILENAME>u98617exv4w1.txt
<DESCRIPTION>EX-4.1 STOCK PURCHASE AGREEMENT,DATED JULY 9,2003
<TEXT>
<PAGE>

                                                                     EXHIBIT 4.1

                                                                  EXECUTION COPY

                            STOCK PURCHASE AGREEMENT

                                 BY AND BETWEEN

                       KOREA DEPOSIT INSURANCE CORPORATION

                                       AND

                             SHINHAN FINANCIAL GROUP

                               DATED JULY 9, 2003

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                <C>
                                                       ARTICLE I
                                                      DEFINITIONS

Section 1.01.         Definitions ..............................................................................    1

Section 1.02.         General Interpretive Principles ..........................................................    7

                                                      ARTICLE II
                                              SALE AND PURCHASE OF SHARES

Section 2.01.         Sale and Purchase of Shares ..............................................................    7

Section 2.02.         Closing ..................................................................................    8

Section 2.03.         Actions at Closing .......................................................................    9

Section 2.04.         Withheld Indemnity Payment Amounts .......................................................    9

Section 2.05.         Earnout Payment ..........................................................................   11

                                                      ARTICLE III
                                     REPRESENTATIONS AND WARRANTIES OF THE SELLER

Section 3.01.         Title to Shares ..........................................................................   12

Section 3.02.         Authorization of Agreement; Enforceability ...............................................   12

Section 3.03.         Consents; No Conflicts ...................................................................   12

Section 3.04.         Ligitation ...............................................................................   13

                                                      ARTICLE IV
                                    REPRESENTATIONS AND WARRANTIES OF THE BANK AND
                                                     SUBSIDIARIES

Section 4.01.         Corporate Organization and Qualification .................................................   13

Section 4.02.         Authorization of Agreement; Enforceability ...............................................   13

Section 4.03.         Consents; No Conflicts ...................................................................   13

Section 4.04.         Capitalization; Securities ...............................................................   14

Section 4.05.         Subsidiaries; Investments ................................................................   14

Section 4.06.         Financial Statements; Undisclosed Liabilities ............................................   15

Section 4.07.         Absence of Certain Changes ...............................................................   15
</TABLE>

                                        i

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                <C>
Section 4.08.         Property .................................................................................   15

Section 4.09.         Litigation ...............................................................................   16

Section 4.10.         Compliance with Laws; Regulatory Approvals ...............................................   16

Section 4.11.         Taxes ....................................................................................   16

Section 4.12.         Employee Benefits Matters ................................................................   17

Section 4.13.         Labor ....................................................................................   17

Section 4.14.         Contracts ................................................................................   17

Section 4.15.         Transaction with Subsidiaries ............................................................   18

Section 4.16.         Performance of Investment Trusts .........................................................   18

Section 4.17.         Derivative Instruments ...................................................................   18

Section 4.18.         Trust Accounts ...........................................................................   19

Section 4.19.         Books and Records ........................................................................   19

Section 4.20.         Insurance ................................................................................   19

Section 4.21.         Environmental, Health and Safety Laws ....................................................   19

Section 4.22.         Finder's Fees ............................................................................   20

Section 4.23.         Consumer Finance Loans ...................................................................   20

Section 4.24          *Funds ...................................................................................   20
                      *MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED SEPARATELY
                      WITH THE COMMISSION.

Section 4.25          Sale of Assets ...........................................................................   20

Section 4.26          Disclosure Schedules .....................................................................   20

                                                       ARTICLE V
                                    REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

Section 5.01.         Corporate Organization and Qualification .................................................   21

Section 5.02.         Authorization of Agreement; Enforceability ...............................................   21

Section 5.03.         Consents; No Conflicts ...................................................................   21

Section 5.04.         Litigation ...............................................................................   21

Section 5.05.         Legal Requirements to Invest in a Bank ...................................................   21

Section 5.06.         Financial Capacity .......................................................................   22
</TABLE>

                                       ii

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                <C>
                                                          ARTICLE VI
                                                    PRE-CLOSING COVENANTS

Section 6.01.         Conduct of Business ......................................................................   22

Section 6.02.         Financial and Other Information ..........................................................   22

Section 6.03.         Notifications ............................................................................   23

Section 6.04.         Taking of Necessary Action ...............................................................   23

Section 6.05.         Further Cooperation ......................................................................   23

Section 6.06.         Public Statements.........................................................................   23

Section 6.07.         Resignation of CHB Directors; Appointment of Acting CEO; Election of Directors
                      and Appointment of Officers ..............................................................   24

                                                      ARTICLE VII
                                                      CONDITIONS

Section 7.01.         Conditions to the Purchaser's Obligations ................................................   24

Section 7.02.         Conditions to the Seller's and the Bank's Obligations ....................................   25

                                                     ARTICLE VIII
                                                POST-CLOSING COVENANTS

Section 8.01.         Lock-up ..................................................................................   26

Section 8.02.         Qualified Public Offering ................................................................   26

                                                      ARTICLE IX
                                                      TERMINATION

Section 9.01.         Termination of Agreement .................................................................   27

Section 9.02.         Effect of Termination ....................................................................   27

                                                       ARTICLE X
                                          INDEMNIFICATION AND SURIVAL PERIOD

Section 10.01.        Indemnification ..........................................................................   28
</TABLE>

                                       iii

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                <C>
Section 10.02.        Survival of Representations and Warranties ...............................................   30

Section 10.03.        Insurance Proceeds; Exceptions and Deductions; Determination of Indemnification Amount ...   30

Section 10.04.        No Duplication; Sole Remedy Procedures ...................................................   31

                                                      ARTICLE XI

                                                 ASSET INDEMNIFICATION

Section 11.01.        Asset Indemnification ....................................................................   31

Section 11.02.        Dispute Resolution .......................................................................   36

                                                      ARTICLE XII
                                                     MISCELLANEOUS

Section 12.01.        Fees and Expenses ........................................................................   36

Section 12.02.        Notices ..................................................................................   36

Section 12.03.        Entire Agreement; Amendment; Severability ................................................   37

Section 12.04.        Counterparts .............................................................................   37

Section 12.05.        Governing Law; Jurisdiction ..............................................................   37

Section 12.06.        Successors and Assigns ...................................................................   37
</TABLE>

                                       iv

<PAGE>

                            STOCK PURCHASE AGREEMENT

                  STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July
9, 2003, by and between (i) Korea Deposit Insurance Corporation, a company
established and existing under the laws of Korea (the "Seller" or "KDIC"), and
(ii) Shinhan Financial Group, a financial holding company established and
existing under the laws of Korea (the "Purchaser" or "SFG") and acknowledged and
agreed to by Chohung Bank, a company established and existing under the laws of
Korea (the "Bank" or "CHB").

                              W I T N E S S E T H:

         WHEREAS, the Bank is engaged principally in the banking business as
defined under the Banking Act of Korea, with an authorized capital of
2,000,000,000 common shares, par value five thousand (5,000) Won per share
("Common Stock");

         WHEREAS, the Seller owns 543,570,144 shares of Common Stock, which
constitutes 80.04% of the issued and outstanding Common Stock of the Bank as of
the date hereof;

         WHEREAS, the parties hereto have decided to enter into this Agreement
pursuant to which the Purchaser has agreed to purchase from the Seller, and the
Seller has agreed to sell to the Purchaser, 543,570,144 shares of Common Stock
of the Bank, constituting 80.04% of the total issued and outstanding Common
Stock of the Bank (the "Transaction Shares"); and

         WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transaction
contemplated by this Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

                  Section 1.01. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:

                  "Additional Loss Amount" has the meaning set forth in the
Section 11.01.

                  "Affiliate" means (a) with respect to any Person other than a
Korean Governmental Entity (including the Seller), an affiliate of such Person
as defined under the Act on Monopoly Control and Fair Trade Act of Korea, and
(b) with respect to any Korean Governmental Entity (including the Seller), any
other Korean Governmental Entity. For the purposes of this definition, the
Resolution Finance Corporation shall not be deemed an Affiliate of the Seller.

                  "Agreement" has the meaning set forth in the preamble.

<PAGE>

                  "Articles of Incorporation" means the Articles of
Incorporation of the Bank, as amended from time to time.

                  "Asset Indemnity Amount" shall be aggregate amount of the
Asset Indemnity Amount for Corporate Loan, Asset Indemnity Amount for Returned
KAMCO Credits and Asset Indemnity Amount for Card Loan.

                  "Asset Indemnity Amount for Corporate Loans" has the meaning
set forth in Section 11.01.

                  "Asset Indemnity Amount for Card Loans" has the meaning set
forth in Section 11.01.

                  "Asset Indemnity Amount for Returned KAMCO Credits" has the
meaning set forth in Section 11.01.

                  "Bank" has the meaning set forth in the preamble.

                  "Bank Financial Statements" means the audited consolidated
balance sheets of the Bank as of December 31, 2002, 2001 and 2000, and the
related consolidated statements of income, changes in capital surplus and
retained earnings, and cash flows for the years then ended, as prepared in
accordance with Korean GAAP and audited by the Bank's external auditors.

                  "Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in Korea are closed.

                  "Card Loans" mean Card Loan A and Card Loan B.

                  "Card Loan A" means (A) credit card cash advances made by CHB
to its credit card customers (the "Cash Advances") as of December 31, 2002; (B)
credit card loans, including Daewhan-loans made by CHB to its credit card
customers (the "Credit Card Loans") as of December 31, 2002; (C) any outstanding
credit card balances, including any accrued interests thereon, resulting from
purchases made by CHB credit card customers (the "Receivables") as of December
31, 2002; and (D) any additional Cash Advances or Credit Card Loan or
Receivables from January 1, 2003 until the Closing Date made by or to the credit
card customers in (A), (B) and (C) above. The details of Cash Advances, Credit
Card Loan and Receivables shall be described in Appendix 1 and the details of
any additional Cash Advances or Credit Card Loan or Receivables from January 1,
2003 until the Closing Date shall be described in Appendix 2

                  "Card Loan B" means any card loan which was subject to any
extensions of maturity or roll-overs or conversion (Daewhan) of the Card Loan A
during January 1, 2003 to December 31, 2003.

                  "Closing" means the closing of the sale and purchase of the
Transaction Shares pursuant to Section 2.02.

                                       2

<PAGE>

                  "Closing Date" has the meaning set forth in Section 2.02.

                  "Collateral Value" means the value of collateral securing the
Corporate Loans, as calculated in accordance with Appendix 3.

                  "Common Stock" has the meaning set forth in the recitals.

                  "Contract" means any contract, agreement, arrangement or
instrument which is legally binding on the parties thereto.

                  "Convertible Securities" means any subscriptions, options,
conversion rights, exchange rights, warrants, or other agreements, securities or
commitments of any kind obligating the Bank, if applicable, or any of its
Subsidiaries to issue, grant, deliver or sell, or cause to be issued, granted,
delivered or sold, any equity securities of the Bank, if applicable, or any of
its Subsidiaries.

                  "Corporate Loan(s)" mean (i) any commitments or extension of
loans (including syndicated loans), commercial paper, debt securities (including
convertible bonds or bonds with warrants), guarantees, equity securities
(excluding equity securities owned by CHB for trading purposes) or any similar
credit extension (Yeoshin) instruments made or held by CHB to certain CHB
borrowers set forth in Appendix 4 hereto as of December 31, 2002, and (ii) any
further commitments or extensions of loans (including syndicated loans),
commercial paper, debt securities (including convertible bonds or bond with
warrants), guarantees, equity securities (excluding equity securities owned by
CHB for trading purposes) or any similar credit extension (Yeoshin) instruments
made or held by CHB to certain CHB borrowers set forth in Appendix 4 from (and
including) January 1, 2003 until the Second Calculation Date up to, where
applicable, the "Credit Limit" existing as of the date hereof as identified in
Appendix 5. For purposes of this definition, "Credit Limit" shall mean the
credit limits classified by each corporate loan type; and any new credit limit
amounts resulting from an interchange of one corporate loan type into another
corporate loan type pursuant to (i) decisions of a creditors committee under the
Corporate Restructuring Promotion Law or other workout procedures (including
banks managements (Eunhangkwanri) or private restructuring arrangements
sponsored by banks), (ii) other laws or regulations or court orders, or (iii)
government policies or guidelines (each of the foregoing items (i) , (ii) and
(iii) will be referred to as a "Special Cause") will be deemed to be included in
the amount of the Credit Limit as if such corporate loan type had existed as of
the date hereof. For avoidance of doubt, any extensions of maturity or
roll-overs or conversion (including Daehwan) of corporate loans shall be
included in the foregoing definition of Corporate Loan(s); provided (i) any new
term loans made after a substantial time period (under normal circumstances a
two week time period or longer will be deemed to be a substantial time period)
has elapsed since the maturity of any previous term loan and (ii) any extensions
of maturity, roll-overs or conversion (which would not include any lending made
within certain credit limits, i.e. Hando-Georae) made on significantly adversely
different terms ("Special Rollovers") without the consent (which consent shall
not be unreasonably withheld) of KDIC shall be excluded. Special Rollovers shall
mean any extensions of maturity or roll-overs or conversion with a (A) change in
the Bank's proprietary credit rating for the Bank's borrowers (the "Bank's
Credit Rating System") in a significantly material manner (except the changes of

                                       3

<PAGE>

credit rating between and among "normal" and "precautionary" status of the
Bank's borrowers. For avoidance of doubt, if the consent of KDIC is given in
this respect, any extension of maturity or roll-overs or conversion for the same
borrower, so long as such borrower remains in the same credit rating status,
such extension of maturity or roll-overs or conversion shall not be deemed as a
change in the Bank's Credit Rating System in a significantly material manner.),
(B) any change in collateral (including corporate guarantees) which results in a
significantly material reduction of the total collateral for such extensions of
maturity or roll-overs or conversion and any other changes of a same or
character or nature tantamount to significantly adversely different terms
provided that such change was not due to a Special Cause. The consent of KDIC
may be made prior to or after the extensions of maturity or roll-overs or
conversion and any such post consent procedure shall not be penalized only
because such consent request was made after the extensions of maturity or
roll-overs or conversion; provided, that such post consent request was not made
deliberately.

                  "Employee Benefit Plans" means all bonus, deferred
compensation, pension, profit sharing, stock option, employee stock purchase or
other employee benefit plans applicable to any or all of the employees of the
Bank or any of its Subsidiaries.

                  "Exchangeable Note Documents" shall mean the Indenture between
the Seller, as Issuer, and JPMorgan Chase Bank, as Trustee, dated December 11,
2001, for the US$500,000,000 2.50% Exchangeable Notes due 2005, a copy of which
has been provided to the Purchaser, and the Terms and Conditions of the
Exchangeable Notes.

                  "First Calculation Date" means the end date of the quarterly
fiscal period of CHB immediately preceding the first anniversary of the earlier
of the Cash Portion Closing or September 30, 2003.

                  "GI Payment Amount" has the meaning set forth in Section
2.04(b).

                  "Governmental Entity" means any government or political
subdivision or department of such government or political subdivision, any
governmental or regulatory body, commission, board, bureau, agency or
instrumentality, any stock exchange or any court.

                  "Independent Accountant" means an individual third party
accountant or accounting firm appointed under Section 11.02.

                  "Intellectual Property" means all intellectual property
rights, including patents, patent rights, trademarks, service marks, trade
names, copyrights, applications for any of the foregoing, licenses, trade
secrets, know-how and proprietary processes and formulae.

                  "Investment Agreement" has the meaning set forth in Section
7.01(f).

                  "Judgments" has the meaning set forth in Section 4.09.

                  "Korea" means the Republic of Korea.

                                       4

<PAGE>

                  "Korean GAAP" means the generally accepted accounting
principles in Korea.

                  "Law" means any law, treaty, statute, ordinance, code, rule or
regulation of a Governmental Entity or judgment, decree, order, writ, award,
injunction or determination of an arbitrator or court or other Governmental
Entity.

                  "Lien" means any mortgage, pledge, lien, yangdo tambo or any
other security interest.

                  "Lock-up Period" has the meaning set forth in Section 8.01.

                  "Losses" means any and all losses, penalties, liabilities and
expenses (including reasonable attorneys' and advisors' fees and disbursements)
incurred by, imposed upon or asserted against any Person.

                  "Material Adverse Effect" means, with respect to any Person,
any material adverse effect on either (i) the financial condition, results of
operations or business of such Person (and with respect to the Bank and its
Subsidiaries, taken as a whole) or (ii) the ability of the Person to perform its
obligations under this Agreement.

                  "Other Commercial Banks" shall mean Kookmin Bank, Hana Bank,
Korea First Bank, Koram Bank, Woori Bank and Korea Exchange Bank (or any of
their successors) to the extent that such banks have any credit exposure
(non-collateral loan) of not less than ten (10) billion Won to the CHB borrowers
set forth in Appendix 5 hereto.

                  "Permitted Liens" means (i) mechanics', carriers', repairmen's
or other like Liens arising or incurred in the ordinary course of business, (ii)
statutory Liens for Taxes not yet due and payable and (iii) other Liens that do
not materially impair the continued use and operation of the assets to which
they relate.

                  "Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated organization or
Governmental Entity.

                  "Pre-Closing Period" means the period from the date hereof
until the earlier of the Equity Portion Closing and the termination of this
Agreement.

                  "Proceeding" means any claim, suit, action, arbitration,
investigation or other legal proceeding against a party to this Agreement.

                  "Purchase Price" means the total consideration to be paid for
the Transaction Shares as set forth in Section 2.01.

                  "Purchaser" has the meaning set forth in the preamble.

                  "Regulatory Approvals" means, with respect to any matter, (i)
any and all permits, licenses, consents, approvals, orders, registrations,
authorizations, clearances from, or filings or

                                       5

<PAGE>

registrations with, Governmental Entities, and (ii) the expiration of any and
all waiting periods imposed by applicable laws, in each case in respect of such
matter.

                  "Relevant Corporate Loans Amount" means, with respect to
Corporate Loans to each CHB borrowers identified in Appendix 4 hereto, the
aggregate amount of Corporate Loan, provided, the Relevant Corporate Loans
Amount shall not include (i) the amount of the write-off or Write-Down of the
relevant Corporate Loans, as of the Second Calculation Date under Section
11.01(a)(iii) (for avoidance of doubt, in case CHB is required to reserve with
respect to the remaining balance of the applicable Corporate Loans that have
been written-off or Written-Down, such remaining balance shall be included in
the Relevant Corporate Loans Amount) or (ii) the amount sold to a third party
under Section 11.01(a)(iv)

                  "Representatives" means, with respect to any Person and any
particular matter, any of such Person's officers, directors, employees, agents,
attorneys, accountants, actuaries, consultants, or financial advisors or other
Person acting on behalf of such Person in respect of such matter.

                  "Required Regulatory Approvals" means each Regulatory Approval
required to be obtained in connection with the execution, delivery and
performance of this Agreement and the Investment Agreement.

                  "Returned KAMCO Credits" mean any assets, loans, or other
credits previously sold to KAMCO but are returned to CHB under the agreements
between KAMCO and CHB with regard to such assets as described in Appendix 6.

                  "Second Calculation Date" means the end date of the quarterly
fiscal period of CHB immediately preceding the second anniversary of the earlier
of the Cash Portion Closing and September 30, 2003.

                  "Secured Corporate Loans" means any portion of the Corporate
Loans that is secured by collateral, but only to the extent covered by the
Collateral Value of such collateral. For the avoidance of doubt, if the amount
of Corporate Loans with collateral exceeds the Collateral Value, such portion of
the Corporate Loans shall constitute the Unsecured Corporate Loans.

                  "Seller" has the meaning set forth in the preamble.

                  "Subsidiary" means as to any Person, any other Person of which
more than 50% of the capital voting stock is at the time directly or indirectly
owned or controlled by such Person or if any Person that, alone or together with
any other Person, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such Person (but
not including an ABS specialty company established under the Asset Backed
Securitization Act of Korea). For purposes of this definition, "control"
(including the terms "controlling", "controlled by" and "under common control
with"), as used with respect to any Person shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the

                                       6

<PAGE>

management policies of such Person, whether through ownership of voting
securities, by contract, agency or otherwise.

                  "Tax" or "Taxes" means all taxes, including any interest,
liabilities, fines, penalties or additions to tax that may become payable in
respect of such taxes, imposed by any Governmental Entity, including Korean and
other income taxes, payroll and employee withholding taxes, unemployment
insurance, social security, sales and use taxes, excise taxes, franchise taxes,
gross or net receipts taxes, occupation taxes, real and personal property taxes,
ad valorem taxes, stamp taxes, transfer taxes, capital taxes, import duties,
withholding taxes, workers' compensation taxes and other obligations of the same
or of a similar nature.

                  "Transaction Shares" has the meaning set forth in the
preamble.

                  "Transfer" has the meaning set forth in Section 8.01.

                  "Unsecured Corporate Loans" means any Corporate Loans that are
not Secured Corporate Loans.

                  "Write-Downs" or "Written-Down" means any reduction in the
amount of the principal for Corporate Loans or Card Loans, as applicable, due to
debt-equity swaps, exemptions, reduction of debt (Gamaek-Sonsil), valuation loss
(Pyungga-Sonsil) and any other similar actions or events resulting in the loss
of any principal on the Corporate Loans other than through provisioning of
reserves with respect to the Corporate Loans; provided any Write-Down or
Written-Down with respect to equity securities and convertible securities shall
be calculated as set forth in the Appendix 7.

                  Section 1.02. General Interpretive Principles. Whenever used
in this Agreement, except as otherwise expressly provided or unless the context
otherwise requires, any noun or pronoun shall be deemed to include the plural as
well as the singular and to cover all genders. The name assigned to this
Agreement and the section captions used herein are for convenience of reference
only and shall not be construed to affect the meaning, construction or effect
hereof. Unless otherwise specified, the term "including" means "including
without limitation" (and "include," "includes" and "included" shall be similarly
interpreted). References in this Agreement to Articles, Sections, Annexes,
Exhibits or Schedules mean the Articles, Sections, Annexes, Exhibits and
Schedules of or to this Agreement, and such Annexes, Exhibits and Schedules are
an integral part of this Agreement.

                                   ARTICLE II
                           SALE AND PURCHASE OF SHARES

                  Section 2.01. Sale and Purchase of Shares. Subject to the
terms and conditions of this Agreement, the Seller agrees to sell and transfer
to the Purchaser, and the Purchaser agrees to purchase from the Seller, the
Transaction Shares for the following consideration (the Purchase Price"):

                                       7

<PAGE>

                  (i)      Maximum amount of 1,718,800,548,296 Won for
         277,220,773 Transaction Shares consisting of the following components
         (the "Cash Portion"):

                           1.       900,000,000,000 Won in cash to be paid at
                                    Closing (the "Closing Cash Payment Amount");
                                    and

                           2.       The Withheld Indemnity Payment Amounts (as
                                    described in Section 2.04); and

                  (ii)     91,304,564 newly issued shares of preferred stock of
         the Purchaser consisting of the following components (the "Equity
         Portion"):

                           1.       46,583,961 newly issued shares of redeemable
                                    preferred stock ("RPS") of the Purchaser
                                    (the major terms of which are attached as an
                                    exhibit to the Investment Agreement) in
                                    exchange for 135,892,536 Transaction Shares
                                    (reflecting a 0.3428 : 1 ratio between one
                                    share of redeemable preferred stock of the
                                    Purchaser and one Transaction Share; and

                           2.       44,720,603 newly issued shares of redeemable
                                    convertible preferred stock ("RCPS") of the
                                    Purchaser (the major terms of which are
                                    attached hereto as an exhibit to the
                                    Investment Agreement) in exchange for
                                    130,456,835 Transaction Shares (reflecting a
                                    0.3428 : 1 ratio between one share of
                                    redeemable convertible preferred stock of
                                    the Purchaser and one Transaction Share.

                  Section 2.02. Closing. The purchase and sale of the
Transaction Shares contemplated by this Agreement shall be consummated at one or
more closings (the "Closings") to be held at a place to be mutually agreed upon
as soon as practicable and, in any event, no later than September 30, 2003 or
such other time, date and location as the Seller and the Purchaser may agree
(such times and dates being herein referred to as the "Closing Dates"); provided
that the Purchaser may have the option to consummate the purchase and sale of
the Transaction Shares relating to the Equity Portion first (the "Equity Portion
Closing") and subsequently consummate the purchase and sale of the Transaction
Shares relating to the Cash Portion (the "Cash Portion Closing"). For avoidance
of doubt, the Equity Portion Closing shall mean (i) the issue of the Equity
Portion by the Purchaser to the Seller and (ii) the delivery by the Seller to
the Purchaser of the Transaction Shares relating to the Equity Portion (the date
thereof being the "Equity Portion Closing Date"), and the Cash Portion Closing
shall mean (i) the payment of the Cash Closing Payment and (ii) the delivery by
the Seller to the Purchaser of the Transaction Shares relating to the Cash
Portion (the date thereof being the "Cash Portion Closing Date"). Further, the
date of the Equity Portion Closing shall be deemed as the Closing Date for the
purpose of Articles IV, VI, 7.01(a) but only with respect to Article IV therein,
(g) and (h), X and XI and otherwise the Closing Date shall mean the Equity
Portion Closing Date or the Cash Portion Closing Date, as the case may be unless
provided otherwise in the relevant provisions.

                                       8

<PAGE>

                  Section 2.03. Actions at Closing.

                  (a)      Cash Portion Closing. At the Cash Portion Closing,
         the following actions shall occur:

                                    (i)      The Purchaser will deliver to the
                  Seller by wire transfer, to a bank account designated in
                  advance by the Seller, the Closing Cash Payment Amount of the
                  Purchase Price.

                                    (ii)     The Seller will deliver to the
                  Purchaser stock certificates of the Bank, in due and proper
                  form, representing the Transaction Shares relating to the Cash
                  Portion.

                                    (iii)    The Seller and the Bank will
                  deliver to the Purchaser the other documents to be delivered
                  pursuant to Section 7.01.

                                    (iv)     The Purchaser will deliver to the
                  Seller the other documents to be delivered pursuant to Section
                  7.02.

                  (b)      Equity Portion Closing. At the Equity Portion
         Closing, the following actions shall occur:

                                    (i)      The Seller will deliver to the
                  Purchaser stock certificates of the Bank, in due and proper
                  form, representing the Transaction Shares relating to the
                  Equity Portion.

                                    (ii)     The Purchaser will deliver to the
                  Seller the receipt representing the in-kind contribution for
                  the RPS and RCPS.

                                    (iii)    The Seller and the Bank will
                  deliver to the Purchaser the other documents to be delivered
                  pursuant to Section 7.01.

                                    (iv)     The Purchaser will deliver to the
                  Seller the other documents to be delivered pursuant to Section
                  7.02.

                  Section 2.04. Withheld Indemnity Payment Amounts. The total
additional payments relating to certain indemnities (the "Withheld Indemnity
Payment Amounts") that shall be deducted from the Cash Portion shall consist of
the following components:

                  (a)      AI Payment Amount. The Purchaser shall pay to the
         Seller an additional amount calculated as below (the "AI Payment
         Amount") on the earlier of (i) 60 days after the date the Additional
         Loss Amount (whether full or partial) with respect to the Second
         Calculation Date is finally determined pursuant to Section 11.01(d) and
         Section 11.02, or (ii) the date as agreed between the Seller and the
         Purchaser (the "AI Payment Date"). The AI Payment Amount shall be
         calculated as follows:

                           (i)      The AI Payment Amount shall be as follows:

                                       9

<PAGE>

                                    652,284,172,800 Won - (aggregate Asset
                                    Indemnity Amount for Corporate Loans +
                                    aggregate Asset Indemnity Amount for
                                    Returned KAMCO Credits + aggregate Asset
                                    Indemnity Amount for Card Loans), provided
                                    that (i) the sum of the aggregate Asset
                                    Indemnity Amount for the Corporate Loans and
                                    the aggregate Asset Indemnity Amount for
                                    Returned KAMCO Credits shall not exceed
                                    332,073,000,000 Won, (ii) the Asset
                                    Indemnity Amount for Card Loans shall not
                                    exceed 450,667,000,000 Won, and (iii) the AI
                                    Payment Amount shall not be less than zero.

                           (ii)     The Purchaser shall pay to the Seller the
                  interest accrued on the AI Payment Amount. The rate for the
                  interest on the AI Payment Amount shall be 4.3% per annum and
                  shall accrue from the earlier of the Cash Portion Closing or
                  October 1, 2003 to the AI Payment Date; provided that any AI
                  Payment Amount not paid on such date shall accrue interest
                  thereon at 6% per annum until actual payment is made.

                  (b)      GI Payment Amount. The Purchaser shall pay to the
         Seller an amount equal to 166,516,375,496 Won (the "GI Payment Amount")
         on the second anniversary of the earlier of the Cash Portion Closing or
         September 30, 2003 (the "GI Payment Date"), subject to the following:

                           (i)      The Purchaser shall pay the Seller interest
                  on the GI Payment Amount at a rate of 4.3% per annum starting
                  from the earlier of the Cash Portion Closing or October 1,
                  2003 until the GI Payment Date; provided, that the interest
                  shall not accrue on the Setoff Amount after the setoff of the
                  Setoff Amount in accordance with (ii) below; provided, further
                  that any GI Payment Amount not paid on the GI Payment Date
                  shall accrue interest at 6% per annum until the date of actual
                  payment.

                           (ii)     If there are any amounts due and payable by
                  the Seller to the Purchaser on or before the GI Payment Date
                  pursuant to Section 10.01 (the "Setoff Amount"), the Purchaser
                  shall notify the Seller in writing (the "Setoff Notice") of
                  the Setoff Amount requesting the consent of the Seller to
                  deduct the Setoff Amount from the GI Payment Amount. If the
                  Seller consents to the deduction of the Setoff Amount from the
                  GI Payment Amount or does not object to such deduction in a
                  written notice to the Purchaser within 30 days of the Setoff
                  Notice, the Purchaser shall deduct the Setoff Amount from the
                  GI Payment Amount.

                           (iii)    If the Seller objects to the deduction of
                  the Setoff Amount from the GI Payment Amount in a written
                  notice sent to the Purchaser within 30 days of the receipt of
                  the Setoff Notice, the Purchaser shall not deduct the Setoff
                  Amount from the GI Payment but instead the Seller shall pay
                  the Purchaser the Setoff Amount separately within 60 days of
                  receipt of the Setoff Notice and the Purchaser's rights,
                  interests and claims of the Purchaser to receive the Setoff
                  Amount from the Seller shall not be affected. If the Seller
                  does not pay the Setoff

                                       10

<PAGE>

                  Amount within 60 days of the receipt of the Setoff Notice,
                  interest shall accrue commencing upon the expiration of the 60
                  day period and be payable by the Seller to the Purchaser on
                  such amount at the rate of 6.0%. For the avoidance of doubt,
                  no interest shall accrue during the 60 days of the receipt of
                  the Setoff Notice.

                  Section 2.05. Earn Out Payment.

                  (a)      The Purchaser shall pay to the Seller an amount equal
         to 20% of the total Excess Amount for fiscal years 2004, 2005 and 2006
         (the "Earn Out Payment Amount") within 30 days after the Excess Amount
         (as defined below in (c) below) has been finally determined for the
         fiscal year 2006.

                  (b)      Within 90 days after the end of 2006, the Purchaser
         shall, or cause the Bank to, notify KDIC of the Excess Amount (as
         defined in (c) below) for the fiscal years 2004, 2005 and 2006 (the
         "Earn Out Notice").

                  (c)      The term Excess Amount shall mean with, respect to
         fiscal years 2004, 2005 and 2006, the aggregate of the net income
         appearing on the relevant audited consolidated income statement of the
         Bank prepared in accordance with Korean GAAP (subject to 2.05 (d)
         below) which is in excess of 1,800,000,000,000; provided that with
         respect to the annual financial statements for fiscal year 2003, the
         Bank shall use the provisioning method for reserves of Shinhan Bank as
         attached in Exhibit A.

                  (d)      When calculating the net incomes of the Bank in (c)
         above, in the event that the Bank and Shinhan Bank are merged, the net
         incomes of the Bank and Shinhan Bank for the two fiscal years prior to
         such merger shall be used as the basis for the calculation of net
         income for the fiscal year during which the merger occurs.

                  (e)      When calculating the net incomes of the Bank in (c)
         above, the net income derived from credit card business of CHB but
         which are subsequently transferred to Shinhan Card Co., Ltd. after the
         Cash Portion Closing will be taken into consideration in accordance
         with the guidelines and principles contained in Exhibit B.

                  (f)      In addition, the Seller and Purchaser agree in
         principle, that in the case of any merger, split merger, split-off,
         spin-off or other business combination or similar event involving the
         business of the Bank (excluding "Mooljuk-Bunhal") subsequent to the
         Cash Portion Closing, any profits or loss resulting from the above, as
         well as the net income derived from such split-off or spin-off
         business, will be reflected in the calculation of the net income of the
         Bank in (c) above. The details of such calculation may be discussed
         before the occurrence of any of the foregoing event.

                  (g)      SFG shall take all necessary action to ensure the
         election of an outside director of CHB recommended by KDIC and approved
         by SFG in accordance with Section 7.02 (b) through (f) of the
         Investment Agreement, which shall apply mutatis mutandis, provided that
         employees of KDIC will be eligible to serve as an outside director of
         CHB. The foregoing right of KDIC shall be from the general shareholders

                                       11

<PAGE>

         meeting in 2003 to be held in accordance with Section 6.07(c) and
         terminate at the annual general shareholders meeting in 2007.

                                   ARTICLE III
               REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER

                  The Seller hereby represents and warrants to the Purchaser, as
of the date hereof and as of the Closings as if made on and as of each of the
Closing Dates (or, with respect to representations and warranties that are given
as of a specific date, as of such date), as follows:

                  Section 3.01. Title to Shares. The Seller is the legal and
beneficial owner of the Transaction Shares and upon consummation of the purchase
contemplated herein, the Purchaser will acquire from the Seller good title to
such Transaction Shares free and clear of Liens. Except as set forth in Schedule
3.01, the Transaction Shares have been duly authorized and are validly issued
and fully paid and non-assessable and will not be subject to any preemptive or
similar rights, restriction on voting rights (other than such restrictions on
voting rights provided for under applicable Law) or other Liens.

                  Section 3.02. Authorization of Agreement; Enforceability.

                  (a) The Seller has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate action on the part of the Seller.

                  (b) This Agreement has been duly executed and delivered by the
Seller and constitutes a valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting creditors' rights generally and by general
principles of equity.

                  Section 3.03. Consents; No Conflicts.

                  (a) Except for the Required Regulatory Approvals with respect
to the sale and transfer of the Transaction Shares set forth in Schedule
3.03(a), no Regulatory Approval is required to have been obtained by the Seller
in connection with the execution, delivery and performance of this Agreement.

                  (b) The execution, delivery and performance by the Seller of
this Agreement will not: (i) violate any provision of the Seller's articles of
association or other constitutional documents, (ii) result in the violation of
any Law or Regulatory Approval applicable to the Seller, nor (iii) violate,
conflict with or result in a breach or termination of any contract, obligation,
or commitment to which the Seller is a party or by which it is bound, except for
such violations, conflict, breach or termination that, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.

                                       12

<PAGE>

                  Section 3.04. Litigation. There are no Proceedings against the
Seller that enjoin, restrict or could materially delay the Seller's ability to
sell or transfer the Transaction Shares hereunder.

                                   ARTICLE IV
              REPRESENTATIONS AND WARRANTIES REGARDING THE BANK AND
                                  SUBSIDIARIES

                  Each of the Seller and the Bank hereby represents and warrants
to the Purchaser, as of the date hereof and as of the Equity Portion Closing as
if made on and as of the Equity Portion Closing Date (or, with respect to
representations and warranties that are given as of a specific date, as of such
date) giving effect to any supplements to the Disclosure Schedule made in
accordance with Section 6.08, as follows:

                  Section 4.01. Corporate Organization and Qualification. The
Bank is a corporation duly organized and validly existing under the laws of
Korea, has all power and authority required to use its properties and conduct
its business as it is now being conducted and is duly licensed to do business in
each jurisdiction in which it is required to be so licensed.

                  Section 4.02. Authorization of Agreement; Enforceability.

                  (a) The Bank has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate action on the part of the Bank.

                  (b) This Agreement has been duly executed and delivered by the
Bank and constitutes a valid and binding obligation of the Bank, enforceable
against the Bank in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights generally and by general principles
of equity.

                  Section 4.03. Consents; No Conflicts.

                  (a) Except for the Required Regulatory Approvals with respect
to the sale and purchase of the Transaction Shares set forth in Schedule
4.03(a), no Regulatory Approval is required to have been obtained by the Bank in
connection with the execution, delivery and performance of this Agreement.

                                       13

<PAGE>

                  (b) The execution, delivery and performance of this Agreement
will not: (i) violate any provision of the Articles of Incorporation or other
constitutional documents of the Bank or any of its Subsidiaries nor (ii) result
in the violation of any Law or Regulatory Approval applicable to the Bank or any
of its Subsidiaries, except for such violations, conflict, breach or termination
that, individually or in the aggregate, neither have had nor are reasonably
likely to have a Material Adverse Effect.

                  (c) The Seller is registered as the holder of the Transaction
Shares in the Bank's shareholders' registry and no Liens are registered on the
Transaction Shares in such registry.

                  Section 4.04. Capitalization; Securities.

                  (a) As of the date hereof, the authorized and outstanding
capital stock and outstanding Convertible Securities of the Bank are as set
forth in Schedule 4.04(a). Except as set forth in Schedule 4.04(a), the Bank has
no obligations to issue or sell any other capital stock or Convertible
Securities.

                  (b) All outstanding shares of Common Stock (including the
Transaction Shares) were duly authorized and validly issued and are fully paid
and non-assessable.

                  (c) Except as set forth in Schedule 4.04(c), the Bank and its
Subsidiaries are not a party to any agreements (other than this Agreement) with
respect to the governance or management of the Bank and any of its Subsidiaries
or the exercise of voting rights in respect of equity securities of the Bank and
any of its Subsidiaries.

                  Section 4.05. Subsidiaries; Investments.

                  (a) Schedule 4.05(a) sets forth a list of all of the Bank's
Subsidiaries. For the avoidance of doubt, the trust accounts of the Bank shall
not be deemed a Subsidiary of the Bank for purposes of this Agreement and shall
be treated as a part of the Bank. Each Subsidiary is a corporation duly
organized and validly existing under the laws of its jurisdiction of
incorporation, has all power and authority required to use its properties and
conduct its business as it is now being conducted and is duly licensed to do
business in each jurisdiction in which it is required to be so licensed, except
for such failures to be licensed that, individually or in the aggregate, neither
have had nor are reasonably likely to have a Material Adverse Effect.

                  (b) As of the date hereof, the authorized and outstanding
capital stock and outstanding Convertible Securities of each Subsidiary are as
set forth in Schedule 4.05(b). Except as disclosed in Schedule 4.05(b), all of
the outstanding capital stock and outstanding Convertible Securities in each
Subsidiary is owned by the Bank free and clear of any Liens and none of the
Subsidiaries have any obligation to issue or sell any other capital stock or
Convertible Securities. All outstanding shares of the capital stock of each of
the Subsidiaries were duly authorized and validly issued and are fully paid and
non-assessable.

                  (c) Schedule 4.05(c) lists all of the Bank's equity ownership
interests in any other Person, other than (i) listed securities held in the
ordinary course of business representing less than ten percent (10%) of the
capital stock of the issuer and (ii) other equity ownership interests valued at
less than ten (10) billion Won.

                                       14

<PAGE>

                  Section 4.06. Financial Statements; Undisclosed Liabilities.

                  (a) The Bank Financial Statements and the financial statements
of the Subsidiaries were prepared in accordance with the requirements of
applicable Law and Korean GAAP (and with respect to the non-Korean Subsidiaries,
the generally accepted accounting principles of the jurisdictions of such
Subsidiaries) and present fairly, in material respects, the financial position,
results of operations, changes in capital surplus and retained earnings and cash
flows of the Bank and its Subsidiaries, as of the dates and for the periods
covered thereby.

                  (b) Except as disclosed in Schedule 4.06(b), as at the date of
the most recent audited financial statements, the Bank and its Subsidiaries have
no liability or obligations of any nature (whether known or unknown, accrued,
absolute, fixed, contingent, liquidated or otherwise ("Undisclosed
Liabilities"), except (i) as fully reserved against the latest Bank Financial
Statement (including footnotes thereof) and the most recently available audited
financial statements of the Subsidiaries (which shall have been delivered by the
Seller to the Purchaser prior to the date hereof) and (ii) for such Undisclosed
Liabilities that, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.

                  (c) Except as disclosed in Schedule 4.06(c), since the date of
the most recent audited financial statements, the Bank and its Subsidiaries have
no Undisclosed Liabilities, except those incurred in the ordinary and usual
course of business consistent with prudent banking practices in Korea.

                  Section 4.07. Absence of Certain Changes. Except for (i) the
transaction contemplated by this Agreement or (ii) as disclosed in Schedule
4.07, since December 31, 2002 (with respect to the Bank) and the date of the
most recent audited financial statements of the Subsidiaries (with respect to
the Subsidiaries), the Bank and its Subsidiaries have conducted their business
in the ordinary and usual course, and there has not been any development that,
individually or in the aggregate, have had or is reasonably likely to have a
Material Adverse Effect.

                  Section 4.08. Property.

                  (a) Except as set forth in Schedule 4.08(a), the Bank and its
Subsidiaries have good and marketable title to all real property and buildings
owned by them free and clear of any Liens other than Permitted Liens.

                  (b) Except as set forth in Schedule 4.08(b), the Bank and its
Subsidiaries have made all payments, and are not in material default, under any
leases relating to real property and buildings held by or used by them, all of
which are in full force and effect, except for such non-payments, defaults and
non-effectiveness that, individually or in the aggregate, neither have had nor
could reasonably likely to have a Material Adverse Effect.

                  (c) Except as set forth in Schedule 4.08(c), the Bank and its
Subsidiaries (i) have the necessary rights to use the Intellectual Property used
in the conduct of their business, (ii) are in compliance with such rights to use
the Intellectual Property and (iii) have not received any notice of any
infringement of or conflict with asserted rights of others with respect to such

                                       15

<PAGE>
Intellectual Property or any challenge to or claim against the rights of the
Bank or any of its Subsidiaries with respect to such Intellectual Property
except for such lack of rights, non-compliance and claims and challenges that,
individually or in the aggregate, neither have had nor are reasonably likely to
have a Material Adverse Effect.

                  Section 4.09. Litigation. Except as disclosed in Schedule
4.09, (i) there are no material judgments, decrees, injunctions or orders
(collectively, "Judgments") outstanding against the Bank and any of its
Subsidiaries or any of their respective assets and (ii) there are no Proceedings
pending or, to the knowledge of the Seller, the Bank and its Subsidiaries,
threatened, relating to or affecting the Bank and any of its Subsidiaries or any
of their respective assets, except for Proceedings that individually involve
claims of less than one hundred (100) million Won for which individually or in
the aggregate, have not had nor are reasonably likely to have a Material Adverse
Effect.

                  Section 4.10. Compliance with Laws; Regulatory Approvals.
Except as set forth in Schedule 4.10, (i) the Bank and its Subsidiaries and, to
the knowledge of the Seller, the Bank and its Subsidiaries, the officers and key
employees of the Bank and its Subsidiaries (during the course of their
respective duties) are in compliance with all applicable Laws in material
respects, and (ii) neither the Bank nor any of its Subsidiaries is subject to
any investigation, inquiry or enforcement proceedings or process by any
Governmental Entity of which the Bank or its Subsidiaries have been notified,
except for such instances of non-compliance, failures to obtain Regulatory
Approvals and investigation, inquiry or enforcement proceedings or process that,
individually or in the aggregate, neither have had nor are reasonably likely to
have a Material Adverse Effect on the Bank and its Subsidiaries.

                  Section 4.11. Taxes. Except as disclosed on Schedule 4.11
hereto:

                  (a) The Bank and its Subsidiaries have duly filed all Korean
and other tax returns (including any information returns), reports and
statements that are required to have been filed with the appropriate taxing
authorities and have paid all Taxes required to have been paid for all relevant
periods (other than Taxes that are being contested in good faith and for which
appropriate reserves have been set aside);

                  (b) No audits or investigations relating to any Taxes for
which the Bank or any of its Subsidiaries may be liable are pending or, to the
knowledge of the Seller, the Bank and its Subsidiaries, threatened before any
taxing authority. There are no agreements or applications by the Bank or any of
its Subsidiaries for the extension of the time for filing any tax return or
paying any Tax, nor have there been any waivers by the Bank or any of its
Subsidiaries of any statutes of limitation for the assessment of any Taxes nor
are such agreements, applications and waivers under discussion; and

                  (c) The Bank and its Subsidiaries are not a party to any
agreements relating to the sharing or allocation of Taxes nor are they
discussing becoming a party to such agreements.

                                       16

<PAGE>

                  Section 4.12. Employee Benefits Matters.

                  (a) Except as set forth in Schedule 4.12(a), the Bank and its
Subsidiaries have no liability with respect to, and have timely made all
payments due to, and recorded on their books all amounts properly accrued in
respect of, all Employee Benefit Plans, except for such liabilities and failures
to pay that, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.

                  (b) Except as set forth in Schedule 4.12(b), the Employee
Benefit Plans conform to applicable Laws in material respects and there are no
Proceedings pending with respect to the Employee Benefit Plans, except in each
case for such non-conformities and Proceedings that, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.

                  Section 4.13. Labor.

                  (a) Except as set forth in Schedule 4.13(a), the Bank and its
Subsidiaries do not have any collective bargaining agreements or wage agreements
generally applicable to any of their employees. Except as set forth in Schedule
4.13(a), the Bank and its Subsidiaries have conducted their businesses in
compliance with all material employment agreements, the rules of employment,
collective bargaining agreements and wage agreements, except for such
non-compliance that, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.

                  (b) Except as set forth in Schedule 4.13(b), since December
31, 2002, the Bank and its Subsidiaries have not experienced any strikes, work
stoppages, or other material labor disputes, and there are no pending or, to the
knowledge of the Seller, the Bank and its Subsidiaries, threatened strikes, work
stoppages or other material labor disputes.

                  (c) Except as set forth in Schedule 4.13(c), the Bank and its
Subsidiaries are in compliance with all Laws in material respects relating to
employment, industrial relations, labor unions, mandatory severance benefits,
and social insurance programs, except for such non-compliance that, individually
or in the aggregate, neither have had nor are reasonably likely to have a
Material Adverse Effect.

                  Section 4.14. Contracts.

                  (a) Except as set forth in Schedule 4.14(a), all Contracts are
valid and enforceable in accordance with the terms thereof except for such
invalidity or unenforceability which, individually or in the aggregate, neither
have had nor are reasonably likely to have a Material Adverse Effect.

                  (b) Except as set forth in Schedule 4.14(b), the Bank and its
Subsidiaries have not violated the terms of, nor are they in default under, any
Contracts, except for such violations and defaults which, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.

                                       17

<PAGE>

                  (c) Except as set forth in Schedule 4.14(c), the execution,
delivery and performance of this Agreement, the performance by the Seller or the
Bank of its obligations hereunder and the consummation of the transactions
contemplated herein do not and will not violate, conflict with, or result in the
breach or termination of, or otherwise give any other Person the right to
challenge the validity of the transactions contemplated herein, accelerate,
renegotiate or terminate or receive any payment, or constitute a default or an
event of default (or an event which with notice, lapse of time, or both, would
constitute a default or event of default) under the terms of, or result in the
imposition of any Lien under, any Contracts to which the Bank or any of its
Subsidiaries are a party or by which the Bank or any of its Subsidiaries or any
of their respective assets or operations are bound or affected.

                  Section 4.15. Transaction with Subsidiaries. Except as
disclosed in Schedule 4.15, there are no material contracts, arrangements or
understandings of any kind between the Bank, on the one hand, and the
Subsidiaries , on the other hand, except for those contracts or arrangements
entered into in the ordinary course of business.

                  Section 4.16. Performance of Investment Trusts. Except as set
forth in Schedule 4.16, (i) there are no guarantees to investors by the Bank or
CHITMC relating to the yield, return or redemption value, of units of securities
investment trusts or shares of securities investment trust companies established
pursuant to the Securities Investment Trust Business Act or the Securities
Investment Company Act ("Investment Trusts"), or any interest therein, sold,
distributed, maintained or established by the Bank or CHITMC, except such
guarantees that are legally permitted pursuant to the Securities Investment
Trust Business Act and the Securities Investment Company Act and for such
guarantees which, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect, (ii) there has not been and
there exist no material violations of the relevant trust deeds or other
constituent instruments, contractual requirements, laws and regulations,
internal regulations of CHITMC or any such Investment Trusts managed by CHITMC,
and (iii) that CHITMC and each of the Investment Funds managed by CHITMC are in
compliance with all material legal obligations (including but not limited to
fiduciary duties) owed to investors in any of the Investment Trusts managed by
CHITMC, except for such non-compliance which, individually or in the aggregate,
neither have had nor are reasonably likely to have a Material Adverse Effect. In
addition, the Investment Trusts have been duly organized and the interests in
such Investment Trust have been validly issued. Except as set forth in Schedule
4.16, there are no agreements or side letters relating to CHITMC or any of the
funds managed by CHITMC that obligates CHITMC to roll-over and/or repurchase
commercial paper (so called "option CP") in connection with the commercial paper
held by CHITMC or any of the funds managed by CHITMC.

                  Section 4.17. Derivative Instruments.

                  (a) Except as set forth in Schedule 4.17(a), any swaps, caps,
floors, futures, forward contracts, option agreements, and any other derivative
financial instruments, contracts or arrangements (collectively, "Derivative
Instruments"), whether entered into for the account of the Bank or any of its
Subsidiaries or for the account of one of its customers, were entered into in
the ordinary course of business and in accordance with applicable Law. The Bank
and its Subsidiaries have complied in material respects with its obligations
under such Derivative Instruments to the extent that such obligations have
accrued and has not received any written

                                       18

<PAGE>

notice of default, acceleration or termination in respect of its Derivative
Instruments from any counterparty.

                  (b) Except as set forth in Schedule 4.17(b), the total
derivatives positions of the Bank and its Subsidiaries are hedged or secured
either by back-to-back or matching derivatives transactions or by other
transactions entered into by, or collateral provided to, the Bank and its
Subsidiaries consistent with prudent banking practices in Korea. All of the
outstanding Derivative Instruments of the Bank have been marked to market as of
the end of the preceding month in accordance with Korean GAAP.

                  Section 4.18. Trust Accounts. Except as set forth in Schedule
4.18, (i) the Bank has not engaged in any transfers of assets between trust
accounts of the Bank established under the Trust Business Act (the "Bank Trust
Accounts") that do not comply with the requirements of applicable Law, (ii)
there are no guarantees to customers relating to the yield, return, of the Bank
Trust Accounts (other than guarantees that are legally permitted pursuant to the
Trust Business Act), (iii) there has not been and there exist no material
violations of the relevant trust agreement or other constituent instruments,
contractual requirements, laws and regulations, internal regulations of the Bank
or any such investment vehicle or instrument, in relation to management or
distribution of such Bank Trust Accounts or any interest or participation
therein, and (iv) that the Bank is in compliance in material respects with all
material legal obligations (including but not limited to trustee's fiduciary
duties) owed to investors in any of the Bank Trust Accounts, except for such
non-compliance which, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.

                  Section 4.19. Books and Records. All of the books and records
of the Bank and its Subsidiaries that have been provided to the Purchaser or
that the Purchaser shall have access to shall be accurate and complete. The Bank
and its Subsidiaries have maintained, in all material respects, the books and
records required to be maintained pursuant to the applicable Laws.

                  Section 4.20. Insurance. Except as set forth in Schedule 4.20,
the Bank and its Subsidiaries are insured against such losses and risks and in
such amounts as is (i) required by Law and (ii) consistent, in material
respects, with applicable internal risk management guidelines of the Bank and
its Subsidiaries and as is customary in the business in which it is engaged. No
notice of default with respect to any provision of any such policies has been
received, and all such policies are in full force and effect and will not be
impaired as a result of the performance of this Agreement, except for such
defaults, non-effectiveness and impairments that, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.

                  Section 4.21 Environmental, Health and Safety Laws. Except as
set forth in Schedule 4.21, the Bank and each of its Subsidiaries have obtained
from the appropriate Governmental Entity, and have been in compliance with all
terms and condition of, all permits which are required under, the applicable
Laws that are in effect relating to public health and safety, worker health and
safety and pollution or protection of the environment, except for such failures
to obtain permits and non-compliance that, individually or in the aggregate,
neither have had nor are reasonably likely to have a Material Adverse Effect.
Neither the Bank nor any of its

                                       19

<PAGE>

Subsidiaries has any liability (i) under any Law relating to the protection of
human health or safety or concerning employee or worker health and safety or
relating generally to the environment or (ii) for the release of any hazardous
substance which is prohibited by Law (including in relation to any foreclosed
property owned by the Bank and its Subsidiaries), except for such liabilities
that, individually or in the aggregate, neither have had nor are reasonably
likely to have a Material Adverse Effect.

                  Section 4.22 Finder's Fees. Except as set forth on Schedule
4.22, there is no investment bank, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Bank who may be
entitled to any fee or commission from the Bank in connection with the
transactions contemplated by this Agreement.

                  Section 4.23 Consumer Finance Loans. The loan receivables
listed on Schedule 4.23(a) constitute all of the outstanding loan receivables
purchased by the Bank from various consumer finance companies and all such
agreements contain in all material respects the same contents of the form
attached in Schedule 4.23(b).

                  Section 4.24 * Funds. Any and all losses incurred by * as a
result of the portion of the aggregate amount of the Value Deficiency (as
defined below) to be paid by * to all investors (including the distributors of
the funds ) upon redemption and/or cancellation of beneficial certificates of
the * funds (excluding money market funds) (i.e., the fund where the calculation
of the net asset value is based on, subject to adjustment under certain
circumstances, the acquisition cost of the underlying assets plus accrued
interest) existing as of the Equity Portion Closing Date (each a "Relevant *
Fund", and collectively, the "Relevant * Funds"), does not and shall not exceed
50 billion Won, and when and if such loss amount exceeds 50 billion Won (which
shall constitute a breach of this Section 4.24), such excess amount multiplied
by 80% shall constitute the Losses of the Purchaser; provided, that any Losses
under this Section 4.24 shall be limited to (i) Losses of the Relevant * Funds
managed by * ,(ii) those Losses resulting from payments required by law or
regulations to be made by *. For purposes of this Section 4.24, "Value
Deficiency", with respect to a Relevant * Fund, shall mean its * as at the
Equity Portion Closing less its fair market value (to be used for the
calculation of the amount of Value Deficiency constituting the basis of loss to
*) as at the Equity Portion Closing (to be determined by agreement of the Seller
and the Purchaser within 60 days after the Equity Portion Closing Date and if
the Seller and the Purchaser are not able to agree upon the fair market value ,
the fair market value shall be determined in accordance with Section 11.02,
mutatis mutandis provided, that the amount of Value Deficiency of a Relevant *
Fund cannot be negative..) Further, the above 50 billion won threshold shall be
reduced by the amount of any Losses to the Bank or * resulting from the
litigation filed by the Government Officials Pension Funds Management Company
(Case No. Ka-Hab 48394).

*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.

                  Section 4.25 Sale of Assets. The Bank is obligated to (i)
repurchase certain assets sold by the Bank (such sale having occurred before the
Equity Portion Closing), including through the use of ABS specialty companies,
or portions thereof or (ii) pay any difference or shortfall amounts relating to
such sold assets. To the Bank's knowledge, there are no grounds for triggering
such obligations. However, if any such obligation is triggered, any such loss
incurred in fulfilling such obligation shall constitute a breach of this Section
4.25 and any (a) such repurchase amount less the fair value of the repurchased
assets or (b) shortfall amounts shall constitute Losses of the Bank. If the
Seller and the Purchaser are not able to agree upon fair value of the
repurchased assets in the foregoing sentence, the fair value shall be determined
in accordance with Section 11.02, mutatis mutandis. For the avoidance of doubt,
there shall not be any duplication of Losses under this Section 4.25 and Article
XI.

                  Section 4.26 Disclosure Schedules. The inclusion of any
information in the Disclosure Schedule or other documents delivered by Seller or
the Bank under this Agreement shall not be deemed an admission or evidence of
the materiality of such item, nor shall it establish a standard of materiality
for any purpose whatsoever. Moreover, the disclosure in Schedule 4.09 of the
Proceedings involving claims of 100 million Won or more shall not establish a
standard of materiality for any purposes whatsoever.

                                    ARTICLE V
                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

                  The Purchaser represents and warrants to the Seller and the
Bank, as of the date hereof and as of each of the Closing as if made on and as
of each of the Closing Date (or, with

                                       20

<PAGE>

respect to representations and warranties that are given as of a specific date,
as of such date), as follows:

                  Section 5.01. Corporate Organization and Qualification. The
Purchaser is duly organized, validly existing and in good standing under the
laws of Korea, has all power and authority required to use its properties and
conduct its business as it is now being conducted and is duly licensed to do
business in each jurisdiction in which it is required to be so licensed, except
for such failures to be so licensed that, individually or in the aggregate,
neither have had nor are reasonably likely to have a Material Adverse Effect.

                  Section 5.02. Authorization of Agreement; Enforceability

                  (a) The Purchaser has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of the Purchaser.

                  (b) This Agreement has been duly executed and delivered by the
Purchaser and constitutes its valid and binding obligation, enforceable against
it in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws relating to or affecting creditors' rights generally and by general
principles of equity.

                  Section 5.03. Consents; No Conflicts

                  (a) With respect to the purchase of the Transaction Shares set
forth in Schedule 5.03(a), no Regulatory Approval is required to have been made
or obtained by the Purchaser in connection with the execution, delivery and
performance of this Agreement, except for (i) approval from Financial
Supervisory Commission under the Financial Holding Company Act for the inclusion
of subsidiary and (ii) court approval for in-kind contribution.

                  (b) The execution, delivery and performance of this Agreement
will not (i) violate any provision of the Purchaser's articles of association or
other constitutional documents, (ii) result in the violation of any Law or
Regulatory Approval applicable to the Purchaser, or (iii) to the knowledge of
the Purchaser, violate, conflict with or result in a breach or termination of
any material contract, obligation, or commitment to which the Purchaser is a
party or by which it is bound, except for such violations, conflict, breach or
termination that, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect

                  Section 5.04. Litigation. There are no Proceedings against the
Purchaser that enjoin, restrict or materially delay the Purchaser's ability to
purchase the Transaction Shares hereunder.

                  Section 5.05. Legal Requirements to Invest in a Bank. The
Purchaser is qualified under the relevant Laws, and shall have obtained the
necessary approvals by the Equity Portion Closing Date, to acquire a controlling
interest in a Korean bank.

                                       21

<PAGE>

                  Section 5.06. Financial Capacity. The Purchaser (i) has the
financial capacity and means to pay the Purchase Price (including the capacity
to finance all or a portion of the Purchase Price) and to comply with any other
obligations under this Agreement and (ii) the consummation of the transaction
contemplated hereunder will not result in a violation of the applicable Laws,
including but not limited to, the applicable legal and regulatory capital
requirements of the Purchaser.

                                   ARTICLE VI
                              PRE-CLOSING COVENANTS

                  Section 6.01. Conduct of Business.

                  From the date hereof until the earlier of (x) the Equity
Portion Closing Date or (y) the date of the appointment of the directors
nominated by the Purchaser become effective as described in Section 6.07 (c)
below, unless the Purchaser agrees in writing in advance, the Bank shall and
shall cause its Subsidiaries, and the Seller shall use its best efforts to cause
the Bank and its Subsidiaries, (i) to conduct its business in the ordinary
course (including keeping complete and accurate records and accounts of all
business activities in accordance with Korean GAAP or the generally accepted
accounting principles of the relevant jurisdiction), (ii) not amend the articles
of incorporation or other constitutional documents of the Bank or its
Subsidiaries, (iii) not take any action relating to any issuance or sale, or
dividend or other distribution, involving any of its equity securities or
Convertible Securities, (iv) to preserve intact its present business operations
in material respects (including using its best efforts to maintain good
relations with their respective creditors and customers), (v) not to take any
action, or permit the taking of any action, that would result in any of the
representations or warranties in Article IV being inaccurate at the Closing as
if made on and as of the Closing Date (except for such representations and
warranties that are made as of a specific date), (vi) take any action that would
result in any material increase of compensation (including bonus, incentive
compensation, severance payment or termination pay) payable or to become payable
by the Bank or its Subsidiaries to any of its directors, officers, employees or
agents except for increases required under the already existing terms of
employment agreements or amend any employee related service agreements, benefit
plans or collective bargaining agreements; (vii) enter into any material
commitment in respect of any actual or proposed acquisition, merger, investment
(including capital expenditures), divestiture or disposition of assets or other
business combination of any kind; or (viii) take any action or enter into any
transactions regarding the implementation of any bancassurance program).

                  Section 6.02. Financial and Other Information. During the
Pre-Closing Period, to the extent permitted under applicable Law and the
ordinary course of business is not disturbed, the Bank shall give the Purchaser
and its Authorized Representatives reasonable access during business hours to
the properties, books and records of the Bank and its Subsidiaries and to the
Authorized Representatives of the Bank and its Subsidiaries to discuss the
business, finances, operations, risk management, regulatory status and other
matters related to the Bank and its Subsidiaries and to the purchase of the
Transaction Shares, in each case to the extent the Purchaser shall have
requested such access at least one(1) Business Day in advance and the Seller has
provided its consent, which shall not be unreasonably withheld. The Purchaser's
use of information provided pursuant to this Section 6.02 shall be subject to
the

                                       22

<PAGE>

Confidentiality Agreement dated October 22, 2002, by and between the Seller
and the Purchaser. For the purposes of this Section 6.02, an "Authorized
Representative" shall mean a Representative of the Purchaser or a Representative
of the Bank or its Subsidiaries, as the case may be, who has been authorized in
writing by the Seller.

                  Section 6.03. Notifications. During the Pre-Closing Period,
the Seller and the Purchaser will promptly notify the other party in writing of
any fact, condition or occurrence that is reasonably likely to result in any of
its representations and warranties in this Agreement no longer being true at
Closing as if made on and as of the Closing Date (except for such
representations and warranties that are made as of a specific date) or its
failure or possible failure to satisfy any of the conditions set forth in
Article VII.

                  Section 6.04. Taking of Necessary Action. Each of the parties
agrees to use its best efforts promptly to do or cause to be done all things
required to be done by such party under applicable Laws to consummate the
transactions contemplated by this Agreement, including, but not limited to,
using its best efforts to make all filings and obtain all Required Regulatory
Approvals (including, but not limited to, the approval by the FSC of the Bank
becoming a subsidiary of the Purchaser under the Financial Holding Company Act
and any regulatory approvals required by the Purchaser in connection with the
financing of the transactions contemplated by this Agreement and the Investment
Agreement), assist the other party to make its filings and obtain all Required
Regulatory Approvals, and to cooperate with one another in taking all necessary
actions with respect to the foregoing.

                  Section 6.05. Further Cooperation. The Seller and the Bank
agree to do or cause to be done all things required to be done by such party and
otherwise offer full cooperation (including but not limited to preparing
offering circular, arranging management interviews and access to due diligence
documents), to the Purchaser in connection with the Purchaser's equity financing
transactions relating to this Agreement, preparing U.S. GAAP financials or other
materials for U.S, listing purposes and further offering of the shares of the
Purchaser (including but not limited to any new issuance of common shares,
preferred shares or shares for the issuance of depositary receipts). Further,
the Bank shall have a prior consultation with the Purchaser with respect to (i)
the agenda items of the board of directors meeting of the Bank and its
Subsidiaries and (ii) accounting policies when preparing any quarterly and
semi-annual financial statements or reports of the Bank and its Subsidiaries.

                  Section 6.06. Public Statements. Subject to Article 12.07, the
Seller and the Purchaser will agree upon the timing and content of any press
release to be issued relating to the execution of this Agreement and the Seller
and the Purchaser will thereafter consult with and provide reasonable
cooperation to the other in connection with the issuance of any further press
release or the making of any public disclosure describing the transactions
contemplated by this Agreement; provided that nothing in this Section 6.06 shall
prevent the Seller or the Purchaser from issuing any press release or making any
public disclosure that such party reasonably believes (based on the written
advice of experienced legal counsel) it is required to make under any applicable
Law.

                                       23

<PAGE>

                  Section 6.07. Resignation of CHB Directors; Appointment of
Acting CEO; Election of Directors and Appointment of Officers. The Bank shall,
and the Seller shall use its best efforts to cause the Bank to:

                  (a)      use its best efforts to deliver, on the date
         designated by the Purchaser and in form and substance reasonably
         acceptable to the Purchaser, the resignation letters (including waivers
         of any possible claims that could be made by the directors in
         connection with their resignation) of all members of the board of
         directors and officers (i.e., registered directors and non-registered
         directors) of the Bank and CHITMC as notified to the Seller by the
         Purchaser,

                  (b)      use its best efforts to have a member of the board of
         directors of the Bank designated by the Purchaser to be appointed as an
         acting CEO of the Bank, and

                  (c)      use its best efforts to arrange for the meeting of
         the shareholders of the Bank and CHITMC (in each case, ordinary or
         extraordinary) to be held as soon as possible on or after the Equity
         Portion Closing Date but in no event more than one (1) week after such
         date and, at such meeting shall elect the persons nominated by the
         Purchaser as directors of the Bank and CHITMC.

         Section 6.08. Supplements to the Disclosure Schedules. Seller may, from
time to time, by notice in accordance with this Agreement, supplement the
Disclosure Schedule including through one or more supplements (the
"Supplements") until three (3) days prior to the Equity Portion Closing Date
(the "Supplement Date")(for which prior notice shall be given at least twelve
(12) days before the proposed Equity Portion Closing Date, provided, that the
notice shall provide at least 7 Business Days prior to the Supplement Date), to
reflect any new facts that may have risen following the date hereof. The
Supplements shall be subject to the consent of the Purchaser (such consent shall
be deemed to have been given by Purchaser with respect to the Supplements which
are a result of ordinary and usual business consistent with prudent banking
practices) and the related termination provisions in Article IX.

                                   ARTICLE VII
                                   CONDITIONS

                  Section 7.01. Conditions to the Purchaser's Obligations. The
Purchaser will have no obligation to consummate the transaction contemplated
under this Agreement at each Closing unless each of the following conditions
precedent is satisfied or waived in writing by the Purchaser:

                  (a) Representations and Warranties; Covenants. The
representations and warranties set forth in Article III and IV shall be true and
correct in all material respects when made and at the Closing as if made on and
as of the Closing Date (or, with respect to representations and warranties that
are given as of a specific date, as of such date). The Seller and the Bank shall
have performed in all material respects all obligations required to be
respectively performed by it under this Agreement prior to the Closing.

                  (b) Compliance with Laws; No Adverse Action or Decision. Since
the date hereof, (i) no Law shall have been promulgated or enacted that
materially delays or makes illegal

                                       24

<PAGE>

the performance of this Agreement; (ii) no order by any Governmental Entity that
materially delays or makes illegal the performance of this Agreement shall be
effective; and (iii) no Governmental Entity shall have instituted any Proceeding
that seeks to materially delay or make illegal the performance of this
Agreement.

                  (c) Consents. All Required Regulatory Approvals shall have
been obtained on terms reasonably satisfactory to the Purchaser and shall not be
subject to any conditions that, individually and in aggregate, either have had
or are reasonably likely to have a Material Adverse Effect.

                  (d) Documents. The Purchaser shall have received counterpart
originals of this Agreement, the certified resolutions of the Seller and the
Bank approving this Agreement and related matters and copies of such other
documents as it may reasonably request.

                  (e) Opinions of counsel. The Purchaser shall have received at
the Closing from Shin & Kim, Korean counsel to the Seller, a written opinion
dated the Closing Date, in a form reasonably satisfactory to the Purchaser.

                  (f) Investment Agreement. The Seller and the Purchaser shall
have entered into an investment agreement on terms and conditions acceptable to
the Purchaser (the form of which is attached hereto as Exhibit C).

                  (g) Third Party Consents. The Seller shall have obtained from
certain of the Bank's creditors (such as KDB) written consents or waivers, as
the case may be, in connection with such creditor's right to accelerate the
payment of the principle and accrued interest thereon, in connection with the
transaction contemplated by this Agreement.

                  (h) Material Event. Since the date hereof, there will have
been no labor strikes or reduction in the deposits held by the Bank resulting in
any material economic losses or business disruption of the Bank or there will
have been no material economic losses or business disruption of the Bank caused
by or related to the labor strikes of June 2003 by the Bank's labor union.

                  Section 7.02. Conditions to the Seller's and the Bank's
Obligations. The Seller will have no obligation to consummate the transaction
contemplated under this Agreement at the Closing unless each of the following
conditions precedent is satisfied or waived:

                  (a) Representations and Warranties; Covenants. The
representations and warranties of the Purchaser set forth in Article V hereof
shall be true and correct in all material respects when made and at the Closing
as if made on and as of the Closing Date (or, with respect to representations
and warranties that are given as of a specific date, as of such date). The
Purchaser shall have performed in all material respects all obligations required
to be performed by it under this Agreement prior to the Closing.

                  (b) Compliance with Laws; No Adverse Action or Decision. Since
the date hereof, (i) no Law shall have been promulgated or enacted that
materially delays or makes illegal the performance of this Agreement; (ii) no
order by any Governmental Entity that materially delays or makes illegal the
performance of this Agreement shall be effective; and (iii) no

                                       25

<PAGE>

Governmental Entity shall have instituted any Proceeding that seeks to
materially delay or make illegal the performance of this Agreement.

                  (c) Consents. All Required Regulatory Approvals shall have
been obtained on terms reasonably satisfactory to the Seller and shall not be
subject to any conditions that, individually or in the aggregate, have had or
are reasonably likely to have a material adverse effect on the ability of the
Purchaser to perform its obligations under this Agreement or a Material Adverse
Effect.

                  (d) Documents. The Seller shall have received counterpart
originals of this Agreement, the certified minutes and resolutions of the board
of directors of the Purchaser approving this Agreement and related matters and
copies of such other documents as it may reasonably request.

                  (e) Investment Agreement. The Seller and the Purchaser shall
have entered into an investment agreement on terms and conditions acceptable to
the Purchaser (the form of which is attached hereto as Exhibit C).

                                  ARTICLE VIII
                             POST-CLOSING COVENANTS

                  Section 8.01 Lock-up. The Purchaser covenants and agrees with
the Seller that, for a period of three (3) years from the date hereof (the
"Lock-up Period"), without the prior written approval of the Seller, it will
not, directly or indirectly (including, for the avoidance of doubt, any Transfer
of the shares of or interest in the investment vehicle used by the Purchaser to
acquire the Transaction Shares), and will cause each of its Affiliates holding
such securities not to, sell, offer to sell, contract to sell, grant any option
to purchase or otherwise transfer or dispose of (any such act, a "Transfer") any
of the Transaction Shares, except for (and subject in each case to compliance
with all applicable Laws and the receipt of any necessary Regulatory Approvals)
any Transfer to an Affiliate of the Purchaser (provided that (a) such Affiliate
shall have agreed in writing with the Seller to be bound by all of the
provisions of this Agreement, including Article VIII, and (b) the Purchaser
shall cause such Affiliate to remain an Affiliate of the Purchaser at all times
during the Lock-up Period).

                  Section 8.02 Qualified Public Offering. If the common shares
of SFG become subject to the exchange rights under the Exchangeable Note
Documents for the OPERA Bonds and holders of the OPERA Bonds exercise such
exchange rights at an exchange price of less than 18,086 Won per share, the
Purchaser shall pay to the Seller any difference (the "Shortfall") that is
adverse to the Seller between such exchange price and 18,086 Won per share
relating to the OPERA Bonds so exchanged (the "QPO Payment Amount") and the
maximum amount payable by the Purchaser to the Seller pursuant to this Section
8.02 will be the Shortfall multiplied by 44,720,603. The QPO Payment Amount with
respect to all OPERA Bonds exchanged in a given fiscal year will be calculated
and notified to the Purchaser by the Seller within 30 days after the end of such
fiscal year and paid within 60 days after such notification. The Purchaser
agrees to use its best efforts not to cause a QPO. However, in the event that a
QPO will occur, the

                                       26

<PAGE>

Purchaser agrees to provide the Seller with written notice of the contemplated
QPO as soon as possible, but by no later than 3 months prior to such QPO. Upon
receipt of such notice, the Seller agrees to use its best efforts to amend the
Exchangeable Note Documents to remove the requirement to escrow the common
shares of SFG in the event of a QPO.

                                   ARTICLE IX
                                   TERMINATION

                  Section 9.01. Termination of Agreement.

                  (a)      Subject to Section 9.02, this Agreement may be
terminated by notice in writing at any time prior to the Closing:

                           (i)      by either party, if the Equity Portion
         Closing has not occurred by September 30, 2003, provided, however, that
         the right to terminate this Agreement under this Section 9.01(a) will
         not be available to any party whose failure to fulfill any obligation
         under this Agreement has caused the failure of the Equity Portion
         Closing to occur by such date;

                           (ii)     by either party, if prior to the Closing
         Date, any Governmental Entity of competent jurisdiction has taken any
         action prohibiting the consummation of the transaction contemplated by
         this Agreement and such action becomes final and non-appealable;

                           (iii)    prior to the Closing Date, by either party
         may terminate this Agreement if the other party is in material breach
         under this Agreement which cannot be remedied under Article X of this
         Agreement;

                           (iv)     by either party, if the Purchaser does not
         consent to the Supplements to the Disclosure Schedule pursuant to
         Section 6.08; or

                           (v)      by the Seller and the Purchaser so mutually
         agree in writing.

                  (b)      Subject to Section 9.02, if the Cash Portion Closing
has not occurred by September 30, 2003, the Seller agrees to extend the Cash
Portion Closing to October 31, 2003 at which this Agreement shall terminate
automatically. The Purchaser shall pay to the Seller interest on the Closing
Cash Payment Amount at the rate of 6% per year, which shall accrue commencing on
October 1, 2003 until the consummation of the Cash Portion Closing if the Cash
Portion Closing is extended to October 31, 2003.

                  Section 9.02. Effect of Termination. If this Agreement is
terminated in accordance with Section 9.01 and the transaction contemplated by
this Agreement are not consummated, this Agreement shall become null and void
and of no further force and effect, except that the terms and provisions of this
Section 9.02, Article X, and Article XII shall remain in full force and effect.
In case of termination pursuant to Section 9.01 (b), the Seller may claim for
the losses of the Seller from the failure of such Cash Portion Closing and the
relevant expenses of the Seller (other than in the event such failure is due to
the failure to obtain any

                                       27

<PAGE>

Regulatory Approvals in connection with transactions contemplated under this
Agreement and the Investment Agreement and in connection with the provisions of
Article 46 of the Financial Holding Company Act relating to the issuance of
redeemable preferred shares to be issued for financing the above transactions).

                                    ARTICLE X
                       INDEMNIFICATION AND SURVIVAL PERIOD

                  Section 10.01. Indemnification.

                  The Seller agrees to indemnify and hold harmless the Purchaser
and each Representative of the Purchaser (collectively, the "Indemnified
Purchaser Parties") from and against any and all Losses incurred by any of the
Indemnified Purchaser Parties (including the Bank and its Subsidiaries) as a
result of, or arising out of or in connection with, the breach of any
representation or warranty (without giving effect to any qualifiers or
exceptions relating to materiality (except those which are not related to or
does not result in the Losses), Material Adverse Effect or words of similar
import but giving effect to the Material Adverse Effect qualifier in 4.06(c) and
4.09, agreement or covenant made by the Seller and the Bank (in the case of the
Bank, however, any indemnification under this Article X will not be applicable
to the covenants in Section 6.01); provided, however, that: (i) the aggregate
amount of the Seller's liability for indemnification of all Indemnified
Purchaser Parties shall be limited to an amount equal to 30% of the Purchase
Price Won, (ii) no claim may be made against the Seller for any indemnification
unless the aggregate amount of such claims exceeds fifteen (15) billion Won (the
"Indemnification Threshold"), provided, further, that for any individual claims
that are less than 100 million Won (the "Small Claims"), the aggregate of the
Small Claims shall be included as indemnification amounts if the aggregate of
Small Claims exceed twenty (20) billion Won and (iii) any Losses described in
4.25 shall not be subject to the Indemnification Threshold . For avoidance of
doubt, claims that are based upon the same cause of action(s) shall be
aggregated and taken together as a whole to constitute an individual claim for
purposes of the foregoing provision regarding Indemnification Threshold. The
Seller shall be responsible for indemnification only for the amounts that exceed
fifteen (15) billion Won.

                  (b) The Purchaser agrees to indemnify and hold harmless the
Seller and its Representatives (the "Indemnified Seller Parties") from and
against any and all Losses incurred by any of the Indemnified Seller Parties as
a result of, or arising out of, the breach of any representation, warranty,
agreement or covenant made by the Purchaser in this Agreement, as they are
incurred; provided, however, that (i) the aggregate amount of the Purchaser's
liability for indemnification of all Indemnified Seller Parties shall be limited
to an amount equal to 30% of the Purchase Price and (ii) no claim may be made
against the Purchaser for any indemnification hereunder unless the total amount
of such claims against the Purchaser in the aggregate exceeds the
Indemnification Threshold.

                  (c) In the event any indemnified party should have a claim
against any indemnifying party that does not involve a Third Party Claim (as
defined below) being asserted

                                       28

<PAGE>

against or sought to be collected from such indemnified party, the indemnified
party shall deliver notice of such claim with reasonable promptness and
specifying the factual basis of that claim in reasonable detail to the
indemnifying party on or before the expiration of the applicable survival period
under Section 10.02, such notice to state that it is delivered pursuant to this
Section 10.01(c). The failure of any indemnified party to so notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may have to the indemnified party, unless and only to the extent such
failure results in actual and material prejudice to the indemnifying party.
Except as otherwise provided in this Agreement, within 60 days after receipt of
such notice, the indemnifying party shall pay the amount of such liability to
the indemnified party or, in the case of any notice in which the amount of the
claim (or any portion thereof) is estimated or if the indemnified party contests
the claim, on such later date when such claim becomes finally determined;
provided, that, if reimbursement is not made within 60 days after any such claim
becomes finally determined, amounts owed shall accrue interest at the rate of
6.0 % per annum.

                  (d) The following provisions shall apply to claims for Losses
from claims by a third party:

                           (i) An indemnified party entitled to any
         indemnification provided for under this Agreement in respect of,
         arising out of or involving a claim or demand made by any Person
         against the indemnified party, including the Bank and its Subsidiaries
         when the indemnified party is the Purchaser under this Section, (a
         "Third Party Claim") shall deliver a notice specifying the factual
         basis of that claim in reasonable detail to the indemnifying party
         promptly after receipt by such indemnified party of written notice of
         the Third Party Claim on or before the expiration of the applicable
         survival period under Section 10.02, provided, that failure to give
         such notification shall not affect the indemnified party's entitlement
         to indemnification under this Article X unless and only to the extent
         such failure results in actual and material prejudice to the
         indemnifying party;

                           (ii) If a Third Party Claim is made against an
         indemnified party, the indemnifying party may undertake, direct and
         control, through counsel of its own choosing (subject to the consent of
         the applicable indemnified party, such consent not to be unreasonably
         withheld) and at the indemnifying party's sole risk and expense, the
         good faith settlement or defense of such claim, provided that, the
         indemnifying party notifies the indemnified party in writing within 30
         calendar days after the indemnified party has given notice of the Third
         Party Claim that the indemnifying party has decided to assume the
         defense of the Third Party Claim and acknowledging the indemnification
         obligation under this Article with respect to such claims;

                           (iii) If the indemnifying party has assumed the
         defense of a Third Party Claim, (A) the indemnified party may retain
         separate co-counsel or counsel and participate in the defense of the
         Third Party Claim , (B) the indemnified party shall not consent to the
         entry of any judgments or enter into any settlement with respect to the
         Third Party Claim without the prior written consent of the indemnifying
         party (not to be withheld unreasonably), and (C) the indemnifying party
         will not, without the prior written consent of the indemnified party
         (not to be withheld unreasonably), consent to the entry of any
         judgments or enter into any settlement with respect to the Third Party
         Claim;

                                       29

<PAGE>

                           (iv) If the indemnifying party has not assumed the
         defense or settlement of a Third Party Claim, the indemnifying party
         shall reimburse the indemnified party for the reasonable fees and
         expenses of counsel employed by the indemnified party in defending or
         settling such Third party Claim; and

                           (v) To the extent permitted by applicable Law, and to
         the extent its relevant files and records and other information
         contained therein are not protected by any privilege available under
         applicable law (including, the attorney-client privilege), so long as
         the indemnifying party is reasonably contesting any such Third Party
         Claim in good faith, the indemnified party shall, and shall cause its
         Affiliates to, at all times cooperate in all reasonable ways with,
         provide reasonable access to its relevant files and records or
         otherwise render reasonable assistance to, the indemnifying party (i)
         in its defense of any action for which indemnity is sought hereunder
         and (ii) in its prosecution under the preceding sentence of any related
         claim, cross-complaint, counterclaim or right of subrogation.

                  Section 10.02 Survival of Representations and Warranties.
Notwithstanding any provision herein to the contrary, each representation or
warranty in this Agreement shall survive the Closing for a period of one year
after the Closing Date except that, the representations and warranties in this
Agreement relating to each * fund, tax and environmental matters shall
survive the Closing for a period of five (5) years after the Closing Date. Any
matter as to which a claim has been asserted by written notice within the time
limitation applicable by reason of the immediately preceding sentence that is
pending or unresolved at the end of any applicable limitation period under this
Section 10.02 or the statute of limitations applicable to such claim shall
continue to be covered by this Article 10 notwithstanding any applicable statue
of limitations (which the parties hereby waive solely with respect to such
circumstances) or the expiration date described in the immediately preceding
sentence of this Section 10.02 until such matter is finally terminated or
otherwise resolved by the parties under this Agreement, by an arbitration or by
a court of competent jurisdiction and any amounts payable hereunder are finally
determined and paid. Notwithstanding any provision herein to the contrary, no
claim may be asserted nor any action commenced against the Seller for breach of
any representation or warranty following the expiration of the indemnification
period set forth above, irrespective of whether the subject matter of such claim
shall have occurred before or after such date.

*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.

         Section 10.03. Insurance Proceeds; Exceptions and Deductions;
Determination of Indemnification Amount.

                  (a) To the extent any Indemnified Parties receive any
insurance proceeds with respect to any Loss to be indemnified under this
Agreement, such insurance proceeds (on a net basis) shall be deducted from the
relevant Loss amount payable. For avoidance of doubt, "on a net basis" means
that any costs associated with or incurred in connection with the relevant
insurance coverage shall first be deducted from the insurance proceeds and the
resulting amount shall be deducted from the relevant Loss amount payable.

                  (b) No indemnifying party shall have liability under any
indemnification provision of this Article X, if and to the extent the Losses, or
any portion of such Losses, arise from or are attributable to the negligence or
willful misconduct of the indemnified party or its



                                       30

<PAGE>

Affiliates and in no event shall an indemnifying party be liable for special or
consequential damages arising from or in connection with this Agreement or the
transactions contemplated hereunder. The indemnified party shall take all
reasonable steps to mitigate losses upon and after becoming aware of an event
which, in the indemnified party's good faith judgment, is reasonably likely to
give rise to such Losses.

                  (c) For purposes of determining the Losses of the Purchaser
based on the breach of any representation and warranty by the Bank and its
Subsidiaries under Article IV (other than for Section 4.25), the amount of
Losses of the Bank and its Subsidiaries shall be multiplied by the Seller 's
share ownership percentage in the Bank (i.e., 80.04%) and the Bank's share
ownership percentage in its Subsidiaries as of the date immediately prior to the
Equity Portion Closing.

                  Section 10.04 No Duplication; Sole Remedy Procedures.

                  (a) Any liability for indemnification hereunder shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.

                  (b) The indemnified party's rights to indemnification as
provided for in Section 10.01 shall constitute the indemnified party's sole and
exclusive remedy and the indemnifying party shall have no other liability or
damages to the indemnified party in case payment of money damages is sought
against any indemnified parties.

                                   ARTICLE XI
                             ASSET INDEMNIFICATION

                  Section 11.01.  Asset Indemnification. Upon the request of
the Purchaser, the Seller agrees to indemnify and hold harmless the Indemnified
Purchaser Parties in regards to the loss arising from certain cases provided for
in this Article XI of the Bank, including the assets of the trust accounts
(excluding performance based trust accounts) of the Bank (the "Additional Loss
Amount"), and 80.04% of such Additional Loss Amount shall be an asset indemnity
amount (the "Asset Indemnity Amount"). For avoidance of doubt, the Asset
Indemnity Amount shall be separate from amounts payable by the Seller to the
Purchaser under Article X. The Seller and the Purchaser understand and
acknowledge that the basic principles of this Article XI are to determine any
loss arising from the Corporate Loans, Card Loans and KAMCO Returned Credits
from December 31, 2002 to the relevant Calculation Date.

                  (a)    Corporate Loans: The aggregate Additional Loss
Amount of the Corporate Loans shall be the sum of the Additional Loss Amount of
the Corporate Loans for each CHB borrower set forth in Appendix 4. The
Additional Loss Amount of the Corporate Loans for such borrower shall be {the
sum of the following in (1), (2) and (3) below for such borrower} minus {the
threshold amount for such borrower Appendix 8 (provided that such Additional
Loss Amount shall not be negative):

                          (1) any Required Reserve Amount based on the Reserve
                   Method, or Required Reserve Amount based on the Fair Value
                   Method, as the case may be,

                          (2) the total amount of any Write-Downs or write-offs
                   of any Corporate Loans from (and including) January 1, 2003
                   to the Second Calculation Date, and

                          (3) any Sales Loss Amount arising from the sale of
                   Corporate Loans from (and including) January 1, 2003 to the
                   Second Calculation Date.

                  (i) Required Reserve Amount based on the Reserve Method: If
         the Reserve Ratio of the Other Commercial Banks and CHB are available
         for any of the Corporate Loans, the Required Reserve Amount based on
         the Reserve Method shall be the sum of (x) the Relevant Corporate Loans
         Amount for Secured Corporate Loans multiplied by the Reserve Ratio of
         the Secured Corporate Loans as of the Second Calculation Date and (y)
         the Relevant Corporate Loans Amount for Unsecured Corporate Loans
         multiplied by the Reserve Ratio of the Unsecured Corporate Loans as of
         the Second Calculation Date:

                          (A) RESERVE RATIO OF THE SECURED CORPORATE LOANS as of
                   the Second Calculation Date means (i) with respect to Secured
                   Corporate Loans that are classified as "normal" or
                   "precautionary", a reserve ratio for unsecured loans
                   applicable to such borrower and (ii) with respect to Secured
                   Corporate Loans that


                                       31

<PAGE>

                   are classified as "substandard", "doubtful" or "estimated
                   loss", a reserve ratio of 20% provided that the Secured
                   Corporate Loans to be covered by bank cash deposit collateral
                   will be deemed as having a reserve ratio of 0%. For the
                   purpose of calculating the Reserve Ratio of each of the
                   relevant Secured Corporate Loans as of the Second Calculation
                   Date, the asset quality classification reflected in the
                   financial statements of CHB shall be used.

                          (B) RESERVE RATIO OF THE UNSECURED CORPORATE LOANS as
                   of the Second Calculation Date = (40% X Reserve Ratio of the
                   Other Commercial Banks as of the Second Calculation Date for
                   certain unsecured corporate loans) + (60% X Reserve Ratio of
                   CHB as of the Second Calculation Date for certain unsecured
                   corporate loans).

                   For the purpose of calculating the Reserve Ratio of the Other
                   Commercial Banks for certain unsecured corporate loans and
                   Reserve Ratio of CHB for certain unsecured corporate loans,
                   in each case, as of the Second Calculation Date, "certain
                   unsecured corporate loans" shall mean corporate loans with
                   respect to which provisioning of reserves is required in
                   accordance with asset quality classification standards of the
                   Financial Supervisory Commission but for which there is no
                   collateral.


                   RESERVE RATIO OF THE OTHER COMMERCIAL BANKS as of the Second
                   Calculation Date for certain unsecured corporate loans shall
                   mean the arithmetic mean of the reserve ratio for each
                   borrower of Corporate Loans, as the case may be, used by each
                   Other Commercial Bank that have been submitted to the
                   Financial Supervisory Service by the Other Commercial Banks
                   as of the Second Calculation Date such that the Reserve Ratio
                   of the Other Commercial Banks for certain unsecured corporate
                   loans of each of the Other Commercial Banks should be
                   calculated based on the following: (i) the aggregate reserve
                   amount of certain unsecured corporate loans of such Other
                   Commercial Bank divided by (ii) the aggregate amount of
                   certain unsecured corporate loans of such Other Commercial
                   Bank.

                   The Seller and the Purchaser shall use its best efforts to
                   provide the Other Commercial Banks' Reserve Ratios to the
                   extent not prohibited by applicable law and provide to each
                   other documentary evidence and source (the "Documentary
                   Evidence and Source") satisfactory to each other of such
                   Other Commercial Banks' Reserve Ratios within 60 days of the
                   Second Calculation Date. If the Documentary Evidence and
                   Source are not available within 60 days of the Second
                   Calculation Date or the Seller and the Purchaser do not agree
                   on the acceptability of the Other Banks Reserve Ratios, then
                   notwithstanding the above, the Reserve Ratio of the Unsecured
                   Corporate Loans shall be calculated using the Fair Value
                   Method (as described below).


                                        32
<PAGE>


                   RESERVE RATIO OF CHB as of the Second Calculation Date for
                   certain unsecured corporate loans shall mean the reserve
                   ratio for certain unsecured corporate loans used by CHB and
                   submitted to the Financial Supervisory Service as of the
                   Second Calculation Date such that the Reserve Ratio of CHB
                   for certain unsecured corporate loans shall be calculated
                   based on the following: (i) the aggregate reserve amount of
                   certain unsecured corporate loans of CHB divided by (ii) the
                   aggregate amount of certain unsecured corporate loans of CHB.

                  (ii) REQUIRED RESERVE AMOUNT BASED ON FAIR VALUE METHOD: The
         Required Reserve Amount based on the Fair Value Method shall be
         determined as follows:

                        The aggregate amount of (the principal of each of the
                   Unsecured Corporate Loans that is subject to the Fair Value
                   Method minus the Fair Value of each of the Unsecured
                   Corporate Loan Amount as of the Second Calculation Date),
                   provided that this amount cannot be negative.

                        The Independent Account shall determine the liquidation
                   value of each of the relevant CHB borrowers of the Unsecured
                   Corporate Loans (the "Liquidation Value") and the on-going
                   value of each of the relevant CHB borrowers of such Unsecured
                   Corporate Loans (the "On-Going Value"). The Fair Value in the
                   above formula shall be calculated based on the arithmetic
                   mean of the Liquidation Value and the On-Going Value. Section
                   11.02 shall be used for the purposes of determining the
                   Liquidation Value and the On-Going Value.

                  (iii) THE AMOUNT FOR ANY WRITE-OFF OR WRITE-DOWN FOR THE
         CORPORATE LOANS shall be calculated based on the following with the
         understanding that CHB shall write-off or Write-Down the relevant
         Corporate Loans in good faith:

                        For each of the Corporate Loans that have been
                   written-off or Written-Down, the principal of the Corporate
                   Loan that was subject to write-off or Write-Down by CHB for
                   the applicable Corporate Loans minus {the remaining balance
                   of the applicable Corporate Loan that was subject to
                   write-off or Write-Down} minus {any additional collections
                   after such write-off or Write-Down from (and including)
                   January 1, 2003 until the Second Calculation Date}.

                        If the Other Commercial Banks' reference information in
                   regards to any of the Corporate Loans for the calculation of
                   write-off or Write-Down amounts are available and
                   satisfactory to the Seller and the Buyer, they may agree on
                   the amount for any write-off or Write-Down considering such
                   reference information and, if such agreement between both
                   parties is not made, then, the above formula shall be used
                   for the calculation of write-off or Write-Down amounts.


                                       33
<PAGE>

                  (iv) THE SALES LOSS AMOUNT FOR THE CORPORATE LOANS shall
         be calculated based on the following:

                       (A) If CHB has sold or sells any of the Corporate Loans
                  to any third party on or before the Closing, or

                       (B) If CHB sells any of the Corporate Loans to any third
                  party with the consent of the Seller (such consent shall not
                  be unreasonably withheld) after the Closing but before the
                  Second Calculation Date,

                       the principal of the applicable Corporate Loans that were
                       subject to such sales by CHB minus the sale price of the
                       applicable Corporate Loan

         (b) Card Loans: The Additional Loss Amount of the Card Loans shall be
the sum of the following in (1), (2), (3), (4) and (5) below minus the threshold
amount for Card Loans as set forth in Appendix 9, provided that this number
shall not be negative:

                       (1) Required Reserve Amount for the Card Loans which
                  shall be the sum of {First Calculation Date Reserve Amount of
                  the Card Loan A and the Second Calculation Date Reserve Amount
                  of the Card Loan B}.

                       (2) The total amount of any write-offs or Write-Downs of
                  Card Loans A from (and including) January 1, 2003 to the First
                  Calculation Date;

                       (3) Any Sales Loss Amount arising from sale of Card Loans
                  A from (and including) January 1, 2003 to the First
                  Calculation Date;

                       (4) The total amount of any write-offs or Write-Downs of
                  the Card Loans B from (and including) January 1, 2003 to the
                  Second Calculation Date; and

                       (5) Any Sales Loss Amount of Card Loan B from (and
                  including) January 1, 2003 to the Second Calculation Date.

                  (i)  FIRST CALCULATION DATE RESERVE AMOUNT OF THE CARD LOAN A
         and the SECOND CALCULATION DATE RESERVE AMOUNT OF THE CARD LOAN B mean
         the reserve amount which is calculated as of the First Calculation Date
         or the Second Calculation Date, as applicable, pursuant to the minimum
         reserve required under the Bank Business Supervision Regulations
         promulgated by the Financial Supervisory Commission which is effective
         as of the date hereof (as attached in the Appendix 10) in regards to
         such Card Loans A and Card Loans B, respectively.


                                       34
<PAGE>

                  (ii) THE AMOUNT FOR ANY WRITE-OFF OR WRITE-DOWN FOR THE CARD
         LOANS shall be calculated based on the following:

                  For each of the Card Loans that were subject to write-offs or
         Write-Downs, {the principal amount of the applicable Card Loans that
         were subject to write-offs or Write-Downs by CHB} minus {the remaining
         balance of the applicable Card Loans that were subject to write-offs or
         Write-Downs} minus {any amount of additional collections after such
         write-offs or Write-Downs from (and including) January 1, 2003 to the
         First Calculation Date (in case of Card Loans A) or the Second
         Calculation Date (in case of Card Loans B)}.

                  (iii) THE SALES LOSS AMOUNT FOR THE CARD LOANS A AND CARD
         LOANS B shall be calculated based on the following:

                          (A) If CHB has sold or sells any of the Card Loans A
                  or Card Loans B to any third party on or before the Closing,
                  or

                          (B) If CHB sells any of the Card Loans A or Card Loans
                  B to any third party with the consent of the Seller (such
                  consent shall not be unreasonably withheld and such consent
                  shall be deemed to be made in case of the Appendix 11) after
                  the Closing until the First Calculation Date (in case of Card
                  Loans A) or the Second Calculation Date (in case of Card
                  Loans B),

                  the principal of the applicable Card Loans that has been sold
         by CHB minus the sale price of the applicable Card Loans

         (c) Returned KAMCO Credits: The Additional Loss Amount of the Returned
KAMCO Credits shall be (i) any amount paid (including any payment of accrued
interests thereon) by CHB to KAMCO with respect to the Returned KAMCO Credits
returned from (and including) January 1, 2003 until the Second Calculation Date
minus (ii) the Value of the Returned KAMCO Credits minus (iii) the threshold
amount for the Returned KAMCO Credits set forth in Appendix 12.

                  The Value of the Returned KAMCO Credits shall be calculated
using the Fair Value Method.

         (d) Within 90 days after the First Calculation Date and the Second
Calculation Date, as applicable, the Purchaser may, or may cause CHB to, notify
the Seller (the "Asset Indemnity Notice") of the Additional Loss Amount as
calculated in this Section 11(a), (b) and (c). Within 30 days of receipt of the
Asset Indemnity Notice, the Seller shall notify to the Purchaser (i) the
Seller's acceptance of the Additional Loss Amount as stated in the Asset
Indemnity Notice, in which case such amount shall be final and binding upon the
parties, or (ii) the Seller's contestation of the Additional Loss Amount as
stated in the Asset Indemnity Notice, in which case the amount becomes final and
binding on the parties on the date when the dispute resolution procedure is
completed in accordance with Section 11.02.


                                       35
<PAGE>
                  (e) The provisions of this Article XI shall be applicable
notwithstanding any merger, split merger, spin-off, business transfer or other
business combination affecting CHB subsequent to the Closing and any references
to CHB under this article shall include such resulting or surviving or
transferee entity.

                   Section 11.02.  Dispute Resolution. If any amount of the
Additional Loss Amount under Section 11.01 is subject to dispute (a "Dispute"),
the following procedure will apply to resolve a Dispute.

                   (a) In the case of a Dispute, the Seller and the Purchaser
shall jointly agree to appoint an Independent Accountant. If agreement is not
made within fourteen (14) days following the first notice of either party to
appoint an Independent Accountant, the parties agree that the Korean Institute
of Certified Public Accountants shall appoint the Independent Accountant
following the request of either party and such appointment shall become final.

                   (b) The appointed Independent Accountant shall review and
evaluate the assets based on the methods described in Section 11.01 and submit
an evaluation report (the "Evaluation Report") to the Purchaser and the Seller
with respect to the amount of the relevant Additional Loss Amount within 1 month
of its appointment, provided that at the discretion of the Independent
Accountant, such period may be extended to complete the Evaluation Report,
provided, further, that such extension shall not be grounds for challenging the
contents of the Evaluation Report by any of the parties.

                   (c) The Evaluation Report shall be final and binding upon the
Seller and the Purchaser upon receipt, and shall be deemed as a final and
binding arbitration award that is enforceable in any court having jurisdiction.

                   (d) Any costs and expenses incurred by the Independent
Accountant hereto in connection with the Dispute Resolution pursuant to Section
11.02, shall be borne equally by both parties.

                                  ARTICLE XII
                                 MISCELLANEOUS

                  Section 12.01. Fees and Expenses. The Seller and the Purchaser
shall bear its own costs, taxes and expenses including, but not limited to,
attorneys, accountants, consultants, agents and brokers' fees, incurred or to be
incurred by it in connection with this Agreement and the transaction
contemplated hereby, regardless of whether the transaction is consummated.

                  Section 12.02. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given upon
receipt, if delivered personally, sent by fax or sent by first class mail,
postage prepaid, as follows:

                           (a) If to the Seller, to:
                               Korea Deposit Insurance Corporation
                               33 Da-dong, Chung-gu
                               Seoul 100-180, Korea


                                       36

<PAGE>

                           (b) If to the Purchaser, to:
                               Shinhan Financial Group
                               120 2Ga Taepyung-ro, Chung-gu
                               Seoul 100-102, Korea

                           (c) If to the Bank, to:
                               Chohung Bank
                               14 Namdaemoonro 1-ga, Chung-gu,
                               Seoul, Korea

or, in each case, to such other address or addresses or fax numbers as shall
hereafter be furnished as provided in this Section 10.02 by any party to the
other parties. All notices shall be effective when received.

                  Section 12.03. Entire Agreement; Amendment; Severability. This
Agreement and the documents described herein, or attached or delivered pursuant
to such agreements, set forth the entire agreement between the Purchaser, the
Bank and the Seller, with respect to the transaction contemplated by this
Agreement and supersede all prior agreements and undertakings. Any provision of
this Agreement may be amended, modified or supplemented in whole or in part at
any time by an agreement in writing between the Seller and the Purchaser. No
failure on the part of any party to exercise, and no delay in exercising, any
right shall operate as a waiver of such right, nor shall any single or partial
exercise by any party of any right preclude any other or future exercise of such
right or the exercise of any other right. If any provision of this Agreement is
held to be invalid or unenforceable, all other provisions shall nevertheless
continue in full force and effect.

                  Section 12.04. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same document.

                  Section 12.05. Governing Law; Jurisdiction.

                  (a) This Agreement shall be governed by, and interpreted in
accordance with, the laws of Korea applicable to contracts made and to be
performed in that jurisdiction without reference to its conflict of laws rules.

                  (b) Any dispute, controversy or claim arising out of, relating
to or in connection with the execution, performance, interpretation and breach
of this Agreement shall be subject to the exclusive jurisdiction of the Seoul
District Court.

                  Section 12.06. Successors and Assigns. Except as otherwise
expressly provided herein, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the parties' successors and permitted assigns.
Neither this Agreement nor any rights or obligations

                                       37

<PAGE>

hereunder shall be assignable or transferable by the Seller or the Purchaser
without the prior written consent of the other party.

                  Section 12.07 Confidentiality. Without the express written
consent of the other Party, for a period of one year from the date hereof, each
Party agrees to keep confidential and not disclose, and will cause its agents,
Affiliates, employees, officers and directors to keep confidential and not
disclose, all confidential and proprietary information contained in or relating
to this Agreement, including but not limited to the contents of this Agreement
(other than information relating to the Purchase Price, the terms of the RPS and
RCPS or the existence of the AI Payment and GI Payment), except as may be
required to comply with the other terms and conditions of this Agreement and any
applicable law, rule or regulation and for information which is already in the
public domain.

                                       38

<PAGE>

IN WITNESS WHEREOF, this Agreement has been executed as a deed on behalf of the
parties to this Agreement by their respective duly authorized Representatives,
all as of the date first above written.

KOREA DEPOSIT INSURANCE
CORPORATION

By: ________________________________

Name: ______________________________

Title: _____________________________

SHINHAN FINANCIAL GROUP

By: ________________________________

Name: ______________________________

Title: _____________________________

                                       39

<PAGE>

Acknowledged and agreed:

CHOHUNG BANK

By: ________________________________

Name: ______________________________

Title: _____________________________

                                       40

<PAGE>

                    Exhibit A - Shinhan Provisioning Methods

<PAGE>

    Exhibit B - Principles and Guidelines on Net Income Calculation for Card
                                    Business

<PAGE>

                        Exhibit C - Investment Agreement
<PAGE>

                                 SCHEDULE 3.01
                                TITLE TO SHARES

N/A

<PAGE>

                                SCHEDULE 3.03(a)
                             CONSENTS; NO CONFLICTS

KDIC may dispose its equity by resolutions of the Public Fund Oversight
Committee (Sale Examination Sub-Committee), Policy Committee and its Board of
Directors pursuant to the Public Fund Oversight Special Act, Regulation on
Public Fund Oversight Committee, Regulation on Policy Committee and Regulation
on Board of Director, respectively.

- -    2002.12.11-26    Examination by the Sale Examination Sub-Committee (four
                      (4) times)

- -    2003.1.16        Recommendation of Shinhan Financial Group Co., Ltd ("SFG")
                      as a candidate for preferred negotiation in the Sale
                      Examination Sub-Committee

- -    2003.1.23        Selection of SFG as a party for preferred negotiation in
                      the Public Fund Oversight Committee

- -    2003.6.19        Determination of SFG as a final purchaser of CHB in the
                      Public Fund Oversight Committee

- -    2003.7.7         Resolution of execution of the Agreement in the Board of
                      Directors of KDIC

- -    2003.7.9         Resolution of execution of the Agreement in the Policy
                      Committee (Expected)

<PAGE>

                                SCHEDULE 4.03(a)
                             CONSENTS; NO CONFLICTS

N/A

<PAGE>

                                SCHEDULE 4.04(a)
                           CAPITALIZATION; SECURITIES

CURRENT STATUS OF SHARES HELD BY CHOHUNG BANK

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
                                                NUMBER OF ISSUED
                          NUMBER OF             AND OUTSTANDING
CLASSIFICATION        AUTHORIZED SHARES              SHARES                 PAR VALUE
=====================================================================================
<S>                 <C>                         <C>                         <C>
Common Shares       2,000,000,000 shares        679,118,429 shares          5,000 Won
- -------------------------------------------------------------------------------------
</TABLE>

CURRENT STATUS OF SHAREHOLDERS OF CHOHUNG BANK

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
                                                                    NUMBER OF    SHAREHOLDING
PRIORITY               NAME OF SHAREHOLDER                           SHARES          RATIO
=============================================================================================
<S>        <C>                                                      <C>          <C>
   1       Korea Deposit Insurance Corporation                      543,570,144     80.041%
- ---------------------------------------------------------------------------------------------
   2       Hyundai Heavy Industries Co., Ltd                         12,089,238      1.780%
- ---------------------------------------------------------------------------------------------
   3       Hyundai Motor Group      Hyundai Motor Co., Ltd.           2,631,328      0.387%
                                    ---------------------------------------------------------
                                    Hyundai Capital Service Inc.      4,198,832      0.618%
                                    ---------------------------------------------------------
                                    Subtotal                          6,830,160      1.006%
- ---------------------------------------------------------------------------------------------
Others     Minority Shareholder (less than 1% of                    116,628,887     17.173%
              Shareholding)
- ---------------------------------------------------------------------------------------------
</TABLE>

Current status of issuance of equity linked bonds of CHB (CB, BW, EB etc.),
options and otherwise and current status of any and all agreements, contracts,
etc. to issue or sell the shares thereby

N/A

CURRENT STATUS OF STOCK OPTION OF CHOHUNG BANK

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
                                  NUMBER
                      NUMBER OF     OF
         GRANTING      GRANTED    GRANTED                                              EXERCISE
           DATE        SHARES     PERSON              EXERCISE PRICE                    PERIOD
================================================================================================
<S>    <C>            <C>         <C>        <C>                                     <C>
1      2000.3.27.      969,200      19                   5,000 Won                    2003.3.28.
                       Shares                                                        ~2006.3.27.
- ------------------------------------------------------------------------------------------------
2      2001.3.09.      664,000      15                   5,000 Won                    2004.3.10.
                       Shares                                                         ~2007.3.9.
- ------------------------------------------------------------------------------------------------
3      2002.3.29.      312,000      17       Based on the standard exercise price     2004.3.20.
                       Shares                (5,720 Won), the exercise price shall   ~2007.3.29.
- ------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------
<S>    <C>             <C>          <C>      <C>                                     <C>
                                             be determined by the formula
                                             linked to the stock price index of
                                             the banking business at the time of
                                             exercise of stock option.
- ------------------------------------------------------------------------------------------------
4      2003.3.28.      312,000      17       -      Based on the standard             2005.3.29.
                       Shares                   exercise price (3,730 Won),          ~2008.3.28.
                                                60% of the stock option shall be
                                                determined by the formula linked
                                                to increase ratio of the stock
                                                price index of the banking
                                                business at the time of exercise
                                                of stock option. In spite of the
                                                foregoing formula, the calculated
                                                price is below 5,000 Won, the
                                                exercise price is 5,000 Won.
                                             -      40% of the stock option is
                                                5,000 Won.
- ------------------------------------------------------------------------------------------------
       Total          2,257,200     68
                      Shares
- ------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 4.04(c)
                           CAPITALIZATION; SECURITIES

CHOHUNG BANK

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                    RELEVANT       AGREED          AGREED        UNDERLYING
CLASSIFICATION     INSTITUTION     DATE            PERIOD           LAWS             MAJOR CONTENTS                    REMARKS
====================================================================================================================================
<S>                <C>           <C>           <C>             <C>              <C>                              <C>
Agreement for      FSC, KDIC     1999.11.12.   In case the     Articles 4 and   - Agreement for the performance  2002.4.9.
Performance                                    shareholding    8 of the Act     of the management                (Termination of
of Management                                  ratio of        on the           rehabilitation plan subject      request for taking
Rehabilitation                                 the government  Structural       to assistance of public funds    actions of
Plan                                           falls below     Financial        - Improvement of management      management
                                               50%             Industry         control structure                improvement)
                                                                                -Performance of business
                                                                                division system
                                                                                - Reconstruction of business
                                                                                infrastructure
                                                                                - Substantiality of capital
                                                                                - Granting of aim of
                                                                                financial ratio
- ------------------------------------------------------------------------------------------------------------------------------------
Agreement for      KDIC          2002.1.31.    In case the     Public Fund      - Financial Sector:              Submission of
Performance                                    first           Oversight        amplification of capital, sale   letter of
of Management                                  shareholder is  Special Act      of NPL, sale of fixed assets,    undertaking
Rehabilitation                                  disqualified                    reorganization of
Plan                                           in case the                      office/subsidiary, granting of
(Re-execution)                                 (shareholding                    aim of financial ratio
                                               of the                           - Non-Financial Sector:
                                               government is                    introduction/enforcement of
                                               less than 1/3,                   personnel system weighted on
                                               it is reviewed                   performance, strengthening of
                                               to terminate                     risk management system,
                                               the Agreement.)                  construction of reasonable
                                                                                credit system
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

OVERSEAS SUBSIDIARY OF CHOHUNG BANK

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
                                    RELEVANT      AGREED      AGREED     UNDERLYING           MAJOR
  SUBSIDIARY      CLASSIFICATION  INSTITUTION      DATE       PERIOD        LAWS            CONTENTS        PERFORMANCE
==========================================================================================================================
<S>               <C>             <C>           <C>         <C>          <C>             <C>              <C>
CHB America Bank  Agreement for      KDIC       1999.11.12  To be        Article 17 of   Merged with      Merged on March
(Formerly, CHB    Performance of                            consulted    the Public      CHB New York     24, 2003.
California        Management                                separately   Fund            Bank
Bank)             Rehabilitation                                         Oversight
                  Plan                                                   Special Act
- --------------------------------------------------------------------------------------------------------------------------
Chohung Vina      Joint Venture   Bank for      2002.11.19  2013.1.3.                    Participation
Bank              Agreement       Foreign                                                in 50% of
                                  Trade of                                               shareholding
                                  Vietnam                                                and acquisition
                                  Bank                                                   of managerial
                                                                                         right
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

DOMESTIC SUBSIDIARY OF CHOHUNG BANK

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                               DATE OF
 SUBSIDIARY      AGREEMENT        PARTY       AGREEMENT        MAJOR CONTENTS
================================================================================
<S>            <C>             <C>            <C>          <C>
CNV Co., Ltd   Joint Venture   Chohung Bank   2001.06.04   Participation of one
               Agreement       Valuemeet                   (1) non-standing
                               Investment                  director as an
                               Co., Ltd                    equity participant,
                                                           not direct
                                                           participating in
                                                           operation of company
- --------------------------------------------------------------------------------
</TABLE>

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                SCHEDULE 4.05(a)
                            SUBSIDIARIES; INVESTMENTS

SUBSIDIARIES OF CHOHUNG BANK

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
                                                                                       RATIO OF
                          NAME OF COMPANY                            CAPITAL         SHAREHOLDING
=================================================================================================
<S>         <C>                                              <C>                     <C>
            Chohung Investment Trust Management Co., Ltd.       45,000,000,000 Won       79.77%
Domestic    -------------------------------------------------------------------------------------
            CNV Co., Ltd.                                        1,000,000,000 Won       49.00%
- -------------------------------------------------------------------------------------------------
            Chohung Finance Ltd. (Hong Kong)                 US$        15,000,000       99.99%
            -------------------------------------------------------------------------------------
            CHB America Bank                                 US$        44,680,700      100.00%
Overseas    -------------------------------------------------------------------------------------
            Chohung Bank (Deutschland) GmbH                  EUR     15,338,756.44      100.00%
            -------------------------------------------------------------------------------------
            Chohung Vina Bank (Vietnam)                      US$        20,000,000       50.00%
- -------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 4.05(b)
                            SUBSIDIARIES; INVESTMENTS

CURRENT STATUS OF SHAREHOLDERS OF SUBSIDIARIES

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
                   NAME OF COMPANY                       CAPITAL                RATIO OF SHAREHOLDING
============================================================================================================
<S>            <C>                              <C>                         <C>
               Chohung Investment Trust            45,000,000,000 Won       Chohung Bank 79.77%
               Management Co., Ltd.                                         KGI Securities Co., Ltd. 18.72%
                                                                            Employee Stock Ownership
Domestic                                                                    Association, etc. 1.51%
               ---------------------------------------------------------------------------------------------
               CNV Co., Ltd.                        1,000,000,000 Won       Chohung Bank 49.00%
                                                                            Valuemeet Investment Co., Ltd.
                                                                            51.00%
- ------------------------------------------------------------------------------------------------------------
               Chohung Finance Ltd.             US$        15,000,000       Chohung Bank 99.99%
               (Hong Kong)                                                  Yong-Kil Kim 1 share
               ---------------------------------------------------------------------------------------------
               CHB America Bank                 US$        44,680,700       Chohung Bank 100.00%
               ----------------------------------------------------------------------------------------------
Overseas       Chohung Bank (Deutschland) GmbH  EUR     15,338,756.44       Chohung Bank 100.00%
               ----------------------------------------------------------------------------------------------
               Chohung Vina Bank (Vietnam)      US$        20,000,000       Chohung Bank 50.00%
                                                                            Bank for Foreign Trade of Vietnam
                                                                            50.00%
- -------------------------------------------------------------------------------------------------------------
</TABLE>

Current status of issuance and options of equity linked bonds issued by
Subsidiaries (CB, BW, EB etc.), and current status of any and all agreements,
contracts, etc. by which the shares are issued or sold

N/A

<PAGE>

                                SCHEDULE 4.05(c)
                            SUBSIDIARIES; INVESTMENTS

CURRENT STATUS OF CHOHUNG BANK'S INVESTMENT IN OTHER COMPANIES

LISTED SHARES

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                               TOTAL MARKET     RATIO OF HOLDING
    NAME OF COMPANY        NUMBER OF SHARES     VALUE (WON)           (%)
================================================================================
<S>                        <C>                <C>               <C>
Ssangyong Motor Company        9,200,216       50,601,188,000         7.62
 (cost method)(1)
- --------------------------------------------------------------------------------
Ssangyong Motor Company        3,000,000       19,200,000,000         2.48
 (market value method)
- --------------------------------------------------------------------------------
Hynix Semiconductor Inc.      45,418,897      175,398,499,759        10.24
 (cost method)(2)
- --------------------------------------------------------------------------------
</TABLE>

UNLISTED SHARES

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
                                                                              RATIO OF HOLDING
         NAME OF COMPANY              NUMBER OF SHARES    BOOK VALUE (WON)          (%)
==============================================================================================
<S>                                   <C>                 <C>                 <C>
Chohung Investment Trust                  7,179,678        57,912,022,362         79.77
Management Co., Ltd.
- ----------------------------------------------------------------------------------------------
KGI Securities Co., Ltd.                  2,801,608        13,040,757,318          8.76
- ----------------------------------------------------------------------------------------------
Korea Securities Corporation              2,014,799        10,060,436,408          2.96
- ----------------------------------------------------------------------------------------------
Daewoo Electronics Corp.                  5,794,620        28,973,100,000          5.55
- ----------------------------------------------------------------------------------------------
Samsung Life Insurance Co., Ltd.(3)          58,387        28,527,888,200          0.29
- ----------------------------------------------------------------------------------------------
Seoul Express Bus Terminal Co., Ltd.         35,611        11,283,986,348          5.57
- ----------------------------------------------------------------------------------------------
</TABLE>

INVESTMENT

Invest 12,986,677,024 Won in Securities Market Stabilization Fund (as of June
30, 2003)

- ------------------

(1) Sales will be restricted by December 31, 2003

(2) Sales will be restricted by December 31, 2006

(3) Shares acquired as a compensation for credits relating to Renault Samsung
    Motors Co., Ltd.

<PAGE>

                                SCHEDULE 4.06(b)
                  FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES

CHOHUNG BANK

1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE

(As of December 31, 2002)                                  (Unit: Million Won)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
              DESCRIPTION                     DOMESTIC    OVERSEAS     TOTAL
==============================================================================
<S>                                           <C>         <C>        <C>
Won Currency Payment Guarantee                  576,826          -     576,826
- ------------------------------------------------------------------------------
   Bond Issue Payment Guarantee                  27,169          -      27,169
- ------------------------------------------------------------------------------
   Payment Guarantee for Loan Collateral         94,516          -      94,516
- ------------------------------------------------------------------------------
   Import L/C related Guarantee                       -          -           -
- ------------------------------------------------------------------------------
   Commercial Bill Guarantee                          -          -           -
- ------------------------------------------------------------------------------
   Trade Bill Acceptance                              -          -           -
- ------------------------------------------------------------------------------
   Other Won Currency Payment Guarantee         455,141          -     455,141
- ------------------------------------------------------------------------------
Foreign Currency Payment Guarantee              458,870    233,890     660,798
- ------------------------------------------------------------------------------
   Acceptance                                   290,415     26,631     317,046
- ------------------------------------------------------------------------------
   Foreign Currency Loan Acceptance                   -          -
- ------------------------------------------------------------------------------
   L/G for imported freight                      61,477        115      61,592
- ------------------------------------------------------------------------------
   Other Foreign Currency Payment Guarantee     106,978    207,144     282,160
- ------------------------------------------------------------------------------
   (Credit Derivatives Sale)                          -                      -
- ------------------------------------------------------------------------------
Total of Confirmed Payment Guarantee          1,035,696    233,890   1,237,624
- ------------------------------------------------------------------------------
</TABLE>

note) In Table, The difference of 31,962 million Won stated above between the
sum of domestic amount and overseas amount of foreign currency payment guarantee
and the total amount above is resulted because the payment guarantee with
respect to the same case is included both in the domestic and overseas amount.

2. CURRENT STATUS OF SOUNDNESS OF CONFIRMED PAYMENT GUARANTEE

(As of December 31, 2002)                                    (Unit: Million Won)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
                  WON CURRENCY PAYMENT   FOREIGN CURRENCY PAYMENT
                        GUARANTEE               GUARANTEE                  TOTAL
                 ---------------------   ------------------------   --------------------
     ASSET       GUARANTEE               GUARANTEE                  GUARANTEE
   SOUNDNESS      DEPOSIT     RESERVES    DEPOSIT        RESERVES    DEPOSIT    RESERVES
========================================================================================
<S>              <C>          <C>        <C>             <C>        <C>         <C>
Normal            432,914            -    527,483              -      960,397          -
- ----------------------------------------------------------------------------------------
Precautionary       3,076            -    131,105         54,726      134,181     54,726
- ----------------------------------------------------------------------------------------
Substandard            13            3      2,129            426        2,142        429
- ----------------------------------------------------------------------------------------
Doubtful          140,042       70,021         81             71      140,123     70,092
- ----------------------------------------------------------------------------------------
Estimated Loss        676          676          -              -          676        676
- ----------------------------------------------------------------------------------------
Total             576,721       70,700    660,798         55,223    1,237,519    125,923
- ----------------------------------------------------------------------------------------
</TABLE>

<PAGE>

3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE

(As of December 31, 2002)                                    (Unit: Million Won)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
             DESCRIPTION                        DOMESTIC    OVERSEAS     TOTAL
================================================================================
<S>                                             <C>         <C>        <C>
Opening of Standby L/C                          1,143,593    56,070    1,199,663
- --------------------------------------------------------------------------------
   Import L/C (Foreign Currency)                1,097,969    56,070    1,154,039
- --------------------------------------------------------------------------------
   Import L/C (Won Currency)                       45,624         -       45,623
- --------------------------------------------------------------------------------
   Local L/C (Won Currency)                             -         -            -
- --------------------------------------------------------------------------------
Other Payment Guarantee                           306,301     1,411      307,712
- --------------------------------------------------------------------------------
   Total of Unconfirmed Payment Guarantee       1,449,894    57,481    1,507,375
- --------------------------------------------------------------------------------
</TABLE>

4. CURRENT STATUS OF ENDORSED BILL

(As of December 31, 2002)                                    (Unit: Million Won)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
      DESCRIPTION                             DOMESTIC    OVERSEAS      TOTAL
================================================================================
<S>                                          <C>          <C>         <C>
Secured Endorsed Bill                            14,738      -            14,738
- --------------------------------------------------------------------------------
Unsecured Endorsed Bill                      25,160,939      -        25,160,939
- --------------------------------------------------------------------------------
Total of Endorsed Bill                       25,175,677      -        25,175,677
- --------------------------------------------------------------------------------
</TABLE>

5. CURRENT STATUS OF OTHER RESERVES

                                                             (Unit: Million Won)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
            CLASSIFICATION                            2003.3.31      2002.12.31
================================================================================
<S>                                                   <C>            <C>
Ceiling on Credit Card Service                          3,451             863
Credit Card Point                                       2,694           2,494
- --------------------------------------------------------------------------------
Litigation relating to Jang Hang Mutual
Saving's & Finance Co., Ltd.                            2,000           2,000
- --------------------------------------------------------------------------------
Reserve for KAMCO Repurchase Request                   10,000          10,000
- --------------------------------------------------------------------------------
Total                                                  18,145          15,357
- --------------------------------------------------------------------------------
</TABLE>

6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS

(As of December 31, 2002)                                    (Unit: Million Won)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
              DESCRIPTION                      DOMESTIC     OVERSEAS     TOTAL
================================================================================
<S>                                            <C>          <C>        <C>
Derivatives Transactions                       9,648,913     61,837    9,710,750
- --------------------------------------------------------------------------------
A. Transaction relating to Interest Rate       6,666,182     31,210    6,697,392
- --------------------------------------------------------------------------------
   1) Interest Rate Purchased Forward
- --------------------------------------------------------------------------------
   2) Interest Rate Sold Forward
- --------------------------------------------------------------------------------
   3) Interest Rate Purchased Futures             31,041                  31,041
- --------------------------------------------------------------------------------
   4) Interest Rate Sold Futures                 309,875                 309,875
- --------------------------------------------------------------------------------
   5) Interest Rate Purchased Swap             3,162,500     15,605    3,178,105
- --------------------------------------------------------------------------------
   6) Interest Rate Sold Swap                  3,162,766     15,605    3,178,371
- --------------------------------------------------------------------------------
   7) Interest Rate Purchased Option
- --------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- --------------------------------------------------------------------------------
<S>                                            <C>           <C>       <C>
   8) Interest Rate Sold Option
- --------------------------------------------------------------------------------
B. Transactions relating to Currency           2,982,721     30,627    3,013,348
- --------------------------------------------------------------------------------
   1) Purchased Forward Exchange               1,085,743      4,898    1,090,641
- --------------------------------------------------------------------------------
   2) Sold Forward Exchange                    1,352,510     25,729    1,378,239
- --------------------------------------------------------------------------------
   3) Currency Purchased Futures
- --------------------------------------------------------------------------------
   4) Currency Sold Futures
- --------------------------------------------------------------------------------
   5) Currency Purchased Swap                    296,654                 296,654
- --------------------------------------------------------------------------------
   6) Currency Sold Swap                         247,814                 247,814
- --------------------------------------------------------------------------------
   7) Currency Purchased Option
- --------------------------------------------------------------------------------
   8) Currency Sold Option
- --------------------------------------------------------------------------------
C. Transactions relating to Equity                    10                      10
- --------------------------------------------------------------------------------
   1) Stock Purchased Forward
- --------------------------------------------------------------------------------
   2) Stock Sold Forward
- --------------------------------------------------------------------------------
   3) Stock Purchased Futures
- --------------------------------------------------------------------------------
   4) Stock Sold Futures
- --------------------------------------------------------------------------------
   5) Stock Purchased Swap
- --------------------------------------------------------------------------------
   6) Stock Sold Swap
- --------------------------------------------------------------------------------
   7) Purchased Equity Option                          5                       5
- --------------------------------------------------------------------------------
   8) Sold Equity Option                               5                       5
- --------------------------------------------------------------------------------
Purchased of Credit Derivatives
- --------------------------------------------------------------------------------
</TABLE>

Note) The current status of transactions above is prepared on a basis of the
notes of balance sheet being prepared by the Bank rather than the disclosure
method of notes on derivatives under the corporate accounting standard.

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE

(As of December 31, 2002)                                    (unit: million won)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
                                                            Chohung Bank
        DESCRIPTION               Chohung Finance Ltd.   (Deutschland) GmbH    Chohung Vina Bank
================================================================================================
<S>                               <C>                    <C>                   <C>
Acceptance                               3,037                 1,022                 1,422
- ------------------------------------------------------------------------------------------------
Other Foreign Currency Payment
Guarantee                                  143                   523                 9,130
- ------------------------------------------------------------------------------------------------
Total                                    3,180                 1,545                10,552
- ------------------------------------------------------------------------------------------------
</TABLE>

(1$= 1,200.40 Won)

2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION

(As of December 31, 2002)                                    (unit: million Won)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
                                              Chohung Bank (Deutschland)
                      Chohung Finance Ltd.              GmbH                     Chohung Vina Bank
                     ----------------------   --------------------------        --------------------
                     GUARANTEE                GUARANTEE                         GUARANTEE
 CLASSIFICATION       DEPOSIT      RESERVES    DEPOSIT          RESERVES         DEPOSIT    RESERVES
====================================================================================================
<S>                  <C>           <C>        <C>               <C>             <C>         <C>
Foreign Currency       3,180         1,200      1,545               0             10,522          0
- ----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ----------------------------------------------------------------------------------------------------
<S>                  <C>           <C>        <C>               <C>             <C>         <C>
Payment Guarantee
- ----------------------------------------------------------------------------------------------------
   Soundness              179(Normal)                   Normal                     Normal (9,732)
Classification       3,001(Precautionary)                                       Estimated Loss (820)
- ----------------------------------------------------------------------------------------------------
</TABLE>

(1$= 1,200.40 Won)

3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE

(As of December 31, 2002)                                    (unit: million Won)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
                                                              Chohung Bank       Chohung Vina
Description   Chohung Finance Ltd.    CHB America Bank     (Deutschland) GmbH        Bank
==================================================================================================
<S>           <C>                     <C>                  <C>                   <C>
Import L/C
 Issuance             6,142                 7,640                 5,672              8,954
- --------------------------------------------------------------------------------------------------
</TABLE>

(1$= 1,200.40 Won)

4. CURRENT STATUS OF ENDORSED BILL

N/A

5. CURRENT STATUS OF OTHER RESERVES

Chohung Finance Ltd. (Hong Kong)
     Reserve relating to Securities: 180,000,000 Won
     Reserve relating to Corporate Tax: 480,000,000 Won

6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS

(As of December 31, 2002)                                    (unit: million Won)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF SUBSIDIARIES                   DESCRIPTION            AMOUNT    REMARKS
================================================================================
<S>                            <C>                            <C>       <C>
                               Interest Rate Purchased Swap   4,305
Chohung Finance Ltd            -------------------------------------------------
                               Interest Rate Sold Swap        4,305
- --------------------------------------------------------------------------------
                               Interest Rate Purchased Swap   4,201
Chohung New York               -------------------------------------------------
                               Interest Rate Sold Swap        4,201
- --------------------------------------------------------------------------------
</TABLE>

Chohung Investment Trust Management Co., Ltd.

1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE

N/A

2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION

N/A

3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE
<PAGE>

N/A

4. CURRENT STATUS OF ENDORSED BILL

N/A

5. CURRENT STATUS OF OTHER RESERVES

N/A

6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS

N/A

<PAGE>

                                SCHEDULE 4.06(c)

                  FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES

* Each item represents the records as of the date stated below. Any item, even
though described below, cannot be said to occur in the normal commercial course
of banking business.

CHOHUNG BANK

1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE

(As of May 31, 2003)                                         (unit: million Won)

<TABLE>
<CAPTION>
                  DESCRIPTION                         DOMESTIC           OVERSEAS               TOTAL
                  -----------                         --------           --------               -----
<S>                                                   <C>                <C>                 <C>
Won Currency Payment Guarantee                          542,153                  -             542,153
    Bond Issue Payment Guarantee                         23,990                  -              23,990
    Payment Guarantee for Collateral of Loan             84,235                  -              84,235
    Import L/C related Guarantee                              -                  -                   -
    Commercial Bill Guarantee                                 -                  -                   -
    Trade Bill Acceptance                                     -                  -                   -
    Other Won Currency Payment Guarantee                433,928                  -             433,928
Foreign Currency Payment Guarantee                      505,784            209,039             681,347
    Acceptance                                          351,386             27,710             379,096
    Foreign Currency Loan Acceptance                          -                  -                   -
    L/G for imported freight                             43,327              2,257              45,584
    Other Foreign Currency Payment Guarantee            111,071            179,072             256,666
    (Credit Derivatives Sale)                                 -             30,165              30,165
Total of Confirmed Payment Guarantee                  1,047,937            209,039           1,223,500
</TABLE>

2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION

(As of May 31, 2003)                                         (unit: million Won)

<TABLE>
<CAPTION>
                      WON CURRENCY PAYMENT        FOREIGN CURRENCY PAYMENT
                           GUARANTEE                     GUARANTEE                      TOTAL
                   --------------------------     ------------------------      ---------------------
    ASSET          GUARANTEE                      GUARANTEE                     GUARANTEE
  SOUNDNESS         DEPOSIT          RESERVES      DEPOSIT        RESERVES       DEPOSIT     RESERVES
  ---------        ---------         --------     ---------       --------      ---------    --------
<S>                <C>               <C>          <C>             <C>           <C>          <C>
    Normal          555,248               -        561,880              9       1,117,128          9
Precautionary         7,269               -        183,786         59,828         191,055     59,828
 Substandard              -               -          2,157            431           2,157        431
   Doubtful             252             126             74             69             326        195
Estimated Loss          814             814              -              -             814        814
    Total           563,583             940        747,897         60,337       1,311,480     61,277
</TABLE>

++) The Current Status of Confirmed Payment Guarantee Soundness Classification
stated above excludes

<PAGE>

accounts of merchant banks.

3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE

(As of May 31, 2003)                                         (unit: million Won)

<TABLE>
<CAPTION>
             DESCRIPTION                             DOMESTIC           OVERSEAS            TOTAL
             -----------                             --------           --------            -----
<S>                                                  <C>                <C>               <C>
   Opening L/C of Payment Guarantee                    958,529           70,311           1,028,839
  Import L/C Issued Foreign Currency                   913,390           70,311             983,701
    Import L/C Issued Won Currency                      45,140                -              45,140
     Local L/C Issued Won Currency                           -                -                   -
        Other Payment Guarantee                        286,240            1,441             287,681
Total of Unconfirmed Payment Guarantee               1,244,770           71,752           1,316,522
</TABLE>

4. CURRENT STATUS OF ENDORSED BILL

(As of May 31, 2003)                                         (unit: million Won)

<TABLE>
<CAPTION>
      DESCRIPTION                           DOMESTIC             OVERSEAS         TOTAL
      -----------                           --------             --------         -----
<S>                                        <C>                   <C>            <C>
 Secured Endorsed Bill                         19,255                   -           19,255
Unsecured Endorsed Bill                    16,069,887                   -       16,069,887
Total of Endorsed Bill                     16,089,142                   -       16,089,142
</TABLE>

5. CURRENT STATUS OF OTHER RESERVES

                                                             (unit: million Won)

<TABLE>
<CAPTION>
            CLASSIFICATION                           2003. 3.31.                 2002. 12.31.
            --------------                           -----------                 ------------
<S>                                                  <C>                         <C>
    Ceiling on Credit Card Service                      3,451                          863
           Credit Card Point                            2,494                        2,494
Litigation relating to Jang Hang Mutual
      Saving's & Finance Co., Ltd.                      2,000                        2,000
 Reserve for KAMCO Repurchase Request                  10,000                       10,000
            Unlisted Stock                                200
                 Total                                 18,145                       15,357
</TABLE>

6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS

(As of May 31, 2003)                                         (unit: million Won)

<TABLE>
<CAPTION>
            DESCRIPTION                                     DOMESTIC           OVERSEAS       TOTAL
            -----------                                     --------           --------       -----
<S>                                                        <C>                 <C>          <C>
Derivatives Transactions                                   16,508,398           58,657      16,567,055
A. Transaction relating to Interest Rate                   10,098,680           24,132      10,122,812
   1) Interest Rate Purchased Forward
   2) Interest Rate Sold Forward
   3) Interest Rate Purchased Forward                          12,380                           12.380
   4) Interest Rate Sold Futures                              144,102                          144,102
   5) Interest Rate Purchased Swap                          4,971,099           12,066       4,983,165
   6) Interest Rate Sold Swap                               4,971,099           12,066       4,983,165
</TABLE>

<PAGE>

<TABLE>
<S>                                                         <C>                 <C>          <C>
   7) Interest Rate Purchased Option
   8) Interest Rate Sold Option
B. Transactions relating to Currency                        6,257,371           34,525       6,291,896
   1) Purchased Forward Exchange                            2,329,762           20,858       2,350,620
   2) Sold Forward Exchange                                 2,922,222           13,667       2,935,889
   3) Currency Purchased Futures
   4) Currency Sold Futures                                    12,066                           12,066
   5) Currency Purchased Swap                                 507,061                          507,061
   6) Currency Sold Swap                                      486,260                          486,260
   7) Currency Purchased Option
   8) Currency Sold Option
C. Transactions relating to Equity                            152,347                          152,347
   1) Stock Purchased Forward
   2) Stock Sold Forward
   3) Purchased Forward Stock                                     203                              203
   4) Sold Forward Stock
   5) Stock Purchased Swap
   6) Stock Sold Swap
   7) Purchased Equity Option                                  75,732                           75,732
   8) Sold Equity Option                                       76,412                           76,412
Purchase of Credit Derivatives
</TABLE>

7. OTHERS

The total cumulative balance of credit card points as of December 31, 2002 is
approximately 31 billion Won and the allowance thereof is 2,494,000,000 Won.

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE

(As of May 31, 2003)                                         (unit: million Won)

<TABLE>
<CAPTION>
                                                           Chohung Bank
         DESCRIPTION              Chohung Finance Ltd.  (Deutschland) GmbH         Chohung Vina Bank
         -----------              --------------------  ------------------         -----------------
<S>                               <C>                   <C>                        <C>
          Acceptance                     3,464                  435                      1,382
Other Foreign Currency Payment
          Guarantee                          0                  654                      6,043
            Total                        3,464                1,089                      7,425
</TABLE>

(1$=1,206 Won)

2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION

(As of May 31, 2003)                                         (unit: million Won)

<PAGE>

<TABLE>
<CAPTION>
                                                        Chohung Bank
                       Chohung Finance Ltd.         (Deutschland) GmbH           Chohung Vina Bank
                       ---------------------      -----------------------     ----------------------
                       GUARANTEE                  GUARANTEE                   GUARANTEE
 CLASSIFICATION         DEPOSIT     RESERVES       DEPOSIT       RESERVES      DEPOSIT      RESERVES
 --------------        ---------    --------      ---------      --------     ---------     --------
<S>                    <C>          <C>           <C>            <C>          <C>           <C>
Foreign Currency
Payment Guarantee        3,464        1,206          1,089             0        7,425           0
    Soundness                                                                      Normal (6,601)
 Classification        3,016(Precautionary)                Normal              Estimated Loss (824)
</TABLE>

(1$=1,206 Won)

3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE

(As of May 31, 2003)                                         (unit: million Won)

<TABLE>
<CAPTION>
                                                                 Chohung Bank
Description   Chohung Finance Ltd.      CHB America Bank      (Deutschland) GmbH    Chohung Vina Bank
- -----------   --------------------      ----------------      ------------------    -----------------
<S>           <C>                       <C>                   <C>                   <C>
Import L/C
 Issuance             2,849                      7,513                  502                 8,863
</TABLE>

(1$=1,206 Won)

4. CURRENT STATUS OF ENDORSED BILL

N/A

5. CURRENT STATUS OF OTHER RESERVES

Chohung Finance Ltd.
          Reserves for Securities: US$ 150,000
          Reserves for Corporate Tax: US$ 400,000

6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS

(As of May 31, 2003)                                         (unit: million Won)

<TABLE>
<CAPTION>
NAME OF SUBSIDIARIES               DESCRIPTION                  AMOUNT               REMARKS
- --------------------               -----------                  ------               -------
<S>                        <C>                                  <C>                  <C>
 Chohung Finance Ltd       Interest Rate Purchased Swap         3,620
                              Interest Rate Sold Swap           3,620
  CHB America Bank         Interest Rate Purchased Swap         4,223
                              Interest Rate Sold Swap           4,223
</TABLE>

Chohung Investment Trust Management Co., Ltd.

1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE

N/A

2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION

<PAGE>

N/A

3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE

N/A

4. CURRENT STATUS OF ENDORSED BILL

N/A

5. CURRENT STATUS OF OTHER RESERVES

N/A

6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS

N/A
<PAGE>

                                  SCHEDULE 4.07
                           ABSENCE OF CERTAIN CHANGES

CHOHUNG BANK

DETAILS OF DECLINE IN RECEIPT DURING STRIKE FROM 2003. 6. 17. TO 2003. 6. 20.

1. BANK ACCOUNTS' RECEIPT DURING STRIKE (ON A BASIS OF BANK ACCOUNT B/S AS OF
THE DATE)

                                                             (unit: million Won)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
ACCOUNT
 CODE                  DESCRIPTION                               2003.6.17.     2003.6.20.   VARIATIONS
=======================================================================================================
<S>       <C>                                                    <C>            <C>          <C>
200107    Won Currency Deposits                                  36,388,124     33,216,899   -3,171,225
- -------------------------------------------------------------------------------------------------------
200206     Demand Deposits                                        7,044,076      6,963,907      -80,169
- -------------------------------------------------------------------------------------------------------
210104      Current Deposits                                         84,947        495,718      410,771
- -------------------------------------------------------------------------------------------------------
210203      Household Current Deposits                               24,550         24,744          194
- -------------------------------------------------------------------------------------------------------
200215      Miscellaneous Deposits                                5,192,440      5,213,475       21,035
- -------------------------------------------------------------------------------------------------------
210401      Ordinary Deposits                                     1,608,640      1,120,705     -487,935
- -------------------------------------------------------------------------------------------------------
200217      Deposits of Public Funds                                 95,326         74,468      -20,858
- -------------------------------------------------------------------------------------------------------
210708      Won Currency Deposits for Non-residents                     357            519          162
- -------------------------------------------------------------------------------------------------------
200255      Free Won Currency Deposits for Non-residents                 15             15            0
- -------------------------------------------------------------------------------------------------------
210900      Treasury Deposits                                        37,801         34,263       -3,538
- -------------------------------------------------------------------------------------------------------
210906      Other Demand Deposits                                         0              0            0
- -------------------------------------------------------------------------------------------------------
200305     Time and Savings Deposits                             28,362,520     25,284,260   -3,078,260
- -------------------------------------------------------------------------------------------------------
200405      Savings Deposits                                      6,888,081      5,728,493   -1,159,588
- -------------------------------------------------------------------------------------------------------
211008        Ordinary Savings Deposits                           4,608,790      3,877,064     -731,726
- -------------------------------------------------------------------------------------------------------
211015        MMDA Savings Deposits                                 863,094        631,031     -232,063
- -------------------------------------------------------------------------------------------------------
211107        Free Access Savings Deposits                        1,416,197      1,220,399     -195,798
- -------------------------------------------------------------------------------------------------------
200515      Corporate Free Savings Deposits                       3,024,384      1,518,808   -1,505,576
- -------------------------------------------------------------------------------------------------------
211152        Ordinary Corporate Free Savings Deposits              664,414        432,058     -232,356
- -------------------------------------------------------------------------------------------------------
211175        MMDA Corporate Free Savings Deposits                2,359,969      1,086,750   -1,273,219
- -------------------------------------------------------------------------------------------------------
211206      Time Deposits                                        14,544,885     14,141,027     -403,858
- -------------------------------------------------------------------------------------------------------
211305      Installment Savings Deposits                          2,464,405      2,459,201       -5,204
- -------------------------------------------------------------------------------------------------------
211404      Preferred Household Installment Savings Deposits            625            625            0
- -------------------------------------------------------------------------------------------------------
211503      Worker's Savings for Housing Down payment                    84             84            0
- -------------------------------------------------------------------------------------------------------
211602      Worker's Housing Savings                                      0              0            0
- -------------------------------------------------------------------------------------------------------
211701      Won Currency Deposits for Non-residents                       0              0            0
- -------------------------------------------------------------------------------------------------------
211752      Worker's Long-term Savings                                  784            785            1
- -------------------------------------------------------------------------------------------------------
211855      Lone-term Housing Savings                               124,694        125,120          426
- -------------------------------------------------------------------------------------------------------
211894      Household Long-term Savings                             245,495        242,162       -3,333
- -------------------------------------------------------------------------------------------------------
211901      Preferred Worker's Savings                            1,069,083      1,067,954       -1,129
- -------------------------------------------------------------------------------------------------------
211909      Other Time and Savings Deposits                               0              0            0
- -------------------------------------------------------------------------------------------------------
201001     Installment Received Savings                             644,163        631,793      -12,370
- -------------------------------------------------------------------------------------------------------
230108      Installment Savings before Performance                  644,163        631,793      -12,370
- -------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- -------------------------------------------------------------------------------------------------------
<S>       <C>                                                     <C>            <C>          <C>
230207      Installment Savings after Performance                         0              0            0
- -------------------------------------------------------------------------------------------------------
230216     Installment Savings for Housing                          337,365        336,939         -426
- -------------------------------------------------------------------------------------------------------
201250    Transferable Deposits                                   3,299,320      3,292,879       -6,441
- -------------------------------------------------------------------------------------------------------
231009     Certificate of Deposit to Banks                          127,069        127,069            0
- -------------------------------------------------------------------------------------------------------
231101     Certificate of Deposit to Customers                    3,172,251      3,165,810       -6,441
- -------------------------------------------------------------------------------------------------------
201803    Sale of Won Currency Bonds Purchased under                269,018      2,265,018    1,996,000
          Agreement to Resell
- -------------------------------------------------------------------------------------------------------
232500      Sale of Won Currency Bonds Purchased under                    0      2,000,000    2,000,000
            Agreement to Resell for Banks
- -------------------------------------------------------------------------------------------------------
232609      Sale of Won Currency Bonds Purchased under              269,018        265,018       -4,000
            Agreement to Resell for Non-banks
- -------------------------------------------------------------------------------------------------------
201500    Bill Sold                                                 815,458        808,770       -6,688
- -------------------------------------------------------------------------------------------------------
231705     Commercial Bill Sold                                           0              0            0
- -------------------------------------------------------------------------------------------------------
231754     Cover Bill Sold                                          815,458        808,770       -6,688
- -------------------------------------------------------------------------------------------------------
</TABLE>

2. ACCOUNTS OF MERCHANT BANKS

                                                             (unit: million Won)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
 DESCRIPTION                          2003.6.17.      2003.6.20.     VARIATIONS
===============================================================================
<S>                                   <C>             <C>            <C>
Bills Issued                          2,434,609         558,994      -1,875,615
- -------------------------------------------------------------------------------
CMA Deposits                            301,018          68,398        -232,620
- -------------------------------------------------------------------------------
   Total                              2,735,627         627,392      -2,108,235
- -------------------------------------------------------------------------------
</TABLE>

3. AMOUNT OF TRUSTED MONEY IN TRUST ACCOUNT DURING STRIKE (ON A BASIS OF TRUST
ACCOUNT B/S AS OF THE DATE)

                                                             (unit: million Won)

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ACCOUNT
 CODE                     DESCRIPTION                      2003.06.17   2003.06.20   VARIATIONS   REMARKS
=========================================================================================================
<S>      <C>                                               <C>          <C>          <C>          <C>
985118   MONEY TRUST                                        4,294,392    4,265,071      -29,321
- ---------------------------------------------------------------------------------------------------------
985217   Unspecified Money Trust Joint Management               8,381        8,381            0
- ---------------------------------------------------------------------------------------------------------
985314   Accumulative-aimed Trust Joint Management            298,790      293,937       -4,853
- ---------------------------------------------------------------------------------------------------------
985415   Household Money Trust Joint Management                62,884       62,330         -554
- ---------------------------------------------------------------------------------------------------------
985811   Old Age Pension Trust Joint Management               104,558      103,983         -574
- ---------------------------------------------------------------------------------------------------------
986012   Corporate Money Trust Joint Management                31,101       31,053          -48
- ---------------------------------------------------------------------------------------------------------
986418   National Stock Trust Joint Management                  2,097        2,097            0
- ---------------------------------------------------------------------------------------------------------
986815   Individual Pension Trust Joint Management            699,302      700,382        1,079
- ---------------------------------------------------------------------------------------------------------
986839   Household Long-term Trust Joint Management           255,731      247,845       -7,886
- ---------------------------------------------------------------------------------------------------------
986843   Preferred Worker's Trust Joint Management             67,937       66,681       -1,256
- ---------------------------------------------------------------------------------------------------------
986852   New Accumulative Trust Joint Management               75,125       72,939       -2,186
- ---------------------------------------------------------------------------------------------------------
986861   Retirement Trust Joint Management                    157,983      157,941          -42
- ---------------------------------------------------------------------------------------------------------
986210   Restricted Money Trust                             2,106,706    2,097,086       -9,619
- ---------------------------------------------------------------------------------------------------------
986898   Testamentary Trust                                       500          500            0
- ---------------------------------------------------------------------------------------------------------
986872   Unit Money Trust Joint Management                    139,143      138,130       -1,014
- ---------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S>      <C>                                                  <C>          <C>           <C>      <C>
986881   Additional Money Trust Joint Management              118,082      116,575       -1,506
- ---------------------------------------------------------------------------------------------------------
986884   Real Estate Investment Trust                          31,351       31,351            0
- ---------------------------------------------------------------------------------------------------------
986887   New Individual Pension Trust Joint Management          8,409        8,421           13
- ---------------------------------------------------------------------------------------------------------
986892   New Old Age Pension Trust Joint Management            88,007       87,127         -880
- ---------------------------------------------------------------------------------------------------------
986894   Pension Trust Joint Management                        38,304       38,312            8
- ---------------------------------------------------------------------------------------------------------
986924   Property Trust                                       134,723      134,393         -330
- ---------------------------------------------------------------------------------------------------------
987114   Money Receivables Trust Joint Management              31,560       31,230         -330
- ---------------------------------------------------------------------------------------------------------
987213   Joint Trust of Movable Property and Real Estate      103,163      103,163            0
- ---------------------------------------------------------------------------------------------------------
</TABLE>

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

Overseas subsidiaries, New York Chohung Bank and California Chohung Bank were
merged as of March 24, 2003 into CHB America Bank.

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                SCHEDULE 4.08(a)
                                    PROPERTY

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                SCHEDULE 4.08(b)
                                    PROPERTY

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                SCHEDULE 4.08(c)
                                    PROPERTY

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>
                                  SCHEDULE 4.09
                                   LITIGATIONS


CURRENT STATUS OF LITIGATION INSTITUTED AGAINST CHOHUNG BANK (MORE THAN
100,000,000 WON)


<TABLE>
<CAPTION>
                                                                         PROCEEDING
                                                               -------------------------------
                                                                             INTER-
                    DATE OF                      AMOUNT AT         1ST      MEDIATE    FINAL
   PLAINTIFF     COMMENCEMENT      CASE          STAKE(KRW)       TRIAL      APPEAL    APPEAL               CONTENT
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
<S>              <C>           <C>            <C>              <C>          <C>       <C>       <C>

Sang-Yeol Lee     2002/04/24     Dividend         120,000,000       Lost      Lost    Pending   Under the auction procedure of real
                                 Objection      (CHB Portion:                                   property relating to Yong-Nam Lee as
                                                 :13,632,786)                                   debtor, the plaintiff as lessee with
                                                                                                priority requesting to pay dividend
                                                                                                was not entitled to dividend
                                                                                                distribution being regarded as false
                                                                                                lessee. Thus, the plaintiff raised
                                                                                                its objection to dividend
                                                                                                distribution against the provisional
                                                                                                attachment creditors including CHB
                                                                                                and Korea Technology Credit
                                                                                                Guarantee Fund.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Tong Yang         2002/08/08     Dividend         678,100,097        Win     Pending            In relation to CHB's collection of
Investment Bank                  Objection                                                      receivables purchased from Chonggu
                                                                                                Co., Ltd., when the third party
                                                                                                obligor placed the money to the
                                                                                                court and under the distribution
                                                                                                procedure made thereafter, the
                                                                                                plaintiff was not entitled to
                                                                                                distribution because the partial of
                                                                                                its claims was overlapped with the
                                                                                                receivables purchased by CHB. Then,
                                                                                                the plaintiff instituted this
                                                                                                lawsuit.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Tong Yang         2002/09/27     Dividend         367,026,600        Win     Pending            In relation to CHB's collection of
Investment Bank                  Objection                                                      receivables purchased from Chonggu
                                                                                                Co., Ltd., when the third party
                                                                                                obligor placed the money to the
                                                                                                court and under the distribution
                                                                                                procedure made thereafter, the
                                                                                                plaintiff was not entitled to
                                                                                                distribution because the partial of
                                                                                                its claims was overlapped with the
                                                                                                receivables purchased by CHB. Then,
                                                                                                the plaintiff instituted this
                                                                                                lawsuit.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Young-Sung Kwon   2002/07/29   Undue Benefit      120,000,000      Pending                      The plaintiffs are the co-owners of
and two others                                                                                  the partial land used by CHB
                                                                                                headquarter as parking lot. The
                                                                                                plaintiffs assert that CHB uses the
                                                                                                land belong to the co-owned share
                                                                                                and that CHB should return the
                                                                                                rental as consideration of use of
                                                                                                such land to the plaintiffs.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                         PROCEEDING
                                                               -------------------------------
                                                                             INTER-
                    DATE OF                      AMOUNT AT         1ST      MEDIATE    FINAL
   PLAINTIFF     COMMENCEMENT      CASE          STAKE(KRW)       TRIAL      APPEAL    APPEAL               CONTENT
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
<S>              <C>           <C>            <C>              <C>          <C>       <C>       <C>

Dream Holdings    2002/12/04   Undue Benefit      520,000,000      Pending                      The plaintiff which promoted the
Co.,Ltd,                                                                                        Internet lottery related business
                                                                                                was excluded from selection of the
                                                                                                lottery operator. The plaintiff
                                                                                                instituted this lawsuit against the
                                                                                                related parties to compensate for
                                                                                                expenses and efforts.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Woori Bank        2002/12/10   Undue Benefit      110,956,620      Pending                      The plaintiff asserts that more tax
                                                                                                was imposed on the collateral of the
                                                                                                plaintiff than that of CHB under the
                                                                                                public sale of collateral provided
                                                                                                by Young-Ho Choi who is the borrower
                                                                                                of the special credit extended by
                                                                                                Choongjeongro Branch. Thus, the
                                                                                                plaintiff claimed to refund the
                                                                                                undue benefit.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Inforbank         2003/04/17   Verification       800,000,000      Pending                      The plaintiff asserts that CHB
Corporation                         of                                                          extended loan secured by savings
                               Non-existence                                                    deposit after receiving only the
                                 of Debts                                                       minute of board of directors and the
                                                                                                forged corporate seal certificate,
                                                                                                without autograph of the
                                                                                                representative director and thus,
                                                                                                the loan agreement is null and void.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Filler.           2001/11/21   Compensation     U$166,957,963       Dis-                        The plaintiff asserts that the
Perlman                         for Damages                        missed                       defendant banks (Hanvit, Shinhan,
                                                                   because                      CHB) helped the forgery committed by
                                                                  US court                      L&H Korea such as false accounting
                                                                   has no                       of sales. This caused damage to
                                                                   juris-                       Segate which is the shareholder of
                                                                   diction                      L&H. Accordingly, the plaintiff as
                                                                                                shareholder of Segate was also
                                                                                                damaged to the extent of such
                                                                                                damages incurred by Segate.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Baker and three   2002/05/29   Compensation     U$274,647,073       Dis-                        The plaintiff asserts that the
other parties                   for Damages                        missed                       defendant banks (Hanvit, Shinhan,
                                                                   because                      CHB) helped the forgery committed by
                                                                  US court                      L&H Korea such as false accounting
                                                                   has no                       of sales. This caused damage to
                                                                   juris-                       Baker and three other parties which
                                                                   diction                      are the shareholder of L&H.
                                                                                                Accordingly, the plaintiff as
                                                                                                shareholder of Baker and three other
                                                                                                parties was also damaged to the
                                                                                                extent of such damages incurred by
                                                                                                Baker and three other parties.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Government        2002/10/31   Compensation    24,000,000,000      Pending                      While the plaintiff claimed for
Employees                       for Damages                                                     damages against Chohung Investment
Pension                                                                                         Trust Management Co., Ltd. which was
Corporation                                                                                     the management company of the
(Co-defendant :                                                                                 beneficiary certificates, and the
Chohung                                                                                         plaintiff also called to account CHB
Investment                                                                                      which did not withdraw its
Trust                                                                                           management instruction. See the
Management Co.,                                                                                 relevant part of CHBIT.
Ltd.)
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                         PROCEEDING
                                                               -------------------------------
                                                                             INTER-
                    DATE OF                      AMOUNT AT         1ST      MEDIATE    FINAL
   PLAINTIFF     COMMENCEMENT      CASE          STAKE(KRW)       TRIAL      APPEAL    APPEAL               CONTENT
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
<S>              <C>           <C>            <C>              <C>          <C>       <C>       <C>
Soo-Rok Kang      2003/06/24   Compensation       163,093,775      Pending                      The plaintiff received the partial
                                for Damages                                                     facility loan as construction
                                                                                                proceeds after completing the
                                                                                                construction ordered by the borrower
                                                                                                of CHB. However, the plaintiff
                                                                                                asserts that the part of such loan
                                                                                                was paid to other person due to the
                                                                                                fraud act of the officer in charge
                                                                                                of loan operation of CHB, which
                                                                                                caused damages to the plaintiff.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Kangryeung City   2001/04/16   Compensation       250,000,000      Partial   Pending            Kwang-Jin Chang being the public
                                for Damages     (Amount under       lost                        officer of the Plaintiff city
                                                      appeal:      (Lost                        embezzled the public funds in the
                                                  75,000,000)  :75,000,000)                     amount of 250,000,000 Won. The
                                                                                                plaintiff asserts that CHB made such
                                                                                                embezzlement easier by opening the
                                                                                                passbook in violation of the Act on
                                                                                                Real Name Financial Transactions and
                                                                                                Guarantee of Secrecy for the
                                                                                                offender and instituted this lawsuit
                                                                                                to claim the compensation for
                                                                                                damages incurred from joint tort.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Jang Hang         2001/02/27     Return of      7,000,000,000        Lost    Pending            Seung-Koo Lee who is the general
Mutual Saving's                   Savings                                                       manager of Hwajeong-dong branch had
& Finance                         Deposit                                                       deposited the savings on behalf of
Co.,Ltd.                                                                                        the Fund and withdrew (embezzled)
                                                                                                such bank deposit without due
                                                                                                payment procedure. So, the plaintiff
                                                                                                instituted this lawsuit to return
                                                                                                such deposit.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Korea Exchange    2003/05/07     Purchase       9,982,356,165      Pending                      The plaintiff asserts that CHB
Bank                               Price                                                        executed the repurchase contract in
                                                                                                respect to SKG The plaintiff claimed
                                                                                                payment of purchase price asserting
                                                                                                that there was repurchase agreement
                                                                                                with CHB for CPs issued by SKG and
                                                                                                intermediated by the Short Term
                                                                                                Financing Department (purchase
                                                                                                agreement by exercise of option)
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Loit Co.,Ltd.     2003/05/12    Claims for     16,400,000,000      Pending                      While Nan-Joo Yoo, being the
: former name:                 Return of CD                                                     representative director of the
Telnet IT Co.,                                                                                  plaintiff and purchaser of shares
Ltd.                                                                                            embezzled the company funds, Nan-Joo
                                                                                                Yoo provided CD purchased in the
                                                                                                name of the plaintiff as his own
                                                                                                personal collateral to CHB. Thus,
                                                                                                the plaintiff asserts that such act
                                                                                                is null and void.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
KAMCO Two ABS     2003/06/17     Claim for        674,354,087      Pending                      The plaintiff claimed to return the
Specialty Co.,                   Return of                                                      balance resulted from the difference
Ltd.                            Repurchase                                                      in calculation of repurchase price
                                   Price                                                        of the special credits between CHB
                                                                                                and KAMCO.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                         PROCEEDING
                                                               -------------------------------
                                                                             INTER-
                    DATE OF                      AMOUNT AT         1ST      MEDIATE    FINAL
   PLAINTIFF     COMMENCEMENT      CASE          STAKE(KRW)       TRIAL      APPEAL    APPEAL               CONTENT
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
<S>              <C>           <C>            <C>              <C>          <C>       <C>       <C>

Sam-Rang Kang     2003/06/24     Return of        250,000,000      Pending                      The plaintiff deposited three sheets
                                 Money in                                                       of check in the amount of 250
                                  Custody                                                       million Won with the deputy general
                                                                                                manager of Eungam-dong Branch of CHB
                                                                                                and received the receipt fixed by
                                                                                                such deputy general manager without
                                                                                                permission. So, the plaintiff
                                                                                                instituted this lawsuit to refund
                                                                                                such deposited money of 250 million
                                                                                                Won on a basis of such receipt
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Pal-Bok Bang      2002/08/05   Cancellation       130,000,000      Pending                      Young-Keun Kil and Eung-Jeong Kim
and two other                       of                                                          who are the debtors of Ansan Branch
parties                        Registration                                                     of CHB executed the exchange
                                 of Title                                                       contract by forgery and effected the
                                 Transfer                                                       registration of title transfer. The
                                                                                                plaintiff asserts that the cause for
                                                                                                such title transfer is invalid and
                                                                                                claims to perform the registration
                                                                                                of title transfer (approval).
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Jae-Hyun Lee      2002/12/13   Cancellation       360,000,000      Pending                      The plaintiff asserts that the title
                                    of                                                          transfer to the apartment house
                               Registration                                                     owned by himself was registered
                                 of Title                                                       through the fraud act of Shin-Chan
                                 Transfer                                                       Kang as defendant and thus such
                                                                                                transfer is invalid. Therefore, the
                                                                                                registration of kun-mortgage
                                                                                                underlying upon such title transfer
                                                                                                by CHB should be also cancelled.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Sammi Steel       1998/11/30   Objection to     4,542,190,704      Pending                      Sammi Steel Co., Ltd. (guarantor)
Co.,Ltd.                          Claims                                                        under the corporate reorganization
                                                                                                procedure asserts that the credits
                                                                                                of CHB were changed into shares and
                                                                                                notes in accordance with the
                                                                                                composition plan of Sammi Atlas
                                                                                                Canada and thus, the guarantee
                                                                                                obligation was also discharged
                                                                                                because the primary obligation was
                                                                                                discharged.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
IT Relay LTD.     2001/05/28     Return of    (pound) 851,000      Pending                      IT Relay Ltd. in UK (Jong-Woo Kim)
                                Remittance     (1,706 MM Won)                                   remitted (pound)851,000 at the
                                 Proceeds                                                       London branch of Shinhan Bank to
                                                                                                Jeong-Woong Kim who is the customer
                                                                                                of CHB, Eungamdong Branch. CHB paid
                                                                                                such amount in check to the payee.
                                                                                                The plaintiff, IT Relay Ltd. asserts
                                                                                                that it was illegal remittance made
                                                                                                through unlawful act and claims to
                                                                                                refund such remitted amount.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                         PROCEEDING
                                                               -------------------------------
                                                                             INTER-
                    DATE OF                      AMOUNT AT         1ST      MEDIATE    FINAL
   PLAINTIFF     COMMENCEMENT      CASE          STAKE(KRW)       TRIAL      APPEAL    APPEAL               CONTENT
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
<S>              <C>           <C>            <C>              <C>          <C>       <C>       <C>

Kwan-Boon Lee     2000/12/01   Cancellation       150,000,000        Win     Pending            The plaintiffs are the inheritors of
and one other                       of                                                          the collateral furnished to secure
person                         Registration                                                     the obligation of Kyung-Sook Ha as
                                 of Title                                                       borrower. The plaintiffs assert that
                                 Transfer                                                       the cause for title transfer
                                                                                                registration is invalid because
                                                                                                other inheritors in conspiracy made
                                                                                                the title transfer registration
                                                                                                excluding the plaintiffs
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Saewoon           2002/09/10   Cancellation    26,000,000,000      Pending                      CHB created the pledge over the
Construction                        of                                                          kun-mortgaged bonds which was
Co.,Ltd.                        Fraudulent                                                      provided by Seokyung Investment Co.,
                                    Act                                                         Ltd. to secure the loan obligation
                                                                                                of CNC Capital.Co.,Ltd. in the
                                                                                                amount of 26 billion Won. The
                                                                                                plaintiff instituted this lawsuit to
                                                                                                cancel the fraudulent act, asserting
                                                                                                that such creation of pledge by CHB
                                                                                                was fraudulent act.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Seok-Won Kim      2001/10/15   Objection to       150,000,000        Win                        Kang Il Kim as guarantor of Jangkog
                                Provisional                                                     Construction Co.,Ltd. sold its sole
                                Attachment                                                      own real property to his
                                                                                                acquaintance Seok-Won Kim and
                                                                                                thereafter, created new kun-mortgage
                                                                                                and cancelled the existing
                                                                                                kun-mortgage. CHB effected the
                                                                                                provisional attachment on such real
                                                                                                property of Seok Won Kim as debtor
                                                                                                and beneficiary on a basis of
                                                                                                compensation of the value of the
                                                                                                real property. So, Seok Won Kim
                                                                                                raised objection thereto.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Chong-Keun Chung  2002/06/20     Return of        500,000,000        Win     Pending            Chong-Keun Chung, the representative
                                   Stock                                                        director of old Daesung Timber,
                                Certificate                                                     provided his shares of 880,000 as
                                                                                                collateral to secure obligation of
                                                                                                Daesung Timber. With respect to
                                                                                                100,000 shares (par value: 5,000
                                                                                                Won) out of such 880,000 shares, the
                                                                                                plaintiff requested to return the
                                                                                                share certificate for the reason of
                                                                                                discharge of obligation.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Jeong-Tae Nam     2000/02/17    Removal of                  -        Lost      Win              With respect to the amusement
                                 Building,                                                      facility leased by Hyundai
                                   etc.                                                         International Merchant Bank relating
                                                                                                to the lessee Yuni Development
                                                                                                Co.,Ltd., the plaintiff instituted
                                                                                                this lawsuit, asserting removal of
                                                                                                such amusement facility. The counsel
                                                                                                for the lessee approved it.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                         PROCEEDING
                                                               -------------------------------
                                                                             INTER-
                    DATE OF                      AMOUNT AT         1ST      MEDIATE    FINAL
   PLAINTIFF     COMMENCEMENT      CASE          STAKE(KRW)       TRIAL      APPEAL    APPEAL               CONTENT
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
<S>              <C>           <C>            <C>              <C>          <C>       <C>       <C>

Company under     2003/01/20    Lawsuit for    26,201,436,120      Pending                      CHB enforced the shares received to
reorganization                    Denial                                                        secure obligation of Daewoo Motor
procedure                                                                                       Co., Ltd. in order to collect its
Daewoo Motor                                                                                    credits before the commencement of
Co., Ltd.                                                                                       corporate reorganization procedure
                                                                                                was determined. The receiver
                                                                                                instituted the lawsuit of denial
                                                                                                pursuant to the Corporate
                                                                                                Reorganization Act (denial of
                                                                                                enforcement).
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Kijinchulgu Co.   2001/05/02     L/C Price          U$361,370      Pending                      CHB as L/C opening bank notified its
   of Sandong,                                 Yen 28,161,040                                   dishonor for the reason acceptable
   China                                               Total:                                   under the terms of L/C. The
                                                  723,000,000                                   plaintiff institutes this lawsuit,
                                                          Won                                   asserting that CHB should pay the
                                                                                                amount of L/C because the plaintiff
                                                                                                submitted all document required
                                                                                                under the L/C.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Tong Yang         2003/06/12    Delivery of       262,000,000        Lost    Pending            After the Defendant was defeated at
Investment Bank                  Earnings                                                       the 1st trial, this case is pending
Defendant:                                                                                      at the appellate trial. However, if
Coret Trust                                                                                     the defendant is defeated, 7
Co.,Ltd.                                                                                        institutions including CHB should
                                                                                                return the substantial repayment
                                                                                                amount paid by the defendant because
                                                                                                the claims relating to right to
                                                                                                collect expense is judged as
                                                                                                unsecured credit. Thus, CHB
                                                                                                participated in order to support the
                                                                                                defendant to win the case.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Pahlaj Bajaj      2002/08/06   Compensation       995,000,000      Pending                      The plaintiff institutes this
&co. Pvt.Ltd                    for Damages                                                     lawsuit, asserting that the
                                                                                                plaintiff who was the lessor of the
                                                                                                business office of CHB, Mombai
                                                                                                Branch asserts that it was damaged
                                                                                                because CHB did not restore the
                                                                                                office to original condition when
                                                                                                CHB transferred such office.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                         PROCEEDING
                                                               -------------------------------
                                                                             INTER-
                    DATE OF                      AMOUNT AT         1ST      MEDIATE    FINAL
   PLAINTIFF     COMMENCEMENT      CASE          STAKE(KRW)       TRIAL      APPEAL    APPEAL               CONTENT
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
<S>              <C>           <C>            <C>              <C>          <C>       <C>       <C>

In-Yong Seo       1999.12.28   Compensation        70,000,000        Win    Partial    Pending  The plaintiff instituted this
                  (2001.7.26)   for Damages     = 224,250,000                 Lost              lawsuit to claim the compensation
                                                (Extension of                                   for damages which were allegedly
                                                      Claims)                                   incurred from the act committed by
                                                                                                Beom-Seok Seo, who is the brother of
                                                                                                the plaintiff (who is the president
                                                                                                of Elcanto, Pohang agency).
                                                                                                Beom-Seok Seo wrongfully used the
                                                                                                check delivered to him by submitting
                                                                                                the application for current check
                                                                                                affixed with the fabricated seal.
                                                                                                The plaintiff provided the
                                                                                                negligence of CHB to deliver the
                                                                                                check carelessly as cause for
                                                                                                action. This case was dismissed in
                                                                                                the original court. At the
                                                                                                intermediate trial, the part of
                                                                                                claims of the plaintiff was
                                                                                                accepted. So, the CHB appealed this
                                                                                                case to the higher court.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Hak-Seo Park      2003-03-31     Claim for        140,000,000      Pending                      Myung-Seo Park who embezzled the
                                Payment of                                                      funds of Kyeungyeung Engineering
                                  Check                                                         Co.,Ltd. withdrew the cashier's
                                 Amount                                                         check as part of embezzled funds.
                                                                                                With respect to this check, CHB
                                                                                                suspended payment, but the plaintiff
                                                                                                who is the brother of Myung-Seo Park
                                                                                                instituted this lawsuit, asserting
                                                                                                that the cashier's check was legally
                                                                                                delivered to him.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Korea Credit      2002/11/08      Partial         550,000,000      Pending                      CHB received the payment by
Guarantee Fund                  Enforcement                                                     subrogation in connection with the
and 1 other                         of                                                          credit guarantee issued by Korea
party                          Kun-Mortgage                                                     Credit Guarantee Fund and Korea
                                                                                                Technology Credit Guarantee Fund,
                                                                                                but the plaintiffs asserts that they
                                                                                                have preferential right to the
                                                                                                purchase price of the subject
                                                                                                machinery and tools and instituted
                                                                                                this lawsuit. CHB filed an answer to
                                                                                                the plaintiff's pleading for the
                                                                                                reason that it has the preferential
                                                                                                right because this case is
                                                                                                kun-mortgage.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Si-Eun Yoo         20/02/06    Cancellation       267,298,150       Lost      Lost    Pending   The plaintiff asserts that the
                                    of                                                          kun-mortgage agreement was executed
                               Kun-Mortgage                                                     through forgery of CHB employee. So,
                                                                                                the plaintiff instituted this
                                                                                                lawsuit to claim the cancellation of
                                                                                                the kun-mortgage agreement.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
Ing-Duk Park       03/05/22      Return of        251,800,000      Pending                      The plaintiff is the account holder
                               Bank Deposit                                                     relating to the embezzlement of
                                                                                                deposit savings by Ae-Kyung Lee
                                                                                                working at CHB's Wolsandong Branch.
                                                                                                The plaintiff instituted this
                                                                                                lawsuit to claim the return of his
                                                                                                savings deposit.
- ---------------  ------------  -------------  ---------------  -----------  --------  --------  ------------------------------------
</TABLE>


<PAGE>

CURRENT STATUS OF LITIGATION INSTITUTED AGAINST SUBSIDIARIES OTHER THAN CHOHUNG
INVESTMENT TRUST MANAGEMENT CO., LTD. (MORE THAN 100,000,000 WON)


CHB AMERICA BANK

Plaintiff:            Bankcard Services (Outsourcing company delegated with
                      business operation of credit card member shops by CHB
                      California before merger in 1998~2000)

Amounts at stake:     None

Details:              The power of management of member shops was sold to other
                      service company Card Data Service Inc. upon termination of
                      the member shop business operation on April 1, 2003. The
                      plaintiff asserts that it has preferential right as
                      outsourcing company with respect to such sale. This
                      assertion is groundless pursuant to the agreement. The
                      motion for dismissal was filed and is now pending.




CURRENT STATUS OF LITIGATION INSTITUTED AGAINST CHOHUNG INVESTMENT TRUST
MANAGEMENT CO., LTD. ("CHTMC") (MORE THAN 100,000,000 WON)

<TABLE>
<CAPTION>

     PLAINTIFF        AMOUNT AT STAKE   CASE NO. / CASE   COMPETENT COURT             CONTENT                          REMARK
- -------------------  ----------------  -----------------  ---------------  -------------------------------------   ----------------
<S>                  <C>               <C>                <C>              <C>                                     <C>
 Chonbang Co., Ltd   257,000,000 Won                                       The plaintiff asserts that CHITMC         1st Trial:
                                                                           has managed the MMF Fund to invest       Lost in part
                                                                           in Daewoo bonds rated as                     (5%)
                                                                           under-investment grade in the           2nd Trial: Win
                                                                           violation of the terms and              (approximately
                                                                           conditions under which MMF Fund is          247 MM
                                                                           originally scheduled to invest in            Won)
                                                                           only investment-grade securities.
                                                                           The plaintiff alleges that it was
                                                                           damaged from such investment and
                                                                           institutes this lawsuit to claim for
                                                                           compensation.
- -------------------  ----------------  -----------------  ---------------  -------------------------------------   ----------------
Tongyang Investment    3,253,000,000    Compensation for   Seoul District  The plaintiff asserts that CHITMC        Pending in the
        Bank                     Won        Damages            Court       has managed the MMF Fund to invest        first trial
                                                                           in Daewoo bonds rated as                     court
                                                                           under-investment grade in the
                                                                           violation of the terms and
                                                                           conditions under which MMF Fund is
                                                                           originally scheduled to invest in
                                                                           only investment-grade securities.
                                                                           The plaintiff alleges that it was
                                                                           damaged from such investment and
                                                                           institutes this lawsuit to claim for
                                                                           compensation.
- -------------------  ----------------  -----------------  ---------------  -------------------------------------   ----------------
  Youngjin Mutual    200,000,000 Won    Compensation for   Seoul District  The plaintiff asserts that CHITMC        Pending in the
 Savings Bank Joint                         Damages            Court       has invested in Daewoo bonds in            first trial
        Ltd.                                              Southern Branch  excess of 10% in the breach of terms         court
                                                                           and conditions under which MMF Fund
                                                                           could not invest in any single issue
                                                                           in excess of 10%. The plaintiff
                                                                           alleges that it was damaged from
                                                                           such investment and institutes this
                                                                           lawsuit to claim for compensation.
- -------------------  ----------------  -----------------  ---------------  -------------------------------------   ----------------
     Government       24,000,000,000    2002 Kahap48394    Seoul District  The plaintiff asserts that CHITMC        Pending in the
 Employees Pension               Won    Compensation for       Court       substituted the guaranteed Hynix           first trial
    Corporation                            Damages                         bonds, which were the original               court
(Co-defendant: CHB)                                                        investments, with non-guaranteed
                                                                           Hynix bonds at its own accord
                                                                           without the consent of the
                                                                           plaintiff. The plaintiff alleges
                                                                           that it was damaged from such
                                                                           investment and institutes this
                                                                           lawsuit to claim for compensation.
- -------------------  ----------------  -----------------  ---------------  -------------------------------------   ----------------
</TABLE>
<PAGE>

                                  SCHEDULE 4.10
                   COMPLIANCE WITH LAWS; REGULATORY APPROVALS

CHOHUNG BANK

1. MATTERS RELATING TO INSPECTION OR AUDIT OF FINANCIAL SUPERVISORY SERVICE, THE
   BOARD OF AUDIT AND INSPECTION OF KOREA AND THE BANK OF KOREA

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------

                                         FINANCIAL SUPERVISORY SERVICE
                     --------------------------------------------------------------------
                     CAUTIONARY   MEASURES   MATTERS                            ON-SITE
        BUSINESS     MATTERS IN  SUBJECT TO   TO BE    CORRECTIVE  CAUTIONARY  CORRECTIVE
YEAR      TYPE       MANAGEMENT   REPRIMAND  IMPROVED   MATTERS     MATTERS     MEASURES
- -----------------------------------------------------------------------------------------
<S>   <C>            <C>         <C>         <C>       <C>         <C>         <C>
2001    Deposit                                            1
- -----------------------------------------------------------------------------------------
         Trust           1           1          5          1           2
- -----------------------------------------------------------------------------------------
         Credit          6           2          1                      6
- -----------------------------------------------------------------------------------------
        Foreign
        Exchange                                           1           8
- -----------------------------------------------------------------------------------------
      Computation        2                      5          2           1
- -----------------------------------------------------------------------------------------
        Internal
        Control                                 2          1           1
- -----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
                         THE BOARD OF AUDIT AND       THE BANK
                           INSPECTION OF KOREA        OF KOREA
                     ------------------------------------------------
        BUSINESS
YEAR      TYPE       NOTICE  CAUTION  RECOMMENDATION   OTHERS   TOTAL
- ---------------------------------------------------------------------
<S>   <C>            <C>     <C>      <C>             <C>       <C>
2001    Deposit                                          1        2
- ---------------------------------------------------------------------
         Trust                                                   10
- ---------------------------------------------------------------------
         Credit                                          3       18
- ---------------------------------------------------------------------
        Foreign
        Exchange                                         2       11
- ---------------------------------------------------------------------
      Computation                                                10
- ---------------------------------------------------------------------
        Internal
        Control                                                   4
- ---------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- -----------------------------------------------------------------------------------------
<S>   <C>            <C>         <C>         <C>       <C>         <C>         <C>
        Business
       Management        9                      5          2           3
- -----------------------------------------------------------------------------------------
          Risk
       Management        4
- -----------------------------------------------------------------------------------------
       Real Name
       Financial
      Transaction
- -----------------------------------------------------------------------------------------
          Fund
       Management        2
- -----------------------------------------------------------------------------------------
        Finance          3                      2                      2
- -----------------------------------------------------------------------------------------
      International
        Business
- -----------------------------------------------------------------------------------------
      Credit Card                               1
- -----------------------------------------------------------------------------------------
        SUBTOTAL        27           3         21          8          23
- -----------------------------------------------------------------------------------------
2002    Deposit                                            1
- -----------------------------------------------------------------------------------------
         Trust                                                         1
- -----------------------------------------------------------------------------------------
         Credit          5           1          1          1           1
- -----------------------------------------------------------------------------------------
        Foreign
        Exchange         1                      1                      2
- -----------------------------------------------------------------------------------------
      Computation                               1          2
- -----------------------------------------------------------------------------------------
        Internal
        Control          1                      1                      1
- -----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
- ---------------------------------------------------------------------
<S>   <C>            <C>     <C>      <C>             <C>       <C>
        Business
       Management                                                 19
- ---------------------------------------------------------------------
          Risk
       Management                                                  4
- ---------------------------------------------------------------------
       Real Name
       Financial
      Transaction
- ---------------------------------------------------------------------
          Fund
       Management                                                  2
- ---------------------------------------------------------------------
        Finance                                                    7
- ---------------------------------------------------------------------
      International
        Business
- ---------------------------------------------------------------------
      Credit Card                                                  1
- ---------------------------------------------------------------------
        SUBTOTAL                                         6        88
- ---------------------------------------------------------------------
2002    Deposit                                          1         2
- ---------------------------------------------------------------------
         Trust                                                     1
- ---------------------------------------------------------------------
         Credit                                          5        14
- ---------------------------------------------------------------------
        Foreign
        Exchange                                         1         5
- ---------------------------------------------------------------------
      Computation                                                  3
- ---------------------------------------------------------------------
        Internal
        Control                                                    3
- ---------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- -----------------------------------------------------------------------------------------
<S>   <C>            <C>         <C>         <C>       <C>         <C>         <C>
        Business
       Management        10                     3                      3
- -----------------------------------------------------------------------------------------
          Risk
       Management         2
- -----------------------------------------------------------------------------------------
       Real Name
       Financial
      Transaction
- -----------------------------------------------------------------------------------------
          Fund
       Management         1
- -----------------------------------------------------------------------------------------
        Finance                                                        2
- -----------------------------------------------------------------------------------------
      International
        Business
- -----------------------------------------------------------------------------------------
      Credit Card         1
- -----------------------------------------------------------------------------------------
        SUBTOTAL         21          1          7          4          10
- -----------------------------------------------------------------------------------------
     TOTAL               48          4         28         12          33
- -----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
- ---------------------------------------------------------------------
<S>   <C>            <C>     <C>      <C>             <C>       <C>
        Business
       Management                                                16
- ---------------------------------------------------------------------
          Risk
       Management                                                 2
- ---------------------------------------------------------------------
       Real Name
       Financial
      Transaction
- ---------------------------------------------------------------------
          Fund
       Management                                                 1
- ---------------------------------------------------------------------
        Finance                                                   2
- ---------------------------------------------------------------------
      International
        Business
- ---------------------------------------------------------------------
      Credit Card                                                 1
- ---------------------------------------------------------------------
        SUBTOTAL                                         7       50
- ---------------------------------------------------------------------
     TOTAL                                              13      138
- ---------------------------------------------------------------------
</TABLE>

2. MATTERS RELATING TO FAIR TRADE COMMISSION

- -        With respect to abuse of the market controlling status of BC Card Co.,
     Ltd, 12 member banks, LG Capital Co., Ltd and Samsung Card Co., Ltd, on
     March, 2001, the corrective order (Resolution no. 2001-040) was rendered
     and the penalty surcharge in the amount of 357,100,000 Won was imposed. The
     penalty surcharge imposed on CHB is reduced into 353,400,000 Won.

- -        With respect to unfair joint activity relating to differential
     application of the merchant charge for the departments by Kookmin Card Co.,
     Ltd, Korea Exchange Card Co., Ltd., Samsung Card Co., Ltd, LG Card Co., Ltd
     and BC Card Co. Ltd, on November, 2002, the penalty

<PAGE>

     surcharge in the amount of 340,000,000 Won was imposed (Resolution no.
     2002-341). The allotted charge of CHB is 39,432,000 Won.

- -        Around March, 2002, Korea Federation of Community Credit Cooperative
     instituted the lawsuit for the reason of unfair joint activity and
     transaction activity subject to confinement against BC Card Co. Ltd to the
     Fair Trade Commission.

- -        With respect to transaction rejection activity of 7 banks including
     CHB, the corrective order (Resolution no. 2002-0001) was rendered on
     January, 2002.

- -        Hyundai International Merchant Bank was merged into Kangwon Bank on
     February, 1999 and Kangwon Bank was merged into CHB on September, 1999.
     With respect to unfair assistance activity to 17 Hyundai affiliates, such
     as Hyundai Investment Trust Management Co., Ltd, the corrective order
     (Resolution no. 99-213) has been rendered. CHB instituted the lawsuit for
     cancellation of corrective order (Case no. 2000 Nu 4943) to the Seoul High
     Court and it is currently pending.

- -        Hyundai International Merchant Bank was merged into Kangwon Bank on
     February, 1999 and Kangwon Bank was merged into CHB on September, 1999.
     With respect to unfair assistance activity to Aluminum of Korea Ltd. and
     Mando Machinery Cooperation by way of acceptance of private convertible
     bonds or commercial papers, etc, the corrective order (Resolution no.
     98-171) was rendered and the penalty surcharge in the amount of
     644,000,000 Won was imposed. CHB instituted the lawsuit for cancellation of
     corrective order and imposition of the penalty surcharge (Case no. 2001 Du
     6197) to the Supreme Court and it is currently pending.

3. DETAILS OF FINANCIAL ACCIDENTS RELATING TO EMBEZZLEMENT AND MISAPPROPRIATION
   OF EMPLOYEES (2000.1.1~PRESENT)

                                                             (Unit: Million Won)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
       ACCIDENT   ACCIDENT
YEAR     DATE      AMOUNT        BRANCH                   CONTENTS             BALANCE              RESULT               REMARKS
====================================================================================================================================
<S>    <C>        <C>       <C>                <C>                             <C>      <C>                             <C>
2000    94.7.30      249    Kyedong Branch     Unfair withdrawal of suspense      245   Offender: Disciplinary
        ~95.7.8               (Formerly,       receipts and inter-bank                  Dismissal                        Accused
                             Kangwon Bank      adjustment funds in dealing              Person Concerned: 2             on January
                             Seoul Branch)     with clearance business and              Persons for Reprimand, 5         19, 2000
                                               embezzlement thereof                     Persons for Warning, 25
                                                                                        Persons for Caution
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>              <C>  <C>                <C>                                 <C>  <C>                             <C>
2000     98.8.14       108    Soosongdong      Misappropriation of                   0  Offender: Suspension from
        ~99.7.21                Branch         miscellaneous deposits, credit           Office for 6 months
                                               card fees and current                    Person Concerned: 1 Person
                                               deposits, etc.                           for Reprimand, 5 Persons for
                                                                                        Warning, 15 Persons for
                                                                                        Caution
                                                                                        Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
2000    2000.1.8       500      Chungbu        Embezzlement of the loans            74  Offender: Disciplinary          Confined
       ~2000.1.8               Corporate       extended after provision of              Dismissal                       on April
                            Financial Center   other banks with collateral                                              21, 2000
                                               obtained by illegal theft of
                                               treasury bonds, which are
                                               property collaterals
- ------------------------------------------------------------------------------------------------------------------------------------
2000    99.12.1~        70   Ulsan Central     Embezzlement of the cash in CD        0  Offender: Disciplinary
       2000.4.12                Branch         machines located in any other            Dismissal
                                               place other than the branch              Person Concerned: 2 Persons
                                                                                        for Warning, 5 Persons for
                                                                                        Warning
                                                                                        Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
2000     99.7.28       325  Pohang Nam         Fraud of the loans and the          314  Offender: Disciplinary          Prosecuted
      ~2000.3.23              Branch           amounts withdrawn from cash              Dismissal                       on June 27,
                                               service of the credit card,              Person Concerned: 1                2000
                                               based on the false credit                Person for Salary Reduction, 2
                                               documents                                Persons for Reprimand
- ------------------------------------------------------------------------------------------------------------------------------------
2000     00.6.17       350   Wonju Branch      Embezzlement of the cash              0  Offender: Disciplinary
        ~00.6.17                               received from forgery of the             Dismissal
                                               receipt of cash transportation           Person Concerned: 1
                                               between other banks and other            Person for Warning
                                               banks                                    Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
2000     00.8.23        15  Seochodong         Embezzlement of some bundles          0  Offender: Disciplinary
        ~00.8.23              Branch           of cash in the safe                      Dismissal
                                                                                        Person Concerned: 1
                                                                                        Person for Warning, 1 Person
                                                                                        for Caution
                                                                                        Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
2000     00.1.25       126   Yangpyungdong     Remittance without sources,         103  Offender: Disciplinary          Prosecuted
         ~00.9.2                Branch         correction of the receipt of             Dismissal                       October 23,
                                               customer's deposits and                  Person Concerned: 4                2000
                                               embezzlement of public                   Persons for Reprimand Full
                                               imposts, etc                             payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>             <C>  <C>                <C>                                 <C>  <C>                             <C>
2000     00.3.30        46   Dogokdong         Fraud of the card use amounts         0  Offender: Suspension from
        ~00.6.24               Branch          after issuance of the card               Office for 6 months
                                               based on the false credit card           Person Concerned: 1 Person for
                                               application                              Warning, 5 Persons for Caution
                                                                                        Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
2000    00.10.31       231  Hwajeongdong       Fraud of the loans extended by      183  Offender: Disciplinary          Prosecuted
        ~00.11.9               Branch          the false credit documents and           Dismissal                       November 13,
                                               private money borrowing and              Person Concerned: 1 Person for     2000
                                               lending, etc.                            Suspension from Office, 3
                                                                                        Persons for Reprimand, 3
                                                                                        Persons for Warning
- ------------------------------------------------------------------------------------------------------------------------------------
2000    00.11.30         1    Hwajeong         Correction (temporary                 0  Offender: Salary Reduction for
       ~00.11.30               Branch          misappropriation) after                  6 months
                                               illegal withdrawal of the                Full payment of accident
                                               customer's deposits                      amount
- ------------------------------------------------------------------------------------------------------------------------------------
2000    00.10.28        23   Bujeondong        Embezzlement of the cash in CD        0  Offender: Suspension from
       ~00.10.28               Branch          machines                                 Office for 6 months
                                                                                        Person Concerned: 1 Person for
                                                                                        Reprimand, 2 Persons for
                                                                                        Warning
                                                                                        Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
2000     00.6.24        27  Sachang Nambu      Embezzlement of public imposts        0  Offender: Suspension from
       ~00.12.21               Branch                                                   Office for 6 months
                                                                                        Person Concerned: 1 Person for
                                                                                        Warning, 4 Persons for Caution
                                                                                        Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>              <C> <C>                <C>                                   <C>  <C>                             <C>
2001    00.10.29        11   Ssangmundong      Embezzlement of public imposts        0    Offender: Suspension from
       ~00.12.30                Branch                                                    Office for 6 months
                                                                                          Person Concerned: 1 Person for
                                                                                          Caution
                                                                                          Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001     00.8.31        53    Myunmokdong      Fraud of the loans extended by        0    Offender: Suspension from
        ~00.12.7                Branch         the false credit documents,                Office for 3 months
                                               private money borrowing and                Person Concerned: 1 Person for
                                               lending and violation of the               Salary Reduction, 2 Persons for
                                               real name financial                        Warning
                                               transaction, etc.                          Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001     00.4.20        11    Hupyungdong      Embezzlement of public imposts        0    Offender: Suspension from
        ~01.1.31                Branch                                                    Office for 6 months
                                                                                          Person Concerned: 1 Person for
                                                                                          Caution
                                                                                          Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001     01.3.22         1     Bomundong       Embezzlement of the cash lost         0    Offender: Disciplinary
        ~01.3.22                 Branch        by a customer in the office                Dismissal
                                               for payment of the default                 Person Concerned: 3 Persons
                                               money of the credit card                   for Warning
                                                                                          Full payment of accident
                                                                                          amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001      01.4.4        30   Sokcho Branch     Computational manipulation of         0    Offender: Disciplinary
         ~01.4.4                               delivery and payment of the                Dismissal
                                               cash in CD machines and                    Person Concerned: 2 Persons for
                                               embezzlement of such cash                  Warning
                                                                                          Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001    00.11.13        20  Yicheon Branch     Computational manipulation of         0    Offender: Disciplinary
        ~01.4.11                               delivery and payment of the                Dismissal
                                               cash in CD machines and                    Person Concerned: 2 Persons for
                                               embezzlement of such cash                  Reprimand, 3 Persons for Warning
                                                                                          Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>             <C>  <C>                <C>                                 <C>   <C>                             <C>
2001      00.9.9       199   Onsan Branch      Rejection of subrogation due          0   Offender: Disciplinary
         ~00.9.9                               to the loans extended by                  Dismissal
                                               ignoring the special                      Person Concerned: 2
                                               conditions of the credit L./G             Persons for Reprimand
                                                                                         Full payment of accident
                                                                                         amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001     00.1.26       0.6  Kwangju Branch     Embezzlement of the small sum         0   Offender: Suspension from
        ~00.4.28                               deposits in hand after                    Office for 6 months
                                               discretionary registration of             Person Concerned: 1 Person
                                               the debit card for the                    for Warning, 1 Person for
                                               convenience of customer's                 Caution
                                               deposit transactions                      Full payment of accident
                                                                                         amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001     00.6.20       4.7   Jeonnongdong      After making cash service             0   Offender: Disciplinary
        ~00.6.20                Branch         transfer with BC card of the              Dismissal
                                               customer, not returning the               Person Concerned: 1 Person
                                               card, withdrawal of the                   for Caution
                                               customer's deposits from CD               Full payment of accident
                                               machines and embezzlement                 amount
                                               thereof
- ------------------------------------------------------------------------------------------------------------------------------------
2001      00.2.7         8   Juahn Branch      Embezzlement of public imposts        0   Offender: Disciplinary
         ~00.9.8                                                                         Dismissal
                                                                                         Person Concerned: 3 Persons
                                                                                         for Warning
                                                                                         Full payment of accident
                                                                                         amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001     97.6.10       117   Kangnam Central   Fraud of the loans extended by       53   Offender: Disciplinary          Prosecuted
        ~01.3.23                 Branch        the false credit documents and            Dismissal                       on August
                             Shihwa Kongdan    embezzlement of the refund of             Person Concerned: 3             24, 2001
                                 Branch        the deposit money                         Persons for Warning, 2
                                                                                         Persons for Caution
- ------------------------------------------------------------------------------------------------------------------------------------
2001     00.6.22        69    Suwon Branch     Embezzlement of public imposts        0   Offender: Disciplinary
       ~00.10.24                                                                         Dismissal
                                                                                         Person Concerned: 2
                                                                                         Persons for Warning
                                                                                         Full payment of accident
                                                                                         amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001     94.4.28       145   Seongnam Branch   After discretionary receipt of      114   Offender: Disciplinary          Accused on
       ~95.10.17                               slips of the uncollected                  Dismissal
                                               domestic exchange bonds,                  Person Concerned: 9 Persons
                                                                                         for
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>             <C>  <C>                <C>                                 <C>  <C>                             <C>
                            Mikeum Station     withdrawal (destruction of               Warning, 7 Persons              August 31,
                                Branch         slips) and embezzlement                  for Caution                        2001
                                               thereof

- ------------------------------------------------------------------------------------------------------------------------------------
2001     01.9.14        35   Ulsan Branch      Misappropriation of the funds         0  Offender: Disciplinary
        ~01.9.14                               after payment without sources            Dismissal
                                               into other banks                         Person Concerned: 1 Person
                                                                                        for Reprimand, 2 Persons for
                                                                                        Warning
                                                                                        Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001      01.7.9         5     Business        Fraud of the difference                  Offender: Disciplinary
       ~01.11.12              Operational      accrued from double                      Dismissal
                              Department       manipulation of the foreign              Person Concerned: 1 Person
                                               exchange rate at the time of             Persons for Reprimand, 5
                                               customer exchange                        for Salary Reduction, 3
                                                                                        Persons for Warning, 1 Person
                                                                                        for Caution
                                                                                        Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
2001      01.8.7       288    Shinwoldong      Misappropriation from unfair             Offender: Disciplinary
       ~01.11.24                Branch         extension of the loans secured           Dismissal
                                               by the customer's deposits               Person Concerned: 5 Persons
                                               through internet banking                 for Warning
                                               system                                   Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
2002      00.9.6       487    Tyeokyedong      After discretionary                 362  Offender: Disciplinary          Prosecuted
        ~02.5.15                Branch         registration of the internet             Dismissal                       on May 31,
                            Kangwon Business   banking system, embezzlement             Person Concerned: 2             2002 and
                              Operational      of the security for deposits             Persons for Salary Reduction,   currently
                              Department       and credit loans, etc                    1 Person for Reprimand, 3       in prison
                                                                                        Persons for Warning
- ------------------------------------------------------------------------------------------------------------------------------------
2002     02.5.13       150   Bulkwangdong      Embezzlement of the cash              0  Offender: Disciplinary
        ~02.6.10                Branch         withdrawn from remittance                Dismissal
                                               without sources into the                 Person Concerned: 1 Person
                                               principal's accounts                     for Reprimand, 1 Person for
                                                                                        Warning
                                                                                        Full payment of accident
                                                                                        amount
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S>    <C>             <C>  <C>                <C>                                <C>  <C>                              <C>
2002     00.7.29        19     Dohwadong       Misappropriation of discounted       0  Offender: Suspension from
        ~00.7.29                Branch         notes, default interest                 Office for 6 months
                                               (special bonds) and received            Person Concerned: 1 Person for
                                               amounts                                 Warning, 1 Person for Caution
                                                                                       Full payment of accident
                                                                                       amount
- ------------------------------------------------------------------------------------------------------------------------------------
2002     02.5.14       212    Shihungdong      Embezzlement of the cash             0  Offender: Disciplinary
        ~02.8.14                Branch         withdrawn from remittance               Dismissal
                                               without sources into the                Person Concerned: 1  Person for
                                               principal's accounts                    Reprimand, 2 Persons for
                                                                                       Warning
                                                                                       Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
2002      98.3.4       563  Wolsandong Branch  After discretionary                460  Offender: Disciplinary            Accused on
       ~02.10.30              Hwajeongdong     re-issuance of the deposit and          Dismissal                        November 15,
                                 Branch        trust passbooks, embezzlement           Person Concerned: 2 Persons        2002 and
                            Daeindong Branch   from their early termination            for Salary Reduction,             currently
                                                                                       1 Person for Reprimand, 6         in prison
                                                                                       Persons for Warning
- ------------------------------------------------------------------------------------------------------------------------------------
2002    02.10.11        30   Deungchondong     Embezzlement of public imposts       0  Offender: Disciplinary            Accused on
       ~02.12.10                 Branch                                                Dismissal                         January 7,
                                                                                       Person Concerned: 3 Persons        2003 and
                                                                                       for Warning                       currently
                                                                                       Full payment of accident amount   in prison
- ------------------------------------------------------------------------------------------------------------------------------------
2003     03.2.27         1   Inchon Airport    Fraud of the difference              0  Offender: Suspension from
        ~03.3.16                 Branch        accrued from double                     Office for 1 month
                                               manipulation of the foreign             Full payment of accident amount
                                               exchange rate at the time of
                                               customer exchange
- ------------------------------------------------------------------------------------------------------------------------------------
2003    02.12.31        14   Jamsil Branch     Embezzlement of public imposts       0  Offender: Disciplinary
        ~03.4.10                                                                       Dismissal
                                                                                       Person Concerned: 3 Persons
                                                                                       for Warning
                                                                                       Full payment of accident amount
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S>     <C>              <C>   <C>             <C>                                   <C>  <C>                           <C>
2003     03.4.30         0     Eungamdong      Drain of the CD certificates          0    Under disciplinary actions     Accused on
        ~03.5.20                 Branch        and false issuance thereof in                                            May 26, 2003
                                               consideration of money and                                                  and
                                               goods in conspiracy with the                                              currently
                                               confidence group                                                          in prison
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

SUBSIDIARY OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD

CHB Germany Bank was examined by FSS on June, 2002 and was required to rectify 5
cautionary matters in management for overall businesses. And then, CHB completed
to perform such cautionary matters in management on March, 2003 and reported it
to FSS.

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD

1. MATTERS RELATING TO INSPECTION OR AUDIT OF FINANCIAL SUPERVISORY SERVICE, THE
   BOARD OF AUDIT AND INSPECTION OF KOREA AND THE BANK OF KOREA

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
                                         FINANCIAL SUPERVISORY SERVICE
           BUSINESS  --------------------------------------------------------------------
YEAR         TYPE    CAUTIONARY   MEASURES   MATTERS                            ON-SITE
                     MATTERS IN  SUBJECT TO   TO BE    CORRECTIVE  CAUTIONARY  CORRECTIVE
                     MANAGEMENT  REPRIMAND   IMPROVED   MATTERS     MATTERS     MEASURES
- -----------------------------------------------------------------------------------------
<S>        <C>       <C>         <C>         <C>       <C>         <C>         <C>
  July,     Trust                                          1
  2000     ------------------------------------------------------------------------------
           SUBTOTAL                                        1
- -----------------------------------------------------------------------------------------
February,   Trust                   1
  2001     ------------------------------------------------------------------------------
           SUBTOTAL                 1
- -----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
                         THE BOARD OF AUDIT AND       THE BANK
                           INSPECTION OF KOREA        OF KOREA
           BUSINESS  ------------------------------------------------
YEAR         TYPE    NOTICE  CAUTION  RECOMMENDATION   OTHERS   TOTAL
- ---------------------------------------------------------------------
<S>        <C>       <C>     <C>      <C>              <C>      <C>
  July,     Trust                                                 1
  2000     ----------------------------------------------------------
           SUBTOTAL                                               1
- ---------------------------------------------------------------------
February,   Trust                                                 1
  2001     ----------------------------------------------------------
           SUBTOTAL                                               1
- ---------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- -----------------------------------------------------------------------------------------
<S>       <C>        <C>         <C>         <C>       <C>         <C>         <C>
            Trust                   2                                 4             2
          -------------------------------------------------------------------------------
 August,   Internal                              1
  2001     Control
          -------------------------------------------------------------------------------
           SUBTOTAL                 2            1                    4             2
- -----------------------------------------------------------------------------------------
          TOTAL                     3            1         1          4             2
- -----------------------------------------------------------------------------------------
</TABLE>

<TABLE>
- ---------------------------------------------------------------------
<S>       <C>        <C>     <C>      <C>              <C>      <C>
            Trust                                                 8
          -----------------------------------------------------------
 August,   Internal                                               1
  2001     Control
          -----------------------------------------------------------
           SUBTOTAL                                               9
- ---------------------------------------------------------------------
          TOTAL                                                   11
- ---------------------------------------------------------------------
</TABLE>

2. MATTERS RELATING TO FAIR TRADE COMMISSION

N/A
<PAGE>

                                  SCHEDULE 4.11
                                      TAXES

CHOHUNG BANK

N/A

SUBSIDIARY OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD

N/A

<PAGE>

                                SCHEDULE 4.12(a)
                            EMPLOYEE BENEFITS MATTERS

CHOHUNG BANK

1. COMPENSATION FOR UNUSED DAYS OF MONTHLY LEAVE

- -    Provisions regarding monthly leave in the Rules of Employment ("ROE"): One
     (1) day of monthly leave for each month (From July 1, 2002, the individual
     monthly leave is not granted due to the implementation of the Five-day
     Workweek System).

- -    Case where compensation for the unused days of monthly leave has not been
     paid: N/A

2. ALLOWANCE FOR WORK OUTSIDE REGULAR WORKING HOURS

- -    Provisions in the ROE: Compensation for overtime work is stipulated as
     required by the pertinent law (In case of overtime work, nighttime work, or
     day-off work which is performed before or after business hours, the
     employer shall pay the allowance equivalent to 1.5/183 of the ordinary wage
     for each hour of work outside regular working hours).

- -    Status of operation: The above allowance is paid for the overtime work
     performed by special service and general service employees.

- -    Remark: With respect to nighttime work, day-off work, and overtime work,
     although it is difficult to eliminate the concerns about any potential
     legal disputes, such as a claim for the failure to pay the compensation
     amount, it is true that any action or legal dispute regarding the unpaid
     allowance for work outside regular working hours has not been brought up to
     date.

3. SUSPENSION OF AGREED AMOUNT OF THE WAGE INCREASE

N/A

(Upon the wage negotiation for the year 2001, the Union and the Company agreed
to apply the wage increase for the year 2000 and the year 2001 starting from
January 1, 2002, and it has been applied.)

4. RETURN OF REGULAR BONUS

N/A

(In 1998, the regular bonus was returned on a discriminative basis (160% up to
250%) pursuant to each position grade in accordance with the agreement with the
Union (dated May 30, 1998). However, the prescription of the wage claim (3
years) has already elapsed.)

<PAGE>

5. RETURN OF WELFARE BENEFIT SUBSIDIES

N/A

(In 1998, some welfare benefit subsidies were suspended from January 1, 1998
until December 31, 1998 in accordance with the agreement with the Union (dated
May 30, 1998). However, the prescription of the wage claim (3 years) has already
elapsed.)

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT

COMPENSATION FOR UNUSED DAYS OF MONTHLY LEAVE

The Leave Regulation and the Remuneration Regulation provide that any unused
days of monthly leave shall be compensated. However, from January 1, 1999 until
October 30, 2002, the use of monthly leave was obligatory (one (1) weekday, two
(2) Saturdays), and since November 1, 2002 to the present, the Five-day Workweek
System and the Saturdays-off System have been temporarily implemented. In this
regard, Company regulations will be amended after the Labor Standards Act is
confirmed.

The above matters were implemented after a full discussion with and a notice to
the officers and employees, and in this regard, there has been no legal dispute.

<PAGE>

                                SCHEDULE 4.12(b)
                            EMPLOYEE BENEFITS MATTERS

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                SCHEDULE 4.13(a)
                                      LABOR

CHOHUNG BANK

1. DETAILS OF COLLECTIVE BARGAINING AGREEMENT, ETC.

     A. Collective Bargaining Agreement

          - Composition : preamble, 108 articles in the text, 7 articles in the
           addendum, and 1 attachment

          - Date of Execution : May 23, 2002

          - Parties : Heads of 26 financial institutions, Chairman of the
           Financial Industry Union, and respective Chairman of each Branch
           Union

          - Major Provisions : Any and all matters in relation to the Company
           and the Union including working conditions and the Union activities

     B. Agreement on Five-day Workweek System (including Supplementary
Agreement)

          - Composition : 10 articles in the text and 1 article in the
           attachment

          - Date of Execution : May 23, 2002

          - Parties : Heads of 26 financial institutions, Chairman of the
           Financial Industry Union, and respective Chairman of each Branch
           Union

          - Major Provisions : Matters regarding the Five-day Workweek System

     C. Agreement on Job Security

          - Composition : 11 articles in the text and 2 articles in the addendum

          - Date of Execution : May 23, 2002

          - Parties : Heads of 26 financial institutions, Chairman of the
           Financial Industry Union, and respective Chairman of each Branch
           Union

          - Major Provisions : Any and all matters regarding job security of
           employees

     D. Agreement on Company Development Committee

          - Composition : 7 articles in the text and 2 articles in the addendum

          - Date of Execution : May 23, 2002

          - Parties : Heads of 26 financial institutions, Chairman of the
           Financial Industry Union, and respective Chairman of each Branch
           Union

          - Major Provisions : Any and all matters regarding the Company
           Development Committee

     E. Supplementary Agreement of Collective Bargaining Agreement

          - Composition : 47 articles in the text, 4 articles in the addendum,
           and 6 articles in the attachment

          - Date of Execution : December 26, 2002

          - Parties : President of Chohung Bank, and Chairman of Chohung Bank
           Branch Union

<PAGE>

          - Major Provisions : Any and all matters in relation to the Company
           and the Union including the detailed matters regarding the Collective
           Bargaining Agreement

     F. Remuneration Agreement

          - Composition : 14 articles in the text, 4 articles in the addendum,
           and 1 article in the attachment

          - Date of Execution : December 26, 2002

          - Parties : President of Chohung Bank, and Chairman of Chohung Bank
           Branch Union

          - Major Provisions : Any and all matters regarding the remuneration

     G. Supplementary Agreement on the Five-day Workweek System

          - Composition : 5 articles in the text

          - Date of Execution : June 29, 2002

          - Parties : President of Chohung Bank, and Chairman of Chohung Bank
           Branch Union

          - Major Provisions : Matters regarding the Five-day Workweek System

     H. Agreement etc.

          - 2003.4.15: Agreement (Regarding the operation of the
          representative office in Kangwon Land Casino)

          - 2003.2.25: Agreement (Regarding the collection of the donation for
          the "Daegu subway disaster" victims' relief)

          - 2002.12.16: Agreement (Regarding the wage increase)

          - 2002.10.2: Agreement (Performance based payment for employees in
          charge of the funds operation)

          - 2002.8.23: Agreement (Regarding the performance based payment
          system)

          - 2002.8.12: Agreement (Collection of the donation for the flood
          victims' relief)

          - 2002.7.3: Agreement (Regarding the operation of offices on
          Saturdays)

          - 2002.6.29: Agreement (Regarding the five-day workweek system)

          - 2002.6.26: Agreement (Payment of the duty allowance in connection
          with the strike of CAPS)

          - 2002.1.28: Agreement (Regarding the payment of the car maintenance
          subsidy and commuting subsidy)

          - 2002.1.26: Agreement (Regarding CHB Chohung family Hanmaum pledge)

          - 2001.10.5: Agreement (Regarding the wage increase)

          - 2001.9.29: Agreement (Regarding the amendment of the compensation
          system and the abolishment of a reduction and the exemption from the
          loan rate for the officers and employees)

          - 2001.6.8: Agreement (Collection of the donation for the drought
          victims' relief)

          - 2001.5.23: Agreement (Regarding the operation of the branch office
          in the Inchon international airport)

          - 2001.5.7: Agreement (Regarding the increase of loan rate for the
          officers and employees)

          - 2001.3.29: Agreement (Regarding the commuting allowance and car

<PAGE>

          maintenance subside)

          - 2001.3.2: Agreement (Regarding the operation of branch office in
          the National Cancer Center)

          - 2001.1.31: Agreement (Regarding the voluntary resignation)

          - 2001.1.16: Agreement (Regarding the development of new system for
          credit card)

          - 2001.1.8: Agreement (Regarding the change of severance payment
          standards)

          - 2001.1.3: Agreement (Regarding the development of new system for
           credit card)

     I. Labor Management Council Agreement

          - 2002.12.26: Extraordinary Labor Management Council(the "LMC")
          Agreement

          - 2002.4.25: LMC Agreement in the first quarter of 2002

          - 2001.5.7: LMC Agreement in the first quarter of 2001

          - 2000.12.30: LMC Agreement in the third quarter of 2000

          - 2000. 5.30: LMC Agreement in the first quarter of 2000

2. DETAILS OF NON-COMPLIANCE OF COLLECTIVE BARGAINING AGREEMENT, ETC.

The collective bargaining agreement as of May 23, 2002, provides as follows:

     The Bank may pay a special severance pay in addition to the statutory
     severance pay to an employee who is over 45 years old, has worked for 20
     years or longer, and voluntarily retires before reaching the retirement
     age. However, the employer and the Union shall separately determine the
     detailed matters..

Article 44 of the Supplementary Agreement in relation to the Special Severance
Payment for an employee who retires at an age equivalent to the retirement age,
provides as follows:

     The Company shall pay the special severance pay in addition to the
     statutory severance pay to the employee who is over 45 years old, has
     worked for 20 years or longer, and voluntarily retires before reaching
     retirement age. The special severance pay set forth in Item 1. shall
     comply with the separate agreement between the employer and the Union.

The employer and the Union, however, did not come to an agreement concerning the
scope of a special severance pay.

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT

CHOHUNG VINA BANK (VIETNAM)

1. DETAILS OF COLLECTIVE BARGAINING AGREEMENT, ETC.

<PAGE>

     Collective Bargaining Agreement

      - Composition: 12 articles in the text

      - Date of Execution: April 23, 2001.

      - Parties: Chairman of labor union and the president of Chohung Vina Bank

      - Major Provisions: All matters concerning labor and management including
      working conditions and matters regarding union activities

2. DETAILS OF NON-COMPLIANCE OF COLLECTIVE BARGAINING, ETC.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT

N/A

<PAGE>

                                SCHEDULE 4.13(b)
                                      LABOR

CHOHUNG BANK

- -    On November 5, 2002, the Korea Financial Industrial Union Chohung Bank
   Branch Union submitted the application for mediation of a labor dispute in
   relation to the Wage Agreement and the Collective Bargaining Agreement of the
   year 2002.

- -    From 09:30 of June 18, 2003 to 08:30 of June 22, 2003, a general strike
   against selling Chohung Bank

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT

N/A

<PAGE>

                                SCHEDULE 4.13(c)
                                      LABOR

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                SCHEDULE 4.14(a)
                                    CONTRACTS

N/A

<PAGE>

                                SCHEDULE 4.14(b)
                                    CONTRACTS

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                SCHEDULE 4.14(c)
                                    CONTRACTS

CHOHUNG BANK

- -    US$ 100,000,000 Transferable Term Loan Facility Agreement for Chohung Bank,
   arranged by Arab Bank Plc, The Korea Development Bank, Singapore Branch,
   Standard Chartered Bank with The Korea Development Bank, Singapore Branch
   as agent

   It is provided in Paragraph 7.1 (Early Prepayment) that if the Korean
   Government is disqualified from the direct or indirect largest shareholder
   for the shares issued by the Borrower, and at the Majority Banks(i)'
   discretion, such disqualification is likely to give a material adverse effect
   to the current or future financial situation of the Borrower, the Agent (i)
   may give a notice of cancellation of the lending obligations of the Lender to
   the Borrower (if it is instructed by the Majority Banks, the Agent shall be
   obliged to give a notice to the Borrower), and (ii) the Borrower shall repay
   the loan in full within 10 business days from the receipt of such notice.

- -    Agreement for Performance of Management Rehabilitation Plan entered by and
   between CHB and KDIC on November 12, 1999

   The shareholding ratio of CHB held by KDIC is below 50%, it shall be
   destroyed.

- -    Agreement for Performance of Management Rehabilitation Plan re-entered by
   and between CHB and KDIC on January 31, 2002

   In case KDIC is disqualified from the first shareholder of CHB, it shall be
   destroyed.

- -    Employee's compensation liability insurance contract entered by and between
   CHB and Hyundai Marine & Fire Insurance Co., Ltd. on November 25, 2002

   In case of change of the shareholding of CHB and otherwise, the premium
   may be readjusted. In this case, CHB shall give a notice of it to the other
   party.

SUBSIDIARY OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD

N/A

<PAGE>

                                  SCHEDULE 4.15
                          TRANSACTION WITH SUBSIDIARIES

CHOHUNG BANK

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
  COUNTERPARTY          CONTRACT DATE      EXPIRATION DATE                    CONTENTS
- ---------------------------------------------------------------------------------------------------
<S>                     <C>                <C>                <C>
CH Biz Co., Ltd.        2002. 11. 1.        2003. 10. 31.     Contracts on Operation of CHB
                                                              Phone-Banking Counseling Center (11.2
                                                              billion Won)
                     ------------------------------------------------------------------------------
                        2000. 12. 31.       2003. 12. 31.     Contracts on Security Service
- ---------------------------------------------------------------------------------------------------
</TABLE>

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARIES   COUNTER-PARTY  CONTRACT DATE  EXPIRATION DATE    CONTENTS            AMOUNT
- -----------------------------------------------------------------------------------------------------------
<S>                    <C>            <C>            <C>              <C>                 <C>
Chohung Finance Ltd.        CHB        1995. 9. 19.   2005. 9. 19.    Subordinated            USD 3,000,000
                                                                       Borrowing
                                      ---------------------------------------------------------------------
                                       1997. 3. 24.   2007. 3. 24.    Subordinated           USD 13,000,000
                                                                       Borrowing
- -----------------------------------------------------------------------------------------------------------
    Chohung Bank            CHB       1995. 11. 13.   2005. 11. 15.   Subordinated        EURO 7,669,378.22
 (Deutschland) GmbH                                                    Borrowing
- -----------------------------------------------------------------------------------------------------------
</TABLE>

CHOHUNG INVESTMENT TRUST CO., LTD.

AGREEMENTS WITH CHB

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
            NAME OF AGREEMENTS                                            COUNTERPARTY      EXECUTION DATE
- ----------------------------------------------------------------------------------------------------------
<S>                                                                       <C>               <C>
Consignment Sale Agreement                                                    CHB             1999. 6.
- ----------------------------------------------------------------------------------------------------------
Administrative Agreement                                                      CHB             1999. 6.
- ----------------------------------------------------------------------------------------------------------
Securities Investment Trust Agreement                                         CHB             1997. 4. 7.
- ----------------------------------------------------------------------------------------------------------
Amendment Agreement for Bank Account Interest                                 CHB             2002. 1.
- ----------------------------------------------------------------------------------------------------------
Agreement on Withholding Tax of Trust Assets                                  CHB             1997. 4. 7.
- ----------------------------------------------------------------------------------------------------------
Facsimile Usage Agreement                                                     CHB             1997. 4. 7.
- ----------------------------------------------------------------------------------------------------------
</TABLE>

LIST OF FUNDS WHOSE TRUST COMPANY IS CHB

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
                                                                             DATE OF        NUMBER OF BALANCE
         TYPE            FUND CODE        NAME OF FUND                    ESTABLISHMENT          ACCOUNT
- -------------------------------------------------------------------------------------------------------------
<S>                      <C>         <C>                                  <C>               <C>
        EQUITY              5033     MOA Accumulative Equity 1              2002-07-22             8,654
                         ------------------------------------------------------------------------------------
                            5131     POWER Growing Equity 1                 2002-04-03             8,906
                         ------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                         <C>      <C>                                    <C>                   <C>
                         ------------------------------------------------------------------------------------
                            5231     Stable Long-term Equity                2001-10-22             7,279
                         ------------------------------------------------------------------------------------
                            5232     Growing Long-term Equity               2001-10-22            11,108
                         ------------------------------------------------------------------------------------
                            5233     Stable Long-term Equity 2              2001-11-29            28,063
- -------------------------------------------------------------------------------------------------------------
EQUITY TOTAL                                                                                      64,010
- -------------------------------------------------------------------------------------------------------------
    EQUITY-BALANCED         5141     FIGHTING Balanced                      2002-04-17            12,261
                         ------------------------------------------------------------------------------------
                            5333     CHANGE 15C-2                           1999-05-14             2,567
                         ------------------------------------------------------------------------------------
                            5347     CHANGE 7+3 1                           2001-11-28               415
                         ------------------------------------------------------------------------------------
                            5348     CHANGE 7+3 2                           2001-12-11             1,188
                         ------------------------------------------------------------------------------------
                            5349     CHANGE 7+3 3                           2002-01-10               660
                         ------------------------------------------------------------------------------------
                            5350     CHANGE 12+3 1                          2002-01-12               330
                         ------------------------------------------------------------------------------------
                            5356     CHANGE 7+3 4                           2002-02-23               328
                         ------------------------------------------------------------------------------------
                            5357     CHANGE 7+3 5                           2002-03-14             1,585
                         ------------------------------------------------------------------------------------
                            5358     CHANGE 7+3 6                           2002-03-21            15,402
                         ------------------------------------------------------------------------------------
                            5359     CHANGE 7+3 7                           2002-03-29             1,683
                         ------------------------------------------------------------------------------------
                            5360     CHANGE 7+3 8                           2002-04-11            18,148
                         ------------------------------------------------------------------------------------
                            5361     CHANGE 7+3 9                           2002-04-24            16,267
                         ------------------------------------------------------------------------------------
                            5362     CHANGE 7+3 10                          2002-05-10             7,719
                         ------------------------------------------------------------------------------------
                            5363     CHANGE 7+3 11                          2002-05-23             7,972
                         ------------------------------------------------------------------------------------
                            5364     CHANGE 7+3 12                          2002-06-10             2,599
                         ------------------------------------------------------------------------------------
                            5401     GWANGSU THINKING C-1                   1999-04-22            12,839
                         ------------------------------------------------------------------------------------
                            5411     GWANGSU 2 TAILORED B1                  1999-06-08             1,306
                         ------------------------------------------------------------------------------------
                            5414     SILKROAD 1                             2000-02-29               708
- -------------------------------------------------------------------------------------------------------------
EQUITY-BALANCED TOTAL                                                                            103,977
- -------------------------------------------------------------------------------------------------------------
         BOND               1021     HANBAGUNI C-1                          1998-10-08             6,328
                         ------------------------------------------------------------------------------------
                            1027     HANBAGUNI C7                           1998-10-23             3,154
                         ------------------------------------------------------------------------------------
                            1063     NEW JUMP Short-term 3                  1998-05-18               148
                         ------------------------------------------------------------------------------------
                            2073     HANBAGUNI D-3                          1998-09-02               273
                         ------------------------------------------------------------------------------------
                            2092     HANBAGUNI E-2                          1998-10-12               108
                         ------------------------------------------------------------------------------------
                            2503     NEW JUMP Medium-term C3                1998-10-23             2,303
                         ------------------------------------------------------------------------------------
                            3051     TOP Long-term 2-51                     1998-01-30                 9
                         ------------------------------------------------------------------------------------
                            3107     HAN Long-term B7                       1998-10-23            94,185
                         ------------------------------------------------------------------------------------
                            3638     HAN Long-term C-8                      1998-11-14               409
                         ------------------------------------------------------------------------------------
                            6201     G NEW JUMP Short-term 1                1998-05-19            36,660
                         ------------------------------------------------------------------------------------
                            6233     G HANBAGUNI C7                         1998-10-23                88
                         ------------------------------------------------------------------------------------
                            6234     G HANBAGUNI 6                          1998-07-31               215
                         ------------------------------------------------------------------------------------
                            6236     G1 HAN Long-term C4                    1998-10-23               487
                         ------------------------------------------------------------------------------------
                            6237     G2 HAN Long-term C4                    1998-10-23             4,764
                         ------------------------------------------------------------------------------------
                            6239     G HAN Long-term C-5                    1998-11-14               303
                         ------------------------------------------------------------------------------------
                            6240     G1 HAN Long-term C-6                   1998-11-14               134
                         ------------------------------------------------------------------------------------
                            6243     G4 HAN Long-term C-6                   1998-11-14                75
                         ------------------------------------------------------------------------------------
                            6244     G5 HAN Long-term C-6                   1998-11-14            40,099
                         ------------------------------------------------------------------------------------
                            6245     G1 HAN Long-term C-7                   1998-11-14               722
                         ------------------------------------------------------------------------------------
                            6246     G2 HAN Long-term C-7                   1998-11-14             3,023
                         ------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                         <C>      <C>                                    <C>                  <C>
                         ------------------------------------------------------------------------------------
                            7004     OPTI Long-term A-1                     2000-02-18             1,259
                         ------------------------------------------------------------------------------------
                            7008     OPTI Medium-term A-3                   2000-07-10             1,260
- -------------------------------------------------------------------------------------------------------------
         BOND               7017     12M Private Bond 2                     2002-09-05            30,000
                         ------------------------------------------------------------------------------------
                            7019     12M Private Bond 3                     2002-09-27            40,000
                         ------------------------------------------------------------------------------------
                            7028     OPTI Short-term HT1                    2000-09-29               872
                         ------------------------------------------------------------------------------------
                            7030     (Private) Bond 3                       2002-02-09            30,042
                         ------------------------------------------------------------------------------------
                            7035     6M Private Bond 6                      2002-11-15            11,900
                         ------------------------------------------------------------------------------------
                            7036     24M Private Bond 1                     2002-12-24            20,000
                         ------------------------------------------------------------------------------------
                            7038     OPTI Short-term S-1                    2000-06-14             9,267
                         ------------------------------------------------------------------------------------
                            7039     3M Private Bond 9                      2003-01-08            30,400
                         ------------------------------------------------------------------------------------
                            7040     (Private) Bond 4                       2002-03-22            22,930
                         ------------------------------------------------------------------------------------
                            7045     6M Private Bond 8                      2003-01-24            50,000
                         ------------------------------------------------------------------------------------
                            7046     6M Private Bond 9                      2003-01-27           100,000
                         ------------------------------------------------------------------------------------
                            7047     6M Private Bond 10                     2003-02-20            99,966
                         ------------------------------------------------------------------------------------
                            7049     6M Private Bond 11                     2003-03-13            10,000
                         ------------------------------------------------------------------------------------
                            7054     3M Private Bond 13                     2003-03-25            16,200
                         ------------------------------------------------------------------------------------
                            7059     6M Private Bond 13                     2003-04-14            13,000
                         ------------------------------------------------------------------------------------
                            7060     3M Private Bond 16                     2003-05-29               197
                         ------------------------------------------------------------------------------------
                            7062     3M Private Bond 17                     2003-06-19            10,000
                         ------------------------------------------------------------------------------------
                            7065     3M Private Bond 18                     2003-07-08            11,000
                         ------------------------------------------------------------------------------------
                            7072     BEST NETIAN 2                          2000-05-16           375,337
                         ------------------------------------------------------------------------------------
                            7088     ACE Long-term Government and           2000-10-02            40,000
                                     Public Bond II
                         ------------------------------------------------------------------------------------
                            7110     S GUARD Medium-term 1                  2003-03-12               973
                         ------------------------------------------------------------------------------------
                            7111     GUARD Medium-term Bond 1               2002-05-28             5,476
                         ------------------------------------------------------------------------------------
                            7112     GUARD Medium-term Bond 2               2002-10-08             7,499
                         ------------------------------------------------------------------------------------
                            7122     CHOICE Medium-term 2                   2001-09-29               532
                         ------------------------------------------------------------------------------------
                            7172     CHOICE Short-term 4                    2001-12-18            19,133
                         ------------------------------------------------------------------------------------
                            7174     CHOICE Short-term 6                    2003-03-13            45,000
                         ------------------------------------------------------------------------------------
                            7175     CHOICE Short-term 4(7172)              2001-12-18             7,434
                         ------------------------------------------------------------------------------------
                            7176     CHOICE Short-term 4(7172)              2001-12-18             9,287
                         ------------------------------------------------------------------------------------
                            7182     HIGH JUMP Bond 2                       2002-04-17               198
                         ------------------------------------------------------------------------------------
                            7303     OPTI Long-term J-3                     2000-05-26             1,405
                         ------------------------------------------------------------------------------------
                            7831     Separated Taxation Government          2001-12-19            18,967
                                     Bond 1
                         ------------------------------------------------------------------------------------
                            7832     Separated Taxation Government          2002-07-11            23,993
                                     Bond 2
                         ------------------------------------------------------------------------------------
                            7923     OPTI Long-term IIB3                    2000-06-23             2,636
                         ------------------------------------------------------------------------------------
                            7930     Non-taxable Government and             2000-07-27            27,035
                                     Public CH-1
                         ------------------------------------------------------------------------------------
                            7931     Non-taxable Bond CH-1                  2000-07-27             2,600
                         ------------------------------------------------------------------------------------
                            7932     Non-taxable Bond C1                    2000-07-27               386
                         ------------------------------------------------------------------------------------
                            7933     Non-taxable Government and             2000-08-08             1,998
                                     Public IIC1
                         ------------------------------------------------------------------------------------
                            7934     Non-taxable Government and             2000-09-04               247
                                     Public J1
                         ------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                         <C>      <C>                                       <C>                <C>
                         ------------------------------------------------------------------------------------
                            7943     OPTI Medium-term IIIA1                    2000-11-13             2,333
                         ------------------------------------------------------------------------------------
                            7947     OPTI Medium-term IIIH1                    2000-11-24               305
                         ------------------------------------------------------------------------------------
                            7963     OPTI Medium-term IIICH1                   2001-03-12             3,283
                         ------------------------------------------------------------------------------------
                            7965     OPTI Medium-term IIICH2                   2001-05-17             6,333
                         ------------------------------------------------------------------------------------
                            7970     OPTI Long-term IIICH1                     2001-07-16             1,626
                         ------------------------------------------------------------------------------------
                            7972     OPTI Medium-term IIICH5                   2001-08-09               984
                         ------------------------------------------------------------------------------------
                            8101     Chohung 12M B1                            1999-12-29             1,980
- -------------------------------------------------------------------------------------------------------------
BOND TOTAL                                                                                        1,308,761
- -------------------------------------------------------------------------------------------------------------
BOND-BALANCED               5262     PW20 SA Unit 1                            2002-07-29             2,500
                         ------------------------------------------------------------------------------------
                            5365     NEW CHANGE 1                              2003-01-07             2,710
                         ------------------------------------------------------------------------------------
                            5366     NEW CHANGE 2                              2003-02-04               918
                         ------------------------------------------------------------------------------------
                            5367     NEW CHANGE 3                              2003-07-07               300
                         ------------------------------------------------------------------------------------
                            5385     MERIT Unit B-1                            2000-01-27            32,313
                         ------------------------------------------------------------------------------------
                            5446     MERIT II6MCH1                             2001-03-13             1,183
- -------------------------------------------------------------------------------------------------------------
     BOND BALANCED          5447     MERIT II3MJ4                              2001-05-29               822
                         ------------------------------------------------------------------------------------
                            5449     FUSION 6M 1                               2002-01-12             2,365
                         ------------------------------------------------------------------------------------
                            5451     MERIT II 6M2                              2002-01-17             3,248
                         ------------------------------------------------------------------------------------
                            5452     MERIT II 6M3                              2002-01-31            19,281
                         ------------------------------------------------------------------------------------
                            6005     D NEW JUMP Medium-term B4                 1998-07-16               326
                         ------------------------------------------------------------------------------------
                            6006     D NEW JUMP Medium-term B11                1998-10-23                76
                         ------------------------------------------------------------------------------------
                            6261     BEST 9M SA Balanced 1                     2002-12-12            49,480
                         ------------------------------------------------------------------------------------
                            6310     High-yield Balanced C1                    2001-08-14             3,912
                         ------------------------------------------------------------------------------------
                            6311     High-yield Balanced CH1                   2001-08-16            12,983
                         ------------------------------------------------------------------------------------
                            6312     High-yield Balanced CH2                   2002-05-04            68,137
                         ------------------------------------------------------------------------------------
                            6320     High-yield Balanced A1                    2001-08-14               371
                         ------------------------------------------------------------------------------------
                            6321     S High-yield Balanced CH1                 2003-03-12               490
                         ------------------------------------------------------------------------------------
                            6322     S High-yield Balanced CH2                 2003-03-12             1,899
                         ------------------------------------------------------------------------------------
                            6504     CLOVER H-Y A1                             2000-03-16            20,646
                         ------------------------------------------------------------------------------------
                            6505     CLOVER H-Y A2                             2000-03-16            12,220
                         ------------------------------------------------------------------------------------
                            6506     CLOVER H-Y B                              2000-03-27            63,836
                         ------------------------------------------------------------------------------------
                            6507     CLOVER H-Y C1                             2000-05-10            39,273
                         ------------------------------------------------------------------------------------
                            6508     CLOVER H-Y C2                             2000-05-10             2,659
                         ------------------------------------------------------------------------------------
                            6509     CLOVER HY Balanced J1                     2000-09-27             2,416
                         ------------------------------------------------------------------------------------
                            6518     NEW H-Y12M001                             2000-01-24             5,557
                         ------------------------------------------------------------------------------------
                            6519     NEW H-Y DII                               2000-06-15             4,855
                         ------------------------------------------------------------------------------------
                            7050     CP Private Offering Balanced 1            2003-03-14            30,000
                         ------------------------------------------------------------------------------------
                            7063     CP Private Offering Balanced 3            2003-07-04            10,000
                         ------------------------------------------------------------------------------------
                            7064     CP Private Offering Balanced 4            2003-07-04            10,000
- -------------------------------------------------------------------------------------------------------------
BOND BALANCED TOTAL                                                                                 404,776
- -------------------------------------------------------------------------------------------------------------
          MMF               1317     BEST NEW MMF J6                           2000-10-27            28,714
                         ------------------------------------------------------------------------------------
                            1325     BEST NEW MMF A3                           1999-09-17            42,743
                         ------------------------------------------------------------------------------------
                            1338     BEST NEW MMF C1                           1999-03-23                37
                         ------------------------------------------------------------------------------------
                            1339     BEST NEW MMF C2                           1999-08-19            33,846
                         ------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                         <C>      <C>                                    <C>                <C>
                         ------------------------------------------------------------------------------------
                            1381     BEST NEW MMF H1                        1999-06-30               836
                         ------------------------------------------------------------------------------------
                            1392     BES NEW MMF HT2                        2000-08-03             1,396
                         ------------------------------------------------------------------------------------
                            1393     BEST NEW MMF C3                        2000-07-05               210
                         ------------------------------------------------------------------------------------
                            1395     BEST NEW MMF C5                        2000-10-06             6,355
                         ------------------------------------------------------------------------------------
                            1396     BEST NEW MMF C6                        2001-01-11            35,377
                         ------------------------------------------------------------------------------------
                            1400     BEST NEW MMF 1                         2001-05-10           185,688
                         ------------------------------------------------------------------------------------
                            1418     CLEAN MMF IICH1                        2001-03-12           250,708
                         ------------------------------------------------------------------------------------
                            1433     CLEAN MMF II 1                         2001-06-04            42,548
                         ------------------------------------------------------------------------------------
                            1436     BES NEW MMF 2                          2003-03-13           332,478
                         ------------------------------------------------------------------------------------
                            1437     BES NEW MMF 3                          2003-03-13           128,190
                         ------------------------------------------------------------------------------------
                            1438     CLEAN MMF II 3                         2003-03-14            76,141
                         ------------------------------------------------------------------------------------
                            1439     Government and Public Bond  MMF 4      2003-03-20            49,000
                         ------------------------------------------------------------------------------------
                            1440     Government and Public Bond  MMF 5      2003-03-26           251,930
                         ------------------------------------------------------------------------------------
                            1442     Government and Public Bond MMF 7       2003-04-03           791,543
                         ------------------------------------------------------------------------------------
                            1443     Government and Public Bond
                                     MMF II 4                               2003-04-10             2,035
                         ------------------------------------------------------------------------------------
                            1444     Government and Public Bond
                                     MMF 8                                  2003-04-16           228,600
                         ------------------------------------------------------------------------------------
                            1450     BEST NEW MMF J6(1317)                  2000-10-27            15,806
                         ------------------------------------------------------------------------------------
                            1451     BEST NEW MMF No.1(1400)                2001-05-10            46,017
- -------------------------------------------------------------------------------------------------------------
MMF TOTAL                                                                                      2,550,198
- -------------------------------------------------------------------------------------------------------------
TOTAL                                                                                          4,431,722
- -------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                  SCHEDULE 4.16
                         PERFORMANCE OF INVESTMENT FUNDS

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

CURRENT STATUS OF REVOLVING CP

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
TRANSACTION                                       AGREED     INTEREST
   DATE         NAME OF ISSUE      DUE DATE       AMOUNT       RATE                  REMARKS
- --------------------------------------------------------------------------------------------------------
<S>             <C>               <C>          <C>           <C>          <C>
2002.4.9.       SK Corporation     2003.4.9.   20 billion      5.40%      Termination of Agreement
                                               Won
- -------------------------------------------------------------------------------------------------------
2002.5.13.      SK Corporation    2003.5.13.   20 billion      5.45%      Termination of Agreement
                                               Won
- -------------------------------------------------------------------------------------------------------
2002.4.24.      Kookmin Credit    2004.1.16.   50 billion      5.91%      2003. 4. 17. Refusal to accept
                Card Co., Ltd.                 Won                        refinancing issued CP, Removal
                                                                          of Agreement
- -------------------------------------------------------------------------------------------------------
2002.2.6.       Samsung Capital   2004.4.24.   10 billion      5.85%      2003. 4. 24. Refusal to accept
                Co., Ltd.                      Won                        refinancing issued CP, Removal
                                                                          of Agreement
- -------------------------------------------------------------------------------------------------------
2002.4.17.      Samsung Capital   2004.1.29.   40 billion      5.60%      2003. 4. 29. Refusal to accept
                Co., Ltd.                      Won                        refinancing issued CP, Removal
                                                                          of Agreement
- -------------------------------------------------------------------------------------------------------
2002.1.29.      Woori Credit      2004.2.6.    40 billion      5.55%      2003. 5. 6. Refusal to accept
                Card Co., Ltd                  Won                        refinancing issued CP, Removal
                                                                          of Agreement
- -------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                SCHEDULE 4.17(a)
                             DERIVATIVE INSTRUMENTS

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                SCHEDULE 4.17(b)
                             DERIVATIVE INSTRUMENTS

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                  SCHEDULE 4.18

                                 TRUST ACCOUNTS

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                  SCHEDULE 4.20
                                    INSURANCE

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                  SCHEDULE 4.21
                      ENVIRONMENTAL, HEALTH AND SAFETY LAWS

CHOHUNG BANK

N/A

SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.

N/A

<PAGE>

                                  SCHEDULE 4.22
                                  FINDER'S FEES

N/A

<PAGE>

                                  SCHEDULE 4.23
                             CONSUMER FINANCE LOANS

FINANCIAL COOPERATION DETAILS OF CHOHUNG BANK

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
       NAME OF COMPANY                                       BALANCE
- -------------------------------------------------------------------------
<S>                                                     <C>
LG Card Co., Ltd.                                       200.5 billion Won
- -------------------------------------------------------------------------
Hyundai Capital Service Inc.                            178.9 billion Won
- -------------------------------------------------------------------------
Samsung Capital Co., Ltd.                                24.8 billion Won
- -------------------------------------------------------------------------
            Total                                       404.2 billion Won
- -------------------------------------------------------------------------
</TABLE>

* Reference to Exhibit in contents of contracts

- --------

(i) The Majority Banks mean that the aggregate outstanding loans among the
Lenders are 66 2/3% of the aggregate loans.
<PAGE>

EXHIBIT A: RATIO OF ALLOWANCES OF SHINHAN BANK

* Ratio of Allowances based on Asset Classification

(as of June 30, 2003)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Grade                  Asset Classification                  Ratio of Allowances
- --------------------------------------------------------------------------------
<S>                    <C>                                   <C>
  1                                                                0.2%
- -----                                                        -------------------
  2                                                                0.5%
- -----                                                        -------------------
  3                            Normal                              0.6%
- -----                                                        -------------------
  4                                                                1.2%
- -----                                                        -------------------
  5                                                                1.5%
- -----                                                        -------------------
  6                                                                2.0%
- --------------------------------------------------------------------------------
  7                        Precautionary                           4.0%
- --------------------------------------------------------------------------------
  8                         Substandard                           20.0%
- --------------------------------------------------------------------------------
  9                          Doubtful                             95.0%
- --------------------------------------------------------------------------------
 10                       Estimated Loss                         100.0%
- --------------------------------------------------------------------------------
</TABLE>

<PAGE>

EXHIBIT B.        CALCULATION METHOD OF "EARN-OUT" AS A RESULT OF SPIN-OFF OF
                  CREDIT CARD BUSINESS DIVISION

- -        If the credit card business division of Chohung Bank ("CHB") will be
         spun off (including business transfer, hereinafter the same), the net
         income of CHB for the years of 2004 to 2006 should reflect the
         contribution by the credit card business division of CHB to the net
         income of the consolidated credit card company created after spin-off
         ("CHB Contribution Profit") (the concept of "net income" includes net
         loss).

- -        After spin-off, the method of calculation of the CHB Contribution
         Profit shall be agreed between the parties by the Cash Portion Closing,
         taking into account any appropriate methods including without
         limitation Method 1 and Method 2 set forth below; provided, that the
         method of calculation should be agreed in a way that the contribution
         ratio will be produced on a basis of objective data in order to prevent
         any dispute in the future.

Method 1

Determine the profit contribution ratio by the credit card business division of
CHB and Shinhan Card Co., Ltd. on a basis of the net credit card receivables
(amount of credit card receivables minus allowances) of each of credit card
business division of CHB and Shinhan Card Co., Ltd. as of December 31, 2002.
Then calculate the CHB Contribution Profits by applying the said profit
contribution ratio to the aggregate net profit and loss of the consolidated
credit card company after spin-off for the period during 2004 to 2006.

Method 2

Calculate CHB Contribution Profit arising from the credit card business division
of CHB out of the annual profit and loss of the consolidated credit card company
after the spin-off appropriately by taking into account the customers concerned
and the relevant profits/expenses.

<PAGE>

EXHIBIT C:        INVESTMENT AGREEMENT

<PAGE>

APPENDIX 1: CARD LOAN A

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                                       Balance as of End of 2002
                  Classification                          (Unit: Million Won)
- --------------------------------------------------------------------------------
<S>                                                    <C>
                Total of Card Loan A
- --------------------------------------------------------------------------------
                  (A) Cash Advance +
                  (B) (C) Receivables
- --------------------------------------------------------------------------------
(B) Credit Card Loan (Including Replacement
                        Loan)
- --------------------------------------------------------------------------------
</TABLE>

Note 1)  Amount for each item specified above shall be attached hereto after
         both parties confirm the materials provided by CHB by the Cash Closing.

Note 2)  Details of the Card Loan A per each borrower shall be attached hereto
         after both parties confirm the materials provided by Chohung Bank by
         the Cash Closing.

<PAGE>

APPENDIX 2: CARD LOAN A (D)

- -        Details of the Card Loan A (D) shall be attached hereto after both
         parties confirm the materials provided by CHB at least one (1) month
         from the Cash Closing.

<PAGE>

APPENDIX 3: COLLATERAL VALUE

- -        It means the collateral value of property for each corporate loan as of
         the Second Calculation Date. It shall be calculated by deducting the
         secured obligations which have priority (mortgage, pledge, wage claim
         (including severance payment) and tax claim, etc.) from the sum of 1) +
         2).

         1)       In case of land, building and any other movable property, the
                  value evaluated by one or more certified appraisal company
                  which is(are) selected through agreements of both parties at
                  the time of evaluation

                  -        In case more than one certified appraisal companies
                           shall evaluate, the Collateral Value shall be
                           calculated by using the arithmetic average.

                  -        Expenses relating to the appraisal shall be borne by
                           each party at 50:50 basis.

         2)       In case of deposits, public and corporate bonds or other
                  monetary receivables, the Collateral Value shall be the
                  present value.

<PAGE>

APPENDIX 4: WORKSHEET OF THE 9 ENTERPRISES SUBJECT TO INDEMNIFICATION RELATING
TO CORPORATE LOANS & BALANCE OF CORPORATE LOANS AS OF DECEMBER 31, 2002


* Balance of Loans of Enterprises Subject to Indemnification and Detailed
Balance classified by Corporate Loan Type

<TABLE>
<CAPTION>
                Borrower                    Total    Type     Type     Type     Type     Type     Type     Type
                --------                    -----    ----     ----     ----     ----     ----     ----     ----
           (unit: million won)
<S>                                        <C>      <C>       <C>      <C>      <C>      <C>      <C>      <C>
*
*
*
*
*
*
*
*
*
</TABLE>

Note) The amount by each item shall be attached hereto after both parties
confirm the materials provided by CHB by the Cash Closing.

*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.




<PAGE>

APPENDIX 5: WORKSHEET OF THE 9 ENTERPRISES SUBJECT TO INDEMNIFICATION OF
CORPORATE LOANS & CEILING OF CORPORATE LOANS AS OF SIGNING


* Credit Ceiling of Each Enterprise subject to Indemnification by Corporate Loan
Type

<TABLE>
<CAPTION>
                Borrower                    Total    Type     Type     Type     Type     Type     Type     Type
                --------                    -----    ----     ----     ----     ----     ----     ----     ----
           (unit: million won)
<S>                                        <C>      <C>       <C>      <C>      <C>      <C>      <C>      <C>
*
*
*
*
*
*
*
*
*
</TABLE>

Note) The amount by each item shall be attached hereto after both parties
confirm the materials provided by CHB by the Cash Closing.

*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.



<PAGE>

APPENDIX 6: STATUS OF RETURNED KAMCO CREDIT

<TABLE>
<CAPTION>
     Name of Company                             Purchase Price
     ---------------                             --------------
                                               (unit: million won)
<S>                                            <C>
































Total
</TABLE>

Note)  Each enterprise and each amount by enterprise shall be attached
       hereto after both parties confirm the materials provided by CHB by
       the Cash Closing.


<PAGE>

APPENDIX 7:       CALCULATION OF REDUCTION LOSS (VALUATION LOSS) OF EQUITY AND
                  EQUITY LINKED SECURITIES

- -        Reduction loss (including valuation loss) of equity and equity linked
         securities shall be calculated per relevant equity and equity linked
         securities by using the weighted average of the average loss ratios of
         other banks and that of CHB at a ratio of 4:6.

         In other words, reduction loss and valuation loss of equity and equity
         linked securities shall be calculated as follows:

         = Principal amount before Reduction and Valuation X Loss Ratio

- -        Average loss ratio of other banks shall be the average of the loss
         ratio calculated by each bank.

         -   Loss Ratio by each Bank = (Principal amount before Reduction or
             Valuation - Balance after Reduction or Valuation)/(Principal amount
             before Reduction or Valuation)

- -        Average Loss Ratio of CHB = (Principal amount before Reduction or
         Valuation - Balance after Reduction or Valuation)/(Principal amount
         before Reduction or Valuation)

- -        The loss ratio of equity and equity linked securities of other banks
         and CHB includes negative (-) ratio. (in case of valuation profit)

- -        Standard for selecting other banks: commercial banks (Kookmin Bank,
         Hana Bank, Korea First Bank, KorAm Bank, Woori Bank, Korea Exchange
         Bank) which hold the balance of the relevant equity and equity linked
         securities by each corporation amounting to 10 billion Won or more.

- -        Except as specified in this Appendix 7, for the detailed calculation
         method and procedure, etc. of the average loss ratio of other bank(s)
         (arithmetic average of loss ratio of each bank, provision of the
         Documentary Evidence and Source, or application of the Fair Value
         Method, if applicable) the provision of the "RESERVE RATIO OF THE OTHER
         COMMERCIAL BANKS" of Section 11.01 (a)(i)(B) in the Agreement shall
         apply.

<PAGE>

APPENDIX 8: THRESHOLD OF CORPORATE LOANS OF THE 9 ENTERPRISES


<TABLE>
<CAPTION>
                                                                                         (unit: million won)

                                                                                 Shinhan Accounting
                                                      Amount of Allowances          Corporation
                                                        as of End of 2002      Additional Allowances      Threshold
No         Borrower                                            (A)                      (B)                 (A+B)
- ---        --------                                   --------------------     ---------------------      ----------
<S>       <C>                                           <C>                        <C>                    <C>
1           *
2           *
3           *
4           *
5           *
6           *
7           *
8           *
9           *
</TABLE>

Notes)

1)   The amount stated above refers to the amount stated in the evaluation
     report on share value submitted by Shinhan Accounting Corporation to Korea
     Deposit Insurance Corporation ("KDIC") in connection with stock sale of
     CHB, and is attached by the Cash Closing after the Purchaser confirms.

2)   KDIC makes its best efforts to assist the Purchaser's confirmation.

3)   In case of SK Global Co., Ltd., additional reserves will be calculated
     taking into account amount of allowances as of the end of 2002 after
     converting the ratio of allowance evaluated by Shinhan Accounting
     Corporation into 19%.

*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.


<PAGE>

APPENDIX 9: THRESHOLD OF CARD LOANS

                                                             (Unit: Million Won)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                          Additional Allowances
                Allowances as of End of   of Shinhan Accounting
                         2002                  Corporation           Threshold
Classification           (A)                       (B)                  (A+B)
- --------------------------------------------------------------------------------
<S>             <C>                       <C>                        <C>
  Card Loan
- --------------------------------------------------------------------------------
</TABLE>

Note 1)  The amount stated above refers to the amount stated in the evaluation
         report on share value submitted by Shinhan Accounting Corporation to
         Korea Deposit Insurance Corporation ("KDIC") in connection with stock
         sale of CHB, and is attached by the Cash Closing after the Purchaser
         confirms.

Note 2)  KDIC makes its best efforts to assist the Purchaser's confirmation.

<PAGE>

APPENDIX 10:  GUIDELINES FOR ALLOWANCE RATIO ON CARD LOANS

* Credit Card & Card Loan (Banking Business Supervision Regulation)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
                                    Asset Classification                               Minimum
                 ---------------------------------------------------------------      Allowance
Classification      Default Period             Other Creditworthiness                   Ratio
- -----------------------------------------------------------------------------------------------
<S>              <C>                   <C>                                            <C>
Normal           Less than 1 month     Customers maintaining good financial               1%
                 & no default          conditions and no problems in the
                                       recovery are expected
- -----------------------------------------------------------------------------------------------
Precautionary    Less than 3 months    Customers having potential factor which           12%
                                       may cause deterioration of their
                                       repayment capability in the future
- -----------------------------------------------------------------------------------------------
Substandard      Expected recovery     Portion of credits classified as                  20%
                 portion out of        "Doubtful" and "Estimate Loss" which
                 credits classified    is expected to be recovered
                 as "Doubtful" and     Customers from whom recoverability has
                 "Estimate Loss"       serious risk
- -----------------------------------------------------------------------------------------------
Doubtful         Less than 6 month     Customers from whom recoverability has            60%
                                       serious risk occurred because their
                                       repayment capability have been remarkably
                                       deteriorated
- -----------------------------------------------------------------------------------------------
Estimated Loss   6 month or more       Customers from whom recoverability is            100%
                                       sure to be impossible and the charge-off
                                       is inevitable because the repayment
                                       capability of customers have been
                                       seriously deteriorated
                                       Customers undergoing insolvency,
                                       bankruptcy or liquidation or
                                       discontinuance of business
- -----------------------------------------------------------------------------------------------
</TABLE>

[ ] In determining the other creditworthiness of customers, the credit rating
may be consulted in case of a corporation and the credit information held by
other financial institution may be consulted in case of an individual.

(Reference: In case of a corporation, its credit rating means application of
standard for classification of credit rating to corporation loan to such
corporation.)


<PAGE>

* Replacement Loan

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
                                   Soundness Classification                            Minimum
                 ---------------------------------------------------------------      Allowance
Classification      Default Period             Other Creditworthiness                   Ratio
- -----------------------------------------------------------------------------------------------
<S>              <C>                   <C>                                            <C>
Precautionary    Less than 1           Customers maintaining good financial              12%
                 month & no            conditions and no problems in the
                 defaults              recovery are expected
                                       Customers having potential factor which
                                       may cause deterioration of their
                                       repayment capability in the future
- -----------------------------------------------------------------------------------------------
Substandard      Expected recovery     Portion of of credits classified as               20%
                 portion out of        "Doubtful" and "Estimate Loss" which is
                 credits classified    expected to be recovered
                 as "Doubtful" and     Customers from whom recoverability has
                 "Estimate Loss"       serious risk
- -----------------------------------------------------------------------------------------------
Doubtful         Less than 3 month     Customers from whom recoverability has            60%
                                       serious risk occurred because their
                                       repayment capability have been
                                       remarkably deteriorated
- -----------------------------------------------------------------------------------------------
Estimated Loss   3 month or more       Customers from whom recoverability is            100%
                                       sure to be impossible and the charge-off
                                       is inevitable because the repayment
                                       capability of customers have been
                                       seriously deteriorated
                                       Customers undergoing insolvency,
                                       bankruptcy or liquidation or
                                       discontinuance of business
- -----------------------------------------------------------------------------------------------
</TABLE>

[ ] In determining the other creditworthiness of customers, the credit rating
may be consulted in case of a corporation and the credit information held by
other financial institution may be consulted in case of an individual.

(Reference: In case of a corporation, its credit rating means application of
standard for classification of credit rating to corporation loan to such
corporation.)

APPENDIX 11.  MATTERS RELATING TO SALE OF CARD LOANS

         -        When card loans are to be sold after the Closing, in case of
                  followings, it is deemed that KDIC has consented thereto.

1)       Sale of Card Loan in default for six months or more

2)       Sale of Card Loan Written-Off

3)       In case the sale loss occurring from sale of Card Loan in default less
         than six months is

<PAGE>

         to be satisfied with the allowances in accordance with the standard of
         allowances in Appendix 10

<PAGE>

APPENDIX 12:  THRESHOLD OF RETURNED KAMCO CREDITS

                                                             (unit: million won)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
                                                 Additional
                                               Allowances of
                    Allowances as of End     Shinhan Accounting
                          of 2002               Corporation          Threshold
Classification              (A)                     (B)                (A+B)
- --------------------------------------------------------------------------------
<S>                 <C>                      <C>                     <C>
Returned KAMCO
   Credits
- --------------------------------------------------------------------------------
</TABLE>

Note 1)  The amount stated above refers to the amount stated in the evaluation
         report on share value submitted by Shinhan Accounting Corporation to
         Korea Deposit Insurance Corporation ("KDIC") in connection with stock
         sale of CHB, and is attached by the Cash Closing after the Purchaser
         confirms.

Note 2)  KDIC makes its best efforts to assist the Purchaser's confirmation.

<PAGE>

SCHEDULE 5.03(A): CONSENTS; NO CONFLICTS.

         1.       Pursuant to Article 16 of the Financial Holding Company Act,
                  FSC (Financial Supervisory Commission) approval is required
                  for the acquisition of 80.04% stakes in CHB and CHB becoming a
                  subsidiary.

         2.       For the Closing of Equity Section, the court approval is
                  required for contribution in kind of equities held by the
                  government for the Company's issuance of new shares.

         3.       With respect to the Company's issuance of new shares for the
                  Closing of Equity Section, the acceptance by FSS (Financial
                  Supervisory Service) of the registration statement submitted
                  to FSS is required.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>7
<FILENAME>u98617exv4w2.txt
<DESCRIPTION>EX-4.2 INVESTMENT AGREEMENT, DATED JULY 9,2003
<TEXT>
<PAGE>

                                                                     EXHIBIT 4.2

                              INVESTMENT AGREEMENT

                                 BY AND BETWEEN

                             SHINHAN FINANCIAL GROUP

                                       AND

                       KOREA DEPOSIT INSURANCE CORPORATION

                               DATED JULY 9, 2003

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                    <C>
                                         ARTICLE I
                                        DEFINITIONS

Section 1.01.     Definitions........................................................   1

Section 1.02.     General Interpretive Principles....................................   5

                                        ARTICLE II
                                SALE AND ISSUANCE OF SHARES

Section 2.01.     Sale and Issuance of Shares........................................   6

Section 2.02.     In-Kind Contribution of the CHB Shares.............................   7

Section 2.03.     Closing............................................................   7

Section 2.04.     Actions at Closing.................................................   7

Section 2.05.     Actions Post-Closing...............................................   7

                                        ARTICLE III
                             REPRESENTATIONS AND WARRANTIES OF
                                 SFG AND ITS SUBSIDIARIES

Section 3.01.     Corporate Organization and Qualification...........................   8

Section 3.02.     Authorization of Agreement; Enforceability.........................   8

Section 3.03.     Consents; No Conflicts.............................................   8

Section 3.04.     Capitalization; Securities.........................................   8

Section 3.05.     Subsidiaries.......................................................   9

Section 3.06.     Financial Statements; Undisclosed Liabilities......................   9

Section 3.07.     Absence of Certain Changes.........................................  10

Section 3.08.     Litigation.........................................................  10

Section 3.09.     Compliance with Laws; Regulatory Approvals.........................  10

Section 3.10.     Taxes..............................................................  10

Section 3.11.     Contracts..........................................................  11

Section 3.12.     Transaction with Major Subsidiaries................................  11

Section 3.13.     Derivative Instruments.............................................  11

Section 3.14.     Trust Accounts.....................................................  12

Section 3.15.     Books and Records..................................................  12
</TABLE>

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                    <C>
Section 3.16.     Financial Projections..............................................  12

Section 3.17.     Disclosure Schedules...............................................  12

                                        ARTICLE IV
                          REPRESENTATIONS AND WARRANTIES OF KDIC

Section 4.01.     Corporate Organization and Qualification...........................  12

Section 4.02.     Authorization of Agreement; Enforceability.........................  13

Section 4.03.     Consents; No Conflicts.............................................  13

Section 4.04.     Litigation.........................................................  13

                                         ARTICLE V
                                   PRE-CLOSING COVENANTS

Section 5.01.     Conduct of Business................................................  13

Section 5.02.     Financial and Other Information....................................  14

Section 5.03.     Notifications......................................................  14

Section 5.04.     Taking of Necessary Action.........................................  14

Section 5.05.     Public Statements..................................................  14

Section 5.06.     Supplements to Disclosure Schedules................................  14

                                        ARTICLE VI
                                        CONDITIONS

Section 6.01.     Conditions to KDIC's Obligations...................................  15

Section 6.02.     Conditions to the Seller's and SFG's Obligations...................  16

                                        ARTICLE VII
                                        GOVERNANCE

Section 7.01.     General ...........................................................  16

Section 7.02.     KDIC's Nomination Right............................................  17

                                       ARTICLE VIII
                                  POST-CLOSING COVENANTS

Section 8.01.     Notice of Default..................................................  18

Section 8.02.     Financial and Accounting Records...................................  18
</TABLE>

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                    <C>
Section 8.03.     Right of Inspection................................................  18

Section 8.04.     Redemption of Transaction Shares...................................  19

                                        ARTICLE IX
                                    TRANSFER OF SHARES

Section 9.01.     Demand Registration................................................  19

Section 9.02.     Piggyback Registration Rights......................................  19

Section 9.03.     Transfer Restrictions..............................................  20

Section 9.04.     Right of First Offer...............................................  20

                                         ARTICLE X
                                        TERMINATION

Section 10.01     Termination of Agreement Prior to Closing..........................  21

Section 10.02     Termination of Agreement After Closing.............................  22

Section 10.03.    Consequences of Termination........................................  23

                                        ARTICLE XI
                            INDEMNIFICATION AND SURIVAL PERIOD

Section 11.01.    Indemnification....................................................  23

Section 11.02.    Survival of Representations and Warranties.........................  25

Section 11.03.    Insurance Proceeds; Exceptions and Deductions; Determination of
                  Indemnification Amount.............................................  26

Section 11.04.    No Duplication; Sole Remedy Procedures.............................  26

                                        ARTICLE XII
                                       MISCELLANEOUS

Section 12.01.    Fees and Expenses..................................................  26

Section 12.02.    Notices............................................................  26

Section 12.03.    Entire Agreement; Amendment; Severability..........................  27

Section 12.04.    Counterparts.......................................................  27
</TABLE>

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                    <C>
Section 12.05.    Governing Law; Jurisdiction........................................  27

Section 12.06.    Successors and Assigns.............................................  27

Section 12.07.    Confidentiality....................................................  28
</TABLE>

<PAGE>

                              INVESTMENT AGREEMENT

                  INVESTMENT AGREEMENT (this "Agreement"), dated as of July 9,
2003, by and between Shinhan Financial Group, a financial holding company
established and existing under the laws of Korea ("SFG") and Korea Deposit
Insurance Corporation, a company established and existing under the laws of
Korea ("KDIC").

                                   WITNESSETH:

                  WHEREAS, SFG and KDIC have entered into that certain Stock
Purchase Agreement dated July 9, 2003 (the "Stock Purchase Agreement") pursuant
to which SFG will acquire from KDIC 543,570,144 common shares of Chohung Bank
("CHB Shares"), a company established and existing under the laws of Korea
("CHB"), constituting 80.04% of the total issued and outstanding shares of CHB;

                  WHEREAS, in connection with the acquisition of the CHB Shares
by SFG under the Stock Purchase Agreement, SFG will issue, and KDIC will
subscribe for, 46,583,961 newly issued redeemable preferred shares of SFG ("SFG
Redeemable Preferred Shares") and 44,720,603 newly issued redeemable convertible
preferred shares of SFG ("SFG Redeemable Convertible Preferred Shares" and
together with the SFG Redeemable Preferred Shares, the "Transaction Shares");

                  WHEREAS, following the consummation of the transaction
contemplated by this Agreement, KDIC will own 13.27% of the total issued and
outstanding shares of SFG (on an as converted basis); and

                  WHEREAS, the parties hereto desire to make certain
representations, warranties, covenants and agreements in connection with the
transaction contemplated by this Agreement and the governance of SFG.

                  NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

                  Section 1.01 Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:

                  "Affiliate" means (a) with respect to any Person other than a
Korean Governmental Entity (including KDIC), an affiliate of such Person as
defined under the Act on Monopoly Control and Fair Trade Act of Korea, and (b)
with respect to any Korean Governmental Entity

<PAGE>

(including KDIC), any other Korean Governmental Entity. For the purposes of
this definition, the Resolution Finance Corporation shall not be deemed an
Affiliate of KDIC.

                  "Agreement" has the meaning set forth in the preamble.

                  "Articles of Incorporation" means the Articles of
Incorporation of SFG, as amended from time to time.

                  "Board of Directors" or "Board" means the board of directors
of SFG.

                  "Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in Korea are closed.

                  "Contract" means any contract, agreement, arrangement or
instrument which is legally binding on the parties thereto.

                  "CHB" means Chohung Bank.

                  "CHB Shares" has the meaning set forth in the recitals.

                  "Closing" means the closing of the sale and purchase of the
Transaction Shares pursuant to Section 2.03.

                  "Closing Date" has the meaning set forth in Section 2.03.

                  "Convertible Securities" means any subscriptions, options,
conversion rights, exchange rights, warrants, or other agreements, securities or
commitments of any kind obligating SFG or, if applicable, any of its
Subsidiaries, to issue, grant, deliver or sell, or cause to be issued, granted,
delivered or sold, any equity securities of SFG or, if applicable, any of its
Subsidiaries.

                  "Director" means a member of the Board of SFG.

                  "Financial Statements" means the audited consolidated balance
sheets of SFG as of December 31, 2002 and 2001, and the related consolidated
statements of income, changes in capital surplus and retained earnings, and cash
flows for the years then ended, in each case as prepared in accordance with
Korean GAAP and audited by SFG's external auditors.

                  "GMSS" shall mean Good Morning-Shinhan Securities Co., Ltd.

                  "Governmental Entity" means any government or political
subdivision or department of such government or political subdivision, any
governmental or regulatory body, commission, board, bureau, agency or
instrumentality, any stock exchange or any court.

                  "In-Kind Contribution" has the meaning set forth in Section
2.02.

                                       2

<PAGE>

                  "Issue Price per SFG Redeemable Preferred Share" has the
meaning set forth in Section 2.01(a).

                  "Judgments" has the meaning set forth in Section 3.09.

                  "KDIC" has the meaning set forth in the preamble.

                  "Korea" means the Republic of Korea.

                  "Korean GAAP" means the generally accepted accounting
principles in Korea.

                  "Korean Securities Act" means the Korean Securities and
Exchange Act of 1962, as amended, together with the rules and regulations
thereunder.

                  "Law" means any law, treaty, statute, ordinance, code, rule or
regulation of a Governmental Entity or judgment, decree, order, writ, award,
injunction or determination of an arbitrator or court or other Governmental
Entity.

                  "Lien" means any mortgage, pledge, lien, yangdo tambo or any
other security.

                  "Losses" means any and all losses, penalties, liabilities and
expenses (including reasonable attorneys' and advisors' fees and disbursements)
incurred by, imposed upon or asserted against any Person.

                  "Major Subsidiary" means, GMSS and Shinhan Bank.

                  "Material Adverse Effect" means, with respect to any Person,
any material adverse effect on either (i) the financial condition, results of
operations or business of such Person (and with respect to SFG and its
Subsidiaries, taken as a whole) or (ii) the ability of the Person to perform its
obligations under this Agreement.

                  "Necessary Action" means, with respect to a result required to
be caused, all actions (to the extent such actions are permitted by applicable
Law) reasonably necessary to cause such result, which actions may include (a)
convening a meeting of the shareholders or the Board and placing on the agenda
of such meeting the matters necessary to cause such result, and (b) making, or
causing to be made, with a Government Entity or other Persons, all filings,
applications for approvals, registrations or similar actions that are required
to achieve such result.

                  "Outside Director" means an independent outside director of
SFG under the Korea Financial Holding Company Act.

                  "Permitted Liens" means (i) mechanics', carriers', repairmen's
or other like Liens arising or incurred in the ordinary course of business, (ii)
statutory Liens for Taxes not yet due and

                                       3

<PAGE>

payable, (iii) other Liens that do not materially impair the continued use and
operation of the assets to which they relate.

                  "Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated organization or
Governmental Entity.

                  "Pre-Closing Period" means the period from the date hereof
until the earlier of the Closing and the termination of this Agreement.

                  "Proceeding" means any claim, suit, action, arbitration,
investigation or other legal proceeding against a party to this Agreement.

                  "QPO" has the meaning set forth in the Exchangeable Note
Documents (as defined in the Stock Purchase Agreement).

                  "Regulatory Approvals" means, with respect to any matter, any
and all permits, licenses, consents, approvals, orders, registrations,
authorizations, clearances from, or filings or registrations with, Governmental
Entities, in each case in respect of such matter.

                  "Representatives" means, with respect to any Person and any
particular matter, any of such Person's officers, directors, employees, agents,
attorneys, accountants, actuaries, consultants or financial advisors or other
Person acting on behalf of such Person in respect of such matter.

                  "Required Regulatory Approvals" means each Regulatory Approval
required to be obtained in connection with the execution, delivery and
performance of this Agreement.

                  "SBITMC" shall mean Shinhan BNP Paribas Investment Trust
Management Company.

                  "SFG" has the meaning set forth in the preamble.

                  "SFG Redeemable Preferred Shares or RPS" has the meaning set
forth in the recitals.

                  "SFG Redeemable Preferred Share Portion" has the meaning set
forth in Section 2.01(a).

                  "SFG Redeemable Convertible Preferred Shares or RCPS" has the
meaning set forth in the recitals.

                  "SFG Redeemable Convertible Preferred Share Portion or RCPS
Portion" has the meaning set forth in Section 2.01(b).

                                       4

<PAGE>

                  "Shares" means the shares of common stock and preferred stock
of SFG, including the Transaction Shares.

                  "Shinhan Bank" shall mean Shinhan Bank Co., Ltd.

                  "Shinhan Card" shall mean Shinhan Card Co., Ltd.

                  "Stock Purchase Agreement" has the meaning set forth in the
recitals.

                  "Subsidiary" means, as to any Person, any other Person of
which more than 50% of the capital voting stock is at the time directly or
indirectly owned or controlled by such Person or if any Person that, alone or
together with any other Person, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person (but not including an ABS specialty company established under the
Asset Backed Securitization Act of Korea). For purposes of this definition,
"control" (including the terms "controlling", "controlled by" and "under common
control with"), as used with respect to any Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management policies of such Person, whether through ownership of voting
securities, by contract, agency or otherwise.

                  "Tax" or "Taxes" means all taxes, including any interest,
liabilities, fines, penalties or additions to tax that may become payable in
respect of such taxes, imposed by any Governmental Entity, including Korean and
other income taxes, payroll and employee withholding taxes, unemployment
insurance, social security, sales and use taxes, excise taxes, franchise taxes,
gross or net receipts taxes, occupation taxes, real and personal property taxes,
ad valorem taxes, stamp taxes, transfer taxes, capital taxes, import duties,
withholding taxes, workers' compensation taxes and other obligations of the same
or of a similar nature.

                  "Transaction Shares" has the meaning set forth in the
recitals.

                  "Transfer" shall any transfer or pledge which could result in
a transfer.

                  "Undisclosed Liability" has the meaning set forth in Section
3.06.

                  "U.S. Securities Act" means the United States Securities Act
of 1933, as amended, together with the rules and regulations thereunder

                  Section 1.02. General Interpretive Principles. Whenever used
in this Agreement, except as otherwise expressly provided or unless the context
otherwise requires, any noun or pronoun shall be deemed to include the plural as
well as the singular and to cover all genders. The name assigned to this
Agreement and the section captions used herein are for convenience of reference
only and shall not be construed to affect the meaning, construction or effect
hereof. Unless otherwise specified, the term "including" means "including
without limitation" (and "include," "includes" and "included" shall be similarly
interpreted). References in this

                                       5

<PAGE>

Agreement to Articles, Sections, Annexes, Exhibits or Schedules mean the
Articles, Sections, Annexes, Exhibits and Schedules of or to this Agreement, and
such Annexes, Exhibits and Schedules are an integral part of this Agreement.

                                   ARTICLE II
                    IN-KIND CONTRIBUTION AND ISSUANCE SHARES

                  Section 2.01. Sale and Issuance of Shares. Subject to the
terms and conditions of this Agreement, SFG agrees to issue and sell to KDIC,
and KDIC agrees to subscribe for and purchase from SFG by way of an in-kind
contribution of shares of CHB, the Transaction Shares for the following
consideration:

                  (a)      46,583,961 SFG Redeemable Preferred Shares at 18,086
Won per share (the "Issue Price per SFG Redeemable Preferred Share"), for
135,892,536 CHB Shares (the "SFG Redeemable Preferred Share Portion") at the
aggregate issue price of 842,517,518,646 Won as follows:

                  Series A SFG Redeemable Preferred Shares : 9,316,792

                  Series B SFG Redeemable Preferred Shares : 9,316,792

                  Series C SFG Redeemable Preferred Shares : 9,316,792

                  Series D SFG Redeemable Preferred Shares : 9,316,792

                  Series E SFG Redeemable Preferred Shares : 9,316,793

                  The terms and rights of the SFG Redeemable Preferred Shares
shall be as set forth in Exhibit A hereto.

                  (b)      44,720,603 SFG Redeemable Convertible Preferred
Shares at 18,086 Won per share, for 130,456,835 CHB Shares (the "SFG Redeemable
Convertible Preferred Share Portion") at the aggregate issue price of
808,816,825,858 Won.

                  The terms and rights of the SFG Redeemable Convertible
Preferred Shares shall be as set forth in Exhibit B hereto. In addition, KDIC
shall convert the RCPS into Shares of SFG only in accordance with the following
conversion schedule (the "Conversion Schedule"):

                  (1)      Up to 11,180,151 Shares of SFG at any time after the
                           first anniversary of the Issue Date;

                  (2)      Up to 11,180,151 Shares of SFG at anytime after the
                           second anniversary of the Issue Date; and

                  (3)      Up to 22,360,301 Shares of SFG at anytime after the
                           third anniversary of the Issue Date.

                                       6

<PAGE>

                  Provided, that if the Shares of SFG become subject to the
exchange rights under the Exchangeable Note Documents for the OPERA Bonds and
holders of the OPERA Bonds exercise such exchange rights which would result in
all or a portion of the RCPS being converted into Shares of SFG in contradiction
to the above Conversion Schedule, the number of RCPS that may be converted will
be limited to such number as is required for enabling the Seller to comply with
duly exercised exchange rights pursuant to the Exchangeable Note Documents, and
any such conversions shall be deemed to have been converted in the order of 1, 2
and 3 stated in the Conversion Schedule. Notwithstanding the foregoing, in no
event will the RCPS be converted prior to the first anniversary of the RCPS
Issue Date.

                  Section 2.02. In-Kind Contribution of the CHB Shares. KDIC and
SFG agree that for the purpose of KDIC's in-kind contribution, 266,349,371 CHB
Shares shall be delivered to SFG in consideration for the Transaction Shares
(the "In-Kind Contribution").

                  Section 2.03. Closing. Subject to the satisfaction or waiver
(by the party entitled to waive such condition) of the conditions precedent
specified in Article VI, the In-Kind Contribution contemplated by this Agreement
shall be consummated at a closing (the "Closing") to be held at a place to be
mutually agreed upon simultaneously with closing under the Stock Purchase
Agreement (such time and date to be agreed upon between KDIC and SFG, being
herein referred to as the "Closing Date").

                  Section 2.04. Actions at Closing. At the Closing, the
following actions shall occur:

                  (a)      KDIC will deliver to SFG the stock certificates for
         266,349,371 CHB Shares, in due and proper form, representing the
         In-Kind Contribution.

                  (b)      SFG will deliver to KDIC the receipt representing the
         issuance of the Transaction Shares.

                  (c)      SFG will deliver to KDIC the documents in Section
         6.01(d) and (e).

                  (d)      KDIC will deliver to SFG the documents in Section
         6.02(d).

                  Section 2.05. Actions Post-Closing. After the Closing, (i) if
physical stock certificates representing the Transaction Shares are to be
delivered, then SFG shall deliver such stock certificates, in due and proper
form, within 15 Business Days after the Closing or (ii) if the Transaction
Shares are represented in book-entry form with the Korea Securities Depositary
(the "KSD"), then the Transaction Shares will be reflected in such form in
KDIC's account with the KSD as soon as possible after the Closing.

                                       7

<PAGE>

                                  ARTICLE III
                      REPRESENTATIONS AND WARRANTIES OF SFG

                  SFG hereby represents and warrants to KDIC, as of the date
hereof and as of the Closing as if made on and as of the Closing Date (or, with
respect to representations and warranties that are given as of a specific date,
as of such date), giving effect to any supplement to the Disclosure Schedule
made in accordance with Section 5.06, as follows:

                  Section 3.01. Corporate Organization and Qualification. SFG is
a corporation duly organized and validly existing under the laws of Korea, has
all power and authority required to use its properties and conduct its business
as it is now being conducted and is duly licensed to do business in each
jurisdiction in which it is required to be so licensed.

                  Section 3.02. Authorization of Agreement; Enforceability.

                  (a)      SFG has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate action of SFG.

                  (b)      This Agreement has been duly executed and delivered
by SFG and constitutes a valid and binding obligation of SFG, enforceable
against SFG in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights generally.

                  Section 3.03. Consents; No Conflicts.

                  (a)      Except for the Required Regulatory Approvals with
respect to the sale and purchase of the Transaction Shares set forth in Schedule
3.03(a), no Regulatory Approval is required to have been obtained by SFG in
connection with the execution, delivery and performance of this Agreement.

                  (b)      The execution, delivery and performance of this
Agreement will not: (i) violate any provision of the articles of incorporation
of SFG, or (ii) result in the violation of any Law or Regulatory Approval
applicable to SFG or any of its Major Subsidiaries, except for such violations
that, individually or in the aggregate, neither have had nor are reasonably
likely to have a Material Adverse Effect.

                  Section 3.04. Capitalization; Issuance; Securities.

                  (a)      As of the date hereof, the authorized and outstanding
capital stock and outstanding Convertible Securities of SFG are as set forth in
Schedule 3.04(a). Except as set forth in Schedule 3.04(a), SFG has no
obligations to issue or sell any other capital stock or Convertible Securities,
other than the shares to be issued in connection with the funding of this
transaction.

                                       8

<PAGE>

                  (b)      All outstanding capital stock of SFG were duly
authorized and validly issued and are fully paid and non-assessable.

                  (c)      The issuance of the Transaction Shares has been, or
will be by the Closing Date, duly authorized by SFG, validly issued, fully paid
and non-assessable and free and clear of any Liens and no Person will be
entitled to a pre-emptive right as a result of the issuance of the Transaction
Shares.

                  Section 3.05. Subsidiaries.

                  (a)      Each Subsidiary is a corporation duly organized and
validly existing under the laws of its jurisdiction of incorporation, has all
power and authority required to use its properties and conduct its business as
it is now being conducted and is duly licensed to do business in each
jurisdiction in which it is required to be so licensed, except for such failures
to be so licensed that, individually or in the aggregate, neither have had nor
are reasonably likely to have a Material Adverse Effect in connection with the
issuance of the Transaction Shares.

                  (b)      Except as disclosed in Schedule 3.05(b), all of the
outstanding capital stock and outstanding Convertible Securities in each
Subsidiary is owned by SFG free and clear of any Liens. All outstanding shares
of the capital stock of each of the Subsidiaries were duly authorized and
validly issued and are fully paid and non-assessable.

                  Section 3.06. Financial Statements; Undisclosed Liabilities.

                  (a)      The Financial Statements and the financial statements
of the Major Subsidiaries as of the most recent fiscal year end were prepared in
accordance with the requirements of applicable Law and Korean GAAP and present
fairly, in material respects, the financial position, results of operations,
changes in capital surplus and retained earnings and cash flows of SFG and its
Major Subsidiaries, as of the dates and for the periods covered thereby.

                  (b)      Except as disclosed in Schedule 3.06(b), as at the
date of the most recent audited financial statements, SFG and its Major
Subsidiaries have no liability or obligations of any nature (whether accrued,
absolute, fixed, contingent, liquidated or otherwise and whether due or to
become due) ("Undisclosed Liabilities"), except (i) as reflected or fully
reserved against the latest 2002 Financial Statements of SFG (including
footnotes thereto) and the most recently available audited financial statements
(including footnotes thereto) of the Major Subsidiaries (a copy of which has
been provided to KDIC) and (ii) for such Undisclosed Liabilities that
individually or in the aggregate, neither have had nor are reasonably likely to
have a Material Adverse Effect.

                  (c)      Except as disclosed in Schedule 3.06(c), since the
date of the most recent audited financial statements, SFG and its Major
Subsidiaries have no Undisclosed Liabilities, except those incurred in the
ordinary and usual course of business consistent with prudent banking practices
in Korea.

                                       9

<PAGE>

                  Section 3.07. Absence of Certain Changes. Except for (i) the
transactions contemplated by, or relating to, this Agreement and the Stock
Purchase Agreement or (ii) as disclosed in Schedule 3.07, since December 31,
2003 (with respect to SFG) and the date of the most recent audited financial
statements (with respect to the Major Subsidiaries), SFG and its Major
Subsidiaries have conducted their business in the ordinary and usual course, and
there has not been any development that, individually or in the aggregate, have
had or is reasonably likely to have a Material Adverse Effect in connection with
the issuance of the Transaction Shares.

                  Section 3.08. Litigation. Except as disclosed in Schedule
3.08, (i) there are no material judgments, decrees, injunctions or orders
(collectively, "Judgments") outstanding against SFG and any of its Major
Subsidiaries or any of their respective assets and (ii) there are no Proceedings
pending or, to the knowledge of SFG and its Major Subsidiaries, threatened
relating to or affecting SFG and any of its Major Subsidiaries or any of their
respective assets, except for Proceedings that individually involve claims of
less than 1 billion Won for which individually or in the aggregate have not had
nor are reasonably likely to have a Material Adverse Effect.

                  Section 3.09 Compliance with Laws; Regulatory Approvals.
Except as set forth in Schedule 3.9, (i) SFG and its Major Subsidiaries and, to
the knowledge of SFG, the officers and key employees of SFG and its Major
Subsidiaries (during the course of their respective duties) are in compliance
with all applicable Laws in material respects, and (ii) neither SFG nor any of
its Major Subsidiaries is subject to any investigation, inquiry or enforcement
proceedings or process by any Governmental Entity of which SFG and its Major
Subsidiaries have been notified, except for such instances of non-compliance,
investigation, inquiry or enforcement proceedings or process that, individually
or in the aggregate, neither have had nor are reasonably likely to have a
Material Adverse Effect on SFG and its Major Subsidiaries, taken as a whole.

                  Section 3.10. Taxes. Except as disclosed on Schedule 3.10
hereto:

                  (a)      SFG and its Major Subsidiaries have duly filed all
Korean and other tax returns (including any information returns), reports and
statements that are required to have been filed with the appropriate taxing
authorities and have paid all Taxes required to have been paid for all relevant
periods (other than Taxes that are being contested in good faith and for which
appropriate reserves have been set aside).

                  (b)      No audits or investigations relating to any Taxes for
which SFG or any of its Major Subsidiaries may be liable are pending or, the
knowledge of SFG and its Major Subsidiaries, threatened before any taxing
authority. There are no agreements or applications by SFG or any of its Major
Subsidiaries for the extension of the time for filing any tax return or paying
any Tax, nor have there been any waivers by SFG or any of its Major Subsidiaries
of any statutes of limitation for the assessment of any Taxes nor are such
agreements, applications and waivers under discussion.

                                       10

<PAGE>

                  Section 3.11 Contracts.

                  (a)      Except as set forth in Schedule 3.11(a), all
Contracts are valid and enforceable in accordance with the terms thereof, except
for such invalidity and unenforceability which, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.

                  (b)      Except as set forth in Schedule 3.11(b), SFG and its
Major Subsidiaries have not violated the terms of, nor are they in default
under, any Contracts, except for such violations and defaults which,
individually or in the aggregate, neither have had nor are reasonably likely to
have a Material Adverse Effect.

                  (c)      Except as ser forth in Schedule 3.11(c), the
execution, delivery and performance of this Agreement, the performance by SFG of
its obligations hereunder and the consummation of the transactions contemplated
herein do not and will not violate, conflict with, or result in the breach or
termination of, or otherwise give any other Person the right to, accelerate,
renegotiate or terminate or receive any payment, or constitute a default or an
event of default (or an event which with notice, lapse of time, or both, would
constitute a default or event of default) under the terms of, or result in the
imposition of any Lien under, any Contracts to which SFG or any of its Major
Subsidiaries are a party or by which SFG or any of its Major Subsidiaries or any
of their respective assets or operations are bound or affected.

                  Section 3.12. Transaction with Major Subsidiaries. Except as
disclosed in Schedule 3.12, there are no material contracts or arrangements of
any kind between any Major Subsidiaries, on the one hand, and SFG, on the other
hand, except for those contracts or arrangements entered into in the ordinary
course of business.

                  Section 3.13 Derivative Instruments. (a) Except as set forth
in Schedule 3.13(a), any swaps, caps, floors, futures, forward contracts, option
agreements, and any other derivative financial instruments, contracts or
arrangements (collectively, "Derivative Instruments"), whether entered into for
the account of the Major Subsidiaries or for the account of one of its
customers, were entered into in the ordinary course of business and in
accordance with applicable Law. The Major Subsidiaries have complied in material
respects with its obligations under such Derivative Instruments to the extent
that such obligations have accrued and has not received any written notice of
default, acceleration or termination in respect of its Derivative Instruments
from any counterparty.

                  (b)      Except as set forth in Schedule 3.13(b), the total
derivatives positions of the Major Subsidiaries are hedged or secured either by
back-to-back or matching derivatives transactions or by other transactions
entered into by, or collateral provided to, the Major Subsidiaries, in line with
prudent banking practices in Korea. All of the outstanding Derivative
Instruments of the Major Subsidiaries have been marked to market as of the end
of the preceding month in accordance with Korean GAAP.

                                       11

<PAGE>

                  Section 3.14 Trust Accounts. Except as set forth in Schedule
3.14, (i) Shinhan Bank has not engaged in any transfers of assets between trust
accounts established under the Trust Business Act (the "Trust Accounts") that do
not comply with the requirements of applicable Law, (ii) there are no guarantees
to customers relating to the yield or return, of the Trust Accounts of Shinhan
Bank (other than guarantees that are legally permitted pursuant to the Trust
Business Act), (iii) there has not been and there exist no material violations
of the relevant trust agreement or other constituent instruments, contractual
requirements, laws and regulations, internal regulations of Shinhan Bank or any
such investment vehicle or instrument, in relation to management or distribution
of such Trust Accounts or any interest or participation therein, and (iv) that
Shinhan Bank is in compliance in material respects with all material legal
obligations (including but not limited to trustee's fiduciary duties) owed to
investors in any of the Trust Accounts of Shinhan Bank, except for such
non-compliance which, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.

                  Section 3.15. Books and Records. SFG and its Major
Subsidiaries have maintained, in all material respects, the books and records
required to be maintained pursuant to the applicable Laws, and that such books
and records are true and accurate in all material respects and all of the books
and records of SFG and its Major Subsidiaries that have been provided to KDIC or
that KDIC shall have access to shall be accurate and complete.

                  Section 3.16 Financial Projections. The financial projections
attached hereto as Schedule 3.16 have been prepared by SFG in a prudent manner.

                  Section 3.17 Disclosure Schedules. The inclusion of any
information in the Disclosure Schedule or other documents delivered by SFG under
this Agreement shall not be deemed an admission or evidence of the materiality
of such item, nor shall it establish a standard of materiality for any purpose
whatsoever.

                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF KDIC

                  KDIC represents and warrants to SFG, as of the date hereof and
as of the Closing as if made on and as of the Closing Date (or, with respect to
representations and warranties that are given as of a specific date, as of such
date), as follows:

                  Section 4.01. Corporate Organization and Qualification. KDIC
is duly organized, validly existing and in good standing under the laws of
Korea, has all power and authority required to use its properties and conduct
its business as it is now being conducted and is duly licensed to do business in
each jurisdiction in which it is required to be so licensed, except for such
failures to be so licensed that, individually or in the aggregate, neither have
had nor are reasonably likely to have a Material Adverse Effect.

                                       12

<PAGE>

                  Section 4.02. Authorization of Agreement; Enforceability

                  (a)      KDIC has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate action on the part of KDIC.

                  (b)      This Agreement has been duly executed and delivered
by KDIC and constitutes its valid and binding obligation, enforceable against it
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws relating to or affecting creditors' rights generally and by general
principles of equity.

                  Section 4.03. Consents; No Conflicts

                  (a)      Except for the Required Regulatory Approvals with
respect to the purchase of the Transaction Shares set forth in Schedule 4.03(a),
no Regulatory Approval is required to have been made or obtained by KDIC in
connection with the execution, delivery and performance of this Agreement.

                  (b)      The execution, delivery and performance of this
Agreement will not (i) violate any provision of KDIC's articles of incorporation
or other constitutional documents, (ii) result in the violation of any Law or
Regulatory Approval applicable to KDIC, or (iii) to the knowledge of KDIC,
violate, conflict with or result in a breach or termination of any material
contract, obligation, or commitment to which KDIC is a party or by which it is
bound, except for such violations, conflict, breach or termination that,
individually or in the aggregate, neither have had nor are reasonably likely to
have a Material Adverse Effect

                  Section 4.04. Litigation. There are no Proceedings against
KDIC that enjoin, restrict or materially delay KDIC's ability to purchase the
Transaction Shares hereunder.

                                   ARTICLE V
                              PRE-CLOSING COVENANTS

                  Section 5.01. Conduct of Business. During the Pre-Closing
Period, unless KDIC consents in writing in advance (such consent not to be
unreasonably withheld), SFG shall, and shall use best efforts to cause its Major
Subsidiaries to, (i) conduct its business in the ordinary course, (ii) not amend
the articles of incorporation or other constitutional documents of SFG, (iii)
not take any action relating to any issuance or sale, or dividend or other
distribution, involving any of its equity securities or Convertible Securities,
other than (x) for common and preferred shares to be issued in connection with
the financing transaction relating to this Agreement and the Stock Purchase
Agreement and (y) as a result of obligations pursuant to already existing
securities or agreements, (iv) preserve intact its present business operations
in material respects, and (v) not take any action, or permit the taking of any
action, that would result in any of the representations or warranties in Article
III being materially inaccurate at the Closing as if made

                                       13

<PAGE>

on and as of the Closing Date (except for such representations and warranties
that are made as of a specific date).

                  Section 5.02. Financial and Other Information. During the
Pre-Closing Period, to the extent permitted under applicable Law and the
ordinary course of business is not disturbed, SFG shall give KDIC and its
Authorized Representatives reasonable access during business hours to the
properties, books and records of SFG and its Major Subsidiaries and to the
Authorized Representatives of SFG and its Major Subsidiaries to discuss the
business, finances, operations, risk management, regulatory status and other
matters related to SFG and its Major Subsidiaries and to the purchase of the
Transaction Shares, in each case to the extent KDIC shall have requested such
access at least one (1) Business Day in advance and SFG has provided its
consent, which shall not be unreasonably withheld. KDIC shall keep the
information provided pursuant to this Section 5.02 confidential and shall not
disclose publicly or to any third party without the prior written consent of
SFG. For the purposes of this Section 5.02, an "Authorized Representative" shall
mean a Representative of KDIC, SFG or its Major Subsidiaries, as the case may
be, and in each case who has been authorized in writing by SFG.

                  Section 5.03. Notifications. During the Pre-Closing Period,
SFG and KDIC will promptly notify the other party in writing of any fact,
condition or occurrence that is reasonably likely to result in any of its
representations and warranties in this Agreement no longer being true at Closing
as if made on and as of the Closing Date (except for such representations and
warranties that are made as of a specific date) or its failure or possible
failure to satisfy any of the conditions set forth in Article VI.

                  Section 5.04. Taking of Necessary Action. Each of the parties
agrees to use its best efforts promptly to do or cause to be done all things
required to be done by such party under applicable Laws to consummate the
transactions contemplated by this Agreement, including, but not limited to,
using its best efforts to make all filings and obtain all Required Regulatory
Approvals, assist the other party to make its filings and obtain all Required
Regulatory Approvals, and to cooperate with one another in taking all necessary
actions with respect to the foregoing.

                  Section 5.05. Public Statements. Subject to Article 12.07, SFG
and KDIC will agree upon the timing and content of any press release to be
issued relating to the execution of this Agreement and SFG and KDIC will
thereafter consult with and provide reasonable cooperation to the other in
connection with the issuance of any further press release or the making of any
public disclosure describing the transactions contemplated by this Agreement;
provided that nothing in this Section 5.05 shall prevent SFG or KDIC from
issuing any press release or making any public disclosure that such party
reasonably believes (based on the written advice of experienced legal counsel)
it is required to make under any applicable Law.

                  Section 5.06 Supplements of Disclosure Schedule. SFG may, from
time to time, by notice in accordance with this Agreement, supplement the
Disclosure Schedule including through one or more supplements three (3) days
prior to the Closing Date (the "Supplement Date") (for which prior notice shall
be given at least twelve (12) days before the proposed Closing Date,

                                       14

<PAGE>

provided, that the notice shall provided at least seven (7) Business Days prior
to the Supplement Date), to reflect any new facts that may have risen following
the date hereof. The supplements shall be subject to the consent of KDIC (such
consent shall be deemed to have been given by KDIC with respect to the
supplements which are a result of ordinary and usual business consistent with
prudent banking practices) and the related termination provisions in Article XI.

                                   ARTICLE VI
                                   CONDITIONS

                  Section 6.01. Conditions to KDIC's Obligations. KDIC will have
no obligation to consummate the transaction contemplated under this Agreement at
the Closing unless each of the following conditions precedent is satisfied or
waived in writing by KDIC:

                  (a)      Representations and Warranties; Covenants. The
representations and warranties set forth in Article III shall be true and
correct in all material respects when made and at the Closing as if made on and
as of the Closing Date (or, with respect to representations and warranties that
are given as of a specific date, as of such date). SFG shall have performed in
all material respects all obligations required to be respectively performed by
it under this Agreement prior to the Closing.

                  (b)      Compliance with Laws; No Adverse Action or Decision.
Since the date hereof, (i) no Law shall have been promulgated or enacted that
materially delays or makes illegal the performance of this Agreement; (ii) no
order by any Governmental Entity that materially delays or makes illegal the
performance of this Agreement shall be effective; and (iii) no Governmental
Entity shall have instituted any Proceeding that seeks to materially delay or
make illegal the performance of this Agreement.

                  (c)      Consents. All Required Regulatory Approvals shall
have been obtained on terms reasonably satisfactory to KDIC and shall not be
subject to any conditions that, individually and in aggregate, either have had
or are reasonably likely to have a Material Adverse Effect.

                  (d)      Documents. KDIC shall have received counterpart
originals of this Agreement, the certified minutes for the resolutions of the
Board of Directors approving this Agreement and related matters and copies of
such other documents as it may reasonably request.

                  (e)      Opinions of counsel. KDIC shall have received at the
Closing from [Kim & Chang], Korean counsel to SFG, a written opinion dated the
Closing Date, in a form reasonably satisfactory to KDIC.

                  (f)      Stock Purchase Agreement. SFG and KDIC shall have
entered into the Stock Purchase Agreement and the performance of SFG's
obligations thereunder shall occur simultaneously with the Closing under this
Agreement.

                                       15

<PAGE>

                  Section 6.02. Conditions to SFG's Obligations. SFG will have
no obligation to consummate the transaction contemplated under this Agreement at
the Closing unless each of the following conditions precedent is satisfied or
waived in writing by SFG:

                  (a)      Representations and Warranties; Covenants. The
representations and warranties of KDIC set forth in Article IV hereof shall be
true and correct in all material respects when made and at the Closing as if
made on and as of the Closing Date (or, with respect to representations and
warranties that are given as of a specific date, as of such date). KDIC shall
have performed in all material respects all obligations required to be performed
by it under this Agreement prior to the Closing.

                  (b)      Compliance with Laws; No Adverse Action or Decision.
Since the date hereof, (i) no Law shall have been promulgated or enacted that
materially delays or makes illegal the performance of this Agreement; (ii) no
order by any Governmental Entity that materially delays or makes illegal the
performance of this Agreement shall be effective; and (iii) no Governmental
Entity shall have instituted any Proceeding that seeks to materially delay or
make illegal the performance of this Agreement.

                  (c)      Consents. All Required Regulatory Approvals shall
have been obtained on terms reasonably satisfactory to SFG and shall not be
subject to any conditions that, individually or in the aggregate, have had or
are reasonably likely to have a material adverse effect on the ability of KDIC
to perform its obligations under this Agreement or a Material Adverse Effect.

                  (d)      Documents. SFG shall have received counterpart
originals of this Agreement, the certified minutes for the resolutions of the
board of directors of KDIC approving this Agreement and related matters and
copies of such other documents as it may reasonably request (including certified
approval documents of the Public Funds Oversight Committee or any other
government agency which has the authority or ability to approve of this
Agreement).

                  (e)      Stock Purchase Agreement. SFG and KDIC shall have
entered into the Stock Purchase Agreement and the performance of KDIC's
obligations under the Stock Purchase Agreement shall occur simultaneously with
the Closing under this Agreement.

                                   ARTICLE VII
                                   GOVERNANCE

                  Section 7.01 General. As a general matter, SFG shall exercise
all voting rights with respect to the common shares of SFG received in
connection with the conversion of SFG Redeemable Convertible Preferred Shares,
if any, the SFG Redeemable Preferred Shares (to the extent enfranchised) and the
SFG Redeemable Convertible Preferred Shares (to the extent enfranchised),
provided that as long as the common shares of SFG held by KDIC represents more
than 4% of the total issued and outstanding common shares of SFG, including the
SFG Redeemable Preferred Shares (to the extent enfranchised and for such period
of enfranchisement) and the SFG Redeemable Convertible Preferred Shares (to the
extent enfranchised and for such

                                       16

<PAGE>

period of enfranchisement), with respect to the matters set forth below, SFG
must obtain KDIC's consent before exercising the voting rights relating to such
shares. In connection with the foregoing, KDIC shall grant a proxy/power of
attorney to SFG or any Person designated by SFG on an annual basis and delivered
to SFG at least 10 Business Days prior to each annual general shareholders
meeting of SFG.

                  (a)      any matters which require a special resolution or
                  unanimous resolution of the shareholders under the Korean
                  Commercial Code;

                  (b)      approval of any dividend payment on common shares of
                  SFG; and

                  (c)      appointment or dismissal of any Outside Director
                  nominated by KDIC.

                  Section 7.02 Outside Director.

                  (a)      KDIC's Nomination Right. KDIC shall be entitled to
recommend candidates for the position of one Outside Director to SFG if, and
only if KDIC holds 4% or more of the total issued and outstanding common shares
of SFG as of the relevant shareholders meeting of SFG as a result of the
conversion of all or a part of the SFG Redeemable Convertible Preferred Shares
into the common shares of SFG. For the avoidance of doubt, KDIC will no longer
be entitled to such recommendation right if the ratio of the above common shares
held by KDIC becomes lower than 4% of the total issued and outstanding common
shares of SFG.

                  (b)      Notice. KDIC shall submit a notice of its
recommendation for a candidate to be nominated as an Outside Director ("Outside
Director Notice") to SFG at least 1 month prior to the relevant general
shareholders meeting electing directors. KDIC shall seek and obtain the consent
of SFG prior to such notice with respect to the candidate's qualifications to
ensure (i) satisfaction of legal requirements under Korean law, and (ii) that
such candidate has relevant knowledge of and experience in the financial
industry.

                  (c)      Election of Outside Director. SFG shall take all
Necessary Action and use its best efforts to ensure the election of the Outside
Director recommended by KDIC and approved by SFG in accordance with this Section
7.02 at the next annual shareholders meeting electing directors following the
receipt of the Outside Director Notice

                  (d)      Term of KDIC Outside Director. The term of any KDIC
Outside Director shall be for one year, regardless of whether KDIC maintains the
4% shareholding threshold during such term.

                  (e)      Vacancies. In case the position of an Outside
Director recommended by KDIC becomes vacant for any reason, SFG shall take all
Necessary Action (excluding the obligation to hold a shareholders meeting solely
for the purpose of appointing such an Outside Director) and use its best efforts
to cause the election as a substitute Outside Director, a person recommended by
KDIC. If KDIC wishes to change any of its recommended Outside Directors,

                                       17
<PAGE>

whether with or without cause, SFG shall take all Necessary Action to change
such Outside Directors; provided, however, that if such dismissal is without
cause, KDIC shall indemnify and hold harmless SFG from any and all damages and
other expenses that may arise from such action. Pending the pending appointment
of KDIC's substitute or replacement Outside Director, the candidate recommended
by KDIC shall be entitled to attend all meetings of the Board of Directors as an
observer.

                  (f)      Scope of Position. For avoidance of doubt, the KDIC
Director is not entitled to be appointed to the Audit Committee or any other
Committee of SFG.

                                  ARTICLE VIII
                             POST-CLOSING COVENANTS

                  Section 8.01 Notice of Default. SFG and KDIC shall give to the
other party prompt written notice of the occurrence or existence of any event,
condition or circumstance occurring which would constitute a violation or breach
of this Agreement by such party.

                  Section 8.02 Financial and Accounting Records. SFG shall, and
shall cause its Subsidiaries or Major Subsidiaries, where applicable, to:

                  (a)      deliver to KDIC complete and accurate statements of
whatever material financial and other information regarding SFG and its Major
Subsidiaries (including material financial and other information required to be
filed with a Governmental Entity) that KDIC may reasonably request;

                  (b)      deliver to KDIC, as soon as available and in no event
more than one hundred twenty (120) days after the end of the fiscal year, a copy
of the annual consolidated financial statements for SFG and its Subsidiaries as
of the end of the fiscal year (including the consolidated balance sheets and
statements of the consolidated profit and loss accounts, cash flows, and
recognized gains and losses for such fiscal year), prepared in accordance with
Korean GAAP and audited by an independent auditor.

                  (c)      deliver to KDIC, as soon as available but no later
than forty-five (45) days after the end of each fiscal quarter, a copy of SFG's
non-consolidated quarterly and interim financial statements; and

                  (d)      maintain its and its Subsidiaries' books and records
in a manner necessary for compliance with any requirement of Law that are
applicable to SFG and its Subsidiaries.

                  Section 8.03 Right of Inspection. Subject to SFG's consent
(which shall not be unreasonably withheld), during office hours of SFG, and upon
reasonable notice to SFG, KDIC shall have full access to all properties, books
of account, and records of SFG, and KDIC shall have the right to make copies
from such books and records at its own expense.

                                       18
<PAGE>

                  Section 8.04 Redemption of Transaction Shares. SFG agrees (i)
to use its best efforts to assure the redemption of the Series A, B, C, D, and E
SFG Redeemable Preferred Shares and the Series A, B and C SFG Redeemable
Convertible Preferred Shares (to the extent not converted by KDIC to common
shares of SFG) on the respective redemption dates, and (ii) unless KDIC consents
(which shall not be unreasonably withheld), not to declare or pay any dividend
in excess of 750 Won per common share of SFG if the net income of SFG is below
800 billion Won in any fiscal year and any of the SFG Redeemable Preferred
Shares and SFG Redeemable Convertible Preferred Shares are outstanding, to the
extent permitted under applicable Law.

                                   ARTICLE IX
                               TRANSFER OF SHARES

                  Section 9.01 Demand Registration. At any time and from time to
time on or after the date hereof, KDIC may request that SFG effect the
registration under the Korean Securities Act and/or the U.S. Securities Act (a
"Demand Registration") covering all or part of the common shares of SFG held by
KDIC as a result of the conversion of all or a part of the SFG Redeemable
Convertible Preferred Shares. Upon receipt of such demand, SFG shall use its
best efforts to effect such Demand Registration as soon as practicable and, in
any event, to file within ninety (90) days of receipt of such request, a
registration statement under the Korean Securities Act or the U.S. Securities
Act, as applicable, covering the Shares subject to such request. SFG and KDIC
shall enter into an underwriting agreement with the underwriter(s) selected by
agreement between KDIC and SFG and shall enter into such other customary
agreements and take all such other customary action (including participation by
SFG's management in roadshows and other meetings with investors) as may
reasonable be requested to facilitate the disposition of such Shares. KDIC shall
bear all costs of preparing and filing the registration statement (including any
selling commissions and underwriting discounts in respect thereof).

                  Section 9.02 Piggyback Registration Rights.

                  (a)      Notice to KDIC.

                           (1)      If SFG determines that SFG will file a
registration statement under the Korean Securities Act and/or the U.S.
Securities Act for the public offering of new common shares of SFG (for
avoidance of doubt, this provision will not be applicable to (A) a private
offering of new common shares of SFG; (B) a deemed public offering of new common
shares of SFG pursuant to the Presidential Decree of the Korean Securities Act,
Article 2-4, Sub-Paragraph 4; and (C) offering of approximately 30,000,000
Shares currently held by Shinhan Bank), SFG shall give prompt written notice to
KDIC (but in no event less than thirty (30) days nor more than ninety (90) days
in advance of filing such registration statement, setting forth (a) the date of
the expected filing, (b) the jurisdiction or jurisdictions in which such
offering is expected to be made, (c) the underwriter or underwriters (if any)
SFG (or such other shareholders of SFG) intends to designate for such offering
and (d) any other material facts involved in such proposed registration. If SFG,
within ten (10) days after giving such notice, receives a written request from
KDIC for registration of any of KDIC's Shares, then SFG shall include in the
same registration statement the

                                       19
<PAGE>

lesser of (x) the number of additional KDIC's Shares to be sold by KDIC as shall
have been specified in its request and (y) a pro rata portion of KDIC's Shares
to the total number of shares to be offered.

                  (2)      SFG and KDIC shall bear its respective portion (i.e.,
in proportion to the number of Shares requested to be sold) of all costs of
preparing and filing the registration statement (including any selling
commissions and underwriting discounts in respect thereof.

                  (3)      Notwithstanding anything herein to the contrary, SFG,
on prior notice to the relevant parties, has the absolute discretion abandon the
filing of, or consummation of a transaction pursuant to, a registration
statement under this Section 9.03 at any time prior to such filing or such
consummation.

                  (b)      Allocation. If the managing underwriter shall inform
SFG in writing that the number of such Shares requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering within price range acceptable to SFG, then SFG shall include in
such registration only such number of Shares which SFG is so advised can be sold
in (or during the time of) such offering. KDIC and SFG shall share pro rata in
the number of Shares to be excluded from such offering, such sharing to be based
on the respective numbers of Shares as to which registration has been requested
by such parties.

                  Section 9.03 Transfer Restriction.

                  Without the prior consent of SFG, KDIC may not transfer 25% or
more of the initial number of the RCPS to any one party, group, consortium or
entities acting in concert, as the case may be provided, that KDIC may not
transfer any of the RCPS held by KDIC to any one party, group, consortium or
entities acting in concert, as the case may be, holding more than 4% of the
total issued and outstanding common shares of SFG.

                  Section 9.04 Right of First Offer.

                  (a)      If KDIC desires to Transfer all or any portion of the
RCPS or any SFG common shares issued pursuant to the conversion of any RCPS (the
"Offered Shares") then SFG shall have the right of first offer to purchase all
(but not part only) of the Offered Shares, upon the terms and subject to the
conditions hereinafter provided.

                  (b)      Prior to any proposed Transfer of the Offered Shares,
KDIC shall deliver to SFG a written bona fide offer to sell the Offered Shares
to SFG stating separately the number of RCPS or any SFG common shares issued
pursuant to the conversion of any RCPS to be transferred and the prices for each
class of shares and terms for such Transfer (a "Transfer Notice"). Subject to
any confidentiality obligations, KDIC shall provide in the Transfer Notice the
identity of any potential purchaser of the Offered Shares existing at the time
of the Transfer Notice; provided, that,

                                       20
<PAGE>

if KDIC is subject to confidentiality obligations, KDIC shall state in the
Transfer Notice that a potential purchaser exists without identifying the
potential purchaser.

                  (c)      SFG shall have a period of 30 days after receipt of
the Transfer Notice (the "Exercise Period") within which to elect to purchase
such Offered Shares at the same price and on the same terms set forth in the
Transfer Notice, which election shall be made by an irrevocable written notice
delivered to KDIC. The failure of SFG to give such notice within the Exercise
Period shall be deemed to be a waiver of SFG's rights under Subsection 9.04(a).

                  (d)      The closing of any purchase of Offered Shares by SFG
shall be held at such time and place as the parties to the transaction may
agree. At such closing, all of the parties to the transaction shall execute such
additional documents as are otherwise necessary or appropriate.

                  (e)      If SFG has not exercised its right to purchase all of
the Offered Shares within the Exercise Period, KDIC may sell all or any part of
the Offered Shares to any other person not later than the 90th date after the
expiration of the Exercise Period (the "Free Sale Period"); provided, that KDIC
shall not Transfer the Offered Shares to any third party on terms and conditions
(including, the price) more favorable than those set forth in the Transfer
Notice received by SFG.

                  (f)      Notwithstanding anything to the contrary, any
Transfer contemplated by this Section 9.05 shall be subject to Government
Approval, if required. If necessary, the Exercise Period and/or the Free Sale
Period referred to in Subsection 9.04(b) and (e) above shall be extended until
such Government Approval has been obtained or officially and finally denied.

                  (g)      If the Offered Shares are not Transferred to third
parties upon the terms established herein and within the Free Sale Period, then
the Offered Shares shall automatically become subject once more to the terms of
this Section 9 as if said Offered Shares had never before been offered for
Transfer.

                                    ARTICLE X
                                   TERMINATION

                  Section 10.01. Termination of Agreement Prior to Closing.
Subject to Section 10.03, this Agreement may be terminated by notice in writing
at any time prior to the Closing by KDIC or SFG if:

                  (a)      Closing has not occurred by September 30, 2003,
         provided, however, that the right to terminate this Agreement under
         this Section 10.01(a) will not be available to any party whose failure
         to fulfill any obligation under this Agreement has caused the failure
         of the Closing to occur by such date;

                  (b)      The Stock Purchase Agreement is terminated in
         accordance with the terms therein;

                                       21
<PAGE>

                  (c)      Prior to the Closing Date, any Governmental Entity of
         competent jurisdiction has taken any action prohibiting the
         consummation of the transaction contemplated by this Agreement and such
         action becomes final and non-appealable;

                  (d)      SFG and KDIC so mutually agree in writing; or

                  (e)      KDIC does not consent to the supplements to the
         Disclosure Schedule pursuant to Section 5.08.

                  Section 10.02 Termination of Agreement After Closing. Subject
to Section 10.03, this Agreement may be terminated by notice in writing (except
that this Agreement shall be automatically terminated without any need for
notice in case of subsection (f) below) at any time after the Closing by KDIC or
SFG as follows:

                  (a)      SFG shall have the right to terminate this Agreement
by giving written notice to KDIC if there has been a material violation or
breach by KDIC of any of its obligations under Articles VII to IX of this
Agreement and such violation or breach has not been waived by SFG or cured
within thirty (30) days from the date KDIC receives written notice of the breach
from SFG;

                  (b)      KDIC shall have the right to terminate this Agreement
by giving written notice to SFG if there has been a material violation or breach
by SFG of any of its obligations under Articles VII to IX of this Agreement and
such violation or breach has not been waived by KDIC or cured within thirty (30)
days from the date SFG receives written notice of the breach from KDIC;

                  (c)      SFG shall have the right to terminate this Agreement
at any time by giving written notice to KDIC if KDIC enters into bankruptcy,
reorganization or compulsory composition or if the creditors of KDIC take over
KDIC's management or if any material or significant part of KDIC's undertakings,
properties or assets are expropriated or confiscated by action of any
government;

                  (d)      KDIC shall have the right to terminate this Agreement
at any time by giving written notice to SFG if SFG enters into bankruptcy,
reorganization or compulsory composition or if the creditors SFG take over SFG's
management or if any material or significant part of SFG's undertakings,
properties or assets are expropriated or confiscated by action of any
government;

                  (e)      SFG and KDIC so mutually agree in writing;

                  (f)      The Stock Purchase Agreement is terminated in
accordance with the terms therein; or

                  (g)      If the number of the common shares of SFG held by
KDIC (including the number of common shares issuable upon the conversion of the
RCPSs) represents less than 4% of

                                       22
<PAGE>

the total issued and outstanding common shares of SFG subsequent to KDIC having
received common shares upon conversion of the RCPS resulting in KDIC owning more
than 4% of the total issued and outstanding common shares of SFG.

                  Section 10.03. Consequences of Termination

                  (a)      Termination of this Agreement shall be without
prejudice to the accrued rights and liabilities of the parties on the date of
termination, unless waived in writing.

                  (b)      Unless expressly stated otherwise, the right of
either party to terminate this Agreement is not an exclusive remedy, and upon
breach of this Agreement, either party shall be entitled alternatively or
cumulatively to any available remedy against the other party under any
applicable law.

                  (c)      Articles X, XI and XII shall survive the termination
of this Agreement.

                                   ARTICLE XI
                                 INDEMNIFICATION

                  Section 11.01. Indemnification.

                  (a)      SFG agrees to indemnify and hold harmless KDIC and
each Representative of KDIC (collectively, the "Indemnified KDIC Parties") from
and against any and all Losses incurred by any of the Indemnified KDIC Parties
as a result of, or arising out of or in connection with, the breach of any
representation or warranty (without giving effect to any qualifiers or
exceptions relating to materiality (except those which are not related to or
does not result in the Losses), Material Adverse Effect or words of similar
import but giving effect to the Material Adverse Effect qualifier in 3.08),
agreement or covenant made by SFG in this Agreement; provided, however, that (i)
the aggregate amount of SFG's liability for indemnification of all Indemnified
KDIC Parties shall be limited to an amount equal to thirty percent (30%) of the
aggregate issue price of the SFG Redeemable Preferred Shares and SFG Redeemable
Convertible Preferred Shares, and (ii) no claim may be made against SFG for any
indemnification hereunder unless the aggregate amount of such claims exceeds 7.5
billion Won (the "Indemnification Threshold"), provided, further, that for any
individual claims that are less than 100 million Won (the "Small Claims"), the
aggregate of the Small Claims shall be included as indemnification amounts if
the aggregate of Small Claims exceed 10 billion Won. For avoidance of doubt,
claims that are based upon the same cause of action(s) shall be aggregated and
taken together as a whole to constitute an individual claim for purposes of the
foregoing provision regarding Indemnification Threshold. SFG shall be
responsible for indemnification only for the amounts that exceed 7.5 billion
Won.

                  (b)      KDIC agrees to indemnify and hold harmless SFG and
its Representatives (the "Indemnified SFG Parties") from and against any and all
Losses incurred by any of the Indemnified SFG Parties as a result of, or arising
out of, the breach of any representation, warranty, agreement or covenant made
by KDIC in this Agreement, as they are incurred; provided, however,

                                       23
<PAGE>

that (i) the aggregate amount of KDIC's liability for indemnification of all
Indemnified SFG Parties shall be limited to an amount equal to thirty percent
(30%) of the aggregate issue price of the SFG Redeemable Preferred Shares and
SFG Redeemable Convertible Preferred Shares and (ii) no claim may be made
against KDIC for any indemnification hereunder unless the aggregate amount of
such claims exceeds the Indemnification Threshold.

                  (c)      In the event any indemnified party should have a
claim against any indemnifying party that does not involve a Third Party Claim
(as defined below) being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness and specifying the factual basis of that claim in
reasonable detail to the indemnifying party on or before the expiration of the
applicable survival period under Section 11.2, such notice to state that it is
delivered pursuant to this Section 11.01(c). The failure of any indemnified
party to so notify the indemnifying party shall not relieve the indemnifying
party from any liability which it may have to the indemnified party, unless and
only to the extent such failure results in actual and material prejudice to the
indemnifying party. Except as otherwise provided in this Agreement, within sixty
(60) days after receipt of such notice, the indemnifying party shall pay the
amount of such liability to the indemnified party or, in the case of any notice
in which the amount of the claim (or any portion thereof) is estimated or if the
indemnified party contests the claim, on such later date when such claim becomes
finally determined; provided, that, if reimbursement is not made within sixty
(60) days after any such claim becomes finally determined, amounts owed shall
accrue interest at the rate of 6.0% per annum.

                  (d)      The following provisions shall apply to claims for
Losses from claims by a third party:

                           (i)      An indemnified party entitled to any
         indemnification provided for under this Agreement in respect of,
         arising out of or involving a claim or demand made by any Person
         against the indemnified party, including SFG and its Subsidiaries when
         the indemnified party is KDIC under this Section (a "Third Party
         Claim") shall deliver a notice specifying the factual basis of that
         claim in reasonable detail to the indemnifying party promptly after
         receipt by such indemnified party of written notice of the Third Party
         Claim on or before the expiration of the applicable survival period
         under Section 11.2, provided, that failure to give such notification
         shall not affect the indemnified party's entitlement to indemnification
         under this Article XI unless and only to the extent such failure
         results in actual and material prejudice to the indemnifying party;

                           (ii)     If a Third Party Claim is made against an
         indemnified party, the indemnifying party may undertake, direct and
         control, through counsel of its own choosing (subject to the consent of
         the applicable indemnified party, such consent not to be unreasonably
         withheld) and at the indemnifying party's sole risk and expense, the
         good faith settlement or defense of such claim, provided that, the
         indemnifying party notifies the indemnified party in writing within 30
         calendar days after the indemnified party has given notice of the Third
         Party Claim that the indemnifying party has decided to assume the

                                       24
<PAGE>

         defense of the Third Party Claim and acknowledging the indemnification
         obligation under this Article with respect to such claims;

                           (iii)    If the indemnifying party has assumed the
         defense of a Third Party Claim, (A) the indemnified party may retain
         separate co-counsel or counsel and participate in the defense of the
         Third Party Claim, (B) the indemnified party shall not consent to the
         entry of any judgments or enter into any settlement with respect to the
         Third Party Claim without the prior written consent of the indemnifying
         party (not to be withheld unreasonably), and (C) the indemnifying party
         will not, without the prior written consent of the indemnified party
         (not to be withheld unreasonably), consent to the entry of any
         judgments or enter into any settlement with respect to the Third Party
         Claim.

                           (iv)     If the indemnifying party has not assumed
         the defense or settlement of a Third Party Claim, the indemnifying
         party shall reimburse the indemnified party for the reasonable fees and
         expenses of counsel employed by the indemnified party in defending or
         settling such Third party Claim; and

                           (v)      To the extent permitted by applicable Law,
         and to the extent its relevant files and records and other information
         contained therein are not protected by any privilege available under
         applicable law (including, the attorney-client privilege), so long as
         the indemnifying party is reasonably contesting any such Third Party
         Claim in good faith, the indemnified party shall, and shall cause its
         Affiliates to, at all times cooperate in all reasonable ways with,
         provide reasonable access to its relevant files and records or
         otherwise render reasonable assistance to, the indemnifying party (i)
         in its defense of any action for which indemnity is sought hereunder
         and (ii) in its prosecution under the preceding sentence of any related
         claim, cross-complaint, counterclaim or right of subrogation.

                  Section 11.02 Survival of Representations and Warranties.
Notwithstanding any provision herein to the contrary, each representation or
warranty in this Agreement shall survive the Closing for a period of one year
after the Closing Date except that, the representations and warranties in this
Agreement relating tax matters shall survive the Closing for a period of five
(5) years after the Closing Date. Any matter as to which a claim has been
asserted by written notice within the time limitation applicable by reason of
the immediately preceding sentence that is pending or unresolved at the end of
any applicable limitation period under this Section 11.02 or the statute of
limitations applicable to such claim shall continue to be covered by this
Article 10 notwithstanding any applicable statue of limitations (which the
parties hereby waive solely with respect to such circumstances) or the
expiration date described in the immediately preceding sentence of this Section
11.02 until such matter is finally terminated or otherwise resolved by the
parties under this Agreement, by an arbitration or by a court of competent
jurisdiction and any amounts payable hereunder are finally determined and paid.
Notwithstanding any provision herein to the contrary, no claim may be asserted
nor any action commenced against the indemnifying party for breach of any
representation or warranty following the expiration of the

                                       25
<PAGE>

indemnification period set forth herein, irrespective of whether the subject
matter of such claim shall have occurred before or after such date.

                  Section 11.03. Insurance Proceeds; Exceptions and Deductions;
Determination of Indemnification Amount.

                  (a)      Insurance Proceeds. To the extent any Indemnified
Parties receive any insurance proceeds with respect to any Loss to be
indemnified under this Agreement, such insurance proceeds (on a net basis) shall
be deducted from the relevant Loss amount payable. For avoidance of doubt, "on a
net basis" means that any costs associated with or incurred in connection with
the relevant insurance coverage shall first be deducted from the insurance
proceeds and the resulting amount shall be deducted from the relevant Loss
amount payable.

                  (b)      No indemnifying party shall have liability under any
indemnification provision of this Article XI, if and to the extent the Losses,
or any portion of such Losses, arise from or are attributable to the negligence
or willful misconduct of the indemnified party or its Affiliates and in no event
shall an indemnifying party be liable for special or consequential damages
arising from or in connection with this Agreement or the transactions
contemplated hereunder. The indemnified party shall take all reasonable steps to
mitigate losses upon and after becoming aware of an event which, in the
indemnified party's good faith judgment, is reasonably likely to give rise to
such Losses.

                  Section 11.04 No Duplication; Sole Remedy Procedures.

                  (a)      Any liability for indemnification hereunder shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.

                  (b)      The indemnified party's rights to indemnification as
provided for in Section 11.01 shall constitute the indemnified party's sole and
exclusive remedy and the indemnifying party shall have no other liability or
damages to the indemnified party in case payment of money damages is sought
against any indemnified parties.

                                   ARTICLE XII
                                  MISCELLANEOUS

                  Section 12.01. Fees and Expenses. SFG and KDIC shall bear its
own costs and expenses including, but not limited to, attorneys, accountants,
consultants, agents and brokers' fees, incurred or to be incurred by it in
connection with this Agreement and the transaction contemplated hereby,
regardless of whether the transaction is consummated.

                  Section 12.02. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given upon
receipt, if delivered personally, sent by fax or sent by first class mail,
postage prepaid, as follows:

                                       26
<PAGE>

                        (a)     If to SFG, to:

                                Shinhan Financial Group
                                120 2Ga Taepyung-Ro, Jung-Gu
                                Seoul 100-102, Korea

                        (b)     If to KDIC, to:

                                Korea Deposit Insurance Corporation
                                33 Da-dong, Chung-gu
                                Seoul 100-180, Korea
                                Attn: Director, Resolution Planning Department

or, in each case, to such other address or addresses or fax numbers as shall
hereafter be furnished as provided in this Section 12.02 by any party to the
other parties. All notices shall be effective when received.

                  Section 12.03. Amendment; Severability. Any provision of this
Agreement may be amended, modified or supplemented in whole or in part at any
time by an agreement in writing between SFG and KDIC. No failure on the part of
any party to exercise, and no delay in exercising, any right shall operate as a
waiver of such right, nor shall any single or partial exercise by any party of
any right preclude any other or future exercise of such right or the exercise of
any other right. If any provision of this Agreement is held to be invalid or
unenforceable, all other provisions shall nevertheless continue in full force
and effect.

                  Section 12.04. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same document.

                  Section 12.05. Governing Law; Jurisdiction.

                  (a)      This Agreement shall be governed by, and interpreted
in accordance with, the laws of Korea applicable to contracts made and to be
performed in that jurisdiction without reference to its conflict of laws rules.

                  (b)      Any dispute, controversy or claim arising out of,
relating to or in connection with the execution, performance, interpretation and
breach of this Agreement shall be subject to the exclusive jurisdiction of the
Seoul District Court.

                  Section 12.06. Successors and Assigns. The provisions of this
Agreement shall inure to the benefit of, and be binding upon, the parties'
successors and assigns; provided, that neither this Agreement nor any rights or
obligations hereunder shall be assignable or transferable by SFG or KDIC without
the prior written consent of the other party.

                                       27
<PAGE>

                  Section 12.07 Confidentiality. Without the express written
consent of the other Party, for a period of one year from the date hereof, each
Party agrees to keep confidential and not disclose, and will cause its agents,
Affiliates, employees, officers and directors to keep confidential and not
disclose, all confidential and proprietary information contained in or relating
to this Agreement, including but not limited to the contents of this Agreement
(other than information relating to the issue price and terms of the RPS and
RCPS ), except as may be required to comply with the other terms and conditions
of this Agreement and any applicable law, rule or regulation and for information
which is already in the public domain.

                  IN WITNESS WHEREOF, this Agreement has been executed as a deed
on behalf of the parties to this Agreement by their respective duly authorized
Representatives, all as of the date first above written.

KOREA DEPOSIT INSURANCE
CORPORATION

By: ____________________________________
Name: __________________________________
Title: _________________________________

SHINHAN FINANCIAL GROUP

By: ____________________________________
Name: __________________________________
Title: _________________________________

                                       28
<PAGE>

Exhibit A

                             SHINHAN FINANCIAL GROUP
                 SERIES [A/B/C/D/E] REDEEMABLE PREFERRED SHARES
                              TERMS AND CONDITIONS

The issue of [# of Shares] Series [A/B/C/D/E] Redeemable Preferred Shares
("Series [A/B/C/D/E] RPSs"), par value KRW 5,000 each, of Shinhan Financial
Group ("SFG" or the "Issuer") has been made on [   ] (the "Issue Date") for an
aggregate amount of KRW [   ] (the "Aggregate Issue Price") with the following
terms and conditions pursuant to the Articles of Incorporation of the Issuer
(the "Articles").

         1.       NAME OF ISSUER

                  Shinhan Financial Group Co., Ltd.

         2.       DATE OF INCORPORATION OF THE ISSUER

                  September 1, 2001

         3.       AUTHORIZED NUMBER OF SHARES

                  1,000,000,000

         4.       PAR VALUE

                  KRW 5,000

         5.       ISSUE PRICE

                  [KRW 18,086] per share

         6.       DATE OF ISSUANCE

                  [    ], 2003

         7.       TYPE OF SECURITIES

                  Series [A/BC/D/E] Redeemable Preferred Shares

         8.       DIVIDEND

              (A) Dividend Ratio : Fixed amount of KRW [THE FORMULA IS 4.04% OF
                  THE ISSUE PRICE X

                                       29
<PAGE>

                  (NUMBER OF DAYS ELAPSED FROM ISSUE DATE TO DECEMBER 31, 2003]]
                  per RCPS for the first fiscal year during which the RCPSs are
                  issued and fixed amount of KRW [; THE RATIO SHALL BE 4.04%]
                  per RCPS thereafter

              (B) Rights: Dividends shall be cumulative and non-participating on
                  dividends on common equity. If no dividends are declared or
                  paid on common equity, the dividend on the Series [A/B/C/D/E]
                  RPSs can be deferred. Deferred dividends on the Series
                  [A/B/C/D/E] RPSs must be paid prior to any payments being made
                  on common equity. No dividend payment would be made for the
                  fiscal year during which the redemption is made.

              (C) Preference: Dividends on the Series [A/B/C/D/E] RPSs will rank
                  senior to dividends on Common Shares.

              (D) Maturity : Indefinite unless redeemed pursuant to Articles 11
                  herein.

         9.       VOTING RIGHT

                  The holder of a Series [A/B/C/D/E] RPS (the "Holders") will
                  not have any voting rights, provided that if dividends on the
                  RPSs are not distributed in any given year, the Holders will
                  be entitled to one vote per RPS from and including any general
                  meeting of shareholders following the ordinary general meeting
                  of shareholders at which a resolution not to pay such
                  dividends is adopted until the close of any ordinary general
                  meeting of shareholders at which a resolution to pay such
                  cumulative annual dividends that are accrued and unpaid in
                  full is adopted.

         10.      TRANSFERABILITY

                  The RPS shall be transferable.

         11.      REDEMPTION:

              (A) Redemption Amount: The aggregate of (1) the Issue Price, (2)
                  Issue Price x number of days that have elapsed from the first
                  day of the fiscal year during which the redemption is made to
                  the redemption date / 365 x 4.04%, and (3) any accrued unpaid
                  dividends, if any.

              (B) Redemption Period: At any time after the
                  [first/second/third/fourth/fifth] anniversary date of the
                  Issue Date and from time to time until the
                  [third/fourth/fifth/six/seventh] anniversary date of the Issue
                  Date (the "Redemption Period"). If there are any Series
                  [A/B/C/D/E] RPSs outstanding on the last day of the Redemption
                  Period (the "Final Redemption Date"), the Issuer is obligated
                  to redeem all such outstanding Series [A/B/C/D/E] RPSs to the
                  extent that Distributable Profits is available for such

                                       30
<PAGE>

                  purchase. In the event that the Issuer does not have
                  sufficient Distributable Profits to redeem all outstanding
                  Series [A/B/C/D/E] RPSs on the Final Redemption Date, the
                  Series [A/B/C/D/E] RPSs will remain outstanding until such
                  time as sufficient Distributable Profits is available.

              (C) Optional Redemption: The Issuer may, at its option, elect to
                  redeem all or part of the any outstanding Series [A/B/C/D/E]
                  RPSs at any time during the Redemption Period.

              (D) Source of Redemption: Distributable profits calculated
                  pursuant to the Korean Commercial Code and other relevant laws
                  ("Distributable Profits").

              (E) Redemption Method: If the Issuer elects optional redemption or
                  redeems the Series [A/B/C/D/E] RPSs on the Final Redemption
                  Date or afterwards if there are RCPSs outstanding after the
                  Final Redemption Date, it shall give the Holders not less than
                  one month's notice in writing stating:

                  (I)      the number of Series [A/B/C/D/E] RPSs to be redeemed
                           (the "Redemption Shares");

                  (II)     the date on which the Series [A/B/C/D/E] RPSs are to
                           be redeemed (the "Redemption Date"); and

                  (III)    the place at which certificates for the Redemption
                           Shares are to be presented for redemption.

                  On each Redemption Date (including the Final Redemption Date
                  or afterwards if there are RPSs outstanding after the Final
                  Redemption Date) each Holder of Redemption Shares redeemable
                  on such Redemption Date shall deliver to the Issuer at the
                  place indicated by the Issuer the certificate (or
                  certificates) for those Redemption Shares. On receipt, the
                  Issuer shall pay to the Holder the redemption money due to the
                  Holder. The redemption money shall be paid in Korean Won to
                  the Holder (by telegraphic or wire-transfer) on receipt of the
                  certificate (or certificates). If a Holder of Redemption
                  Shares fails to deliver the certificate (or certificates) for
                  those Redemption Shares to the Issuer, the Issuer may retain
                  the redemption money until certificates are delivered. No
                  person has a claim against the Issuer for interest on retained
                  redemption money. After the relevant Redemption Date, the
                  Holders of Redemption Shares shall only have a monetary claim
                  for the redemption money due to such Holder and the Redemption
                  Shares shall be null and void as of such Redemption Date.

              (F) Partial Redemption: Any redemption of less than all of the
                  outstanding Series [A/B/C/D/E] RPSs pursuant to this Condition
                  11 shall be made pro rata among the Holders of Series
                  [A/B/C/D/E] RPSs based on the number of Series [A/B/C/D/E]
                  RPSs held by each Holder. Any fractional shares resulting from
                  such proportional allotment shall not be redeemed.

                                       31
<PAGE>

Exhibit B

                             SHINHAN FINANCIAL GROUP
                     REDEEMABLE CONVERTIBLE PREFERRED SHARES
                              TERMS AND CONDITIONS

The issue of [# of Shares] Redeemable Convertible Preferred Shares ("RCPSs"),
par value KRW 5,000 each, of Shinhan Financial Group ("SFG" or the "Issuer") has
been made on [   ] (the "Issue Date") for an aggregate amount of KRW [   ] (the
"Aggregate Issue Price") with the following terms and conditions pursuant to the
Articles of Incorporation of the Issuer (the "Articles").

         1.       NAME OF ISSUER

                  Shinhan Financial Group Co., Ltd.

         2.       DATE OF INCORPORATION OF THE ISSUER

                  September 1, 2001

         3.       AUTHORIZED NUMBER OF SHARES

                  1,000,000,000

         4.       PAR VALUE

                  KRW 5,000

         5.       ISSUE PRICE

                  [KRW 18,086] per share

         6.       DATE OF ISSUANCE

                  [      ], 2003

         7.       TYPE OF SECURITIES

                  Redeemable Convertible Preferred Shares

         8.       DIVIDEND

              (A) Dividend Ratio : Fixed amount of KRW [THE FORMULA IS 2.02% OF
                  ISSUE PRICE X

                                       32
<PAGE>

                  (NUMBER OF DAYS ELAPSED FROM ISSUE DATE TO DECEMBER 31, 2003]
                  per RCPS for the first fiscal year during which the RCPSs are
                  issued and fixed amount of KRW [THE RATIO SHALL BE 2.02%] per
                  RCPS thereafter.

              (B) Rights: Dividends shall be cumulative and non-participating on
                  dividends on common equity. If no dividends are declared or
                  paid on common equity, the dividend on the RCPSs can be
                  deferred. Deferred dividends on the RCPSs must be paid prior
                  to any payments being made on common equity. No dividend
                  payment would be made for the fiscal year during which the
                  redemption is made.

              (C) Preference: Dividends on the RCPSs will rank senior to
                  dividends on Common Shares.

              (D) Maturity : Indefinite unless redeemed or converted pursuant to
                  Articles 11 and 12 herein.

         9.       VOTING RIGHT

                  The holder of a RCPS (the "Holders") will not have any voting
                  rights, provided that if dividends on the RCPSs are not
                  distributed in any given year, the Holders will be entitled to
                  one vote per RCPS from and including any general meeting of
                  shareholders following the ordinary general meeting of
                  shareholders at which a resolution not to pay such dividends
                  is adopted until the close of any ordinary general meeting of
                  shareholders at which a resolution to pay such cumulative
                  annual dividends that are accrued and unpaid in full is
                  adopted.

         10.      TRANSFERABILITY

                  The RCPS shall be transferable.

         11.      REDEMPTION:

              (A) Redemption Amount: The aggregate of (1) the Issuer Price, (2)
                  Issue Price x number of days that have elapsed from the first
                  day of the fiscal year during which the redemption is made to
                  the redemption date / 365 x 2.02% and (3) any accrued unpaid
                  dividends.

              (B) Redemption Period: At any time after the fourth anniversary
                  date or the Issue Date and from time to time until the fifth
                  anniversary date of the Issue Date (the "Redemption Period").
                  If there are any RCPSs outstanding on the last day of the
                  Redemption Period (the "Final Redemption Date"), the Issuer is
                  obligated to redeem all such outstanding RCPSs to the extent
                  that Distributable Profits is available for such purchase. In
                  the event that the Issuer does not have sufficient
                  Distributable

                                       33
<PAGE>

                  Profits to redeem all outstanding RCPSs on the Final
                  Redemption Date, the RCPSs will remain outstanding until such
                  time as sufficient Distributable Profits is available.

              (C) Optional Redemption: The Issuer may, at its option, elect to
                  redeem all or part of the any outstanding RCPSs at any time
                  during the Redemption Period.

              (D) Source of Redemption: Distributable profits calculated
                  pursuant to the Korean Commercial Code and other relevant laws
                  ("Distributable Profits").

              (E) Redemption Method: If the Issuer elects optional redemption or
                  redeems the RCPSs on the Final Redemption Date or afterwards
                  if there are RCPSs outstanding after the Final Redemption
                  Date, it shall give the Holders not less than one month's
                  notice in writing stating:

                  (I)      the number of RCPSs to be redeemed (the "Redemption
                           Shares");

                  (II)     the date on which the RCPSs are to be redeemed (the
                           "Redemption Date"); and

                  (III)    the place at which certificates for the Redemption
                           Shares are to be presented for redemption.

                  On each Redemption Date (including the Final Redemption Date
                  or afterwards if there are RCPSs outstanding after the Final
                  Redemption Date) each Holder of Redemption Shares redeemable
                  on such Redemption Date shall deliver to the Issuer at the
                  place indicated by the Issuer the certificate (or
                  certificates) for those Redemption Shares. On receipt, the
                  Issuer shall pay to the Holder the redemption money due to the
                  Holder. The redemption money shall be paid in Korean Won to
                  the Holder (by telegraphic or wire-transfer) on receipt of the
                  certificate (or certificates). If a Holder of Redemption
                  Shares fails to deliver the certificate (or certificates) for
                  those Redemption Shares to the Issuer, the Issuer may retain
                  the redemption money until certificates are delivered. No
                  person has a claim against the Issuer for interest on retained
                  redemption money. After the relevant Redemption Date, the
                  Holders of Redemption Shares shall only have a monetary claim
                  for the redemption money due to such Holder and the Redemption
                  Shares shall be null and void as of such Redemption Date.

              (F) Partial Redemption: Any redemption of less than all of the
                  outstanding RCPSs pursuant to this Condition 11 shall be made
                  pro rata among the Holders of RCPSs based on the number of
                  RCPSs held by each Holder. Any fractional shares resulting
                  from such proportional allotment shall not be redeemed.

         12.      CONVERSION RIGHT:

              (A) Conversion Right: The Holder may convert his/her holding of
                  RCPSs (not involving

                                       34
<PAGE>

                  a fraction of an RCPSs) into newly issued common shares of SFG
                  ("New Common Shares"). Holders may convert all or a portion of
                  their holding of RCPSs.

              (B) Conversion Period: At any time after the first anniversary
                  date of the Issue Date and from time to time until the fourth
                  anniversary of the Issue Date

              (C) Conversion Ratio: The number of New Common Shares to be issued
                  to a Holder upon conversion of that Holder's RCPSs shall be
                  equal to the number of RCPSs being converted (i.e., at a
                  conversion ratio of one New Common Share for each RCPS (the
                  "Conversion Ratio").

              (D) Conversion Notice : A Holder may elect to convert its RCPSs by
                  completing a notice of conversion in the form annexed to these
                  Conditions in Schedule 1(a "Conversion Notice") and delivering
                  the certificate and Conversion Notice, in duplicate, to the
                  Issuer. The Holder shall be under no obligation to serve a
                  Conversion Notice on the Issuer, [and if the Holder determines
                  not to do so it shall notify the Issuer in writing as soon as
                  reasonably practicable.] If no Conversion Notice is delivered
                  to the Issuer by the last date of the Conversion Period
                  conversion right shall be deemed to have lapsed and the Issuer
                  shall be under no further obligation in respect of converting
                  any RCPS then outstanding. A Conversion Notice once given
                  shall be irrevocable.

              (E) Dividend Payment : Any New Common Shares issued to a Holder
                  who exercises his right to convert the RCPSs shall be deemed
                  to have been issued at the end of the fiscal year immediately
                  prior to the fiscal year during which the New Common Shares
                  are issued for purposes of dividend distribution on such New
                  Common Shares.

              (F) Issuance of Shares upon Conversion : The issue of New Common
                  Shares shall be deemed to have been made on the date on which
                  the Conversion Notice is delivered to the Issuer (the
                  "Conversion Date"). Thereafter the Issuer will, subject to any
                  applicable limitations then imposed by Korean laws and
                  regulations, according to the request made in the relevant
                  Conversion Notice, cause the share transfer agent of the
                  Issuer as soon as practicable, and in any event within
                  [fifteen (15)] days of the Conversion Date, (i) to deliver or
                  cause to be delivered to the order of the person named for
                  that purpose in the relevant Conversion Notice at the
                  specified office in Seoul for the time being of the share
                  transfer agent of the Issuer a certificate or certificates for
                  the relevant New Common Shares registered in the name of the
                  converting Holder or, in cases permitted under Korean law, any
                  other person named for that purpose in the relevant Conversion
                  Notice and (ii) to register every converting Holder or, if
                  permitted under Korean law, such other person named in the
                  relevant Conversion Notice as holder of the relevant number of
                  New Common Shares in the Issuer's shareholders' register.
                  Notwithstanding any other Condition herein to the contrary,
                  fractions of New Common Shares will not be issued on
                  conversion of the RCPSs and the Issuer will pay in cash in
                  Korean Won a sum equal to such fraction.

                                       35
<PAGE>

                                   SCHEDULE 1
                            FORM OF CONVERSION NOTICE
                                      RCPSs

Date:
Name:
Address:

Signature:

To:      Shinhan Financial Group (the "Issuer")

I/We, being the Holder of the RCPSs specified below, elect to convert such RCPSs
into Common Shares of the Issuer ("Shares") in accordance with the Terms and
Conditions of the Redeemable Convertible Preferred Shares ("RCPSs").

Total number of RCPSs to be converted:

Identifying certificate numbers of RCPSs:

[Adjusted] Conversion Ratio: [One Share for each RCPS]

Total number of Shares to be issued: _____________ Shares

N.B. If necessary, a list of the certificate numbers of the RCPSs can be
attached separately.

Name and address of the person in whose name the Shares required to be delivered
on conversion are to be registered:

Name:
Address:

Date:                                       Signature(s)
                                            Print Name(s)

                                       36

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>8
<FILENAME>u98617exv4w3.txt
<DESCRIPTION>EX-4.3 AGREED TERMS, DATED JUNE 22,2003
<TEXT>
<PAGE>

                                                                     EXHIBIT 4.3

                                  AGREED TERMS

WHEREAS approval of execution of the agreement pursuant to which Shinhan
Financial Group will purchase the equity stake in Chohung Bank was provided at
the 38th Meeting of the Public Funds Oversight Committee held on June 19, 2003,

WHEREAS it was decided that Shinhan Financial Group will finalize, the
management plans including employment issues following the acquisition after
consultation with the relevant parties, and Korea Deposit Insurance Corporation
("KDIC") will report the above results to the Public Funds Oversight Committee
on a post facto basis,

With respect to the employment terms following the acquisition, KDIC, Shinhan
Financial Group, Chohung Bank, National Financial Industry Labor Union and its
Chohung Bank Chapter have agreed as follows.

It is noted that future labor-related issues of Chohung Bank will be dealt with
autonomously through consultation between the management and the labor union, as
principals.

1.       Chohung Bank (including its IT division) shall remain as an independent
         legal entity within the holding company for three years.

2.       During the period of remaining as an independent legal entity,
         independent management shall be guaranteed to the best extent possible.

3.       During the period of remaining as an independent legal entity, the CEO
         shall be from Chohung Bank background.

4.       During the period of remaining as an independent legal entity, the
         name of Chohung Bank shall be used in its present form.

5.       The issue of integration shall be discussed and implemented by the
         Integration Committee after two years have lapsed, and shall be
         completed within one year therefrom.

6.       The Integration Committee shall comprise of an equal number of
         representatives from Chohung Bank and Shinhan Bank and the chairperson
         shall be a third party mutually agreed upon by both banks.

7.       Employment of Chohung Bank's employees shall be guaranteed and no
         intentional employee reduction shall occur.

8.       The wage level of Chohung Bank's employees shall be increased in three
         steps to match the wage level of Shinhan Bank. (1st year: 30%, 2nd
         year: 30% and 3rd year: 40%)

<PAGE>

         --  Such increase shall occur from 2003, except the percentage of
             increase may be adjusted based on management results.

9.       The number of officers from Chohung Bank background (at the level of
         executive officer ) of the holding company shall be equal to the number
         of Shinhan Bank's representatives.

10.      Integration, if decided by the Integration Committee, shall be carried
         out according to the following:

         A.       Integration shall be on equal terms in principal;

         B.       Employment shall be guaranteed and no intentional employee
                  reduction shall occur;

         C.       The surviving legal entity from the merger shall be Chohung
                  Bank and "Chohung" shall be used in the name of the newly
                  integrated entity, which shall be decided by the Integration
                  Committee;

         D.       Adjustments to job classification shall be discussed at the
                  Integration Committee following assessment of the present
                  situation; and

         E.       Abstain, to the best of its ability, from closing down
                  branches, which if necessary, shall be discussed at the
                  Integration Committee.

Chohung Bank shall use best efforts to minimize legal actions relating to the
labor strike and shall not claim for any civil or criminal liability in
connection therewith.

The labor union shall provide immediate and full cooperation in order to
normalize Chohung Bank's operations from its current difficulties resulting from
the labor strike.

June 22, 2003

President of Korea Deposit Insurance Corporation                In-Won Lee

CEO of Shinhan Financial Group                                  Young-Hwui Choi

CEO of Chohung Bank                                             Suk-Joo Hong

Chairman of the National Financial Industry Labor Union         Yong-Deuk Lee

Head of the Chohung Bank Chapter of                             Heung-Jin Huh
  the National Financial Industry Labor Union

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8.1
<SEQUENCE>9
<FILENAME>u98617exv8w1.txt
<DESCRIPTION>EX-8.1 LIST OF ALL SUBSIDIARIES OF SFG
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                     EXHIBIT 8.1

                SUBSIDIARIES OF SHINHAN FINANCIAL GROUP CO., LTD.

<TABLE>
<CAPTION>
                                                                 JURISDICTION OF
NAME                                                              INCORPORATION
- ----                                                             ---------------
<S>                                                              <C>
Shinhan Bank                                                          Korea
Chohung Bank                                                          Korea
Shinhan Card Co., Ltd.                                                Korea
Shinhan Capital Co., Ltd.                                             Korea
Goodmorning Shinhan Securities Co., Ltd.                              Korea
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1.(A)
<SEQUENCE>10
<FILENAME>u98617exv12w1wxay.txt
<DESCRIPTION>EX-12.1.(A) CONSENT OF PWC (SFG)
<TEXT>
<PAGE>

                                                                EXHIBIT 12.1.(a)

[PRICEWATERHOUSECOOPERS LOGO]

                                                 Samll Accounting Corporation
                                                 Kukje Center Building
                                                 191 Hankangro 2 ga, Yongsanku
                                                 Seoul 140-702, KOREA
                                                 (Yongsan P.O. Box 266, 140-600)

                                                 Tel +82(2) 709 0800
                                                 Fax +82(2) 792 7001

                        CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Registration Statement on Form 20-F of our
report dated May 23, 2003, except for note 38 as to which the date is September
9, 2003, relating to the consolidated financial statements of Shinhan Financial
Group Co., Ltd., which appear in such Registration Statement. We also consent to
the references to us under the headings "Experts" in such Registration
Statement.

PRICEWATERHOUSECOOPERS

PricewaterhouseCoopers
Seoul, Korea
September 15, 2003


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1.(B)
<SEQUENCE>11
<FILENAME>u98617exv12w1wxby.txt
<DESCRIPTION>EX-12.1.(B) CONSENT OF PWC (CHOHUNG BANK)
<TEXT>
<PAGE>

                                                                 EXHIBIT 12.1(b)

[PRICEWATERHOUSECOOPERS LOGO]

                                                 Samll Accounting Corporation
                                                 Kukje Center Building
                                                 191 Hankangro 2 ga, Yongsanku
                                                 Seoul 140-702, KOREA
                                                 (Yongsan P.O. Box 266, 140-600)

                                                 Tel +82(2) 709 0800
                                                 Fax +82(2) 792 7001

                        CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Registration Statement on Form 20-F of our
report dated August 14, 2003, except for note 34 as to which the date is
September 9, 2003, relating to the consolidated financial statements of Chohung
Bank, which appear in such Registration Statement. We also consent to the
references to us under the headings "Experts" in such Registration Statement.

PRICEWATERHOUSECOOPERS

PricewaterhouseCoopers
Seoul, Korea
September 15, 2003

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>12
<FILENAME>u98617exv12w2.txt
<DESCRIPTION>EX-12.2 KOREAN FINANCIAL HOLDING COMPANY ACT
<TEXT>
<PAGE>
FINANCIAL HOLDING COMPANIES ACT

                                                                    Exhibit 12.2

- --------------------------------------------------------------------------------
                                   2000.10.23                 Act No. 6274
      Amended By                   2002. 4.27                 Act No. 6692


                          CHAPTER I GENERAL PROVISIONS

ARTICLE 1 (PURPOSE)

         The purpose of this Act is to facilitate incorporations of financial
         holding companies and to soundly manage both financial holding
         companies and their subsidiaries with the aim of bolstering the
         financial industry's competitiveness and contributing to the
         development of the national economy.


ARTICLE 2 (DEFINITIONS)


         (1) The definitions of terms used in this Act shall be as follows:
         (Amended by Act No. 6692, Apr. 27, 2002)

         1.The term "financial holding company" (including equity; hereinafter
         the same shall apply) means a company whose primary business is to
         control (hereinafter referred to as "control") companies engaged in the
         financial business (hereinafter referred to as "financial
         institutions") and other companies related closely to the operations of
         the financial business through the ownership of their stocks, according
         to the standards prescribed by the Presidential Decree, and which
         controls one or more financial institutions, and for which an
         authorization under Article 3 has been granted;

         2.The term "subsidiary" means a company controlled by a financial
         holding


<PAGE>

         company;

         3.The term "sub-subsidiary" means a company controlled by a subsidiary;

         4.The terms "complete holding company" and "complete subsidiary" mean,
         in the event that a financial holding company owns the total number of
         stocks issued by a subsidiary, such financial holding company and such
         subsidiary, respectively;

         5.The term "bank holding company" means a financial holding company
         that controls the company falling under any of the following items:

         (a) A financial institution (hereinafter referred to as a "bank")
         established under the Banking Act;

         (b) A long-term credit bank established under the Long-Term Credit
         Bank Act;

         (c) A financial institution, prescribed by the Presidential Decree,
         which runs the banking business under Article 2 (1) 1 of the Banking
         Act; or

         (d) A financial holding company that controls financial institutions
         referred to in items (a) through (c);

         6.The term "local bank holding company" means a bank holding company
         that does not control any bank or any bank holding company falling
         under the following items:

         (a) A bank whose business area covers the whole nation; and

         (b) A bank holding company controlling the banks of item (a);

         7.The term "same person" means a person himself and other person in a
         special relationship, prescribed by the Presidential Decree, with the
         former (hereinafter referred to as a "specially related person");


<PAGE>

         8.The term "non-financial devotee" means a company falling under any
         of the following items:

         (a) The same person concerned, in case where the sum of total capital
         amount (referring to the amount obtained by subtracting total liability
         amount from total asset amount in the balance sheet; hereinafter the
         same shall apply) of the non-financial companies (referring to
         companies in the operation of business other than the financial
         business prescribed by the Presidential Decree; hereinafter the same
         shall apply) among the same person is not less than 25/100 of the sum
         of total capital amount of those being companies among the same person
         concerned;

         (b) The same person concerned, in case where the sum of total capital
         amount of the non-financial companies among the same person is not less
         than two trillion won and also not less than the amount prescribed by
         the Presidential Decree; or

         (c) The securities investment company concerned, in case where a person
         falling under item (a) or (b) possesses (referring to the case where
         the same person holds the voting rights by means of possession of the
         stocks under his name or other's name, or by means of contract, etc.;
         hereinafter the same shall apply) stocks of a securities investment
         company under the Securities Investment Company Act (hereinafter
         referred to as the "securities investment company") in excess of 4/100
         of the total outstanding stocks; and

         9.The term "large stockholder" means a stockholder falling under any
         of the following items:

         (a) One stockholder concerned, in case where the same person including
         a stockholder of a bank holding company possesses stocks with voting
         rights of the bank holding company in excess of 10/100 (15/100 in case
         of a local bank holding company) of the total outstanding stocks; or

         (b) One stockholder concerned, in case where the same person including
         a stockholder of a bank holding company (excluding local bank holding
         companies)

<PAGE>

         possesses stocks with voting rights of the bank holding company in
         excess of 4/100 of the total outstanding stocks (excluding the stocks
         whose voting rights shall not be exercised under Article 8-2 (2)), and
         where the same person concerned, who is the largest stockholder,
         actually exercises influence in the major operations of the bank
         holding company concerned, the subsidiary and the subsubsidiary
         (hereinafter referred to as the "bank hold company, etc.") by means of
         appointment and dismissal, etc. of officers in a manner prescribed by
         the Presidential Decree.

         (2) The scope of the financial business, the scope of companies related
         closely to operations of the financial business and the standards for
         the primary business referred to in paragraph (1) 1 shall be determined
         by the Presidential Decree.


         CHAPTER II INCORPORATIONS, ETC. OF FINANCIAL HOLDING COMPANIES

ARTICLE 3 (AUTHORIZATION)


         (1) Any person who intends to run a financial holding company shall
         obtain an authorization thereof from the Financial Supervisory
         Commission.

         (2) Any person who intends to obtain the authorization referred to in
         paragraph (1) shall file with the Financial Supervisory Commission an
         application therefor under the conditions as prescribed by the
         Presidential Decree.

         (3) The Financial Supervisory Commission may attach conditions to the
         authorization referred to in paragraph (1).

         (4) Any financial holding company shall, where it is granted the
         authorization under paragraph (1), be deemed to file a report in
         accordance with Article 8 of the


<PAGE>

         Monopoly Regulation and Fair Trade Act.


ARTICLE 4 (REQUIREMENTS FOR AUTHORIZATION)


         (1) Any person who intends to get the authorization under Article 3
         shall meet all the requirements of the following subparagraphs:
         (Amended by Act No. 6692, Apr. 27, 2002)

         1.The business plan is required to be appropriate and sound as a stock
         corporation;

         2.The business plan of a company that will become a subsidiary or a
         sub-subsidiary (in the case falling under the proviso of Article 19
         (2), a company controlled by a sub-subsidiary shall be included:
         hereinafter referred to as "subsidiaries, etc.") is required to be
         appropriate and sound;

         3.Major investors under the Presidential Decree are required to be able
         to make adequate investments, financially sound and socially credible;

         4.The financial standing and business management of a company that
         will become a financial holding company and its subsidiaries, etc. are
         required to be sound; and

         5.Where a holding company becomes a complete holding company through an
         all-inclusive stock swap pursuant to the provisions of Article 360-2 of
         the Commercial Act (hereinafter referred to as the "stock swap") or an
         all-inclusive stock transfer pursuant to the provisions of Article
         360-15 of the same Act (hereinafter referred to as the "stock
         transfer"), the swap ratio of stocks is required to be appropriate.

         (2) Detailed requirements for granting the authorization of paragraph
         (1) shall be prescribed by the Presidential Decree.


<PAGE>

ARTICLE 5 (CONSULTATIONS WITH FAIR TRADE COMMISSION)

         In granting the authorization in accordance with Article 3, the
         Financial Supervisory Commission shall consult in advance with the Fair
         Trade Commission about matters falling under each of the following
         subparagraphs:

         1.Matters relating to limiting acts performed by any holding company
         under Article 8-2 (1) of the Monopoly Regulation and Fair Trade Act and
         matters relating to limiting incorporations of holding companies under
         Article 8-3 of the same Act; and

         2.Matters relating to whether the related market is actually limiting
         competition.


ARTICLE 6 (PUBLICATION OF AUTHORIZATION, ETC.)

         The Financial Supervisory Commission shall, when it grants an
         authorization in accordance with Article 3 or revokes an authorization
         in accordance with Article 57 (2), publish without any delay its
         actions in the Official Gazette and make such actions known to the
         public, making use of the personal computer communications, etc.


       CHAPTER III OWNERSHIP LIMITS, ETC. FOR FINANCIAL HOLDING COMPANIES

ARTICLE 7 (LIMIT ON CONTROL RELATIONSHIP BETWEEN FINANCIAL INSTITUTIONS AND
          FINANCIAL HOLDING COMPANIES)

         A financial holding company shall not be in the control relationship
         (hereafter in this Article referred to as the "control relationship"),
         prescribed by the Presidential Decree, with any financial institutions
         (including any financial institutions

<PAGE>

         incorporated in accordance with the foreign Acts and subordinate
         statutes): Provided, That this shall not apply to the case falling
         under any of the following subparagraphs:

         1.Where a financial holding company is in the control relationship with
         another financial holding company, and where the requirements
         prescribed by the Presidential Decree are met; or

         2.Where a securities investment company is in the control relationship
         with a financial holding company.

         [This Article Wholly Amended by Act No. 6692, Apr. 27, 2002]


ARTICLE 8 (LIMIT, ETC. ON POSSESSION OF STOCKS OF BANK HOLDING COMPANY)


         (1) The same person shall not hold stocks of any bank holding company
         in excess of 10/100 of the total number of voting stocks issued by such
         bank holding company: Provided, That this shall not apply to the cases
         falling under any of the following subparagraphs, paragraph (3) and
         Article 8-2 (3):

         1.Where the Government or the Korea Deposit Insurance Corporation
         established in accordance with the Depositor Protection Act holds
         stocks issued by any bank holding company;

         2.Where stocks of a bank holding company concerned which is controlled
         by a financial holding company are being held; or

         3.Where less than 15/100 of the total number of the voting stocks of a
         local bank holding company are being held.

         (2) When the same person (excluding those prescribed by the
         Presidential Decree) comes to fall under any of the following
         subparagraphs, he shall report the Financial

<PAGE>

         Supervisory Commission in the manner prescribed by the Presidential
         Decree:

         1.When he holds in excess of 4/100 of the total number of outstanding
         stocks with voting right of a bank holding company (excluding a local
         bank holding company; hereafter in this paragraph the same shall
         apply);

         2.When the same person who falls under subparagraph 1 becomes the
         largest stockholder of the bank holding company concerned; or

         3.When the proportion of stock possession of the same person who falls
         under subparagraph 1 changes above 1/100 of the total outstanding
         stocks with voting right of the bank holding company concerned.

         (3) Notwithstanding the provisions of the main sentence in the part
         other than the subparagraphs of paragraph (1), whenever the same person
         exceeds the respective limit classified in the following subparagraphs,
         he may hold the stocks of a bank holding company on the respective
         approval of the Financial Supervisory Commission: Provided, That the
         Financial Supervisory Commission may approve, only when it regards it
         necessary in consideration of the possibility of contribution to the
         efficiency and soundness of the banking business, the stock
         distribution among the stockholders of the bank holding company
         concerned, etc., by designating other possession limits besides the
         limits stipulated in the subparagraphs, and in case where the same
         person intends to hold in excess of the approved limit, he shall again
         obtain a separate approval from the Financial Supervisory Commission:

         1.Limit stipulated in the main sentence of paragraph (1) excluding the
         subparagraphs thereof (in the case of a local bank holding company, the
         limit stipulated in paragraph (1) 3);

         2.25/100 of the total number of outstanding stocks with voting right
         of the bank holding company concerned; and


<PAGE>


         3.33/100 of the total number of outstanding stocks with voting right of
         the bank holding company concerned.

         (4) In case where the Financial Supervisory Commission does not approve
         pursuant to the provisions of paragraph (3), it shall clarify the valid
         reason and inform the applicant of it within the time frame prescribed
         by the Presidential Decree.

         (5) In applying the provisions of paragraph (3), the qualifications of
         the persons eligible to hold the stocks of a bank holding company,
         requirements and procedures of approval regarding the possession of
         stocks, and other necessary matters shall be prescribed by the
         Presidential Decree considering the possibility of danger that will
         obstruct the soundness of the bank holding company concerned, the
         appropriateness of the asset size and the financial status, the size of
         credit grant by the bank holding company concerned, and the possibility
         to contribute to the efficiency and soundness of the financial
         industry, etc.

         (6) In case where a securities investment company holds stocks of a
         bank holding company with approval pursuant to the provisions of
         paragraph (3), the provisions of Article 28 (2) 1 and 2 of the
         Securities Investment Company Act shall not apply to the securities
         investment company concerned.
         [This Article Wholly Amended by Act No. 6692, Apr. 27, 2002]


ARTICLE 8-2 (LIMITATION ON POSSESSION OF STOCKS, ETC. OF NON-FINANCIAL DEVOTEE)


         (1) Notwithstanding the provisions of Article 8 (1), a non-financial
         devotee (including those excluded from the enterprise group, etc.
         subject to limitations on mutual investment under Article 14-2 of the
         Monopoly Regulation and Fair Trade Act, and consequently becoming not
         to fall under the non-financial devotee category, for whom the period
         of time prescribed by the Presidential Decree from the date of such
         exclusion has not yet elapsed; hereafter in paragraph (2), the same
         shall apply) shall not possess in excess of 4/100 (15/100, in the case
         of a local bank

<PAGE>

         holding company) of the total outstanding stocks with voting right of
         a bank holding company.

         (2) Notwithstanding the provisions of paragraph (1), in case where a
         non-financial devotee has been approved by the Financial Supervisory
         Commission by satisfying the requirements of financial soundness, etc.
         prescribed by the Presidential Decree on condition that it shall not
         exercise the voting right of the stocks of a bank holding company that
         it intends to hold in excess of the limit of paragraph (1) (excluding
         the case of a local bank holding company), it may hold stocks up to the
         limit stipulated in the main sentence in the part other than the
         subparagraphs of Article 8 (1).

         (3) Notwithstanding the provisions of paragraph (1) and (2), the
         provisions of Article 8 (1) and (3) shall apply to a non-financial
         devotee who has filed with the Financial Supervisory Commission and has
         been approved the plan to changeover (hereinafter referred to as the
         "changeover plan") within two years not to stay as being a
         non-financial devotee any more.

         (4) The approval requirements for the changeover plan and other
         necessary matters regarding the deliberation of approval shall be
         prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 8-3 (APPRAISAL, CHECKUP, ETC OF CHANGEOVER PLAN)


         (1) A non-financial devotee, who intends to apply for approval in
         accordance with the provisions of Article 8-2 (3), shall file a
         changeover plan with the Financial Supervisory Commission, and in case
         where the Financial Supervisory Commission acknowledges an appraisal by
         an expert organization is needful, the appraisal may be executed as
         stipulated by the Financial Supervisory Commission.


<PAGE>

         (2) The Financial Supervisory Commission shall periodically checkup the
         compliance status of the changeover plan of the non-financial devotee
         (hereinafter referred to as the "object of changeover"), who holds
         stocks of a bank holding company in excess of the limit stipulated in
         Article 8-2 (1) after the changeover plan has been approved in
         accordance with the provisions of paragraph (3) of the same Article,
         and announce in public the result by means of personal computer
         communication, etc.

         (3) In case where an object of changeover is not acknowledged to be
         executing the changeover plan as the result of a checkup pursuant to
         the provisions of paragraph (2), the Financial Supervisory Commission
         may set up a time frame of up to six months and order him to execute
         it.

         (4) An object of changeover who falls under any of the following
         subparagraphs shall not be eligible to exercise the voting right of the
         stocks of a bank holding company held in excess of the limit stipulated
         in Article 8-2 (1):

         1.An object of changeover who has been ordered by the Financial
         Supervisory Commission to execute pursuant to the provisions of
         paragraph (3); or

         2.An object of changeover who has been ascertained to have been
         involved in an illegal dealing with a bank holding company, etc. as the
         result of an inspection by the Governor of the Financial Supervisory
         Service pursuant to Article 51-2 (1) 2.

         (5) In case where an object of changeover falls under any of the
         following subparagraphs, the Financial Supervisory Commission may set
         up a time frame of up to six months and order him to dispose of the
         surplus stocks of a bank holding company held in excess of the limit
         stipulated in Article 8-2 (1):

         1.Where an execution order pursuant to the provisions of paragraph (3)
         is not executed; or

         2.Where he falls under paragraph (4) 2.

<PAGE>

         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 9
         Deleted. (by Act No. 6692, Apr. 27, 2002)


ARTICLE 10 (LIMITATIONS PLACED ON VOTING RIGHTS ON STOCKS HELD IN EXCESS OF
           LIMIT)


         (1) Any person who holds stocks issued by a bank holding company in
         excess of the stock-holding limit described in Articles 8 (1) and (3)
         or 8-2 (1) and (2) shall be prohibited from exercising voting rights
         on any stocks held in excess of the stock-holding limit and make
         without any delay his stockholdings consistent with the stock-holding
         limit. (Amended by Act No. 6692, Apr. 27, 2002)

         (2) With respect to any person who fails to observe the provisions of
         paragraph (1), the Financial Supervisory Commission may order him to
         dispose of stocks held in excess of the stock-holding limit within a
         fixed period of not more than 6 months.


ARTICLE 10-2 (DELIBERATION OF ELIGIBILITY, ETC. OF STOCKHOLDERS EXCEEDING LIMIT
             OF POSSESSION)


         (1) The Financial Supervisory Commission shall deliberate in accordance
         with the prescriptions of the Presidential Decree whether those holding
         stocks of a bank holding company pursuant to the provisions of Articles
         8 (3) and 8-2 (3) (hereafter in this article referred to as
         "stockholders exceeding the limit of possession") keep on satisfying
         the qualifications and requirements for approval under Article 8 (5)
         (hereafter in this Article referred to as the "requirements of
         excessive possession") even after they hold the stocks concerned.

<PAGE>

         (2) When necessary for the deliberation pursuant to the provisions of
         paragraph (1), the Financial Supervisory Commission may ask a bank
         holding company or stockholders exceeding limit of possession to
         provide necessary data or information.

         (3) When the Financial Supervisory Commission acknowledges the
         stockholders exceeding the limit of possession do not satisfy the
         requirements of excessive possession as the result of deliberation
         pursuant to the provisions of paragraph (1), it may set up a time frame
         of up to six months and order them to satisfy the requirements of
         excessive possession.

         (4) The stockholders who have been ordered pursuant to the provisions
         of paragraph (3) shall not be eligible to exercise the voting right of
         the stocks of a bank holding company held in excess of the limit
         stipulated in Article 8 (3) 1 (in case where the stockholders exceeding
         the limit of possession are non-financial devotees, the limit
         stipulated in Article 8-2 (1) applies; hereafter the same shall apply
         in paragraph (5)) till they execute such order.

         (5) When the stockholders exceeding the limit of possession do not
         execute the order pursuant to the provisions of paragraph (3), the
         Financial Supervisory Commission may set up a time frame of up to six
         months and order them to dispose of the surplus stocks of a bank
         holding company held in excess of the limit stipulated in Article 8 (3)
         1.

         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLES 11 AND 12
         Deleted. (by Act No. 6692, Apr. 27, 2002)


ARTICLE 13 (EXCEPTIONS FOR BANK HOLDING COMPANY)

         Any bank holding company may hold voting stocks issued by a bank in
         excess of 10/100 of the total number of voting stocks issued by such
         bank, notwithstanding

<PAGE>

          the main sentence of Article 15 (1) of the Banking Act. (Amended by
          Act No. 6692, Apr. 27, 2002)


ARTICLE 14
         Deleted. (by Act No. 6692, Apr. 27, 2002)


       CHAPTER IV BUSINESS OF FINANCIAL HOLDING COMPANY AND INCORPORATION
                        OF COMPANY INTO SUBSIDIARY, ETC.

ARTICLE 15 (BUSINESS)

         Any financial holding company shall be prohibited from running other
         business for the purpose of earning profits except for the business
         that is prescribed by the Presidential Decree as incidental to the
         business of managing its subsidiaries.


ARTICLE 16 (APPROVAL FOR INCORPORATION OF COMPANY INTO SUBSIDIARY)


         (1) Any financial holding company (excluding any financial holding
         company that is controlled by other financial holding company;
         hereafter the same in this Chapter shall apply) shall, where it
         incorporates a company into a new subsidiary and its subsidiary
         incorporates a company into a new sub-subsidiary, obtain approval
         thereof from the Financial Supervision Commission.

         (2) Any person who intends to obtain approval under paragraph (1) shall
         file an application therefor with the Financial Supervisory Commission
         under the conditions

<PAGE>

         as prescribed by the Presidential Decree.

         (3) The Financial Supervisory Commission may attach conditions to the
         approval given under paragraph (1).


ARTICLE 17 (REQUIREMENTS FOR APPROVING INCORPORATION OF COMPANY INTO SUBSIDIARY)


         (1) Any financial holding company that intends to obtain the approval
         described in Article 16 shall meet requirements falling under each of
         the following subparagraphs: (Amended by Act No. 6692, Apr. 27, 2002)

         1.The business plan of a company incorporated into subsidiaries, etc.
         is required to be appropriate and sound;

         2.The financial standing and business management of such financial
         holding company and its subsidiaries, etc. are required to be sound;
         and

         3.The stock swap is required to be appropriate in the event that a
         company is incorporated into a subsidiary, etc. through the stock
         swap.

         (2) In giving the approval of paragraph (1), the Financial Supervisory
         Commission shall consult in advance with the Fair Trade Commission
         about whether the incorporation of a company into a subsidiary, etc.
         substantially limits competition on the related market.

         (3) Detailed requirements for giving the approval of paragraph (1)
         shall be determined by the Presidential Decree.


ARTICLE 18 (REPORT ON INCORPORATION OF COMPANY INTO SUBSIDIARY, ETC.)

<PAGE>

         (1) Any financial holding company that has incorporated a company,
         prescribed by the Presidential Decree taking into account the type and
         characteristics, etc. of such company (hereinafter referred to as a
         "company subject to report"), into a subsidiary, etc. shall file a
         report thereof with the Financial Supervisory Commission under the
         conditions as prescribed by the Presidential Decree notwithstanding the
         provisions of Article 16 (1).

         (2) The Financial Supervisory Commission shall, upon receiving the
         report filed under paragraph (1), consult with the Fair Trade
         Commission about whether the incorporation of such subsidiary, etc.
         substantially limits competition on the related market.

         (3) The Financial Supervisory Commission may, where it is recognized
         that a subsidiary, etc. incorporated under paragraph (1) does not fall
         under a company subject to report or its incorporation substantially
         limits competition in the related market, set up a time frame of up to
         six months and order the financial holding company involved or the
         subsidiary involved to dispose of stocks of the newly incorporated
         subsidiary, etc. (Amended by Act No. 6692, Apr. 27, 2002)

         (4) When a financial holding company or a subsidiary thereof is
         ordered to dispose of stocks pursuant to the provisions of paragraph
         (3), it shall not be eligible to exercise the voting right of the
         stocks ordered to dispose of from the day it was ordered. (Newly
         Inserted by Act No. 6692, Apr. 27, 2002)

         (5) In case where a financial holding company or a subsidiary thereof
         incorporates a company subject to report into a subsidiary, etc., the
         provisions of Article 24 of the Act on the Structural Improvement of
         the Financial Industry shall not apply. (Newly Inserted by Act No.
         6692, Apr. 27, 2002)


ARTICLE 19 (SUB-SUBSIDIARY)

<PAGE>

         (1) Every subsidiary of a financial holding company shall be prohibited
         from controlling other company with the exception of the company
         falling under any of the following subparagraphs: Provided, That with
         respect to a company that controls other company at the time that the
         former becomes a subsidiary, the same shall not be applied for two
         years from the date on which the former becomes a subsidiary:

         1.A financial institution, prescribed by the Presidential Decree,
         which is related in business to the subsidiary concerned; and

         2.A company, prescribed by the Presidential Decree, which is related
         closely to running the financial business.

         (2) Every sub-subsidiary of a financial holding company shall be
         prohibited from controlling any other company: Provided, That with
         respect to a company that controls other company at the time that the
         former becomes a sub-subsidiary, the same shall not be applied for two
         years from the date on which the former becomes a sub-subsidiary.


                               CHAPTER V DELETED.

ARTICLES 20 THROUGH 37
         Deleted. (by Act No. 6692, Apr. 27, 2002)


                CHAPTER VI OPERATION OF FINANCIAL HOLDING COMPANY

<PAGE>

ARTICLE 38 (QUALIFICATION REQUIREMENTS FOR OFFICERS)

         A person falling under any of the following subparagraphs shall not
         become an officer of any financial holding company and he shall, if
         found to fall under any of the following subparagraphs after becoming
         an officer, lose his office:

         1.A minor, a person of incompetence or a person of quasi-incompetence;

         2.A bankrupt who has yet to be reinstated;

         3.A person who was sentenced to imprisonment without prison labor or a
         heavier punishment and for whom 5 years have yet to elapse from the
         date on which the execution of the sentence was terminated (including
         the case where the execution of the sentence is deemed to be
         terminated) or the execution of the sentence was exempted;

         4.A person who was sentenced to a fine or a heavier punishment under
         this Act or finance-related Acts and subordinate statutes prescribed by
         the Presidential Decree and for whom 5 years have yet to elapse from
         the date on which the execution of the sentence was terminated
         (including the case where the execution of the sentence is deemed to be
         terminated) or the execution of the sentence was exempted;

         5.A person who is in a stay period after having been sentenced to a
         stay of the execution of the imprisonment without prison labor or a
         heavier punishment;

         6.A person who has been removed from his office under this Act or
         finance-related Acts and subordinate statutes prescribed by the
         Presidential Decree or dismissed by a disciplinary action and for whom
         5 years have yet to elapse from the date on which he was removed from
         his office or dismissed by the disciplinary action; and

         7.A person who worked as an officer or an employee of a corporation or
         a company whose business license or authorization, etc. was cancelled
         in accordance with this


<PAGE>

         Act or finance-related Acts and subordinate statutes prescribed by the
         Presidential Decree (limited to a person, prescribed by the
         Presidential Decree, who was directly or correspondingly responsible
         for the occurrence of the cause of such cancellation) and for whom 5
         years have yet to elapse from the date on which such business license
         or authorization, etc. was cancelled.


ARTICLE 39 (RESTRICTIONS ON CONCURRENT HOLDING OF OFFICE BY OFFICERS)


         (1) Any officer who works as a managing director for a financial
         holding company shall, where he is in conflict with the interest of
         customers of a subsidiary, etc. of such financial holding company or he
         is feared to undermine the sound management of such subsidiary, etc.,
         which are all prescribed by the Presidential Decree, be prohibited from
         working as a managing director for other company or running other
         business of earning profits.

         (2) Any officer and any employee of a financial holding company may
         become an officer of the subsidiary, etc. of such financial holding
         company notwithstanding paragraph (1) and other finance-related Acts
         and subordinate statutes.

         (3) Notwithstanding other Acts and subordinate statutes, officers of a
         subsidiary, etc. of a financial holding company may become officers of
         another subsidiary, etc. of such financial holding company, which
         engages in the same type of business. (Newly Inserted by Act No. 6692,
         Apr. 27, 2002)


ARTICLE 40 (APPOINTMENT OF OUTSIDE DIRECTOR)


         (1) Every financial holding company (limited to any financial holding
         company prescribed by the Presidential Decree taking into account the
         assets, etc. of such financial holding company and its subsidiaries;
         hereafter in this Article, Articles 41

<PAGE>

         and 21, the same shall apply) shall have not less than three directors
         who do not serve as managing directors on the board of directors
         (hereinafter referred to as "outside directors") and the number of
         such outside directors shall not be less than a half of the total
         number of directors.

         (2) Every financial holding company shall establish a committee
         mandated to recommend candidates for outside directors (hereinafter
         referred to as a "committee mandated to recommend candidates for
         outside directors") under Article 393-2 of the Commercial Act. In this
         case, outside directors shall make up not less than a half of members
         of the committee mandated to recommend candidates for outside
         directors.

         (3) Outside directors shall be appointed at a general meeting of
         stockholders from among persons recommended by the committee mandated
         to recommend candidates for outside directors under paragraph (2).

         (4) A person falling under any subparagraph of Article 54-5 (4) of the
         Securities and Exchange Act shall not become an outside director and he
         shall, if found to fall under such provisions after becoming an outside
         director, lose his office.

         (5) Any financial holding company shall, where the makeup of the board
         of directors is made inconsistent with the requirements as described
         in paragraph (1) on the grounds of resignation or death of any outside
         director, make the composition of the board of directors consistent
         with the requirements of paragraph (1) at a stockholders' meeting
         called first from the date on which such grounds accrued. (Amended by
         Act No. 6692, Apr. 27, 2002)

         (6) The provisions of the later part of paragraph (2) shall not apply
         to any company that is required to appoint outside directors due to
         falling under the requirements of paragraph (1) for the first time.


ARTICLE 41 (AUDIT COMMITTEE)

<PAGE>

         (1) Every financial holding committee shall establish an audit
         committee (referring to the audit committee under Article 415-2 of the
         Commercial Act; hereinafter the same shall apply).

         (2) Outside directors shall make up not less than 2/3 of the total
         number of members of any audit committee.

         (3) Members of any audit committee, who are not outside directors,
         shall not fall under any subparagraph of Article 191-12 (3) of the
         Securities and Exchange Act.

         (4) The composition of any audit committee shall, where it is made
         inconsistent with the requirement of paragraph (2) on the grounds of
         resignation or death, etc. of members, be made consistent with such
         requirement at a regular general meeting of the stockholders called
         first from the date on which such grounds accrued.

         (5) The provisions of the proviso of Article 415-2 (2) of the
         Commercial Act shall not apply to the makeup of any audit committee
         established in accordance with paragraph (1).


ARTICLE 42 (EXERCISE OF STOCKHOLDER' RIGHT)


         (1) Any person who has continued to hold stocks equivalent to not less
         than 5/100,000 of the total number of stocks issued by a financial
         holding company for not less than 6 months as prescribed by the
         Presidential Decree may exercise his right as a stockholder in
         accordance with the provisions of Article 403 of the Commercial Act
         (including the case where the provisions are applied mutatis mutandis
         under Articles 324, 415, 424-2, 467-2 and 542 of the Commercial Act).

         (2) Any person who has continued to hold stocks equivalent to not less
         than

<PAGE>

         250/100,000 (not less than 125/100,000 in case of a financial holding
         company prescribed by the Presidential Decree) of the total number of
         stocks issued by a financial holding company for not less than 6
         months as prescribed by the Presidential Decree may exercise his right
         as a stockholder in accordance with the provisions of Articles 385 of
         the Commercial Act (including the case where the provisions are
         applied mutatis mutandis under Article 415 of the same Act) and
         Articles 402 and 539 of the Commercial Act.

         (3) Notwithstanding the provisions of paragraph (2), any person who
         has continued to hold stocks equivalent to not less than 25/100,000
         (not less than 125/1,000,000 in the case of a bank holding company
         prescribed by the Presidential Decree) of the total number of the
         outstanding stocks of a bank holding company in a manner prescribed by
         the Presidential Decree for not less than six months may exercise his
         right as a stockholder stipulated in Article 402 of the Commercial
         Act. (Newly Inserted by Act No. 6692, Apr. 27, 2002)

         (4) Any person who has continued to hold stocks equivalent to not less
         than 50/10,000 (not less than 25/10,000 in case of a financial holding
         company prescribed by the Presidential Decree) of the total number of
         voting stocks issued by a financial holding company for not less than
         6 months as prescribed by the Presidential Decree may exercise his
         right as a stockholder in accordance with Articles 363-2 and 466 of
         the Commercial Act. (Amended by Act No. 6692, Apr. 27, 2002)

         (5) Notwithstanding the provisions of paragraph (4), any person who
         has continued to hold stocks equivalent to not less than 5/10,000 (not
         less than 25/100,000 in the case of a bank holding company prescribed
         by the Presidential Decree) of the total number of the outstanding
         stocks of a bank holding company in a manner prescribed by the
         Presidential Decree for not less than six months may exercise his
         right as a stockholder stipulated in Article 466 of the Commercial
         Act. (Newly Inserted by Act No. 6692, Apr. 27, 2002)

         (6) Any person who has continued to hold stocks equivalent to not less
         than

<PAGE>

         150/10,000 (not less than 75/10,000 in case of a financial holding
         company prescribed by the Presidential Decree) of the total number of
         stocks issued by a financial holding company for not less than 6 months
         as prescribed by the Presidential Decree, may exercise his right as a
         stockholder in accordance with the provisons of Articles 366 and 467 of
         the Commercial Act. In this case, the exercise of his right as a
         stockholder under Article 366 of the Commercial Act shall be based on
         voting stocks.

         (7) Any stockholder described in paragraph (1) may, when he wins a case
         after filing a litigation under the provisions of Article 403 of the
         Commercial Act (including the case where the provisions are applied
         mutatis mutandis under Articles 324, 415, 424-2, 467-2 and 542 of the
         Commercial Act), apply to any financial holding company for paying
         litigation costs and all other costs resulting from such litigation.


ARTICLE 43 (LIMITS TO INVESTMENT IN SECURITIES)

         Any financial holding company shall be prohibited from investing in
         securities under the Securities and Exchange Act (excluding securities
         issued by subsidiaries belonging to such financial holding company) in
         excess of an amount derived from subtracting the total amount of
         investments made in its subsidiaries from its capital. In this case,
         the method of computing the equity capital shall be determined by the
         Presidential Decree.


ARTICLE 44 (LIMITS TO HOLDING STOCKS OF OTHER COMPANY)


         (1) Any financial holding company may hold stocks issued by other
         company that is not its subsidiary, etc. within the limit of 5/100 of
         the total number of stocks issued by such company: Provided, That the
         same shall not apply to the case where the holding of such stocks falls
         under Article 8-2 (1) 3 (the main sentence) or 4 of the

<PAGE>

         Monopoly Regulation and Fair Trade Act (excluding the case where a bank
         holding company falls under subparagraph 4 of the same paragraph).
         (Amended by Act No. 6692, Apr. 27, 2002)

         (2) Where a financial holding company holds stocks issued by another
         company (excluding a financial institution or any company related
         closely to the financial business) in accordance with the provisons of
         the main sentence of paragraph (1), such financial holding company
         shall exercise its voting right not to affect the voting stocks derived
         from subtracting the number of stocks held by itself from the total
         number of stocks issued by other company at a general meeting of
         stockholders of such other company.


ARTICLE 45 (LIMIT TO EXTENDING CREDITS)


         (1) The total amount of credits extended by a financial holding company
         (excluding any financial holding company controlled by other financial
         holding company; hereafter the same in this Article shall apply) and
         its subsidiary, etc. (hereafter in this Article referred to as the
         "financial holding company, etc.") to the same borrower (referring to
         the same borrower under Article 35 (1) of the Banking Act) shall not
         exceed 25/100 of the net total amount of the equity capital of the
         financial holding company, etc.: Provided, That the same shall not
         apply to the case falling under any of the following subparagraphs,
         which is prescribed by the Presidential Decree:

         1.Where it is necessary for the national economy and for securing the
         effectiveness of credits extended by the financial holding company,
         etc.; and

         2.Where the limit described in the main sentence is exceeded by a
         change in the equity capital and the same borrower, etc. although the
         financial holding company, etc. does not extend any additional credit.


<PAGE>

         (2) The total amount of credits extended by the financial holding
         company, etc. to the same individual or the same corporation shall not
         exceed the net total amount of 20/100 of its equity capital: Provided,
         That the same shall not apply to the case falling under the cause of
         proviso of paragraph (1). (Amended by Act No.6692, Apr. 27, 2002)

         (3) The total amount of credits extended by the financial holding
         company, etc. to the same person who holds stocks in excess of 10/100
         of the total number of voting stocks issued by a financial holding
         company shall not exceed an amount computed according to the method
         prescribed by the Presidential Decree within the limit of 25/100 of the
         net total amount of the equity capital of the financial holding
         company, etc.: Provided, That the same shall not apply to the case
         falling under the cause of proviso of paragraph (1). (Amended by Act
         No. 6692, Apr. 27, 2002)

         (4) The financial holding company, etc. shall, where its credits exceed
         the limit described in paragraph (1), (2), or (3) (the main sentence),
         make such credits consistent with such limit, as prescribed by the
         Presidential Decree, within one year from the date on which such limit
         was exceed: Provided, That where there are unavoidable reasons
         prescribed by the Presidential Decree, the Financial Supervisory
         Commission may extend the period of one year to a fixed period.

         (5) The scope of the subsidiary, etc. referred to in paragraphs (1)
         through (4), standards for extending credits and the method of
         computing the equity capital and the net total amount shall be
         determined by the Presidential Decree.


ARTICLE 45-2 (LIMIT, ETC. OF CREDIT GRANT TO LARGE STOCKHOLDERS OF BANK HOLDING
             COMPANY)


         (1) The total amount of credit grants that a bank holding company, etc.
         (excluding a financial holding company controlled by another bank
         holding company, hereafter in this Article and Articles 45-3 through
         45-5, the same shall apply) can extend to the large stockholders of the
         bank holding company concerned shall not exceed the

<PAGE>

         smaller amount between amount equivalent to the value of the rate,
         prescribed by the Presidential Decree which is within the extent of
         25/100, of the net total amount of such bank holding company's own
         capital, and the amount equivalent to the value of the investment
         proportion of such large stockholders of the bank holding company
         concerned: Provided, That in case where the bank holding company, etc.
         falls under the cause of the proviso of Article 45 (1), this shall not
         apply.

         (2) The total amount of credit grants that a bank holding company, etc.
         can extend to all the large stockholders of the bank holding company
         concerned shall not exceed the amount equivalent to the value of the
         rate, prescribed by the Presidential Decree which is within the extent
         of 25/100, of the net total amount of such bank holding company's own
         capital.

         (3) A bank holding company shall not, for the purpose of evasion from
         the credit grant limit pursuant to the provisions of paragraphs (1) and
         (2), cross-extend credits with other bank holding companies, etc. or
         banks.

         (4) When a bank holding company, etc. intends to extend credit grants
         (including the transaction prescribed by the Presidential Decree;
         hereafter in this Article, the same shall apply) to the large
         stockholders of the bank holding company concerned not less than the
         amount prescribed by the Presidential Decree, it shall be subject to
         the decision of the board of directors in advance. In this case, the
         board of directors shall decide by unanimous approval of all the
         directors on the register.

         (5) When a bank holding company, etc. has extended credit grants to the
         large stockholders of the bank holding company concerned not less than
         the amount prescribed by the Presidential Decree, it shall report such
         fact to the Financial Supervisory Commission and announce in public by
         means of personal computer communication, etc.

         (6) A bank holding company, etc. shall announce in public by means of
         personal computer communication, etc. the matters regarding the credit
         grants to the large stockholders of the financial institutions
         concerned quarterly as prescribed by the

<PAGE>

         Presidential Decree.

         (7) The extent of subsidiary, standard of credit grant, method of
         calculating one's own capital and the net total amount of one's own
         capital pursuant to the provisions of paragraphs (1) through (6) shall
         be prescribed by the Presidential Decree. [This Article Newly Inserted
         by Act No. 6692, Apr. 27, 2002]


ARTICLE 45-3 (ACQUISITION LIMIT, ETC. OF STOCKS ISSUED BY LARGE STOCKHOLDERS)


         (1) A bank holding company, etc. shall not acquire (including
         acquisition by trust business operation; hereafter in this Article, the
         same shall apply) stocks (including the investment equity; hereafter in
         this Article, the same shall apply) issued by the large stockholders in
         excess of the amount equivalent to the value of the rate, prescribed by
         the Presidential Decree, within the extent of 1/100 of the net total
         amount of its own capital.

         (2) In case where persons who have not been the large stockholders
         become the new large stockholders, and consequently a bank holding
         company, etc. comes to exceed the limit pursuant to the provisions of
         paragraph (1), the bank holding company concerned shall dispose of the
         surplus stocks within the time frame prescribed by the Presidential
         Decree.

         (3) When a bank holding company, etc. intends to acquire the stocks
         issued by the large stockholders of the bank holding company concerned
         not less than the amount prescribed by the Presidential Decree, it
         shall be subject to the decision of the board of directors in advance.
         In this case, the board of directors shall decide by unanimous approval
         of all the directors on the register.

         (4) When a bank holding company, etc. has acquired the stocks issued by
         the large stockholder of the bank holding company concerned not less
         than the amount prescribed by the Presidential Decree, it shall report
         such fact to the Financial

<PAGE>


         Supervisory Commission and announce in public by means of personal
         computer communication, etc.

         (5) A bank holding company, etc. shall announce in public by means of
         personal computer communication, etc. the matters regarding the
         acquisition of the stocks issued by the large stockholders of the bank
         holding company concerned quarterly as prescribed by the Presidential
         Decree.

         (6) In exercising the voting right of the stocks issued by a large
         stockholder of the bank holding company concerned, the bank holding
         company, etc. shall exercise in a way that does not affect the contents
         of resolution that can be carried by the number of stocks obtained by
         subtracting the number of stocks held by the bank holding company
         concerned, etc. from the number of stocks attending the stockholders'
         meeting of the large stockholder concerned: Provided, That in case
         where it is evidently expected that loss to the bank holding company
         concerned, etc. will occur by such cases as merger of the large
         stockholder, transfer and takeover of business operations, appointment
         and dismissal of officers, and other matters equivalent to these, this
         shall not apply.

         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 45-4 (PROHIBITION FROM EXERCISE OF UNREASONABLE INFLUENCE BY LARGE
             STOCKHOLDERS)

         A large stockholder of a bank holding company shall not be involved in
         an act falling under any of the following subparagraphs for the purpose
         of his personal interest contrary to the interest of such bank holding
         company:

         1.An act of demanding that the bank holding company concerned, etc.
         furnish undisclosed data or information in order to use unjustifiable
         influence: Provided, That the cases falling under the provisions of
         Article 42 (5) are excluded;

         2.An act of using unjustifiable influence on the personnel management
         or business operation of the bank holding company concerned, etc. in
         consultation with other

<PAGE>

         stockholders under the condition of supply of a benefit in return such
         as an economic gain, etc.;

         3.An act of using influence on the business operations of the bank
         holding company concerned, etc. such as demanding early withdrawal of
         credit grants, etc. for the purpose of interference with the business
         activities of a competing business operator: or

         4.Other acts equivalent to subparagraphs 1 through 3 and prescribed by
         the Presidential Decree.

         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 45-5 (DEMAND, ETC. TO SUBMIT DATA TO LARGE STOCKHOLDERS)


         (1) When the Financial Supervisory Commission acknowledges a bank
         holding company, etc. or the large stockholders of such bank holding
         company are suspected of having violated the provisions of Articles
         45-2 through 45-4, it may demand that the bank holding company, etc. or
         the large stockholders of such bank holding company submit necessary
         data.

         (2) In case where the difficulty in financial structure due to the
         super-abundance, etc. of liability over assets of a large stockholder
         of a bank holding company, is apprehended to be substantially
         detrimental to the operational soundness of such bank holding company,
         etc., and prescribed by the Presidential Decree, the Financial
         Supervisory Commission may take measures prescribed by the Presidential
         Decree such as ordering, etc. the bank holding company, etc. to limit
         credit grants to the large stockholder of the bank holding company
         concerned.

         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 46 (INVESTMENT OF FINANCIAL HOLDING COMPANY)

<PAGE>

         Any financial holding company shall be prohibited from holding stocks
         issued by its subsidiaries in excess of its equity capital: Provided,
         That the same shall not apply to a capital increase for improving the
         financial standing of the subsidiary, etc. and the case prescribed by
         the Presidential Decree. In this case, the method of computing the
         equity capital shall be determined by the Presidential Decree.


ARTICLE 47
         Deleted. (by Act No. 6692, Apr. 27, 2002)


ARTICLE 48 (RESTRICTIONS ON ACTS BY SUBSIDIARIES, ETC.)


         (1) Subsidiaries, etc. of any financial holding company shall be
         prohibited from performing the act falling under any of the following
         subparagraphs: Provided, That the same shall not apply to the case
         where such subsidiaries, etc. are incorporated into a new financial
         holding company and other cases prescribed by the Presidential Decree:

         1.Act of extending credits to a financial holding company to which such
         subsidiaries, etc. belong;

         2.Act of holding stocks issued by other subsidiaries, etc. (excluding
         any company controlled directly by such subsidiaries, etc.) of a
         financial holding company to which such subsidiaries, etc. belong; and

         3.Act of extending credits to other subsidiaries, etc. of a financial
         holding company to which such subsidiaries, etc. belong in excess of
         the standards prescribed by the Presidential Decree.

         (2) Where subsidiaries, etc. belonging to the same financial holding
         company extend

<PAGE>

         credits to each other, such subsidiaries, etc. shall secure appropriate
         securities according to the standards prescribed by the Presidential
         Decree: Provided, That the same shall not apply to the case where such
         subsidiaries, etc. extend credits to each other for their corporate
         restructuring in a manner that meets the requirements prescribed by the
         Financial Supervisory Commission.

         (3) Bad assets prescribed by the Presidential Decree shall not be
         traded between any financial holding company and its subsidiaries, etc.
         and between such subsidiaries, etc.: Provided, That the same shall not
         apply to transactions necessary for the corporate restructuring of such
         subsidiaries, etc. and other cases meeting the requirements prescribed
         by the Financial Supervisory Commission.

         (4) Any financial holding company and its subsidiaries, etc.
         (hereinafter referred to as the "financial holding company, etc.")
         shall observe the standards, such as joint publication and the joint
         utilization of the computer system, etc., prescribed by the
         Presidential Decree.

         (5) The subsidiaries, etc. of any financial holding company shall be
         prohibited from holding stocks issued by such financial holding
         company: Provided, That the same shall not apply to the case where the
         subsidiaries, etc. of such financial holding company acquire stocks
         issued by such financial holding company under Article 62-2 (1) of this
         Act or Article 342-2 of the Commercial Act. (Amended by Act No. 6692,
         Apr. 27, 2002)

         (6) Deleted. (by Act No. 6692, Apr. 27, 2002)

         (7) The subsidiaries, etc. of any financial holding company shall not,
         where they hold stocks issued by such financial holding company or
         other subsidiaries, etc. of such financial holding company, be allowed
         to exercise voting rights thereof.

         (8) The scope of subsidiaries, etc. described in paragraphs (1) 1 and 3
         and (2) and standards for extending credits shall be determined by the
         Presidential Decree.

<PAGE>

ARTICLE 48-2 (SUPPLY AND MANAGEMENT OF PERSONAL CREDIT INFORMATION)


         (1) Notwithstanding the provisions of Articles 23 and 24 (1) of the Use
         and Protection of Credit Information Act, a financial holding company,
         etc. may supply credit information regarding a person (hereinafter
         referred to as the "personal credit information") pursuant to the
         provisions of subparagraphs 1, 3 and 4 of Article 23 of the same Act to
         let the financial holding company, etc. to which he belongs utilize for
         the purpose of business operation.

         (2) A securities company, which is a subsidiary, etc. of a financial
         holding company, may, notwithstanding the provisions of Article 59 of
         the Securities and Exchange Act, buy and sell securities through the
         securities company concerned, or supply information, regarding the
         total amount of money or securities deposited by a truster who intends
         to buy and sell securities, to let the financial holding company to
         which he belongs utilize for the purpose of business operation.

         (3) In case where a subsidiary, etc. supplies the personal credit
         information and information on the total amount of money or securities
         pursuant to the provisions of paragraphs (1) and (2), the provisions of
         Article 24 (2) of the Use and Protection of Credit Information Act
         shall not apply.

         (4) A financial holding company, etc. shall appoint not less than one
         person out of the officers of their own to act as a person in charge of
         the management of personal credit information, etc. (hereinafter
         referred to as a "credit information manager") for the strict
         management of personal credit information, etc.

         (5) A credit information manager shall prepare a business guidebook as
         set up by the Financial Supervisory Commission for the strict
         management of personal credit information, etc. and report the contents
         thereof to the Financial Supervisory Commission.


<PAGE>

         (6) A financial holding company, etc. shall set up a treatment policy
         of the personal credit information, etc. as prescribed by the
         Presidential Decree, and inform the other party of transaction of the
         financial holding company concerned, etc. thereof or announce it in
         public, and post it at the business office. [This Article Newly
         Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 48-3 (RESTRICTION, ETC. ON TAKING BRIBES)


         (1) The officers and employees of a financial holding company shall not
         receive gifts, or offer and take or promise bribes in connection with
         their duty.

         (2) Those who are or have been officers and employees of a financial
         holding company shall not disclose the information that they came to
         know in the course of their duty to others or utilize it for purposes
         other than the business purpose.
         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


              CHAPTER VII SUPERVISION OF FINANCIAL HOLDING COMPANY

ARTICLE 49 (SUPERVISION)


         (1) The Financial Supervisory Commission may issue orders necessary to
         supervise financial holding companies, etc. for their sound management.

         (2) Subject to the regulations and instructions of the Financial
         Supervisory Commission, the Financial Supervisory Service shall
         supervise whether financial holding companies, etc. observe this Act,
         any other finance-related Acts and

<PAGE>

         subordinate statutes, and the regulations, orders and instructions of
         the Financial Supervisory Commission.


ARTICLE 50 (MANAGEMENT GUIDANCE STANDARDS)


         (1) Financial holding companies shall observe the management guidance
         standards set by the Financial Supervisory Commission according to the
         Presidential Decree with respect to matters falling under each of the
         following subparagraphs in order to maintain their sound management:

         1.Matters relating to the financial standing of financial holding
         companies and their subsidiaries, etc.;

         2.Matters relating to the current management state of financial holding
         companies and their subsidiaries, etc.; and

         3.Other matters necessary to secure the sound management.

         (2) The Financial Supervisory Commission may, when any financial
         holding company fails to observe the management guidance standards
         referred to in paragraph (1) and is feared to undermine greatly the
         soundness of its management, order such financial holding company to
         take necessary measures, such as the submission of a management
         improvement plan, an increase in capital, limits on dividends and
         disposal of stocks of its subsidiaries, etc., in order to improve its
         management.


ARTICLE 51 (AUDIT)


         (1) Every financial holding company and its subsidiaries, etc. shall
         undergo audits conducted by the Governor of the Financial Supervisory
         Service (hereinafter

<PAGE>

         referred to as the "Governor of the Financial Supervisory Service")
         with respect to their business and properties.

         (2) The Governor of the Financial Supervisory Service may, when he
         deems it necessary to conduct an audit, ask any financial holding
         company and its subsidiaries, etc. to report their business or
         properties, furnish data and get officials in charge to be present and
         state their opinions.

         (3) Persons who conduct the audit under paragraph (1) shall carry
         certificates showing their authority and produce them to persons
         concerned.

         (4) The Governor of the Financial Supervisory Service may ask auditors
         appointed by any financial holding company and its subsidiaries, etc.
         under the Act on External Audit of Stock Companies to furnish
         information they have learned as a result of audits of such financial
         holding company and its subsidiaries, etc. and other data pertaining to
         the soundness of their management.

         (5) The Governor of the Financial Supervisory Service shall, when he
         conducts an audit in accordance with paragraph (1), file a report
         thereof with the Financial Supervisory Commission. In this case, such
         report shall, when this Act, finance-related Acts and subordinate
         statutes, dispositions taken in accordance with this Act and the
         regulations of the Financial Supervisory Commission are found to have
         been violated, be appended by a statement of views with respect to the
         method of dealing with such violations.

         (6) The Financial Supervisory Commission may determine necessary
         matters concerning methods of and procedures for audit and the affairs
         of audit.


ARTICLE 51-2 (INSPECTION ON OBJECTS OF CHANGEOVER)


         (1) In case where it falls under any of the following subparagraphs,
         the Financial

<PAGE>

         Supervisory Commission may let the Governor of the Financial
         Supervisory Service inspect the operation and property status of the
         objects of changeover within the minimum extent necessary for its duty:

         1.Where it is necessary to ascertain the checkup result pursuant to the
         provisions of Article 8-3 (2); or

         2.Where it is acknowledged that the objects of changeover are highly
         likely to get involved in the illegitimate dealings with a bank holding
         company, etc. due to unhealthy financial status such as rapid increase
         in debt, occurrence of huge loss, etc.

         (2) The definite extent, method and other necessary matters regarding
         the inspection pursuant to the provisions of paragraph (1) shall be set
         up by the Financial Supervisory Commission.

         (3) The provisions of Article 51 (2) through (4) shall apply mutatis
         mutandis regarding the inspection pursuant to the provisions of
         paragraph (1).
         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 52 (ALLOTED CHARGES)


         (1) Any financial holding company that has undergone any audit
         conducted by the Financial Supervisory Service shall pay alloted
         charges to the Financial Supervisory Service to cover expenses incurred
         by audits.

         (2) Necessary matters concerning rates, limits and payments of alloted
         charges referred to in paragraph (1) shall be determined by the
         Presidential Decree.


ARTICLE 53 (ACCUMULATION OF REVENUE RESERVE)

<PAGE>

         Every financial holding company shall accumulate not less than 10/100
         of net earnings, whenever net profits on the settlement of accounts are
         divided, until the reserve amounts to the total amount of the capital.


ARTICLE 54 (DUTY REPORT)


         (1) Every financial holding company shall compile a duty report
         describing business results, financial state and other matters
         prescribed by the Presidential Decree for 3 months, 6 months, 9 months
         and 12 months from the date on which every business year begins and
         file it with the Governor of the Financial Supervisory Service within
         one month after the lapse of each of the periods. In case where the
         presence of inevitable cause is acknowledged, the Governor of the
         Financial Supervisory Service may extend the deadline. (Amended by Act
         No. 6692, Apr. 27, 2002)

         (2) Detailed matters for preparing the duty report referred to in
         paragraph (1) and other necessary matters shall be determined by the
         Financial Supervisory Commission. (Amended by Act No. 6692, Apr. 27,
         2002)


ARTICLE 55 (PUBLICATION OF FINANCIAL STATEMENTS)

         Every financial holding company shall publish the balance sheet, the
         profit and loss statement for the current period for the settlement of
         accounts and the consolidated financial statement required by the Act
         on External Audit of Stock Companies, all compiled as of the date of
         the settlement of accounts according to forms prescribed by the
         Financial Supervisory Commission, within 3 months from the date of the
         settlement of accounts: Provided, That with respect to any document
         which cannot be published within 3 months from the date of the
         settlement of accounts due to unavoidable reasons, its publication may
         be extended on approval of the Financial

<PAGE>

         Supervisory Commission.


ARTICLE 55-2 (SUBMISSION, ETC. BY ELECTRONIC DOCUMENT)

         When a financial holding company submits or announces in public the
         data pursuant to the provisions of Articles 54 and 55, it may do so by
         means of electronic document as set up by the Governor of the Financial
         Supervisory Service or the Financial Supervisory Commission.
         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 56 (PUBLICATION OF MANAGEMENT)

         Every financial holding company shall publish matters necessary to
         protect depositors and investors of its subsidiaries, etc., which are
         prescribed by the Presidential Decree, in a manner prescribed by the
         Financial Supervisory Commission.


ARTICLE 57 (ADMINISTRATIVE DISPOSITION)


         (1) The Financial Supervisory Commission may, where any financial
         holding company is feared to undermine the soundness of its management
         by violating this Act or orders given under this Act, take measures
         falling under any of the following subparagraphs: (Amended by Act No.
         6692, Apr. 27, 2002)

         1.Caution and warning to the financial holding company or demand that
         officers and employees be cautioned, warned and rebuked;

         2.An order given to correct the act of violation in question;

<PAGE>

         3.Deleted; (by Act No. 6692, Apr. 27, 2002)

         4.Recommendation that any officer be dismissed or suspended from his
         duties and an agent be appointed to act in the capacity of any officer
         in performing the later's duties; and

         5.Suspension of part of the business of a financial holding company,
         which has committed an act of violation, for not more than 6 months.

         (2) The Financial Supervisory Commission may, where any financial
         holding company falls under any of the following subparagraphs, order
         such financial holding company to suspend the whole of its business for
         a period of not more than 6 months or dispose of stocks of its
         subsidiaries, etc., or cancel the authorization granted to such
         financial holding company: (Amended by Act No. 6692, Apr. 27, 2002)

         1.Where the company has obtained the authorization of Article 3 in a
         fraudulent or any other unlawful manner;

         2.Where the company has failed to execute an order given to correct the
         act of violation under paragraph (1) 2;

         3.Where the company runs its business during a business-suspension
         period under paragraph (1) 5;

         4.Where, in addition to subparagraphs 1 through 3, the company is
         feared to undermine greatly the interest of depositors and investors of
         its subsidiaries, etc. by violating this Act and orders given or
         dispositions taken under this Act; or

         5.Where the financial holding company becomes not to fall under the
         provisions of Article 2 (1) 1 due to the cause of decrease in stocks in
         possession, increase and decrease in assets, etc.

<PAGE>

ARTICLE 58 (STOCK DISPOSAL DUE TO CANCELLATION OF AUTHORIZATION)


         (1) Any financial holding company shall, where its authorization is
         cancelled in accordance with Article 57 (2), dispose of stocks held by
         its subsidiaries that it owns within 3 months from the date of
         cancellation.

         (2) When a financial holding company is ordered to dispose of stocks
         pursuant to the provisions of paragraph (1), it shall not exercise the
         voting right of the stocks ordered to dispose of from the date it is
         ordered as such.

         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 59 (HEARINGS)

         The Financial Supervisory Commission shall, where it intends to cancel
         the authorization granted to a financial holding company, hold hearings
         in accordance with Article 57 (2).


                      CHAPTER VIII SUPPLEMENTARY PROVISIONS

ARTICLE 60 (AUTHORIZATION FOR MERGER, ETC.)


         (1) Any financial holding company shall, when it intends to dissolve
         itself or merge with other company, obtain an authorization from the
         Financial Supervisory Commission under the conditions as prescribed by
         the Presidential Decree.

<PAGE>

         (2) In determining whether an authorization shall be granted or denied
         under paragraph (1), the Financial Supervisory Commission shall examine
         whether such dissolution or such merger limits the competition or
         disrupts the sound order on the financial market and other matters
         prescribed by the Presidential Decree.

         (3) The provisions of Article 3 (2) and (3) shall apply mutatis
         mutandis to the authorization of paragraph (1).


ARTICLE 61 (MATTERS TO BE REPORTED)

         Any financial holding company shall, when it falls under any of the
         following subparagraphs, report without any delay the fact to the
         Financial Supervisory Commission: (Amended by Act No. 6692, Apr. 27,
         2002)

         1.Where an officer is appointed or dismissed;

         2.Where a change occurs in the largest stockholders (referring to the
         same person in the event of holding the largest number of stocks under
         the standards for the total number of stocks with voting rights issued
         by the financial holding company concerned);

         2-2.Where a large stockholder of a bank holding company is replaced;

         3.Where the firm name is changed;

         4.Where the cause of dissolution accrues;

         5.Where a financial holding company or its subsidiaries lose the
         control over its subsidiaries or their sub-subsidiaries after disposing
         of its or their stocks; and

         6.Where it is feared to undermine the soundness of the management of a
         financial holding company, etc. and is prescribed by the Presidential
         Decree.

<PAGE>

ARTICLE 62 (RELATION WITH OTHER ACTS)


         (1) Every financial holding company shall be governed by the Commercial
         Act and the Monopoly Regulation and Fair Trade Act except as specially
         provided for in this Act.

         (2) Deleted. (by Act No. 6692, Apr. 27, 2002)


ARTICLE 62-2 (EXCEPTIONS TO STOCK SWAP AND STOCK TRANSFER)


         (1) When a subsidiary acquires stocks of a financial holding company or
         when a sub-subsidiary acquires stocks of a subsidiary by means of stock
         swap or stock transfer, in applying the provisions of Article 342-2 of
         the Commercial Act to the stocks of a financial holding company or a
         subsidiary allocated as compensation in exchange for its own stocks
         which fall under any of the following subparagraphs among the stocks
         concerned, "six months" in paragraph (2) of the same Article shall be
         regarded as "three years":

         1.Its own stocks acquired out of the exercise of the appraisal right of
         the stockholders opposing the stock swap or stock transfer; or

         2.Among its own stocks acquired pursuant to the provisions of Article
         189-2 (1) and (2) of the Securities and Exchange Act, those purchased
         from the date of resolution of the board of directors regarding the
         approval on the stock swap contract or the stock transfer contract till
         the expiry date of the exercise of the appraisal right of stockholders.

         (2) In applying the provisions of the Commercial Act on the stock swap
         or stock

<PAGE>

         transfer for the establishment of a complete holding company, "two
         weeks" in the main sentence of Article 354 (4), Articles 360-4 (1),
         360-5 (2), 360-9 (2), 360-10 (4), 360-17 (1) and 363 (1) of the same
         Act shall be regarded as "seven days" respectively, "twenty days" in
         Articles 360-5 (1) and 360-5 (2) of the same Act as "ten days"
         respectively, "before one month" in Article 360-8 (1) of the same Actse
         where.....notifies of his intent to be opposed to the share swap" in
         Article 360-10 (5) o same Act as "in case where.....notifies of his
         intent opposing the stock swap within seven days from the date of
         notification or public announcement stipulated in paragraph (4)",
         "within the period specified for over one month" in Article 360-19 (1)
         2 of the same Act as "within the period fixed for a duration of five
         days or longer", and "within two months" in Article 374-2 (2) of the
         same Act as "within one month".

         (3) In case where an agreement is not reached between the stockholders
         opposing the stock swap or the stock transfer for the establishment of
         a complete holding company and the company over the stock purchase
         price, the stock purchase price shall be the amount calculated in
         accordance with the classification of the following subparagraphs,
         notwithstanding the provisions of Article 374-2 (4) and (5) of the
         Commercial Act applied mutatis mutandis in the Article 360-5 (3) of the
         same Act:

         1.Where the company concerned is a stock-listed company or an
         Association-registered company pursuant to the Securities and Exchange
         Act: the amount calculated by a method prescribed by the Presidential
         Decree which is based on the trading price of the stocks concerned
         traded on the securities market before the day of resolution by the
         board of directors on the approval of stock swap contract or stock
         transfer contract; and

         2.Where the company concerned is other than the one in the subparagraph
         1: the amount calculated by an accounting expert. In this case, the
         extent of accounting expert and the procedures of appointment shall be
         prescribed by the Presidential Decree.

         (4) In case where a company intending to swap stocks or transfer stocks
         for the

<PAGE>

         establishment of a complete holding company, or the stockholders
         holding not less than 30/100 of the number of stocks requested for
         appraisal pursuant to the provisions of Article 360-5 of the Commercial
         Act, oppose the stock purchase price calculated pursuant to the
         provisions of paragraph (3), the company or the stockholders concerned
         may apply for arbitration to the Financial Supervisory Commission till
         ten days prior to the day the purchase pursuant to the provisions of
         Article 374-2 (2) of the Commercial Act is to be completed. [This
         Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


ARTICLE 63 (ENTRUSTMENT OF AUTHORITY)

         The Financial Supervisory Commission shall entrust part of its
         authority under this Act to the Governor of the Financial Supervisory
         Service under the conditions as prescribed by the Presidential Decree.


           CHAPTER IX IMPOSITION AND COLLECTION OF PENALTY SURCHARGES

ARTICLE 64 (PENALTY SURCHARGES)

         The Financial Supervisory Commission may, where any financial holding
         company and its subsidiaries, etc. violate the provisions of Articles
         43 through 45, 45-2, 45-3, 46, 48, 58 (1) or 62-2 (1), impose penalty
         surcharges on them according to the classification falling under each
         of the following subparagraphs: (Amended by Act No. 6692, Apr. 27,
         2002)

         1.Where the limit on the investment of securities under Article 43 is
         exceeded, not more than 10/100 of the amount of the investment made in
         excess;

<PAGE>

         2.Where the limit on the holding of stocks under Article 44 is
         exceeded, not more than 10/100 of the total amount of book value of the
         stocks in possession;

         3.Where the limit on credits under Article 45 (1) through (3) is
         exceeded, not more than 10/100 of the excessive credit grant amount;

         4.Where the limit of credit grants pursuant to the provisions of
         Article 45-2 (1) and (2) is exceeded: not more than 20/100 of the
         excessive credit grant amount;

         5.Where the limit of stock acquisition pursuant to the provisions of
         Article 45-3 (1) is exceeded: not more than 20/100 of the total amount
         of book value of the stocks acquired in excess;

         6.Where the limit on holding stocks under Article 46 is exceeded, not
         more than 10/100 of the total amount of book value of the stocks in
         possession;

         7.Where subsidiaries, etc. extend credits to their financial holding
         company in contravention of Article 48 (1) 1, not more than 10/100 of
         the amount of credits granted;

         8.Where stocks of subsidiaries, etc. are held in contravention of
         Article 48 (1) 2, not more than 10/100 of the total amount of book
         value of the stocks in possession;

         9.Where the limit on cross extension of credits between subsidiaries,
         etc. is exceeded in contravention of Article 48 (1) 3, not more than
         10/100 of the excessive credit grant amount;

         10.Where credits are granted without securing appropriate security in
         contravention of Article 48 (2), not more than 10/100 of the credit
         grant amount;

         11.Where bad assets are traded in contravention of Article 48 (3), not
         more than 10/100 of the book value of such assets;

<PAGE>

         12.Where stocks are held in violation of the provisions of Article 48
         (5): not more than 2/100 of the total amount of book value of the
         stocks in possession;

         13.Where a financial holding company holds stocks of a subsidiary
         longer than the period pursuant to the provisions of Article 58 (1):
         not more than 10/100 of the total amount of book value of the stocks of
         the subsidiary; and

         14.Where stocks are held in violation of Article 62-2 (1): not more
         than 2/100 of the total amount of book value of the stocks in
         possession.


ARTICLE 65 (IMPOSITION OF PENALTY SURCHARGES)


         (1) The Financial Supervisory Commission shall, when it imposes penalty
         surcharges in accordance with Article 64, take into account matters
         falling under each of the following subparagraphs:

         1.Substance and extent of the act of violation;

         2.Period and frequence of the act of violation; and

         3.Scale of profits earned by the act of violation.

         (2) The Financial Supervisory Commission may, where a company that has
         committed a violation of the provisons of this Act merges with other
         company, regard the act of violation committed by such company as
         committed by a company surviving such merger or a company newly
         incorporated by such merger, and impose and collect penalty surcharges.

         (3) Standards for imposing penalty surcharges under paragraph (1) and
         other matters necessary for imposing penalty surcharges shall be
         determined by the Presidential Decree.

<PAGE>

ARTICLE 66 (PUTTING FORTH OF OPINION)


         (1) The Financial Supervisory Commission shall give a party or an
         interested person, etc. an opportunity to put forth his opinion prior
         to imposing any penalty surcharges on him.

         (2) The party or the interested person, etc. referred to in paragraph
         (1) may be present at a meeting of the Financial Supervisory Commission
         to state his opinion or submit necessary data.


ARTICLE 67 (RAISING OBJECTION)


         (1) Any financial holding company that is dissatisfied with a
         disposition taken to impose penalty surcharges on it under Article 64
         may raise an objection to the Financial Supervisory Commission, citing
         the reasons thereof, within 30 days from the date on which it was
         notified of such disposition.

         (2) The Financial Supervisory Commission shall decide on the objection
         raised under paragraph (1) within 30 days from the date of receipt:
         Provided, That where the Financial Supervisory Commission is unable to
         make the decision within the period of 30 days due to unavoidable
         reasons, such period may be extended within the limit of 30 days.

         (3) Any person who is dissatisfied with the decision made under
         paragraph (2) may file an administrative appeal.


ARTICLE 68 (EXTENSION OF TIME LIMIT FOR PAYMENT OF PENALTY SURCHARGES AND
           INSTALLMENT PAYMENT)
<PAGE>


         (1) The Financial Supervisory Commission may, when a person, who is
         subjected to the imposition of penalty charges (hereinafter referred to
         as a "person liable to pay penalty surcharges"), is recognized to be
         difficult to pay the total amount of penalty surcharges imposed on him
         in a lump sum due to the reasons falling under any of the following
         subparagraphs, extend the payment time limit or allow him to pay such
         penalty surcharges in installments. In this case, the Financial
         Supervisory Commission may, where it is deemed necessary, get the
         person liable to pay such penalty surcharges to offer security
         therefor:

         1.Where his property is significantly damaged by disaster, etc.;

         2.Where his business is in serious crisis due to the aggravation of
         business conditions;

         3.Where the lump sum payment of his penalty surcharges is expected to
         weaken significantly his funding position; and

         4.Where any other cause corresponding to each of subparagraphs 1
         through 3 accrues.

         (2) Any person liable to pay penalty surcharges shall, when he intends
         under paragraph (1) to get the time limit for payment of his penalty
         surcharges extended or his penalty surcharges paid in installments,
         file an application thereof with the Financial Supervisory Commission
         at least 10 days prior to the payment time limit.

         (3) The Financial Supervisory Commission may, when any person liable to
         pay penalty charges, whose payment time limit has been extended or
         payment of penalty surcharges in installments has been allowed under
         paragraph (1), falls under any of the following subparagraphs, cancel
         his decision to extend the payment time limit and to allow him to pay
         his penalty surcharges in installments, and then collect

<PAGE>

         the penalty surcharges in a lump sum:

         1.When he fails to pay penalty surcharges that have been decided to be
         paid in installments within the installment payment time limit;

         2.When he fails to execute orders issued by the Financial Supervisory
         Commission to change his security or preserve his security;

         3.When he is subjected to compulsory execution, commencement of
         auction, adjudication of bankruptcy, dissolution of a corporation, and
         a disposition taken to collect national and local taxes in arrears, or
         the whole or part of his penalty surcharges is recognized to be unable
         to be collected; and

         4.When any other cause corresponding to subparagraphs 1 through 3
         accrues.

         (4) Necessary matters with respect to the extension of the payment time
         limit, the payment of penalty surcharges in installments, or security,
         etc. under paragraphs (1) through (3) shall be determined by the
         Presidential Decree.


ARTICLE 69 (COLLECTION OF PENALTY SURCHARGES AND DISPOSITION ON ARREARS)


         (1) The Financial Supervisory Commission may, where any person liable
         to pay penalty surcharges fails to pay his penalty surcharges within
         the payment time limit, collect additional dues prescribed by the
         Presidential Decree, which are imposed on a period ranging from the
         date following the date of the payment time limit to the date preceding
         the date of the payment.

         (2) The Financial Supervisory Commission may, where any person liable
         to pay penalty surcharges fails to pay his penalty surcharges within
         the payment time limit, serve a demand notice, fixing a period for
         paying such penalty surcharges in arrears. The Financial Supervisory
         Commission may, where the person liable to pay

<PAGE>


         penalty surcharges fails to pay his penalty surcharges and additional
         dues referred to in paragraph (1), collect such penalty surcharges and
         additional dues in question according to the example of a disposition
         taken to collect national taxes in arrears.

         (3) The Financial Supervisory Commission may entrust the work of
         collecting penalty surcharges and additional dues or taking disposition
         against arrears as prescribed in paragraphs (1) and (2) to the
         Commissioner of the National Tax Service.

         (4) Matters necessary for the collection of penalty surcharges shall be
         prescribed by the Presidential Decree.


ARTICLE 69-2 (CHARGE TO COMPEL EXECUTION)


         (1) When those who have been ordered to dispose of stocks pursuant to
         the provisions of Article 8-3 (5), 10 (2), 10-2 (5) or 18 (3) do not
         execute such order within the fixed period of time, the Financial
         Supervisory Commission may impose a charge to compel execution thereof
         within the extent not exceeding the amount obtained by multiplying the
         book value of the stocks subject to disposal by 3/10,000 for each day
         passing by.

         (2) The charge to compel execution shall be imposed for the period of
         time from the following day of the expiration of the execution period
         fixed in the stock disposal order till the day the stock disposal
         (referring to the day of stock certificate delivery) is executed.

         (3) In case where the execution is not carried out even after the
         elapse of ninety days from the expiration of execution period set up in
         the stock disposal order, the Financial Supervisory Commission shall,
         regarding the collection of the charge to compel execution, collect the
         charge to compel execution on the basis of each ninety days passing by,
         counting from such expiration day.

<PAGE>

         (4) The provisions of Articles 65 through 69 shall apply mutatis
         mutandis to the imposition and collection of the charge to compel
         execution.
         [This Article Newly Inserted by Act No. 6692, Apr. 27, 2002]


                           CHAPTER X PENAL PROVISIONS

ARTICLE 70 (PENAL PROVISIONS)


         (1) A person who falls under any of the following subparagraphs shall
         be punished by imprisonment of up to five years or by a fine not
         exceeding two hundred million won:

         1.A person who runs the principal business of controlling financial
         institutions or companies closely related to the operation of financial
         business through stock holding, and controls not less than one
         financial institution without obtaining an authorization under Article
         3;

         2.A person who has extended credit grants to the large stockholders and
         the stockholders who have been offered such credit grants in violation
         of the provisions of Article 45-2 (1) through (3);

         3.A person who has acquired stocks issued by the large stockholders in
         violation of the provisions of Article 45-3 (1);

         4.A person who has violated the provisions of Article 45-4;

         5.A person who has violated the provisions of Article 48-3 (1);

         6.A person who has disclosed the information that he came to know in
         the course of

<PAGE>

         his duty or utilized it for purposes other than duty purpose in
         violation of the provisions of Article 48-3 (2); or

         7.An officer or employee of a financial holding company, etc. who has
         furnished or disclosed the personal credit information, etc. that he
         came to know in the course of his duty to those other than such
         financial holding company, etc., or utilized the personal credit
         information for purposes other than business purpose.

         (2) A person who falls under any of the following subparagraphs shall
         be punished by imprisonment of up to three years or by a fine not
         exceeding one hundred million won:

         1.A person who has violated the provisions of Article 7;

         2.A person who has acquired stocks in excess of the stock holding limit
         in violation of Article 44; or

         3.A person who has extended credit grants in excess of the credit grant
         limit in violation of the provisions of Article 45.

         (3) A person who falls under any of the following subparagraphs shall
         be punished by imprisonment of up to one year or by a fine not
         exceeding thirty million won:

         1.A person who has violated the provisions of Article 15;

         2.A person who has incorporated subsidiaries, etc. into his company
         without obtaining an authorization thereof in violation of Article 16;

         3.A person who has incorporated sub-subsidiaries, etc. into his company
         in violation of the provisions of Article 19;

         4.A person who has invested in the securities in excess of the
         investment limit of securities in violation of the provisions of
         Article 43;

<PAGE>

         5.A person who has acquired stocks in excess of the stock-holding limit
         in violation of the provisions of Article 46;

         6.A person who has violated the provisions of Article 48; or

         7.A person who has dissolved his company or merged his company with
         another company without obtaining an authorization pursuant to the
         provisions of Article 60.

         (4) A person who has incorporated subsidiaries, etc. into his company
         without making a report thereof in violation of Article 18 shall be
         punished by imprisonment of up to six months or by a fine not exceeding
         ten million won.
         [This Article Wholly Amended by Act No. 6692, Apr. 27, 2002]


ARTICLE 71 (JOINT PENAL PROVISIONS)

         If the representative of a corporation or the agent, the employed or
         any other employee of a corporation or an individual commits an act of
         violating Article 70 in connection with the business of the corporation
         or the individual, such corporation or such individual shall be fined
         in addition to the punishment of the actor.


ARTICLE 72 (FINE FOR NEGLIGENCE)


         (1) A person who falls under any of the following subparagraphs shall
         be punished by a fine for negligence not exceeding fifty million won:
         (Amended by Act No. 6692, Apr. 27, 2002)

         1.A person who has failed to report in violation of the provisions of
         Article 8 (2);

         2.A person who has violated the order of the Financial Supervisory
         Commission


<PAGE>

         pursuant to the provisions of Article 10 (2);

         3.A person who has failed to respond to the demand of supply, etc. of
         the data pursuant to the provisions of Article 10-2 (2) or 45-5 (1);

         4.A bank holding company, etc. who has failed to go through the
         resolution of the board of directors in violation of the provisions of
         Article 45-2 (4) or 45-3 (3);

         5.A bank holding company, etc. which has failed to report to the
         Financial Supervisory Commission or announce in public in violation of
         Article 45-2 (5) and (6) or 45-3 (4) and (5);

         6.A person who has violated the provisions of Article 48-2 (4) through
         (6);

         7.A person who has refused, obstructed or evaded the inspection
         pursuant to the provisions of Article 51-2; or

         8.A financial holding company which has violated this Act or the
         regulations, orders or directions pursuant to this Act.

         (2) Any person falling under any of the following subparagraphs shall
         be punished by a fine for negligence not exceeding 10 million won:
         (Amended by Act No. 6692, Apr. 27, 2002)

         1.A person who has violated Article 39;

         2.A person who has failed to file a duty report in violation of Article
         54 or falsely prepared a business report;

         3.A person who has failed to publish in violation of Article 55 or
         falsely published;

         4.A person who has failed to make a public notice in violation of
         Article 56 or made a false public notice;


<PAGE>

         5.A person who has dodged or hindered any audit conducted under this
         Act, hiding books and documents, making unreliable reports and using
         other methods;

         6.A person, an officer or an employee of a financial holding company,
         who has neglected to keep or furnish documents, make reports, publish
         or make public notices, which are required by this Act; and

         7.A person who has violated this Act or any regulations made, orders
         issued, or instructions given under this Act.

         (3) The fine for negligence referred to in paragraphs (1) and (2) shall
         be imposed and collected by the Financial Supervisory Commission as
         prescribed by the Presidential Decree.

         (4) Any person who is dissatisfied with a disposition taken to impose a
         fine for negligence on him under paragraph (3) may raise an objection
         to the Financial Supervisory Commission within 30 days from the date on
         which he was notified of such disposition.

         (5) When a person who is subjected to a disposition taken to impose a
         fine for negligence on him under paragraph (3) raises an objection
         under paragraph (4), the Financial Supervisory Commission shall
         promptly notify the competent court, which shall, upon receiving such
         notice, put the case on trial in accordance with the Non-Contentious
         Case Litigation Procedure Act.

         (6) Where the person does not raise any objection within the period as
         prescribed in paragraph (4) and does not pay the fine for negligence in
         question, such fine for negligence shall be collected according to the
         example of a disposition taken to collect national taxes in arrears.


         ADDENDA




<PAGE>


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force one month after the date of its
         promulgation.


ARTICLE 2
         Omitted.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING ALREADY ESTABLISHED COMPANY)

         Where any company, which runs the principal business of controlling
         companies related closely to financial institutions and the financial
         business and controls one or more financial institutions through stock
         holdings, which has already filed with the Fair Trade Commission in
         accordance with Article 8 of the Monopoly Regulation and Fair Trade Act
         at the time when this Act enters into force, such company shall be
         deemed to have been granted an authorization under this Act and
         measures shall be taken to make such company consistent with this Act
         within 6 months from the date on which this Act enters into force.


ARTICLE 4 (SPECIAL CASE FOR RESTRICTIONS ON CONTROL OF FINANCIAL HOLDING
          COMPANIES BY FINANCIAL INSTITUTIONS)


         (1) Any financial institution (including any financial institution
         incorporated in accordance with foreign Acts and subordinate statutes)
         that controls other financial institution at the time that this Act
         enters into force may become a controlling stockholder in control of a
         financial holding company that runs such other financial institution as
         a subsidiary through the swap or transfer of stocks, notwithstanding
         the provisions of Article 7.

<PAGE>

         (2) The swap or transfer of stocks referred to in paragraph (1) shall
         be limited to what is actually effected within one year from the date
         on which this Act enters into force.

         (3) A financial institution, even if it is in control of a financial
         holding company under paragraph (1), shall not become the largest
         stockholder of such financial holding company.

         (4) Any financial institution, which controls a financial holding
         company in accordance with paragraph (1), shall be prohibited from
         holding stocks of such financial holding company in excess of the
         holding ratio (referring to the holding ratio at the time that the
         final effect of the swap or transfer of stocks takes effect) under
         which the former acquires stocks of the latter through the swap or
         transfer of stocks.


ARTICLE 5 (TRANSITIONAL MEASURES CONCERNING CREDIT GRANT LIMIT)

         The provisions of Articles 45 (1) through (3) and 48 (1) 3, where any
         financial institution, which is already established at the time when
         this Act enters into force, has been subject to the application of
         transitional measures with respect to the credit grant limit in
         accordance with other finance-related Acts and subordinate statutes for
         a certain period, shall not apply to such financial institution for
         such period.


ARTICLE 6 (DISPOSAL OF STOCKS OF FINANCIAL HOLDING COMPANY CONTROLLED BY
          GOVERNMENT)


         (1) Where the Government becomes a stockholder in control of any
         financial holding company after the enforcement of this Act, the
         Government shall strive to dispose of stocks held by it through a
         phased process within 3 years.


<PAGE>

         (2) The Government shall, if it fails to dispose of its stocks within
         the period referred to in paragraph (1), dispose of remaining stocks
         within the next one year.


         ADDENDA (Act No. 6692, Apr. 27, 2002)

         (1) (Enforcement Date) This Act shall enter into force three months
         after the date of its promulgation: Provided, That the amended
         provisions of Articles 20 through 37 and 62-2 shall enter into force on
         the day of its promulgation.

         (2) (Transitional Measures regarding Penalty and Fine for Negligence)
         With respect to the application of penalty and fine for negligence
         against the violations perpetrated before the enforcement of this Act,
         the previous provisions shall govern.











</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.3
<SEQUENCE>13
<FILENAME>u98617exv12w3.txt
<DESCRIPTION>EX-12.3 KOREAN BANK ACT
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                                                    Exhibit 12.3

BANKING ACT

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>

<S>                           <C>                        <C>
Wholly amended By             1998 . 1.31                Act No. 5499
Amended By                    1998 . 2.24                Act No. 5520
Amended By                    1998 . 5.25                Act No. 5540
Amended By                    1999 . 2.5                 Act No. 5745
Amended By                    1999 . 5.24                Act No. 5982
Amended By                    1999 . 9.7                 Act No. 6018
Amended By                    2000 . 1.21                Act No. 6177
Amended By                    2000 . 1.28                Act No. 6256
Amended By                    2001 . 3.28                Act No. 6429
Amended By                    2002 . 4.27                Act No. 6691
</TABLE>

                          CHAPTER I GENERAL PROVISIONS

ARTICLE 1 (PURPOSE)

         The purpose of this Act is to contribute to the stability of financial
         markets and the development of the national economy by seeking the
         sound operation of financial institutions, enhancing the efficiency of
         the fund brokerage functions, protecting depositors and maintaining the
         order of credit.
         [This Article Wholly Amended by Act No. 6177, Jan. 21, 2000]


ARTICLE 2 (DEFINITIONS)


         (1) For the purpose of this Act, the definitions of terms shall be as
         follows: (Amended by Act No. 5745, Feb. 5, 1999; Act No. 6691, Apr. 27,
         2002)

<PAGE>

         1.The term "banking business" means a business of lending funds raised
         by bearing debts from many unspecified persons through the receipt of
         deposits and issuance of securities and other bonds;

         2.The term "financial institutions" means all legal persons other than
         the Bank of Korea regularly and systematically engaged in the banking
         business;

         3.The term "commercial financial business" means a business which loans
         funds primarily raised by receipt of demand deposits within a period of
         less than a year, or makes loans for a period of not less than a year
         but less than three years, within the scope not exceeding the ceiling
         limit on loans as determined by the Financial Supervisory Commission,
         taking into account the total deposits;

         4.The term "long-term financial business" means a business which loans
         funds raised by capital stock, reserves, other surplus, or time
         deposits with a maturity of more than one year, or through the issue of
         debentures or other bonds for a period exceeding one year;

         5.The term "equity capital" means the total amount of core capital and
         supplementary capital according to the standards set by the Bank for
         International Settlements;

         6.The term "payment guarantee" means a guarantee or acceptance of debts
         of another person by financial institutions;

         7.The term "credits" means loans, payment guarantees and purchase of
         securities (limited to those of fund assistance nature) or other direct
         and indirect transactions by financial institutions, which involve
         credit risk in financial transactions;

         8.The term "same person" means the principal and a person having such a
         special relationship with the principal as prescribed by the
         Presidential Decree (hereinafter referred to as the "specially related
         person");

<PAGE>

         9.The term "non-financial business operator" means a person falling
         under any of the following items:

         (a) The same person with respect to which the total amount of gross
         capital (referring to the gross amount of assets less the gross amount
         of debts, on the balance sheet; hereinafter the same shall apply) of
         persons who are non-financial companies (referring to companies that
         run such non-financial businesses as determined by the Presidential
         Decree; hereinafter the same shall apply) is not less than 25/100 of
         the total amount of gross capital of persons who are companies;

         (b) The same person with respect to which the total amount of gross
         capital of persons who are non-financial companies is not less than
         such an amount as prescribed by the Presidential Decree, which is not
         less than two billion won; and

         (c) A securities investment company under the Securities Investment
         Company Act (hereinafter referred to as the "securities investment
         company") with respect to which a person as referred to in item (a) or
         (b) holds more than 4/100 of the total number of the issued stocks
         (referring to the case that the same person owns stocks under his or
         another person's name or has voting rights to them through a contract,
         etc.; hereinafter the same shall apply); and

         10.The term "large stockholder" means a person falling under any of the
         following items:

         (a) One stockholder of a financial institution in case that the same
         person including such stockholder holds more than 10/100 [15/100 in
         case of a financial institution which does not operate nationwide
         (hereinafter referred to as the "local financial institution")] of the
         total number of voting stocks issued by the financial institution; and

         (b) One stockholder of a financial institution in case that the same
         person including such stockholder holds more than 4/100 of the total
         number of voting stocks

<PAGE>

         (excluding nonvoting stocks under Article 16-2 (2)) issued by the
         financial institution (excluding a local financial institution) and the
         same person is the largest stockholder of the financial institution or
         exercises a substantial influence over the major managerial matters of
         the financial institution in a manner of appointing or dismissing its
         officers, etc. as prescribed by the Presidential Decree.

         (2) The specific scope of equity capital and credits under paragraph
         (1) 5 and 7 shall be determined by the Financial Supervisory Commission
         under the conditions as prescribed by the Presidential Decree. (Newly
         Inserted by Act No. 5745, Feb. 5, 1999)


ARTICLE 3 (APPLICABLE PROVISIONS)


         (1) All financial institutions in the Republic of Korea shall be
         operated under this Act, the Bank of Korea Act, the Act on the
         Establishment of Financial Supervisory Organizations, and regulations
         and orders issued thereunder.

         (2) This Act and the Bank of Korea Act shall prevail over the
         Commercial Act and other Acts and subordinate statutes.


ARTICLE 4 (LEGAL PERSONS)

         No person other than legal persons shall be engaged in the banking
         business.


ARTICLE 5 (SPECIAL CASES FOR NATIONAL AGRICULTURAL COOPERATIVES FEDERATION,
          ETC.)

         Any credit business sector of the National Agricultural Cooperatives
         Federation, the National Federation of Fisheries Cooperatives and its
         member fisheries cooperatives shall be deemed a financial institution.

<PAGE>

         [This Article Wholly Amended by Act No. 6256, Jan. 28, 2000]


ARTICLE 6 (INSURERS, ETC.)

         Insurers and companies engaged exclusively in savings bank business or
         trust business shall not be deemed financial institutions. (Amended by
         Act No. 6429, Mar. 28, 2001)


ARTICLE 7 (DETERMINATION ON WHETHER LEGAL PERSONS ARE FINANCIAL INSTITUTIONS)


         (1) Whether a legal person is a financial institution shall be
         determined by the Financial Supervisory Commission. (Amended by Act No.
         5540, May 25, 1998; Act No. 5982, May 24, 1999)

         (2) The Financial Supervisory Commission may require any legal person
         concerned to submit books and other documents as necessary to make
         decisions referred to in paragraph (1). (Amended by Act No. 5540, May
         25, 1998; Act No. 5982, May 24, 1999)


               CHAPTER II AUTHORIZATION, ETC. OF BANKING BUSINESS

ARTICLE 8 (AUTHORIZATION OF BANKING BUSINESS)


         (1) Any person who desires to be engaged in the banking business shall
         be subject to authorization by the Financial Supervisory Commission.
         (Amended by Act No.

<PAGE>

         5540, May 25, 1998; Act No. 5982, May 24, 1999)

         (2) In determining whether to grant authorization under paragraph (1),
         the Financial Supervisory Commission shall confirm the feasibility of a
         business project, the appropriateness of capital stock, stockholders'
         composition and stock subscription capital, managerial abilities and
         probity of the organizers or the management, and the public-interest.
         In this case, the matters necessary for confirmation methods, etc.
         shall be determined by the Presidential Decree. (Amended by Act No.
         5540, May 25, 1998; Act No. 5745, Feb. 5, 1999; Act No. 5982, May 24,
         1999)

         (3) The Financial Supervisory Commission may set conditions for
         authorization under paragraph (1). (Amended by Act No. 5540, May 25,
         1998; Act No. 5982, May 24, 1999)


ARTICLE 9 (MINIMUM CAPITAL STOCK)

         Capital stock of a financial institution shall be not less than one
         hundred billion won: Provided, That capital stock of a financial
         institution which does not operate nationwide may be not less than
         twenty-five billion won.


ARTICLE 10 (REPORT OF ALTERATION OF ARTICLES OF INCORPORATION AND REDUCTION IN
           CAPITAL)


         (1) Any financial institution shall, when it intends to perform the act
         falling under each of the following subparagraphs, file in advance a
         report thereof with the Financial Supervisory Commission: (Amended by
         Act No. 6177, Jan. 21, 2000)

         1.Amendment to the articles of incorporation: Provided, That the same
         shall not apply to the case where it is intended to alter trifling
         matters prescribed by the Financial Supervisory Commission; and

<PAGE>

         2.Reduction of capital stocks as determined by the Presidential Decree.

         (2) Where a financial institution amends the articles of association
         under the proviso of paragraph (1) 1, or makes a change in capital
         stock which does not fall under subparagraph 2 of the said paragraph,
         it shall report on it to the Financial Supervisory Commission within
         seven days from the date on which such a cause occurs.

         (3) The Financial Supervisory Commission may, in the event that
         contents of the report it has received are deemed to violate relevant
         Acts and subordinate statutes or infringe on the rights and interests
         of the users of financial institutions, urge the financial institution
         concerned to take corrective and supplementary measures.
         (Amended by Act No. 6177, Jan. 21, 2000)


ARTICLE 11 (SUBMISSION OF APPLICATION)


         (1) Any person who intends to obtain authorization under Articles 8 (1)
         shall file an application thereof with the Financial Supervisory
         Commission. (Amended by Act No. 5540, May 25, 1998; Act No. 5982, May
         24, 1999; Act No. 6177, Jan. 21, 2000)

         (2) The contents and type of the application under paragraph (1) shall
         be determined by the Financial Supervisory Commission. (Amended by Act
         No. 5982, May 24, 1999)


ARTICLE 12 (PUBLICATION OF AUTHORIZATION, ETC.)

         The Financial Supervisory Commission shall, when it grants
         authorization under Article 8 (1) or cancels the authorization under
         Article 53 (2), publish the fact in the Official Gazette and make the
         fact widely known to the public making use of computer communications,
         etc.

<PAGE>

         [This Article Wholly Amended by Act No. 6177, Jan. 21, 2000]


ARTICLE 13 (OPENING AND RELOCATION, ETC. OF BRANCH)

         Any financial institution shall, where it intends to newly open a
         branch, agency or office abroad, or relocate its head office to the
         area of other Special Metropolitan City, Metropolitan City, or Do, make
         in advance plans for opening such branch, agency and office and for
         relocating such head office to consult with the Financial Supervisory
         Commission.
         [This Article Wholly Amended by Act No. 6177, Jan. 21, 2000]


ARTICLE 14 (BAN ON USE OF SIMILAR TRADE NAMES)

         No person other than the Bank of Korea and financial institutions shall
         use a word called bank in his trade name, or the words called banking
         business or banking operations in indicating his business.


       CHAPTER III HOLDING LIMITS, ETC. OF FINANCIAL INSTITUTION'S STOCKS

ARTICLE 15 (STOCK-HOLDING LIMIT, ETC. BY SAME PERSONS)


         (1) The same person shall not hold stocks of a financial institution in
         excess of 10/100 of the total number of its issued voting stocks:
         Provided, That this shall not apply to cases falling under any of the
         following subparagraphs and cases of paragraph (3) and Article 16-2
         (3):


<PAGE>

         1.Where the Government or the Korea Deposit Insurance Corporation
         established under the Depositor Protection Act holds stocks of a
         financial institution; and

         2.Where he is holding not more than 15/100 of the total number of
         issued voting stocks of a local financial institution.

         (2) Where the same person (excluding a person as prescribed by the
         Presidential Decree) falls under any of the following subparagraphs, he
         shall make a report thereon to the Financial Supervisory Commission
         under the conditions as prescribed by the Presidential Decree:

         1.Where he holds more than 4/100 of the total number of issued voting
         stocks of a financial institution (excluding a local financial
         institution; hereafter in this paragraph the same shall apply);

         2.Where the same person falling under subparagraph 1 becomes the
         largest stockholder of the financial institution concerned; and

         3.Where the ratio of stockholding by the same person falling under
         subparagraph 1 is changed to the extent of not less than 1/100 of the
         total number of issued voting stocks of the financial institution
         concerned.

         (3) Notwithstanding the text of paragraph (1) exclusive of its
         subparagraphs, the same person may hold stocks of a financial
         institution with approval of the Financial Supervisory Commission for
         any excess of each such limit as set in any of the following
         subparagraphs: Provided, That the Financial Supervisory Commission may
         grant approval by fixing separate specified limit of stockholding other
         than the limit as set in each subparagraph only where it is deemed
         necessary in view of the possible contribution to the efficiency and
         soundness of the banking business and the stock distribution of
         stockholders of the financial institution, and if the same person
         intends to hold stocks in excess of the approved limit, he shall obtain
         additional approval from the Financial Supervisory Commission:


<PAGE>

         1.The limit as set in the text of paragraph (1) excluding its
         subparagraphs (the limit as set in paragraph (1) 2 in case of a local
         financial institution);

         2.25/100 of the total number of issued voting stocks of the financial
         institution concerned; and

         3.33/100 of the total number of issued voting stocks of the financial
         institution concerned.

         (4) Where the Financial Supervisory Commission refuses to grant
         approval under paragraph (3), it shall specify and notify such cause to
         the applicant within the period as determined by the Presidential
         Decree.

         (5) In applying the provisions of paragraph (3), the qualifications for
         any person capable of holding stocks of a financial institution, the
         requirements and procedures for approval related to stockholding, and
         other necessary matters shall be determined by the Presidential Decree
         in consideration of the possible risk of undermining the soundness of
         the financial institution concerned, the propriety of the size of
         assets and the financial standing of the financial institution
         concerned, the size of credits from the financial institution
         concerned, and the possible contribution to the efficiency and
         soundness of the banking business.

         (6) Where a securities investment company holds stocks of a financial
         institution with the approval under paragraph (3), the provisions of
         Article 28 (2) 1 and 2 of the Securities Investment Company Act shall
         not apply with respect to the securities investment company.
         [This Article Wholly Amended by Act No. 6691, Apr. 27, 2002]


ARTICLE 16 (RESTRICTION, ETC. ON VOTING RIGHT OF LIMIT EXCESS STOCKS)


         (1) Where the same person holds stocks of financial institutions beyond
         the

<PAGE>

         stockholding limit referred to in Article 15 (1) and (3) or 16-2 (1)
         and (2), the scope for exercising the voting right of relevant stocks
         shall be restricted to the limit referred to in Article 15 (1) and (3)
         or 16-2 (1) and (2), and he shall, without delay, make sure that he
         conforms to the relevant limit. (Amended by Act No. 6691, Apr. 27,
         2002)

         (2) Where the same person does not observe the provisions of paragraph
         (1), the Financial Supervisory Commission may order him to dispose of
         the stocks beyond the relevant limit within a specified period of not
         more than six months.


ARTICLE 16-2 (RESTRICTION, ETC. ON STOCKHOLDING BY NON-FINANCIAL BUSINESS
             OPERATOR)


         (1) A non-financial business operator (including a person who is
         excluded from an enterprise group subject to the limitations on mutual
         contribution, etc. under Article 14-2 of the Monopoly Regulation and
         Fair Trade Act and so does not fall under any non-financial business
         operator, and for whom a period as determined by the Presidential
         Decree has not yet passed since the date of the exclusion; hereafter in
         paragraph (2) the same shall apply) may not hold more than 4/100 of the
         total number of issued voting stocks of a financial institution (15/100
         in case of a local financial institution), notwithstanding the
         provisions of Article 15 (1).

         (2) Notwithstanding the provisions of paragraph (1), if a non-financial
         business operator obtains approval from the Financial Supervisory
         Commission for stocks of a financial institution which he intends to
         hold beyond the limit as set in paragraph (1) (excluding the case
         related to a local financial institution) on condition that he will not
         exercise the voting rights to the stocks, after satisfying the
         requirements as determined by the Presidential Decree including
         financial soundness, he may hold such stocks up to the limit as fixed
         in the text of Article 15 (1) excluding its subparagraphs.

         (3) With respect to a non-financial business operator falling under any
         of the


<PAGE>

         following subparagraphs, the text of Article 15 (1) excluding its
         subparagraphs and Article 15 (3) shall apply, notwithstanding the
         provisions of paragraphs (1) and (2):

         1.A non-financial business operator who has submitted to the Financial
         Supervisory Commission a plan for converting himself into a person who
         is not any non-financial business operator within two years
         (hereinafter referred to as the "conversion plan") and has obtained
         approval therefor; and

         2.A non-financial business operator who holds stocks within the scope
         of the ratio of holding stocks of a financial institution by a
         foreigner under the Foreign Investment Promotion Act (hereinafter
         referred to as the "foreigner").

         (4) Where a non-financial business operator comes to exceed the ratio
         of holding stocks by a foreigner as a result of holding stocks of a
         financial institution under paragraph (3) 2, he may not exercise voting
         rights to stocks held in excess.

         (5) The Financial Supervisory Commission may order a non-financial
         business operator to dispose of the stocks held in excess under
         paragraph (4) within a specified period of not more than one year:
         Provided, That if the Financial Supervisory Commission deems it
         inevitable in the light of the number of the stocks held in excess by a
         non-financial business operator and the situation of the securities
         market, etc., it may extend the period of disposing of the stocks
         within a specified limit.

         (6) The number of financial institutions of which the stocks may be
         held by a non-financial business operator under paragraph (3) 2 shall
         be limited to one.

         (7) Requirements for approval of the conversion plan under paragraph
         (3) 1 and other matters necessary for the examination of approval shall
         be prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]

<PAGE>

ARTICLE 16-3 (APPRAISAL, CHECKUP, ETC. OF CONVERSION PLAN)


         (1) A non-financial business operator who intends to apply for approval
         under Article 16-2 (3) 1 shall submit a conversion plan to the
         Financial Supervisory Commission, and if the appraisal of the
         conversion plan by a specialized institution is necessary, the
         Financial Supervisory Commission may have the specialized institution
         conduct such appraisal under the conditions as determined by the
         Financial Supervisory Commission.

         (2) The Financial Supervisory Commission shall regularly check up the
         situation of executing a conversion plan by a non-financial business
         operator (hereinafter referred to as a "person subject to conversion")
         who holds stocks of a financial institution in excess of the limit as
         set in Article 16-2 (1) with approval on the conversion plan under
         paragraph (3) 1 of the same Article, as prescribed by the Presidential
         Decree, and shall disclose its results through computer network, etc.

         (3) Where the Financial Supervisory Commission deems that a person
         subject to conversion fails to execute the conversion plan as a result
         of checkup under paragraph (2), it may order him to execute it within a
         fixed period of not more than six months.

         (4) A person subject to conversion falling under any of the following
         subparagraphs may not exercise the voting rights to the stocks of a
         financial institution held by himself in excess of the limit as set in
         Article 16-2 (1):

         1.A person subject to conversion who is under the execution order of
         paragraph (3) by the Financial Supervisory Commission; and

         2.A person subject to conversion whose illegal transaction with a
         financial institution is confirmed from the inspection of the Governor
         of the Financial Supervisory Service due to any cause as referred to in
         Article 48-2 (1) 2.

<PAGE>

         (5) Where a person subject to conversion falls under any of the
         following subparagraphs, the Financial Supervisory Commission may order
         him to dispose of the stocks of a financial institution held in excess
         of the limit as set in Article 16-2 (1) within a specified period of
         not more than six months:

         1.Where he fails to comply with the execution order under paragraph
         (3); and

         2.Where he falls under paragraph (4) 2.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 16-4 (EXAMINATION OF LIMIT EXCESS STOCKHOLDERS' QUALIFICATIONS, ETC.)


         (1) The Financial Supervisory Commission shall examine whether or not a
         person holding stocks of a financial institution under Articles 15 (3)
         and 16-2 (3) (hereafter in this Article referred to as the "limit
         excess stockholder") continues to meet the qualifications and approval
         requirements under Article 15 (5) (hereafter in this Article referred
         to as the "excess holding requirements") after the holding of the
         stocks, under the conditions as prescribed by the Presidential Decree.

         (2) The Financial Supervisory Commission may, where necessary for the
         examination as referred to in paragraph (1), ask a financial
         institution or a limit excess stockholder to furnish necessary data or
         information.

         (3) Where the Financial Supervisory Commission deems, as a result of
         the examination under paragraph (1), that a limit excess stockholder
         fails to meet the excess holding requirements, it may order him to meet
         such requirements within a specified period of not more than six
         months.

         (4) The limit excess stockholder who is ordered under paragraph (3) may
         not exercise any voting rights to the stocks of a financial institution
         held in excess of the limit as set in Article 15 (3) 1 (referring to
         the limit as set in Article 16-2 (1) in

<PAGE>

         case the limit excess stockholder is a non-financial business operator;
         hereafter in paragraph (5) the same shall apply) before he executes the
         order.

         (5) Where the limit excess stockholder who is ordered under paragraph
         (3) fails to comply with the order, the Financial Supervisory
         Commission may order the limit excess stockholder to dispose of the
         stocks of a financial institution held by him in excess of the limit as
         set in Article 15 (3) 1 within a specified period of not more than six
         months.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 17 (EXERCISE OF MINORITY STOCKHOLDERS' RIGHT)


         (1) Any person, who has held the stocks equivalent to not less than
         5/100,000 of the total number of the stocks issued by any financial
         institution for not less than six months as prescribed by the
         Presidential Decree, may exercise his right as a stockholder as
         prescribed in Article 403 of the Commercial Act (including the case
         where the provisions are applied mutatis mutandis under Articles 324,
         415, 424-2, 467-2, and 542 of the Commercial Act).

         (2) Any person, who has held the stocks equivalent to not less than
         250/100,000 (not less than 125/100,000 in case of financial
         institutions prescribed by the Presidential Decree) of the total number
         of the stocks issued by financial institutions for not less than six
         months as prescribed by the Presidential Decree, may exercise his right
         as a stockholder as prescribed in Articles 385 (including the case
         where the provisions are applied mutatis mutandis under Article 415 of
         the Commercial Act) and 539 of the Commercial Act. (Amended by Act No.
         6691, Apr. 27, 2002)

         (3) Any person, who has held the stocks equivalent to not less than
         25/100,000 (not less than 125/1,000,000 in case of financial
         institutions prescribed by the Presidential Decree) of the total number
         of the stocks issued by financial
<PAGE>

         institutions for not less than six months as prescribed the
         Presidential Decree, may exercise his right as a stockholder as
         prescribed in Article 402 of the Commercial Act. (Newly Inserted by Act
         No. 6691, Apr. 27, 2002)

         (4) Any person, who has held the stocks equivalent to not less than
         50/10,000 (not less than 25/10,000 in case of financial institutions
         prescribed by the Presidential Decree) of the total number of the
         voting stocks issued by financial institutions for not less than six
         months as prescribed the Presidential Decree, may exercise his right as
         a stockholder as prescribed in Article 363-2 of the Commercial Act.
         (Amended by Act No. 6691, Apr. 27, 2002)

         (5) Any person, who has held the stocks equivalent to not less than
         5/10,000 (not less than 25/100,000 in case of financial institutions
         prescribed by the Presidential Decree) of the total number of the
         stocks issued by financial institutions for not less than six months as
         prescribed the Presidential Decree, may exercise his right as a
         stockholder as prescribed in Article 466 of the Commercial Act. (Newly
         Inserted by Act No. 6691, Apr. 27, 2002)

         (6) Any person, who has held the stocks equivalent to not less than
         150/10,000 (not less than 75/10,000 in case of financial institutions
         prescribed by the Presidential Decree) of the total number of the
         stocks issued by any financial institution for not less than six months
         as prescribed by the Presidential Decree, may exercise his right as a
         stockholder as prescribed in Articles 366 and 467 of the Commercial
         Act. In this case, the exercise of the right as a stockholder as
         prescribed in Article 366 of the Commercial Act shall be based on the
         stocks with voting right.

         (7) The stockholder as prescribed in paragraph (1) may, in the event
         that he institutes a suit pursuant to Article 403 of the Commercial Act
         (including the case where the provisions are applied mutatis mutandis
         under Articles 324, 415, 424-2, 467-2 and 542 of the Commercial Act)
         and wins the case, file a request with the financial institution for
         payment of costs and all other expenses incurred by the suit.
         [This Article Newly Inserted by Act No. 6177, Jan. 21, 2000]

<PAGE>

                        CHAPTER IV OFFICERS AND EMPLOYEES

ARTICLE 18 (QUALIFICATIONS, ETC. FOR OFFICERS)


         (1) No person falling under any of the following subparagraphs shall be
         an officer of any financial institution, and if he falls hereunder
         after becoming one, he shall lose the office: (Amended by Act No. 5540,
         May 25, 998; Act No. 5745, Feb. 5, 1999; Act No. 6177, Jan. 21, 2000)

         1.Deleted; (by Act No. 5540, May 25, 1998)

         2.A minor or a person who is incompetent or quasi-incompetent;

         3.A bankrupt who has not been reinstated;

         4.A person who has been sentenced to imprisonment without prison labor
         or more severe punishment and for whom five years have not elapsed
         since he completed the sentence (including where he is deemed to have
         completed the sentence) or was exempted from the sentence;

         5.A person who has been sentenced to a fine or more severe punishment
         under this Act or any foreign country's banking Acts and subordinate
         statutes and other finance-related Acts and subordinate statutes as
         determined by the Presidential Decree and for whom five years have not
         elapsed since he completed the sentence (including where he is deemed
         to have completed the sentence) or was exempted from the sentence;

         6.A person who has been granted a stay of execution of a sentence to
         imprisonment without prison labor or more severe punishment and who is
         under a suspended sentence;


<PAGE>

         7.A person who has been dismissed or removed from office by
         disciplinary punishment under this Act, the Bank of Korea Act, the Act
         on the Establishment, etc. of Financial Supervisory Organizations, the
         Act on the Structural Improvement of the Financial Industry, or any
         foreign country's finance-related Acts and subordinate statutes, and
         for whom five years have not elapsed since he was dismissed or removed
         by disciplinary punishment;

         8.A person who is or was an officer or employee of a financial
         institution (referring to financial institutions under subparagraph 1
         of Article 2 of the Act on the Structural Improvement of the Financial
         Industry) which was subject to timely corrective measures by the
         Financial Supervisory Commission pursuant to Article 10 (1) of the said
         Act or administrative dispositions such as decision on contract
         transfer pursuant to Article 14 (2) of the said Act (limited to any
         person directly or likewise responsible for a reason for such timely
         corrective measures being taken, who is determined by the Presidential
         Decree), and for whom two years have not passed since such timely
         corrective measures, etc. were taken; and

         9.Any person who has worked as an officer or an employee of a
         corporation or a company whose business license and authorization, etc.
         have been cancelled under this Act or finance-related Acts and
         subordinate statutes prescribed by the Presidential Decree (limited to
         any person who is directly or correspondingly responsible for the
         causes of such cancellation and is prescribed by the Presidential
         Decree) and for whom five years have yet to elapse from the date on
         which such business license and authorization were cancelled.

         (2) The officers of any financial institution shall be persons who have
         experience and knowledge in finance and who are unlikely to impede the
         public interest, sound management and credit order of financial
         institutions.

         (3) The specific matters on the qualifications for officers of
         financial institutions shall be determined by the Financial Supervisory
         Commission. (Amended by Act No. 5745, Feb. 5, 1999)

<PAGE>

ARTICLE 19
         Deleted. (by Act No. 5745, Feb. 5, 1999)


ARTICLE 20 (RESTRICTION ON CONCURRENT POSTS HELD BY OFFICERS, ETC.)


         (1) No officer or employee of a financial institution shall be an
         officer or employee of the Bank of Korea or any other financial
         institution or a bank holding company under the Financial Holding
         Companies Act (hereinafter referred to as the "bank holding company"):
         Provided, That this shall not apply to cases falling under any of the
         following subparagraphs:

         1.Where he becomes an officer or employee of a subsidiary bank under
         Article 37 (5);

         2.Where he becomes an officer or employee of a bank holding company
         having the financial institution to which he belongs, as a subsidiary;
         and

         3.Where he becomes an officer of a financial institution which is a
         subsidiary of a banking holding company having the financial
         institution to which he belongs, as another subsidiary.

         (2) No permanent officer of a financial institution shall be engaged in
         the day-to-day operations of other profit-making corporations:
         Provided, That this shall not apply to cases falling under any of the
         following subparagraphs:

         1.Where he falls under any subparagraph of paragraph (1);

         2.Where he is appointed as a manager under the Company Reorganization
         Act; and

<PAGE>

         3.Where he becomes an officer or employee of such a subsidiary as
         referred to in Article 37 (2) (excluding the cases prescribed by the
         Presidential Decree).
         [This Article Wholly Amended by Act No. 6691, Apr. 27, 2002]


ARTICLE 21 (PROHIBITION OF BRIBERY, ETC.)

         No officers or employees of financial institutions shall request,
         accept or promise any gifts or other bribes, whether directly or
         indirectly in connection with his duties.


ARTICLE 22 (COMPOSITION OF BOARD OF DIRECTORS)


         (1) Deleted. (by Act No. 5745, Feb. 5, 1999)

         (2) Any financial institution shall appoint not less than three
         directors who are not engaged in the general affairs of the board of
         directors (hereinafter referred to as "outside directors") and the
         number of outside directors shall not be less than 50/100 of the total
         number of directors. (Amended by Act No. 6177, Jan. 21, 2000)

         (3) Any financial institution shall have a committee as referred to in
         Article 393-2 of the Commercial Act in order to recommend candidates
         for outside directors (hereinafter referred to as the "outside director
         candidate recommendation committee"). In this case, 1/2 or more of the
         total members of the outside director candidate recommendation
         committee shall be composed of outside directors. (Amended by Act No.
         6691, Apr. 27, 2002)

         (4) Outside directors shall be selected and appointed by the general
         meeting of stockholders among persons recommended by the outside
         director candidate recommendation committee. (Newly Inserted by Act No.
         6691, Apr. 27, 2002)

         (5) The latter part of paragraph (3) shall not apply where a newly
         established

<PAGE>

         financial institution first organizes the board of directors. (Newly
         Inserted by Act No. 6691, Apr. 27, 2002)

         (6) Where the composition of the board of directors fails to meet the
         requirements under paragraph (2) due to the resignation or death of the
         outside directors, the composition of the board of directors shall be
         adjusted to meet the requirements under paragraph (2) by the date of
         the general meeting of stockholders convened for the first time after
         the date when such a cause occurs. (Amended by Act No. 6177, Jan. 21,
         2000; Act No. 6691, Apr. 27, 2002)

         (7) and (8) Deleted. (by Act No. 6691, Apr. 27, 2002)

         (9) Deleted. (by Act No. 5745, Feb. 5, 1999)

         (10) The necessary matters on the operation, composition, and
         procedures of the board of directors other than those provided in this
         Act shall be determined by the Presidential Decree.


ARTICLE 23 (POWERS OF BOARD OF DIRECTORS)


         (1) The following matters shall be subject to deliberation and decision
         by the board of directors: (Amended by Act No. 6177, Jan. 21, 2000)

         1.Matters on management objectives and evaluation;

         2.Matters on the amendment of the articles of incorporation;

         3.Matters on the budget and settlement of accounts, including the
         remuneration of officers and employees;

         4.Deleted; (by Act No. 5745, Feb. 5, 1999)

<PAGE>

         5.Matters on major changes in organization such as dissolution,
         business transfer, and merger; and

         6.Matters on internal control standards under Article 23-3.

         (2) Of the powers of the board of directors under Article 393 (1) of
         the Commercial Act, the powers of appointment or dismissal of managers
         and establishment, relocation or closure of branches may be delegated
         on conditions as the articles of association of a financial institution
         may determine.


ARTICLE 23-2 (AUDIT COMMITTEE)


         (1) Any financial institution shall establish an audit committee
         (referring to the audit committee under the provision of Article 415-2
         of the Commercial Act; hereinafter the same shall apply) in the board
         of directors.

         (2) The audit committee shall consist of members with not less than two
         thirds of them being outside directors.

         (3) Members of the audit committee who are not the outside directors
         shall not fall under any subparagraph of Article 191-12 (3) of the
         Securities and Exchange Act: Provided, That any person who serves as a
         member, not as an outside director of the audit committee may,
         notwithstanding the provisions of Article 191-12 (3) 6 of the
         Securities and Exchange Act, become a member of the audit committee,
         who is not an outside director.

         (4) Where the composition of the audit committee fails to meet the
         requirements as prescribed in paragraph (2) on the grounds of the death
         or resignation of members, the composition of the audit committee shall
         be made consistent with the requirements as prescribed in paragraphs
         (2) at the regular general meeting of


<PAGE>

         stockholders, which is first called after the date on which the cause
         occurred.

         (5) The proviso of Article 415-2 (2) of the Commercial Act shall not
         apply to the composition of the audit committee as prescribed in
         paragraph (1).
         [This Article Newly Inserted by Act No. 6177, Jan. 21, 2000]


ARTICLE 23-3 (INTERNAL CONTROL STANDARDS, ETC.)


         (1) Any financial institution shall set fundamental procedures and
         standards (hereinafter referred to as the "internal control standards")
         which the officers and employees of such financial institution have to
         follow when they perform their duties to observe Acts and subordinate
         statutes, operate soundly its assets and protect its depositors.

         (2) Any financial institution shall appoint not less than one person
         assigned to check whether the internal control standards are observed
         and to report any violation of the internal control standards to the
         audit committee (hereinafter referred to as the "compliance officer").

         (3) Where a financial institution intends to appoint a compliance
         officer, it shall go through a resolution of the board of directors:
         Provided, That this shall not apply with respect to a branch office of
         a foreign financial institution under Article 58 (1). (Amended by Act
         No. 6691, Apr. 27, 2002)

         (4) A compliance officer shall meet the following requirements: (Newly
         Inserted by Act No. 6691, Apr. 27, 2002)

         1.He is required to be the person with the experience falling under any
         of the following items:

         (a) A person who has served not less than 10 years in the Bank of Korea
         or an


<PAGE>

         institution subject to inspection (including any foreign financial
         institution corresponding thereto) under Article 38 of the Act on the
         Establishment, etc. of Financial Supervisory Organizations;

         (b) A person with a master's degree or higher in the finance-related
         area who has served not less than 5 years in a university as a
         full-time lecturer or higher or in a research institute as a researcher
         or higher;

         (c) A person with the qualification of an attorney-at-law or a
         certified public accountant who has served not less than 5 years in the
         service area related to such qualification; and

         (d) A person who has served not less than 5 years in the Ministry of
         Finance and Economy, the Financial Supervisory Commission, the
         Securities Futures Commission, or the Financial Supervisory Service
         under Article 44 and for whom 5 years or more have elapsed since he
         resigned or retired from each of such institutions;

         2.He is required not to fall under each subparagraph of Article 18 (1);
         and

         3.He is required not to have been subject to any such measures as
         demand for caution or warning, etc. for violating finance-related Acts
         and subordinate statutes from the Financial Supervisory Commission or
         the Governor of the Financial Supervisory Service under Article 47 in
         the past 5 years.

         (5) Necessary matters concerning the internal control standards and
         compliance officers shall be prescribed by the Presidential Decree.
         (Newly Inserted by Act No. 6691, Apr. 27, 2002) [This Article Newly
         Inserted by Act No. 6177, Jan. 21, 2000]


ARTICLE 24 (RECOMMENDATION OF CANDIDATES FOR MEMBERS OF AUDIT COMMITTEE)

<PAGE>

         Candidates for the members of the audit committee shall be recommended
         by a candidate recommendation committee which is composed of all
         outside directors. In this case, the candidate recommendation committee
         shall make decisions by an affirmative vote of not less than two-thirds
         of all outside directors. (Amended by Act No. 6177, Jan. 21, 2000; Act
         No. 6691, Apr. 27, 2002)


ARTICLE 25 (RESTRICTION ON VOTING RIGHT OF INTERESTED PERSONS)

         Any director who has special interests in any relevant bill under
         consideration by the board of directors shall not cast his vote.


ARTICLE 26 (EXCLUSION FROM APPLICATION)

         The provisions of Articles 23 and 24 shall not apply to financial
         institutions established by foreigners in accordance with the
         Presidential Decree and financial institutions in which foreigners hold
         more than 50/100 of the total number of issued voting stocks under
         Article 15 (3).
         [This Article Wholly Amended by Act No. 6691, Apr. 27, 2002]


                          CHAPTER V BANKING OPERATIONS

ARTICLE 27 (SCOPE OF OPERATIONS)


         (1) Financial institutions may be engaged in all operations in the
         banking business (hereinafter referred to as "banking operations")
         within the scope of this Act and other related Acts.

         (2) The scope of banking operations referred to in paragraph (1) shall
         be

<PAGE>

         determined by the Presidential Decree. (Amended by Act No. 5540, May
         25, 1998; Act No. 5982, May 24, 1999)


ARTICLE 28 (AUTHORIZATION FOR CONCURRENT BUSINESS)


         (1) Where any financial institution intends to directly run a business
         which is not the banking business, but prescribed by the Presidential
         Decree, it shall get authorization thereof from the Financial
         Supervisory Commission. In this case, the provisons of Article 8 (2)
         and (3) shall apply mutatis mutandis to such authorization. (Amended by
         Act No. 6177, Jan. 21, 2000)

         (2) Where engaged in the business listed in paragraph (1), the
         financial institution shall separate the relevant business from banking
         operations and maintain separate books and recorded documents.


ARTICLE 29 (TRUST BUSINESS)


         (1) Any financial institution which operates trust business as
         additional business shall separate funds, securities, or properties
         pertaining to the relevant business and maintain separate books and
         recorded documents.

         (2) The provisions of Article 30 (1) shall not apply to trust business
         referred to in paragraph (1). (Amended by Act No. 5745, Feb. 5, 1999)


ARTICLE 30 (MATTERS TO BE OBSERVED ON RESERVES FOR DEPOSITS AND INTERESTS, ETC.)


         (1) Financial institutions shall hold not less than the minimum ratio
         of reserves for


<PAGE>

         deposits and reserve assets for deposits under Section 2 of Chapter IV
         of the Bank of Korea Act as the reserve requirement for deposit
         liabilities.

         (2) Financial institutions shall abide by the following decisions and
         restrictions taken or placed by the Monetary Policy Committee under the
         Bank of Korea Act:

         1.Decision on the maximum rates of interest on all kinds of deposits or
         other payments of financial institutions;

         2.Decision on the maximum rates of interest for the credit business,
         such as all kinds of loans or other charges of financial institutions;

         3.Restriction on the time limit for loans and kinds of securities
         handled by financial institutions;

         4.Restriction on the maximum limit on loans and investment, or maximum
         limit by sector for financial institutions within a given period in
         case of national economic emergencies such as hyperinflation; and

         5.Prior approval on loans by financial institutions in case of national
         economic emergency such as hyperinflation.


ARTICLE 31 (COMMERCIAL FINANCIAL BUSINESS AND LONG-TERM FINANCIAL BUSINESS)


         (1) Any financial institution may concurrently run the commercial
         financial business and the long-term financial business.

         (2) Deleted. (by Act No. 6177, Jan. 21, 2000)


ARTICLE 32 (HANDLING OF CURRENT ACCOUNTS)

<PAGE>

         Current accounts may be handled only by financial institutions which
         are engaged in the commercial financial business.


ARTICLE 33 (ISSUANCE OF DEBENTURES, ETC.)

         The necessary matters on the conditions and methods for issue of
         debentures or equivalent bonds of financial institutions shall be
         determined by the Presidential Decree. In this case, the limit of
         issuing debentures, etc. shall be determined by the Presidential Decree
         within the limits of five times of the equity capital. (Amended by Act
         No. 5745, Feb. 5, 1999)


ARTICLE 34
         Deleted. (by Act No. 5745, Feb. 5, 1999)


ARTICLE 35 (CREDIT LIMIT ON SAME BORROWERS, ETC.)


         (1) No financial institution shall extend credits exceeding 25/100 of
         the relevant financial institution's equity capital to the same
         individual, corporation and person (hereinafter referred to as the
         "same borrowers") with whom it shares credit risk as determined by the
         Presidential Decree: Provided, That this shall not apply hereunder as
         determined by the Presidential Decree:

         1.Where it is necessary for the national economy or for a financial
         institution to promote the effectiveness of securing claims; and

         2.Where a financial institution exceeds the limit referred to in the
         text due to changes in its equity capital or changes in the composition
         of the same borrowers although it did not extend further credits.

<PAGE>

         (2) Where a financial institution exceeds the limit referred to in the
         text of paragraphs (1), (3) and (4) pursuant to paragraph (1) 2, it
         shall ensure that it meets the limit under the text of paragraphs (1),
         (3) and (4) within one year from the date on which it exceeds such
         limit: Provided, That in cases falling under inevitable cause as
         determined by the Presidential Decree, the Financial Supervisory
         Commission may extend it by setting such period. (Amended by Act No.
         6177, Jan. 21, 2000)

         (3) No financial institution shall extend credits exceeding 20/100 of
         the relevant financial institution's equity capital to the same
         individual or corporation, respectively: Provided, That this shall not
         apply where it falls under the proviso of paragraph (1).

         (4) Where credit which a financial institution extends to the same
         individual, corporation, or the same borrower respectively exceeds
         10/100 of the relevant financial institution's equity capital, the
         total amount of such large credits shall not exceed five times of the
         relevant financial institution's equity capital: Provided, That this
         shall not apply where it falls under the proviso of paragraph (1).
         [This Article Wholly Amended by Act No. 5745, Feb. 5, 1999]


ARTICLE 35-2 (CREDIT LIMIT ON LARGE STOCKHOLDERS OF FINANCIAL INSTITUTIONS,
ETC.)


         (1) The credits which a financial institution can extend to its large
         stockholder (including any person specially related to him; hereinafter
         the same shall apply) shall not exceed an amount falling under the
         ratio as determined by the Presidential Decree within the scope of
         25/100 of the relevant financial institution's equity capital or an
         amount falling under the ratio of any contribution by the relevant
         large stockholder to the relevant financial institution, whichever is
         less.

         (2) The credits which a financial institution can extend to all of its
         large

<PAGE>

         stockholders shall not exceed an amount falling under the ratio as
         determined by the Presidential Decree within the scope of 25/100 of the
         relevant financial institution's equity capital.

         (3) No financial institutions shall extend credits to their large
         stockholders under mutual crossing for the purpose of avoiding the
         credit limit as referred to in paragraphs (1) and (2).

         (4) Where a financial institution intends to extend its large
         stockholders credits of not less than an amount as prescribed by the
         Presidential Decree (including any such transaction as prescribed by
         the Presidential Decree; hereafter in this Article the same shall
         apply), it shall do so after going through a prior resolution of the
         board of directors. In this case, the resolution shall be made by a
         concurrent vote of all the members of the board of directors.

         (5) Where a financial institution extends its large stockholders
         credits of not less than an amount as prescribed by the Presidential
         Decree, it shall make a report thereon to the Financial Supervisory
         Commission without any delay and disclose it through computer networks,
         etc.

         (6) A financial institution shall disclose the matters relevant to
         credits extended to its large stockholders through computer networks,
         etc. every quarter under the conditions as prescribed by the
         Presidential Decree.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 35-3 (ACQUISITION LIMIT ON STOCKS ISSUED BY LARGE STOCKHOLDERS, ETC.)


         (1) No financial institution shall acquire (including to acquire
         through trust business; hereafter in this Article the same shall apply)
         stocks (including investment share; hereafter in this Article the same
         shall apply) issued by large stockholders of the financial institution
         in excess of an amount falling under the ratio as determined by

<PAGE>

         the Presidential Decree within the scope of 1/100 of the relevant
         financial institution's equity capital. In this case, the Financial
         Supervisory Commission may set a separate acquisition limit on stocks
         by class within the acquisition limit as determined in the provisions
         of the former part.

         (2) Where a financial institution exceeds the limit as referred to in
         paragraph (1) as a person who is not its large stockholder becomes its
         large stockholder newly, it shall dispose of the limit excess stocks
         within such a period as determined by the Presidential Decree.

         (3) Where a financial institution intends to acquire stocks issued by
         its large stockholders not less than such an amount as determined by
         the Presidential Decree, it shall go through a resolution of the board
         of directors in advance. In this case, the resolution shall be made by
         a concurrent vote of all the members of the board of directors.

         (4) Where a financial institution acquires stocks issued by its large
         stockholders not less than such an amount as prescribed by the
         Presidential Decree, it shall make a report thereon to the Financial
         Supervisory Commission without any delay and disclose it through
         computer networks, etc.

         (5) A financial institution shall disclose the matters relevant to the
         acquisition of stocks issued by its large stockholders through computer
         networks, etc. every quarter under the conditions as prescribed by the
         Presidential Decree.

         (6) A financial institution shall exercise its voting rights to the
         stocks issued by its large stockholders in such a manner as not
         affecting the contents of resolution by the number of stocks at the
         general meeting of the large stockholders less the number of stocks
         owned by the financial institution: Provided, That this shall not apply
         to the cases of a merger of large stockholders, transfer or takeover of
         business, appointment of officers, or other similar matters, which
         would obviously cause any loss to the financial institution.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]

<PAGE>

ARTICLE 35-4 (BAN ON EXERCISE OF IMPROPER INFLUENCE BY LARGE STOCKHOLDERS)

         No large stockholder of a financial institution shall do any of the
         following acts with intent to gain his own profits against the
         financial institution's interests:

         1.An act of demanding from the financial institution its internal data
         or information not yet disclosed with intent to exercise any improper
         influence: Provided, That this shall not include the cases falling
         under Article 17 (5);

         2.An act of exercising an improper influence over the personnel affairs
         or management of the financial institution in collusion with another
         stockholder on condition of providing any such consideration as
         economic gains;

         3.An act of exercising an influence over the management of the
         financial institution in such a manner as urging it to demand the
         advanced return of credits from a rival company with intent to obstruct
         the business activities of the rival company; and

         4.Other acts similar to those as referred to in subparagraphs 1 through
         3, as prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 35-5 (REQUEST OF DATA TO LARGE STOCKHOLDERS, ETC.)


         (1) Where the Financial Supervisory Commission deems that a financial
         institution or its large stockholder is suspected of any violation of
         Articles 35-2 through 35-4, it may request the financial institution or
         its large stockholder to submit necessary data.

         (2) Where the Financial Supervisory Commission deems that the soundness
         of


<PAGE>

         management of a financial institution might be considerably undermined
         due to such insolvency of its large stockholder's financial structure
         as the debts of the large stockholder (limited to a company) exceed his
         own assets, as prescribed by the Presidential Decree, it may take such
         measures as determined by the Presidential Decree against the financial
         institution, including issuing an order for the financial institution
         to restrict the extension of credits to the large stockholder.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 36 (LOANS TO GOVERNMENTAL AGENCIES)

         Loans to governmental agencies under the Bank of Korea Act shall be
         extended only where the Government guarantees the redemption of their
         principal and interest.


ARTICLE 37 (RESTRICTION ON CONTRIBUTIONS IN OTHER COMPANIES)


         (1) Any financial institution shall be prohibited from holding not less
         than 15/100 of the stocks with voting rights issued by other company
         (including contribution quota; hereafter the same shall apply in this
         Article). (Amended by Act No. 5520, Feb. 24, 1998; Act No. 6177, Jan.
         21, 2000)

         (2) Notwithstanding the provisions of paragraph (1), a financial
         institution may, if a company falls under any category of business as
         determined by the Financial Supervisory Commission or obtains approval
         from the Financial Supervisory Commission as necessary for promoting
         corporate restructuring, hold the stocks in excess of 15/100 of the
         issued stocks with voting rights: Provided, That the same shall not
         apply to the case falling under any of the following subparagraphs:
         (Amended by Act No. 5520, Feb. 24, 1998; Act No. 5745, Feb. 5, 1999;
         Act No. 6177, Jan. 21, 2000)


<PAGE>

         1.Where a financial institution invests the total amount not exceeding
         an amount equivalent to the ratio as determined by the Presidential
         Decree within the limit of 20/100 of the equity capital of the
         financial institution in a company in which it holds more than 15/100
         of the issued stocks with voting rights (hereinafter referred to as
         "subsidiary"): and

         2.Where it meets the requirements otherwise determined by the Financial
         Supervisory Commission under the conditions as prescribed by the
         Presidential Decree.

         (3) No financial institution shall carry out the following activities
         in doing business with its subsidiaries: (Amended by Act No. 5745, Feb.
         5, 1999)

         1.Credit extensions to its subsidiaries, exceeding the ceiling as
         determined by the Financial Supervisory Commission;

         2.Credits in which the stocks of the financial institution's
         subsidiaries are offered as security, and credits to purchase the
         stocks of the financial institution's subsidiaries; and

         3.Loans to officers or employees of the financial institution's
         subsidiaries (excluding petty loans as determined by the Financial
         Supervisory Commission).

         (4) Where any financial institution makes investments in its
         subsidiaries under paragraph (2), it shall report such fact to the
         Financial Supervisory Commission within seven days.

         (5) The terms "parent bank" or "subsidiary bank" in paragraphs (6)
         through (8) mean a financial institution which owns more than 15/100 of
         the total number of the voting stocks issued by other financial
         institution, and such other financial institution. In this case, if a
         parent bank and its subsidiary bank hold altogether more than 15/100 of
         the total number of the voting stocks issued by a financial institution
         which is not the subsidiary bank, the financial institution shall be
         deemed

<PAGE>

         to be a subsidiary bank of the parent bank. (Newly Inserted by Act No.
         6691, Apr. 27, 2002)

         (6) No subsidiary bank shall do any of the following acts: (Newly
         Inserted by Act No. 6691, Apr. 27, 2002)

         1.An act of owning stocks issued by the parent bank and another
         subsidiary bank of the parent bank (hereinafter referred to as the
         "parent bank, etc.") (excluding the cases as prescribed by the
         Presidential Decree);

         2.An act of owning more than 15/100 of the voting stocks issued by
         another financial institution;

         3.An act of extending credits to the parent bank, etc. above the
         standards as set by the Presidential Decree; and

         4.Other acts of being likely to undermine the own sound management of
         the concerned subsidiary bank or to infringe on the interests of
         financial traders, as prescribed by the Presidential Decree.

         (7) Where a subsidiary bank and its parent bank, etc. extend credits to
         each other, they shall do so under proper security meeting the
         standards as set by the Presidential Decree: Provided, That this shall
         not apply where it satisfies the requirements as set by the Financial
         Supervisory Commission, such as the extension of credits necessary for
         restructuring the subsidiary bank and parent bank. (Newly Inserted by
         Act No. 6691, Apr. 27, 2002)

         (8) A subsidiary bank and its parent bank, etc. shall not transact
         mutually such inferior assets as prescribed by the Presidential Decree:
         Provided, That this shall not apply where it satisfies the requirements
         as set by the Financial Supervisory Commission, such as transactions
         necessary for restructuring the subsidiary bank and parent bank. (Newly
         Inserted by Act No. 6691, Apr. 27, 2002)

<PAGE>

ARTICLE 38 (PROHIBITED BUSINESS)

         No financial institution shall conduct the following activities:
         (Amended by Act No. 5745, Feb. 5, 1999; Act No. 6177, Jan. 21, 2000)

         1.Investment in stocks or other securities (excluding state bonds and
         Bank of Korea currency stabilization bonds) with a period of redemption
         of not less than three years which exceeds the amount equivalent to the
         ratio as determined by the Presidential Decree within the limit of
         100/100 of its equity capital. In this case, the Financial Supervisory
         Commission may, if necessary, otherwise determine, within the said
         limit on investment, the ceiling on investment in stocks and
         derivatives which are securities;

         2.Ownership of real estate (excluding real estate acquired through the
         exercise of a security interest such as mortgage) other than real
         estate for business purposes;

         3.Ownership of real estate used for business purposes in excess of an
         amount equivalent to the ratio as determined by the Presidential Decree
         within the limit of 100/100 of equity capital;

         4.Loans of funds to speculate in commodities or securities;

         5.Loans in which stocks of the financial institution or stocks
         exceeding 20/100 of issued stocks of other stock companies are offered
         as security, whether direct or indirect (excluding loans for operators,
         etc. as prescribed by the Presidential Decree who operate private
         investment projects for infrastructure);

         6.Loans contingent on the purchase of stocks of the relevant financial
         institution, whether direct or indirect;

         7.Loans for political funds, whether direct or indirect;


<PAGE>

         8.Loans to officers or employees of the relevant financial institution
         (excluding petty loans as determined by the Financial Supervisory
         Commission); and

         9.Deleted. (by Act No. 6691, Apr. 27, 2002)


ARTICLE 39 (DISPOSAL OF ASSETS, ETC. FOR NON-BUSINESS PURPOSES)

         A financial institution shall, of its properties or other assets, where
         it is prohibited from acquiring or holding them or acquires assets
         through the exercise of a security interest, dispose of them under the
         conditions as determined by the Financial Supervisory Commission.


                              CHAPTER VI ACCOUNTING

ARTICLE 40 (ACCUMULATION OF LEGAL RESERVE)

         A financial institution shall accumulate not less than 10/100 of its
         net profits until the reserve comes up to the total amount of capital
         stock, each time it pays dividends on earned net profits.


ARTICLE 41 (PUBLIC NOTICE, ETC. OF FINANCIAL STATEMENTS)


         (1) A financial institution shall make public notice of balance sheets
         as of the closing date, profit and loss statements for the relevant
         period for settlement of accounts concerned, and consolidated financial
         statements as determined by the Financial Supervisory Commission in
         accordance with the form as determined by the Financial Supervisory
         Commission within three months from the closing date: Provided, That
         for documents which cannot be made public within three months for

<PAGE>

         unavoidable reasons, the said public notice may be delayed upon
         approval by the Financial Supervisory Commission.

         (2) Balance sheets, profit and loss statements, and consolidated
         financial statements under paragraph (1) shall be signed and sealed by
         the representative and the person in charge.

         (3) The closing date of the financial institution shall be December 31:
         Provided, That the Financial Supervisory Commission may direct the
         change of the closing date, and the financial institution may change
         the closing date upon approval by the Financial Supervisory Commission.


ARTICLE 42 (SUBMISSION OF BALANCE SHEETS, ETC.)


         (1) A financial institution shall submit its balance sheets based on
         the end of every month to the Bank of Korea no later than the end of
         the following month in accordance with the form as determined by the
         Bank of Korea, and the Bank of Korea shall carry them in the
         statistical monthly of the Bank of Korea.

         (2) The balance sheets referred to in paragraph (1) shall be signed and
         sealed by the person in charge or his agent.

         (3) The financial institution shall, as prescribed by Acts, provide the
         Bank of Korea, in addition to the balance sheets referred to in
         paragraph (1), with periodical statistical data or information required
         for carrying out its functions and duties.


ARTICLE 43 (REFUSAL TO DISCLOSE MATERIALS)

         The financial institution may, upon request for the inspection or copy
         of account books and documents referred to in Article 466 (1) of the
         Commercial Act, refuse

<PAGE>

         the relevant request where it threatens to cause serious damage to the
         rights and interests of customers.


                     CHAPTER VII SUPERVISION AND INSPECTION

ARTICLE 44 (SUPERVISION OVER FINANCIAL INSTITUTIONS)

         The Financial Supervisory Service established under the Act on the
         Establishment of Financial Supervisory Organizations (hereinafter
         referred to as the "Financial Supervisory Service") shall supervise
         whether financial institutions observe this Act, other related Acts,
         and regulations, and orders and instructions of the Financial
         Supervisory Commission in accordance with the said regulations and
         instructions.


ARTICLE 45 (GUIDANCE FOR SOUND MANAGEMENT)


         (1) Any Financial institution engaged in the banking business shall
         secure sound management such as completing equity capital and
         maintaining adequate liquidity.

         (2) Any financial institution shall, in order to maintain the soundness
         of its management, observe the standards for management guidance set by
         the Financial Supervisory Commission with respect of matters falling
         under each of the following subparagraphs under the conditions as
         prescribed by the Presidential Decree: (Amended by Act No.
         6177, Jan. 21, 2000)

         1.Matters relating to the propriety of capital;

         2.Matters relating to the soundness of assets;

<PAGE>

         3.Matters relating to the liquidity; and

         4.Other matters necessary for securing the soundness of management.

         (3) In its determining the standards for management guidance pursuant
         to paragraph (2), the Financial Supervisory Commission shall reflect
         the principle of supervision over the soundness of financial
         institutions recommended by the Bank for International Settlements.
         (Newly Inserted by Act No. 5745, Feb. 5, 1999)

         (4) Where any financial institution is deemed to threaten to seriously
         harm its sound management, such as failing to meet the guidelines for
         management guidance referred to in paragraph (2), the Financial
         Supervisory Commission may require it to take measures necessary to
         improve management such as increase in capital stock and restriction on
         profits sharing.


ARTICLE 46 (MEASURES FOR INSOLVENCY, ETC. OF DEPOSITS)

         Where any financial institution is deemed to threaten to seriously harm
         the interests of depositors, such as threatening to go bankrupt or
         insolvent, the Financial Supervisory Commission may order to restrict
         the receipt of deposits and credits extensions, suspend payment of
         deposits in whole or in part, or take other necessary measures.


ARTICLE 47 (SUBMISSION OF BUSINESS REPORT, ETC.)


         (1) A financial institution shall submit a report of business
         operations to the Governor of the Financial Supervisory Service in
         accordance with the form as determined by the Governor of the Financial
         Supervisory Service (hereinafter referred to as the "Financial
         Supervisory Service Governor") by the end of the


<PAGE>

         following month.

         (2) The report under paragraph (1) shall be signed and sealed by the
         representative and the person in charge or his agent.

         (3) Financial institutions shall provide the Financial Supervisory
         Service Governor with materials requested by him for the execution of
         his functions.


ARTICLE 48 (INSPECTION)


         (1) The Financial Supervisory Service Governor shall inspect the
         business and current property of a financial institution.

         (2) The Financial Supervisory Service Governor may, when he deems it
         necessary to conduct the inspection referred to in paragraph (1), ask
         the financial institution to make a report on its business and
         property, furnish material and make its officials in charge present to
         state their opinion. (Amended by Act No. 6177, Jan. 21, 2000)

         (3) The Financial Supervisory Service Governor may request any outside
         auditor appointed by a financial institution under the Act on External
         Audit of Stock Companies to submit information which he has learned as
         a result of auditing the financial institution, or other material
         relating to sound management.

         (4) Any person who conducts the inspection under paragraph (1) shall
         carry a certificate showing his authority and produce it to persons
         concerned. (Newly Inserted by Act No. 6177, Jan. 21, 2000)


ARTICLE 48-2 (INSPECTION OF PERSONS SUBJECT TO CONVERSION)

<PAGE>


         (1) In any of the following cases, the Financial Supervisory Commission
         may have the Financial Supervisory Service Governor inspect the
         business matters and financial standing of a person subject to
         conversion within the necessary minimum scope of attaining its
         objective:

         1.Where it is necessary to verify the results of checkup under Article
         16-3 (2); and

         2.Where it is deemed that a person subject to conversion is very likely
         to have illegal business connections with a financial institution due
         to the aggravation of financial standing, such as the sudden increase
         of borrowings and the occurrence of an enormous loss.

         (2) The concrete scope and method of inspection under paragraph (1) and
         other matters necessary for inspection shall be prescribed by the
         Financial Supervisory Commission.

         (3) The provisions of Article 48 (2) through (4) shall apply mutatis
         mutandis to the inspection under paragraph (1).
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 49 (CONTRIBUTIONS)


         (1) Financial institutions which are inspected by the Financial
         Supervisory Service shall pay contributions for meeting the inspection
         costs to the Financial Supervisory Service.

         (2) The sharing rate and limit of contributions under paragraph (1) and
         other necessary matters on the payment of contributions shall be
         determined by the Presidential Decree.

<PAGE>

ARTICLE 50 (REQUEST FOR HOLDING RESERVES AND DISPOSING OF LOSSES)

         The Financial Supervisory Service Governor may request a financial
         institution to take the following measures as it deems necessary to
         maintain the sound management of the financial institution:

         1.Changes in book values of assets;

         2.Holding reserves for unsound assets; and

         3.Writing off assets deemed valueless.


ARTICLE 51 (PUBLICATION OF MANAGEMENT)

         A financial institution shall publish the matters prescribed by the
         Presidential Decree and necessary to protect depositors and investors
         under the conditions as prescribed by the Financial Supervisory
         Commission.
         [This Article Wholly Amended by Act No. 6177, Jan. 21, 2000]


ARTICLE 52 (MODIFICATION, ETC. OF CONTRACTUAL STANDARDS)


         (1) A financial institution shall protect the rights and interests of
         the users of the financial institution in conducting business under
         this Act, and where it intends to establish or modify the contractual
         standards relating to financial transactions, it shall make a report in
         advance to the Financial Supervisory Commission: Provided, That in such
         cases as not affecting adversely the rights and interests of the users
         and as determined by the Financial Supervisory Commission, it may make
         a report to the Financial Supervisory Commission within ten days of the
         establishment or modification of the contractual standards. (Amended by
         Act No. 6691, Apr. 27, 2002)

<PAGE>

         (2) The Financial Supervisory Commission may, in case where necessary
         to maintain the sound order in financial transactions, advise a
         financial institution to modify its contractual standards referred to
         in paragraph (1).

         (3) The Financial Supervisory Commission may determine the time and
         procedures for reporting the establishment or modification of
         contractual standards under paragraph (1) and other necessary matters.

         (4) Financial institutions shall disclose terms and conditions of a
         contract on financial transactions in accordance with the Financial
         Supervisory Commission.


ARTICLE 53 (SANCTIONS AGAINST FINANCIAL INSTITUTIONS)


         (1) The Financial Supervisory Commission may in the event that any
         financial institution is feared to undermine the soundness of its
         management through violating this Act or regulations, orders or
         instructions under this Act, take measures falling under any of the
         following subparagraphs on the recommendation of the Financial
         Supervisory Service Governor or make the Financial Supervisory Service
         Governor take appropriate measures to halt the act of violation and
         issue warnings, etc.:

         1.Order given to correct the act of violation; and

         2.Partial suspension of the business for not more than six months.

         (2) The Financial Supervisory Commission may, if any financial
         institution falls under any of the following subparagraphs, order the
         financial institution to suspend its whole business with fixing a
         period of not more than six months or revoke its license of the banking
         business:

<PAGE>

         1.Where it has gotten the license of the banking business in a
         fraudulent and unlawful manner;

         2.Where it has violated the licensed contents and terms;

         3.Where it has carried on the business during the period for which its
         business has been suspended;

         4.Where it has failed to execute an order given to correct the act of
         violation under paragraph (1); and

         5.Where, in a case other than subparagraphs 1 through 4, it is feared
         to incur great damages to the interests of depositors and investors by
         violating the Act or orders or dispositions under this Act.
         [This Article Wholly Amended by Act No. 6177, Jan. 21, 2000]


ARTICLE 54 (SANCTIONS AGAINST OFFICERS AND EMPLOYEES)


         (1) Where any officer of a financial institution intentionally violates
         this Act or any rules, orders, or instructions under this Act, or
         performs an act which seriously damages the sound operation of the
         financial institution, the Financial Supervisory Commission may, upon
         the recommendation of the Financial Supervisory Service Governor, order
         the officer to suspend the execution of his functions or recommend that
         the general stockholders' meeting dismiss the officer, and may have the
         Financial Supervisory Service Governor take an appropriate measure such
         as issuing a warning.

         (2) Where any employee of a financial institution intentionally
         violates this Act or any rules, orders or instructions under this Act,
         or performs an act which seriously damages the sound operation of the
         financial institution, the Financial Supervisory Service Governor may
         request the head of the financial institution to take


<PAGE>

         appropriate disciplinary measures such as dismissal, suspension,
         deduction of salary, or reprimand.


                  CHAPTER VIII MERGER, CLOSURE, AND DISSOLUTION

ARTICLE 55 (AUTHORIZATION ON MERGER, DISSOLUTION, AND CLOSURE)


         (1) Any financial institution shall, if it intends to perform an act
         falling under any of the following subparagraphs, get authorization
         from the Financial Supervisory Commission under the conditions as
         prescribed by the Presidential Decree: (Amended by Act No. 5540, May
         25, 1998; Act No. 5982, May 24, 1999; Act No. 6177, Jan. 21, 2000; Act
         No. 6691, Apr. 27, 2002)

         1.A division or a merger with any other financial institution
         (including a division-merger);

         2.A dissolution or closedown of the banking business; and

         3.A transfer or takeover of business operations in whole or in part.

         (2) The Financial Supervisory Commission may attach conditions to the
         authorization under paragraph (1). (Amended by Act No. 5540, May 25,
         1998; Act No. 5982, May 24, 1999)


ARTICLE 56 (DISSOLUTION ORDER, ETC. FOR FINANCIAL INSTITUTIONS)

<PAGE>

         (1) Deleted. (by Act No. 5745, Feb. 5, 1999)

         (2) A financial institution shall be dissolved when its authorization
         on banking business is cancelled pursuant to Article 53.

         (3) Where any financial institution is dissolved pursuant to paragraph
         (2), the court may, at the request of interested persons or the
         Financial Supervisory Commission, or ex officio, appoint or dismiss a
         liquidator. (Amended by Act No. 5540, May 25, 1998; Act No. 5745, Feb.
         5, 1999; Act No. 5982, May 24, 1999)


ARTICLE 57 (APPOINTMENT OF LIQUIDATOR, ETC.)


         (1) Where any financial institution is dissolved or goes bankrupt, the
         Financial Supervisory Service Governor or one of his employees shall be
         appointed as liquidator or trustee in bankruptcy.

         (2) The Financial Supervisory Service Governor or his employee
         appointed as liquidator or trustee in bankruptcy pursuant to paragraph
         (1) shall not demand remuneration for his functions: Provided, That
         reasonable expenses required for the execution of his functions may be
         disbursed from the property concerned.


         CHAPTER IX DOMESTIC BRANCHES OF FOREIGN FINANCIAL INSTITUTIONS

ARTICLE 58 (AUTHORIZATION, ETC. ON BANKING BUSINESS FOR FOREIGN FINANCIAL
INSTITUTIONS)


         (1) Where any foreign financial institution (referring to a financial
         institution which


<PAGE>

         presently runs the banking business abroad after having been
         established pursuant to foreign Acts and subordinate statutes;
         hereinafter the same shall apply) intends to open its branch, agency or
         office to run the banking business in the Republic of Korea, or to
         close its branch or agency, it shall get authorization from the
         Financial Supervisory Commission under the conditions as prescribed by
         the Presidential Decree. (Amended by Act No. 5540, May 25, 1998; Act
         No. 5982, May 24, 1999; Act No. 6177, Jan. 21, 2000)

         (2) The Financial Supervisory Commission may set conditions for
         authorization under paragraph (1). (Amended by Act No. 5540, May 25,
         1998; Act No. 5982, May 24, 1999)

         (3) Any foreign financial institution shall, if it intends to relocate
         its branch or agency, or to close its office for which authorization
         has been granted under paragraph (1), file in advance a report thereof
         with the Financial Supervisory Commission. (Newly Inserted by Act No.
         6177, Jan. 21, 2000)


ARTICLE 59 (APPLICATION OF ACT TO FOREIGN FINANCIAL INSTITUTIONS)


         (1) Branches or agents of foreign financial institutions authorized
         pursuant to Article 58 (1) shall be deemed financial institutions under
         this Act, and the domestic representatives of foreign financial
         institutions shall be deemed officers of financial institutions under
         this Act: Provided, That the provisions of Articles 4, 9 and 15 shall
         not apply. (Amended by Act No. 5745, Feb. 5, 1999)

         (2) Where a foreign financial institution establishes two or more
         branches or agents in the Republic of Korea, the relevant branches or
         agents in total shall be deemed financial institutions.


ARTICLE 60 (CANCELLATION, ETC. OF AUTHORIZATION)

<PAGE>

         (1) Where the head office of a foreign financial institution falls
         under any of the following subparagraphs, the Financial Supervisory
         Commission may cancel the authorization for any branch or agent of the
         foreign financial institution referred to in Article 58 (1): (Amended
         by Act No. 5540, May 25, 1998; Act No. 5982, May 24, 1999)

         1.Where it ceases to exist due to a merger or transfer of business
         operations;

         2.Where it has been subject to disciplinary action by the financial
         supervisory agency due to such causes as unlawful acts or unsound
         business activities; and

         3.Where it suspends or temporarily suspends business.

         (2) Where the head office of the foreign financial institution falls
         under any of subparagraphs of paragraph (1), any branch, agent, or
         office of the foreign financial institution shall report to the
         Financial Supervisory Commission within seven days from the date on
         which such a cause occurs. (Amended by Act No. 5540, May 25, 1998; Act
         No. 5982, May 24, 1999)

         (3) Where the head office of a foreign financial institution is
         dissolved or goes bankrupt, closes its banking business, or is
         cancelled its authorization to do banking business, the authorization
         for branches or agents of the foreign financial institution referred to
         in Article 58 (1) shall be deemed to have been cancelled on the date on
         which such a cause occurs.


ARTICLE 61 (CLOSURE AND LIQUIDATION OF BRANCHES AT TIME OF CANCELLATION OF
           AUTHORIZATION)


         (1) Where any branch or agent of a foreign financial institution is
         cancelled or is deemed to be cancelled its authorization pursuant to
         Article 53 or 60 (1) or (3), the


<PAGE>

         relevant branch or agent shall be closed and liquidate all properties
         in the Republic of Korea.

         (2) The court may, at the request of interested persons or the
         Financial Supervisory Commission, or ex officio, appoint or dismiss a
         liquidator. (Amended by Act No. 5540, May 25, 1998; Act No. 5982, May
         24, 1999)

         (3) The provisions of Article 620 (2) of the Commercial Act shall apply
         mutatis mutandis to the liquidation under paragraph (1).


ARTICLE 62 (DOMESTIC ASSETS OF FOREIGN FINANCIAL INSTITUTIONS)


         (1) Branches or agents of foreign financial institutions shall hold all
         or part of assets in the Republic of Korea under the conditions as
         prescribed by the Presidential Decree.

         (2) Where any branch or agent of a foreign financial institution is
         liquidated or goes bankrupt, its assets, capital stock, reserves, and
         other surplus shall be preferentially appropriated for the nationals of
         the Republic of Korea and the foreigners who have addresses or abodes
         in the Republic of Korea.


ARTICLE 63 (APPLICATION OF PROVISIONS ON CAPITAL STOCK)

         The application of the provisions of this Act on capital stock of
         financial institutions with respect to branches or agents of foreign
         financial institutions shall be governed by the Presidential Decree.


                       CHAPTER X SUPPLEMENTARY PROVISIONS

<PAGE>


ARTICLE 64 (HEARING)

         The Financial Supervisory Commission shall hold a hearing where it
         intends to take any of the following dispositions: (Amended by Act No.
         5540, May 25, 1998; Act No. 5982, May 24, 1999)

         1.Cancellation of authorization under Article 53; and

         2.Cancellation of authorization on branches or agents of foreign
         financial institutions under Article 60 (1).


ARTICLE 65 (ENTRUSTMENT OF POWERS)


         (1) Deleted. (by Act No. 5982, May 24, 1999)

         (2) The Financial Supervisory Commission may entrust part of his powers
         under this Act to the Financial Supervisory Service Governor under the
         conditions as prescribed by the Presidential Decree.


ARTICLE 65-2 (PUBLIC ANNOUNCEMENT ON ELECTRONIC DOCUMENTS, ETC.)

         When a financial institution makes a public announcement or submits
         data under Article 41, 42, or 47, it may do so through electronic
         documents under the conditions as determined by the Financial
         Supervisory Commission, the Governor of the Bank of Korea, or the
         Governor of the Financial Supervisory Service.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]




<PAGE>


                      CHAPTER XI IMPOSITION AND COLLECTION
                          OF PENALTY SURCHARGES, ETC.




ARTICLE 65-3 (PENALTY SURCHARGES)

         Where a financial institution violates Article 35, 35-2, 35-3, 37, 38,
         or 62, the Financial Supervisory Commission may impose penalty
         surcharges thereon according to the following division:

         1.Where a financial institution exceeds the credit limit as referred to
         in Article 35 (1), (3), or (4), or Article 37 (3) 1 or (6) 3: Not more
         than 10/100 of the amount of credits in excess;

         2.Where a financial institution exceeds the credit limit as referred to
         in Article 35-2 (1) or (2): Not more than 20/100 of the amount of
         credits in excess;

         3.Where a financial institution exceeds the acquisition limit on stocks
         as referred to in Article 35-3 (1): Not more than 20/100 of the total
         amount of book values of the stocks acquired in excess;

         4.Where a financial institution exceeds the limit on owning of stocks
         as referred to in Article 37 (1), (2), or (6) 2: Not more than 10/100
         of the total amount of book values of the stocks owned in excess;

         5.Where a financial institution extends credits in violation of Article
         37 (3) 2: Not more than 2/100 of the amount of credits;

         6.Where a financial institution owns stocks in violation of Article 37
         (6) 1: Not more than 2/100 of the total amount of book values of the
         stocks owned;

         7.Where a financial institution extends credits without securing any
         proper security in violation of the text of Article 37 (7): Not more
         than 10/100 of the amount of credits;

<PAGE>

         8.Where a financial institution trades inferior assets in violation of
         the text of Article 37 (8): Not more than 10/100 of the book value of
         the inferior assets;

         9.Where a financial institution exceeds the ceiling on investment in
         securities as referred to in subparagraph 1 of Article 38: Not more
         than 10/100 of the amount of investment in excess;

         10.Where a financial institution owns real estate in violation of
         subparagraph 2 of Article 38: Not more than 10/100 of the acquisition
         value of the real estate owned;

         11.Where a financial institution exceeds the limit on owning of real
         estate as referred to in subparagraph 3 of Article 38: Not more than
         10/100 of the acquisition value of the real estate owned in excess;

         12.Where a financial institution offers loans in violation of
         subparagraph 4 or 6 of Article 38: Not more than 2/100 of the amount of
         loans;

         13.Where a financial institution make loans by taking its own stocks as
         a security in violation of subparagraph 5 of Article 38: Not more than
         2/100 of the amount of loans;

         14.Where a financial institution makes loans by taking as a security
         stocks exceeding 20/100 of the stocks issued by another company in
         violation of subparagraph 5 of Article 38: Not more than 10/100 of the
         amount of loans; and

         15.Where a financial institution fails to hold assets under Article 62
         (1): Not more than 2/100 of the amount of violation.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 65-4 (IMPOSITION OF PENALTY SURCHARGE)

<PAGE>

         (1) Where the Financial Supervisory Commission imposes a penalty
         surcharge under Article 65-3, it shall take into account the following
         matters:

         1.Contents and severity of a violation;

         2.Period and frequency of a violation; and

         3.Amount of profits gained from a violation.

         (2) Other necessary matters concerning the imposition of penalty
         surcharges shall be prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 65-5 (SUBMISSION OF OPINIONS)


         (1) The Financial Supervisory Commission shall, prior to the imposition
         of a penalty surcharge, give the party concerned or the persons
         interested, etc. opportunities to present their opinions thereon.

         (2) The party concerned or the persons interested, etc. under paragraph
         (1) may attend a meeting of the Financial Supervisory Commission to
         state their opinions or may submit necessary data thereto.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 65-6 (RAISING OF OBJECTION)


         (1) Any person who is dissatisfied with the imposition of a penalty
         surcharge under Article 65-3 may raise an objection to the Financial
         Supervisory Commission within

<PAGE>

         30 days from the date on which he is notified of such disposition,
         specifying reasons therefor.

         (2) The Financial Supervisory Commission shall decide on the objection
         under paragraph (1) within 30 days: Provided, That if it can not decide
         thereon within the period due to inevitable causes, it may extend the
         period within the scope of 30 days.

         (3) Any person who is dissatisfied with a decision made under paragraph
         (2) may lodge an administrative appeal thereon.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 65-7 (EXTENSION OF TIME LIMIT FOR PAYING PENALTY SURCHARGE AND PAYMENT
OF PENALTY SURCHARGE IN INSTALLMENTS)


         (1) Where the Financial Supervisory Commission deems that a person on
         whom a penalty surcharge is imposed (hereinafter referred to as the
         "person liable for paying a penalty surcharge") has difficulty in
         paying the penalty surcharge in lump sum for any of the following
         causes, it may extend the time limit of the payment or allow him to pay
         the penalty surcharge in installments. In this case, it may have him
         offer a security, if necessary:

         1.Where he sustains any considerable loss in property due to disasters,
         etc.;

         2.Where his business is in serious crisis due to the aggravation of
         business conditions; and

         3.Where it is expected that his financial conditions will be in
         significant difficulty if he pays the penalty surcharge in lump sum.

         (2) Where a person liable for paying the penalty surcharge intends to
         get the time

<PAGE>

         limit for paying the penalty surcharge extended or the penalty
         surcharge paid in installments under paragraph (1), he shall make an
         application therefor to the Financial Supervisory Commission not later
         than 10 days before the time limit of the payment.

         (3) Where a person liable for paying the penalty surcharge falls under
         any of the following subparagraphs after he gets the time limit of
         payment extended or the payment in installments allowed under paragraph
         (1), the Financial Supervisory Commission may cancel the extension of
         the time limit of payment or the decision of the payment in
         installments and then collect the penalty surcharge in lump sum:

         1.Where he fails to pay the penalty surcharge, the payment of which has
         been decided to be made in installments, within the time limit of
         payment;

         2.Where he changes his security or fails to execute orders given by the
         Financial Supervisory Commission, which are necessary to preserve such
         security;

         3.Where it is deemed impossible to collect his penalty surcharge, in
         whole or in part, on the grounds that he is subjected to compulsory
         execution, the commencement of an auction, the declaration of
         bankruptcy, the dissolution of a corporation, or a disposition taken to
         collect national or local taxes in arrears, etc.; and

         4.Other causes equivalent to subparagraphs 1 through 3, as prescribed
         by the Presidential Decree.

         (4) Matters necessary for the extension of the time limit for paying
         penalty surcharges, the payment in installments, or the furnishing of a
         security, etc. under paragraphs (1) through (3) shall be prescribed by
         the Presidential Decree.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 65-8 (COLLECTION OF PENALTY SURCHARGES AND DISPOSITION TAKEN TO COLLECT
PENALTY SURCHARGE IN ARREARS)

<PAGE>

         (1) Where a person liable for paying a penalty surcharge fails to pay
         the penalty surcharge within the time limit of payment, the Financial
         Supervisory Commission may collect additional dues prescribed by the
         Presidential Decree from him for a period ranging from the date
         following the time limit of payment to the date preceding the day he
         actually pays.

         (2) Where a person liable for paying the penalty surcharge fails to pay
         the penalty surcharge within the time limit of payment, the Financial
         Supervisory Commission may urge him to pay the penalty surcharge within
         a specified period. If he fails to pay the penalty surcharge and the
         additional dues under paragraph (1) within such specified period, it
         may collect the penalty surcharge according to the examples of
         disposition on the national taxes in arrears.

         (3) The Financial Supervisory Commission may entrust the Commissioner
         of the National Tax Service with the authority of collecting the
         penalty surcharge and the additional dues or taking the disposition to
         collect the penalty surcharge in arrears under paragraphs (1) and (2).

         (4) Other matters necessary for collection of penalty surcharges shall
         be prescribed by the Presidential Decree.

         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


ARTICLE 65-9 (CHARGES FOR COMPELLING COMPLIANCE)


         (1) Where a person who is under order for the disposal of stocks under
         Article 16 (2), 16-2 (5), 16-3 (5), or 16-4 (5) fails to execute the
         order within the fixed period, the Financial Supervisory Commission may
         impose on him charges for compelling compliance therewith within the
         scope of not exceeding the amount which is obtained by multiplying the
         book value of stocks to be disposed of per day by

<PAGE>

         3/10,000.

         (2) The charges for compelling compliance shall be imposed for the
         period ranging from the day following the closing day of the compliance
         period set in the order for the disposal of stocks to the day the
         person concerned actually disposes of the stocks (referring to the day
         of delivering the stock certificates).

         (3) In collecting charges for compelling compliance, where the order
         for the disposal of stocks is not carried out even after the elapse of
         90 days from the closing date of the compliance period as set in the
         order, the Financial Supervisory Commission shall collect such charges
         for the elapse of every 90 days reckoning from the closing date.

         (4) The provisions of Articles 65-4 through 65-8 shall apply mutatis
         mutandis to the imposition and collection of charges for compelling
         compliance.
         [This Article Newly Inserted by Act No. 6691, Apr. 27, 2002]


                          CHAPTER XII PENAL PROVISIONS

ARTICLE 66 (PENAL PROVISIONS)

         Any person who falls under any of the following subparagraphs shall be
         punished by imprisonment for not more than five years or by a fine not
         exceeding two hundred million won:

         1.A person who is engaged in the banking business without obtaining
         authorization under Article 8 (1);

         2.A person who violates Article 21;

         3.A person who extends credits to a large stockholder in violation of
         Article 35-2

<PAGE>

         (1) through (3), and a large stockholder who is given credits from such
         a person;

         4.A person who acquires stocks issued by a large stockholder in
         violation of Article 35-3 (1);

         5.A person who violates Article 35-4; and

         6.An officer or employee serving or having served at a financial
         institution who discloses information which he has learned in the
         course of business or uses it for non-occupational purposes.
         [This Article Wholly Amended by Act No. 6691, Apr. 27, 2002]


ARTICLE 67 (PENAL PROVISIONS)

         Any person who falls under any of the following subparagraphs shall be
         punished by imprisonment for not more than three years or by a fine not
         exceeding one hundred million won:

         1.A person who extends credits in violation of Article 35 (1), (3), or
         (4); and

         2.A person who violates Article 37 (1), (3), or (6) through (8).
         [This Article Wholly Amended by Act No. 6691, Apr. 27, 2002]


ARTICLE 68 (PENAL PROVISIONS)


         (1) Where any officer, manager, agent representative (where the agent
         representative is a corporation, any member, officer, manager, or any
         other corporation's representative executing the functions), or
         liquidator of a financial institution (hereinafter referred to as
         "officer, etc. of a financial institution") or his employee performs
         any of the following acts, he shall be punished by imprisonment

<PAGE>

         for not more than one year or a fine not exceeding thirty million won:
         (Amended by Act No. 5745, Feb. 5, 1999; Act No. 6177, Jan. 21, 2000;
         Act No. 6691, Apr. 27, 2002)

         1.Where its capital stock falls short of the standards under Article 9;

         2.Deleted; (by Act No. 6691, Apr. 27, 2002)

         3.Where he violates the provisions of Article 29 (1);

         4.Where he violates the provisions of Article 30;

         5.Where he violates the provisions of Article 32;

         6.Where he issues bonds in violation of Article 33;

         7.Deleted; (by Act No. 5745, Feb. 5, 1999)

         8.and 9.Deleted; (by Act No. 6691, Apr. 27, 2002)

         10.Where he violates the provisions of Article 38;

         11.Where he violates the provisions of Article 40;

         12.and 13.Deleted; (by Act No. 6177, Jan. 21, 2000)

         14.Where he performs acts as prescribed in each subparagraph of Article
         55 (1) without authorization under Article 55 (1);

         15.Where he violates the provisions of Article 58 (1) (excluding the
         case where he is required to get authorization to open a branch, agency
         or office);

         16.Where he violates the provisions of Article 62 (1) or (2); and


<PAGE>

         17.Deleted. (by Act No. 6177, Jan. 21, 2000)

         (2) Any person who violates the provisions of Article 14 shall be
         punished by imprisonment for not more than one year or by a fine not
         exceeding thirty million won. (Amended by Act No. 6691, Apr. 27, 2002)

         (3) Deleted. (by Act No. 6691, Apr. 27, 2002)


ARTICLE 68-2 (JOINT PENAL PROVISIONS)

         If the representative of a corporation or the agent, employee or the
         employed of a corporation or an individual commits the act of violating
         Articles 66 through 68 in relation to the business of the corporation
         and the individual, such corporation or such individual shall be fined
         according to relevant Articles in addition to the punishment of an
         actual offender. (Amended by Act No. 6691, Apr. 27, 2002) [This Article
         Newly Inserted by Act No. 6177, Jan. 21, 2000]


ARTICLE 69 (FINE FOR NEGLIGENCE)


         (1) Any person who falls under any of the following subparagraphs shall
         be punished by a fine for negligence not exceeding fifty million won:
         (Amended by Act No. 6691, Apr. 27, 2002)

         1.A person who fails to make a report in violation of Article 15 (2);

         2.A person who refuses to comply with the request for submitting data,
         etc. under Article 16-4 (2) or 35-5 (1);

         3.A financial institution which fails to go through resolution by the
         board of

<PAGE>

         directors in violation of Article 35-2 (4) or 35-3 (3);

         4.A financial institution which fails to make a report to the Financial
         Supervisory Commission or to make a disclosure in violation of Article
         35-2 (5) and (6) or 35-3 (4) and (5);

         5.A person who refuses, obstructs, or evades the inspection under
         Article 48-2; and

         6.Other financial institutions which violate this Act or any rules,
         orders, or instructions under this Act.

         (2) Where any officer, etc. or employee of a financial institution
         falls under any case of the following subparagraphs, he shall be
         punished by a fine for negligence not exceeding ten million won:
         (Amended by Act No. 6691, Apr. 27, 2002)

         1.Where he violates Article 10 (1);

         2.Where he violates Article 20;

         3.Where he falsely publishes matters as prescribed in Article 41;

         4.Where he neglects to submit a report under Article 47 or enters
         matters different from the facts on the report;

         5.Where he refuses, obstructs, or evades the inspection under Article
         48;

         6.Where he neglects to keep, submit, report, publicly announce, or
         disclose documents under this Act; and

         7.Where he violates this Act or any rules, orders, or instructions
         under this Act.

         (3) Deleted. (by Act No. 6691, Apr. 27, 2002)

<PAGE>

         (4) A fine for negligence under paragraphs (1) and (2) shall be imposed
         and collected by the Financial Supervisory Commission on conditions as
         the Presidential Decree may determine. (Amended by Act No. 6691, Apr.
         27, 2002)

         (5) Any person who is dissatisfied with the disposition of a fine for
         negligence under paragraph (4) may make an objection to the Financial
         Supervisory Commission within thirty days from the date of receipt of
         the notice for such disposition.

         (6) Where any person who has been subject to a disposition of a fine
         for negligence pursuant to paragraph (4) makes an objection pursuant to
         paragraph (5), the Financial Supervisory Commission shall notify the
         competent court without delay and the court in receipt of such a notice
         shall bring the case to trial under the Non-Contentious Case Litigation
         Procedure Act.

         (7) Where no objection is made and no fine for negligence is paid
         within the period under paragraph (5), the Financial Supervisory
         Commission shall collect the fine according to the examples of
         disposition on the national taxes in arrears.


          ADDENDA


ARTICLE 1 (ENFORCEMENT DATE)


         (1) This Act shall enter into force on April 1, 1998: Provided, That
         the amended provisions of Article 64 and the amended provisions of
         Article 7 of the Addenda shall enter into force on January 1, 1998 and
         the provisions of Articles 15 through 17, 22 (1) through (8) and (10),
         26, 35 (3), and the amended provisions of Articles 6 (3) and 10 (2) of
         the Addenda shall enter into force on the date of its promulgation.


<PAGE>

         (2) The powers of the Financial Supervisory Commission in connection
         with the enforcement of the provisions of the proviso of paragraph (1)
         shall be exercised by the Director of the Board of Bank Supervision at
         the Bank of Korea from the date on which this Act is promulgated until
         March 31, 1998.


ARTICLE 2 (EXAMPLE OF APPLICATION ON TERM OF OFFICE OF AUDITORS)

         The term of office of auditors under the amended provisions of
         subparagraph 1 of Article 19 shall apply to the first auditors to be
         appointed after the enforcement of this Act.


ARTICLE 3 (GENERAL TRANSITIONAL MEASURES)


         (1) Any authorization, approval, decisions, orders, dispositions, or
         other acts by the Minister of Finance and Economy, the Monetary Board,
         or the Director of the Board of Bank Supervision at the Bank of Korea
         under the previous provisions prior to the enforcement of this Act
         shall be deemed to be acts by the Minister of Finance and Economy, the
         Financial Supervisory Commission, or the Financial Supervisory Service
         Governor under this Act.

         (2) Any declarations, reports, or other acts directed to the Minister
         of Finance and Economy, the Monetary Board, or the Director of the
         Board of Bank Supervision at the Bank of Korea under the previous
         provisions prior to the entry into force of this Act shall be deemed to
         be acts directed to the Minister of Finance and Economy, the Financial
         Supervisory Commission, or the Financial Supervisory Service Governor.


ARTICLE 4 (TRANSITIONAL MEASURES PURSUANT TO ADJUSTMENT OF COMPONENT RATIO OF
          NON-

<PAGE>

PERMANENT DIRECTORS)


         The board of directors under the amended provisions of Article 22 shall
         be composed at the first regular general stockholders' meeting to be
         convened after January 1, 1998, and until then the board of directors
         as of January 1, 1998 shall be deemed the board of directors under this
         Act.


ARTICLE 5 (TRANSITIONAL MEASURES ON PENAL PROVISIONS)

         The application of the penal provisions to acts committed prior to the
         enforcement of this Act shall be governed by the previous provisions.


ARTICLE 6
         Deleted. (by Act No. 6691, Apr. 27, 2002)


ARTICLE 7 (SPECIAL CASES FOR COMMITTEE ON RECOMMENDATIONS FOR CANDIDATES)


         (1) Any financial institution to which the previous provisions of
         Article 14-7 did not apply as of January 1, 1998 and in which the term
         of office of the governor or auditors expires at the first regular
         general stockholders' meeting convened after January 1. 1998, shall
         compose a provisional committee on recommendations for candidates.

         (2) The members of the provisional committee on recommendations for
         candidates under paragraph (1) shall be composed of candidates for
         non-permanent directors under the amended provisions of Article 22, and
         shall not be subject to appointment by a general stockholders' meeting.

         (3) The number of members of the provisional committee on
         recommendations for


<PAGE>

         candidates under paragraph (1) shall be determined by the board of
         directors.

         (4) The chairman of the provisional committee on recommendations for
         candidates shall be chosen from among members.

         (5) The members of the provisional committee on recommendations for
         candidates shall be recommended as candidates for non-permanent
         directors at the first regular general stockholders' meeting convened
         after January 1, 1998.


ARTICLE 8 (SPECIAL CASES FOR APPLICATION OF BOARD OF DIRECTORS SYSTEM)

         With regard to financial institutions converted under the Act on
         Structural Improvement of the Financial Industry prior to the entry
         into force of this Act, the amended provisions of Article 22 (3), (5)
         through (9) shall not apply. (Amended by Act No. 5745, Feb. 5, 1999)


ARTICLE 9
         Omitted.


ARTICLE 10 (RELATION WITH OTHER ACTS AND SUBORDINATE STATUTES)


         (1) Where any of Acts or subordinate statutes at the time of the entry
         into force of this Act cite the previous provisions of the Banking Act,
         the provisions corresponding to this Act, if included, shall be deemed
         to have been cited.

         (2) Notwithstanding the provisions of Article 2 of the Framework Act on
         the Management of Government-Invested Institutions, where the
         Government holds not less than 50/100 of issued stocks of financial
         institutions, the financial institutions shall not be deemed to be
         government-invested institutions.

<PAGE>

          ADDENDA (Act No. 5520, Feb. 24, 1998)

         (1) (Enforcement Date) This Act shall enter into force on the date of
         its promulgation.

         (2) (Transitional Measures concerning Authorization of Financial
         Supervisory Commission) The approving power of the Financial
         Supervisory Commission in connection with the enforcement of the
         amended provisions of Article 37 (2) shall be exercised by the Director
         of the Board of Bank Supervision at the Bank of Korea from the date on
         which this Act is promulgated until March 31, 1998.


          ADDENDUM (Act No. 5540, May 25, 1998)
This Act shall enter into force on the date of its promulgation.


          ADDENDA (Act No. 5745, Feb. 5, 1999)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on April 1, 1999: Provided, That the
         amendments to Articles 15 (7) and 35 (1) through (3) shall enter into
         force on January 1, 2000.


ARTICLE 2 (TRANSITIONAL MEASURES ON CREDIT LINE)

<PAGE>

         (1) A financial institution which extends credits in excess of the line
         under the amendments to Articles 15 (7) and 35 (1) and (3) pursuant to
         the proviso of Article 1 of the Addenda at the time of the entry into
         force of the amendments shall ensure that it conforms to the said
         amendments not later than December 31, 2002, and shall present a
         detailed plan for such implementation to and obtain approval from the
         Financial Supervisory Commission not later than January 31, 2000.

         (2) A financial institution which extends credits in excess of the line
         under the amendments to Article 35 (4) at the time of the entry into
         force of this Act shall ensure that it conforms to the said amendments
         not later than March 31, 2000, and shall present a detailed plan for
         such implementation to and obtain approval from the Financial
         Supervisory Commission no later than April 30, 1999.


ARTICLE 3 (TRANSITIONAL MEASURES ON QUALIFICATION OF OFFICERS)


         (1) Where an officer of a financial institution who is in office at the
         time of the entry into force of this Act falls under Article 18 (1) 7
         or 8 for a cause arising prior to the entry into force of this Act, he
         shall be governed by the former provisions for one year from the date
         of the entry into force of this Act.

         (2) The terms of officers of financial institutions who are in office
         at the time of the entry into force of this Act shall be governed by
         the former provisions notwithstanding the amendments to Article 19:
         Provided, That this shall not apply where the financial institution may
         otherwise determine by the articles of incorporation.


ARTICLE 4 (TRANSITIONAL MEASURES ON PENAL PROVISIONS)

         The application of penal provisions to acts committed prior to the
         entry into force of this Act shall be governed by the former
         provisions.

<PAGE>

          ADDENDA (Act No. 5982, May 24, 1999)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on the date of its promulgation.
         (Proviso Omitted.)


ARTICLES 2 THROUGH 6

         Omitted.

         ADDENDA (Act No. 6018, Sep. 7, 1999)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on July 1, 2000. (Proviso Omitted.)


ARTICLES 2 THROUGH 21

         Omitted.

         ADDENDA (Act No. 6177, Jan. 21, 2000)


ARTICLE 1 (ENFORCEMENT DATE)

<PAGE>

         This Act shall enter into force after the lapse of three months from
         the date of its promulgation: Provided, That the amended provisions of
         Articles 17 and 23-2 shall enter into force on the date of its
         promulgation.


ARTICLE 2 (TRANSITIONAL MEASURES CONCERNING QUALIFICATION REQUIREMENTS FOR
          OFFICERS)

         Where any officer of a financial institution falls under the causes of
         disqualification under the amended provisions of Article 18 (1) 9 due
         to causes that have accrued prior to the enforcement of this Act at the
         time that this Act is enforced, his case shall be governed by the
         previous provisions notwithstanding the amended provisions.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING APPOINTMENTS OF OUTSIDE DIRECTORS)

         Any non-standing director who works for a financial institution at the
         time that this Act is enforced shall be deemed an outside director
         under the amended provisions of Article 22.


ARTICLE 4 (TRANSITIONAL MEASURES CONCERNING ESTABLISHMENT OF AUDIT COMMITTEE)

         Every financial institution shall establish its audit committee in
         accordance with the amended provisions of Article 23-2 at the general
         meeting of stockholders, which is first called after the enforcement of
         this Act.


ARTICLE 5 (TRANSITIONAL MEASURES CONCERNING STANDING AUDITOR FOLLOWING
          ESTABLISHMENT OF AUDIT COMMITTEE)

         Any person who works as a standing auditor of any financial institution
         that has to

<PAGE>

         establish the audit committee at the time that this Act is enforced
         (referring to the standing auditor designated by the board of directors
         of the financial institution in case that the financial institution has
         not less than two standing auditors) shall, if his term of office does
         not expire by the date on which the ordinary general meeting of
         stockholders is called to establish the audit committee in accordance
         with Article 4 of the Addenda and he is not dismissed at the regular
         general meeting of stockholders, be deemed a member of the audit
         committee, who is not an outside director. In this case, the standing
         auditor shall be deemed a director appointed at the general meeting of
         stockholders under the provisions of Article 382 (1) of the Commercial
         Act until the expiration of his term of office.


ARTICLE 6 (TRANSITIONAL MEASURES CONCERNING INTERNAL CONTROL STANDARDS)

         Any financial institution that is in existence at the time that this
         Act is enforced shall set the internal control standards under the
         amended provisions of Article 23-3 (1) within six months after the
         enforcement of this Act.


ARTICLE 7 (TRANSITIONAL MEASURES CONCERNING COMPOSITION OF BOARD OF DIRECTORS)

         Any financial institution under Article 26 (2) shall constitute the
         board of directors in a manner consistent with the amended provisions
         of the same Article at the regular general meeting of stockholders
         which is first called after the enforcement of this Act.


ARTICLES 8 AND 9
         Omitted.


          ADDENDA (Act No. 6256, Jan. 28, 2000)

<PAGE>

ARTICLE 1 (ENFORCEMENT DATE)


         (1) This Act shall enter into force on July 1, 2000. (Proviso Omitted.)

         (2) Omitted.


ARTICLES 2 THROUGH 14

         Omitted.

         ADDENDA (Act No. 6429, Mar. 28, 2001)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on the date prescribed by the
         Presidential Decree within the limit not exceeding 2 years from the
         promulgation date of this Act. (Proviso Omitted.) ((Enforcement date of
         this Act shall be Mar. 1, 2002 pursuant to the Presidential Decree No.
         17519, Feb. 25, 2002))


ARTICLES 2 THROUGH 11

         Omitted.

         ADDENDA (Act No. 6691, Apr. 27, 2002)

<PAGE>

ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force three months after the date of its
         promulgation.


ARTICLE 2 (APPLICABLE CASES CONCERNING QUALIFICATIONS FOR COMPLIANCE OFFICERS OF
          FINANCIAL INSTITUTIONS)

         The amendments to Article 23-3 (4) shall apply to compliance officers
         who are first appointed after the enforcement date of this Act.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING STOCKHOLDING BY FINANCIAL
          INSTITUTIONS)

         The same person who holds stocks of a financial institution in excess
         of the limit under the amendments to Articles 15 (1) and 16-2 (1), in
         accordance with the previous provisions of Article 15 (3) and (4), at
         the time of enforcement of this Act shall be deemed to hold such stocks
         under the amendments to Articles 15 (3) and 16-2 (3).


ARTICLE 4 (TRANSITIONAL MEASURES CONCERNING RESTRICTION ON CONCURRENT HOLDING OF
          OFFICE BY OFFICERS, ETC.)

         Any officer or employee of a financial institution who concurrently
         holds office of an officer or employee of a bank holding company
         (excluding any bank holding company having such financial institution
         as a subsidiary) at the time of enforcement of this Act shall make
         himself compatible with the amendments to Article 20 (1) not later than
         the day of the general meeting of stockholders of such financial
         institution or such bank holding company held for the first time after
         the enforcement of this Act, whichever comes later.

<PAGE>

ARTICLE 5 (TRANSITIONAL MEASURES CONCERNING LIMIT ON CREDITS)

         Any financial institution which extends credits beyond the limit under
         the amendments to Article 35-2 (2) at the time of enforcement of this
         Act shall make itself consistent with such amendments not later than
         one year after this Act takes effect, and shall submit a detailed plan
         for implementation thereof to the Financial Supervisory Commission
         within three months after this Act enters into force and obtain
         approval thereon.


ARTICLE 6 (TRANSITIONAL MEASURES CONCERNING ACQUISITION LIMIT ON STOCKS)

         Any financial institution which holds stocks issued by its large
         stockholders beyond the limit under the amendments to Article 35-3 (1)
         at the time of enforcement of this Act shall make itself consistent
         with such amendments not later than one year from the date this Act
         enters into force: Provided, That the Financial Supervisory Commission
         may extend the period if it is inevitable in the light of the size of
         stocks issued by such large stockholders held by the financial
         institution, and the conditions of the securities market, etc.


ARTICLE 7 (TRANSITIONAL MEASURES CONCERNING PENAL PROVISIONS AND FINE FOR
          NEGLIGENCE)

         The application of the penalty and fine for negligence to acts
         committed prior to the enforcement of this Act shall be governed by the
         previous provisions.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.4
<SEQUENCE>14
<FILENAME>u98617exv12w4.txt
<DESCRIPTION>EX-12.4 KOREAN COMMERCIAL CODE
<TEXT>
<PAGE>
                                                                    Exhibit 12.4

COMMERCIAL ACT

- --------------------------------------------------------------------------------


                                     1962.1.20               Act No. 1000
         Amended By                  1962.12.12              Act No. 1212
         Amended By                  1984.4.10               Act No. 3724
         Amended By                  1991.5.31               Act No. 4372
         Amended By                  1991.12.31              Act No. 4470
         Amended By                  1994.12.22              Act No. 4796
         Amended By                  1995.12.29              Act No. 5053
         Amended By                  1998.12.28              Act No. 5591
         Amended By                  1999.2.5                Act No. 5809
         Amended By                  1999.12.31              Act No. 6086
         Amended By                  2001.7.24               Act No. 6488
         Amended By                  2001.12.29              Act No. 6545



                            PART I GENERAL PROVISIONS

                          CHAPTER I COMMON PROVISIONS

ARTICLE 1 (APPLICABLE RULES TO COMMERCIAL MATTERS)

         When there is no provision in this Act as to a commercial matter, the
         commercial customary law shall apply; and if there is no such law, the
         provisions of the Civil Act shall apply.


ARTICLE 2 (COMMERCIAL ACTIVITIES BY PUBLIC JURISTIC PERSONS)

         Except as otherwise provided by any Acts and subordinate statutes, this
         Act shall apply to commercial activities effected by a public juristic
         person.

<PAGE>


ARTICLE 3 (UNILATERAL COMMERCIAL ACTIVITIES)

         If an act of a party among the relevant parties is considered as a
         commercial activity, this Act shall apply to all the parties involved.


                              CHAPTER II MERCHANTS

ARTICLE 4 (MERCHANT-BY NATURE OF BUSINESS)

         A person who engages in commercial activities in his own name is called
         a merchant.


ARTICLE 5 (MERCHANT-BY LEGAL CONSTRUCTION)


         (1) A person who engages in a business in a merchant's way maintaining
         a shop or similar equipment shall be deemed to be a merchant, even if
         he does not engage in commercial activities.

         (2) The provisions of paragraph (1) shall also be applicable to a
         company even if it does not engage in commercial activities.


ARTICLE 6 (BUSINESS OF INCOMPETENT PERSON AND REGISTRATION THEREOF)

         When a minor or a quasi-incompetent person engages in any business upon
         the permission of his legal representative, registration thereof shall
         be effected.


ARTICLE 7 (INCOMPETENT PERSON AND MEMBER WITH UNLIMITED LIABILITY)


<PAGE>

         When a minor or quasi-incompetent person has become a member with
         unlimited liability of a company upon the permission of his legal
         representative, he shall be deemed to be a person with full capacity in
         respect of any act done in the capacity of such member.


ARTICLE 8 (REPRESENTATION OF BUSINESS BY LEGAL REPRESENTATIVE)


         (1) If a legal representative engages in any business on behalf of a
         minor, quasiincompetent or incompetent person, registration thereof
         shall be effected.

         (2) Any restriction upon the authority of legal representative shall
         not be effective against a third person acting in good faith.


ARTICLE 9 (PETTY MERCHANTS)

         The provisions relating to manager, trade names, trade books, and
         commercial registrations shall not apply to petty merchants.


            CHAPTER III TRADE EMPLOYEES

ARTICLE 10 (APPOINTMENT OF MANAGER)

         A merchant may appoint a manager and have him carry out business either
         at the principal office or at a branch office.


ARTICLE 11 (AGENCY AUTHORITY OF MANAGER)


         (1) A manager may perform all judicial and extra-judicial acts relating
         to his business on behalf of the proprietor of the business.


<PAGE>

         (2) A manager may appoint and dismiss shop clerk and other employees
         who are not managers.

         (3) Any restriction upon the authority of a manager shall not be
         effective against a third person acting in good faith.


ARTICLE 12 (CO-MANAGER)


         (1) A merchant may cause several managers to exercise the agency of
         authority on a joint basis.

         (2) In the case mentioned in the preceding paragraph, any declaration
         of intention made to any one of the managers shall be effective as to
         the proprietor of the business.


ARTICLE 13 (REGISTRATION OF MANAGER)

         The appointment of a manager and the extinguishment of his agency of
         authority shall be registered by the merchant at the place either of
         the principal office or of the branch office for which he has been
         appointed. The same shall apply to matters as provided for in paragraph
         (1) of the preceding Article, and to any alteration thereof.


ARTICLE 14 (APPARENT MANAGER)


         (1) An employee who has been given a title of a head of business of the
         principal office or of a branch office or such other person as has
         similar title shall be deemed to have the same authority as that of a
         manager of the principal office or of a branch office. This shall not,
         however, apply in respect of judicial acts.


<PAGE>

         (2) The provisions of the preceding paragraph shall not apply in cases
         where the other party has acted in bad faith.


ARTICLE 15 (EMPLOYEE INVESTED WITH PARTIAL COMPREHENSIVE AGENCY AUTHORITY)


         (1) An employee who has been entrusted with certain branches of
         business or specified matters relating to business may effect all acts
         other than judicial acts.

         (2) The provisions of Article 11 (3) shall apply mutatis mutandis to
         the case mentioned in the preceding paragraph.


ARTICLE 16 (EMPLOYEE OF SHOP WHICH SELLS GOODS)


         (1) An employee of a shop which sells goods shall be deemed to have all
         the power in regard to the sale of goods.

         (2) The provisions of Article 14 (2) shall apply mutatis mutandis to
         the case mentioned in the preceding paragraph.


ARTICLE 17 (DUTIES OF TRADE EMPLOYEE)


         (1) Without the allowance of the proprietor of the business, a trade
         employee shall neither effect any transaction falling within the class
         of the proprietor's business on his account or on that of a third
         person nor shall he become a member with unlimited liability, nor a
         director of a company, nor a employee of another merchant.

         (2) In the case that a trade employee has effected a transaction in
         contravention of the provisions of the preceding paragraph, and such
         transaction has been effected on his account, the proprietor of the
         business may regard such a


<PAGE>

         transaction as effected on his own account, and if it has been effected
         for the account of a third person, the proprietor may request the
         employee to transfer the profit accrued from such transaction to
         himself.

         (3) The provisions of the preceding paragraph shall not affect the
         termination of a contract by the proprietor against an employee or the
         proprietor's claims for damages against a trade employee.

         (4) The right mentioned in paragraph (2) shall become extinct after two
         weeks from the time when the proprietor has become aware of such
         transaction or after one year has elapsed from the time when the
         transaction has been effected.


                             CHAPTER IV TRADE NAMES

ARTICLE 18 (FREE CHOICE OF TRADE NAME)

         A merchant may use his full name or any other denomination as his trade
         name.


ARTICLE 19 (TRADE NAME OF COMPANY)

         The word "partnership company", "limited partnership company", "stock
         company" or "limited liability company" shall be contained in the trade
         name of a company according to its nature.


ARTICLE 20 (BAN ON ILLEGAL USE OF TRADE NAME OF COMPANY)

         No person other than a company may use, in the trade name, any word
         which is suggestive of a company. This shall apply even in cases where
         the business of a company has been acquired by transfer.


ARTICLE 21 (UNITARY TRADE NAME)

<PAGE>

         (1) A single trade name shall be used in the same business.

         (2) A trade name of a branch office shall expressly show its dependent
         relationship to the principal office.


ARTICLE 22 (EFFECT OF REGISTRATION OF TRADE NAME)

         No trade name which has been registered by another person shall be
         registered as a trade name of the same kind of business in the same
         Seoul Special Metropolitan City, Metropolitan City, and Shi/Kun.
         (Amended by Act No. 3724, Apr. 10, 1984; Act No. 4796, Dec. 22, 1994;
         Act No. 5053, Dec. 29, 1995)


ARTICLE 22-2 (PROVISIONAL REGISTRATION OF TRADE NAME)


         (1) If any person intends to establish a stock or limited liability
         company, he may apply for a provisional registration of the trade name
         to the registry having the jurisdiction over the place of its principal
         office.

         (2) If a company intends to change either or both of its trade name
         or/and purpose, it may apply for a provisional registration of its
         trade name to the registry having the jurisdiction over the place of
         its principal office.

         (3) If a company intends to move its principal office, it may apply for
         a provisional registration of its trade name to the registry having the
         jurisdiction over the place to which it is to move.

         (4) In application of Article 22, the provisional registration of the
         trade name shall be deemed to be as registration of the trade name.

         (5) In making a provisional registration of the trade name, the period
         up to the time the real registration is made, deposit and recovery of
         the deposit money,


<PAGE>

         cancellation of the provisional registration, and other necessary
         procedures shall be determined by the Supreme Court Regulations.
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 23 (PROHIBITION OF USE OF TRADE NAME WHICH IS LIKELY TO MISCONCEIVE
OWNERSHIP OF BUSINESS)


         (1) No person shall, for unfair purpose, use any trade name which is
         likely to induce others to believe that it represents the business of
         another person.

         (2) In a case where a person has used such a misrepresenting trade name
         in contravention of the provisions of paragraph (1), any person whose
         interest is likely to be thereby harmed or any person who has
         registered his trade name may demand cessation of its use.

         (3) The provisions of paragraph (2) shall not prejudice any claim for
         damages.

         (4) Any person who uses the registered trade name of another person in
         the same Seoul Special Metropolitan City, Metropolitan City, and
         Shi/Kun, in respect of the same kind of business shall be presumed to
         have done so for unfair purpose. (Amended by Act No. 3724, Apr. 10,
         1984; Act No. 4796, Dec. 22, 1994; Act No. 5053, Dec. 29, 1995)


ARTICLE 24 (LIABILITY OF PERSON WHO HAS LENT HIS NAME)

         A person, who has allowed another person to carry on business using his
         name or trade name, shall be liable jointly and severally with such
         other person to effect performance in respect of any obligation arising
         from a transaction in favor of a third person who has effected such
         transaction in the belief that such other person was the proprietor of
         the business.


ARTICLE 25 (TRANSFER OF TRADE NAME)

<PAGE>

         (1) A trade name may be transferred only in cases where business is
         discontinued or it is transferred together with the business.

         (2) Transfer of a trade name shall not be effective as to third persons
         unless it has been registered.


ARTICLE 26 (EFFECT OF FAILURE TO USE TRADE NAME)

         If a person who has registered his trade name has failed to use it for
         a period of two years without any justifiable reason, he shall be
         deemed to have abolished trade name.


ARTICLE 27 (APPLICATION FOR CANCELLATION OF REGISTRATION OF TRADE NAME)

         If a trade name has been altered or abolished, and the person who has
         registered such trade name has failed to register such alteration or
         abolition within two weeks, any person interested may apply to the
         court for the cancellation of such registration.


ARTICLE 28 (PENALTIES FOR ILLEGAL USE OF TRADE NAME)

         Any person who has violated Articles 20 and 23 (1) shall be punished
         for a fine for negligence not exceeding two million won. (Amended by
         Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29, 1995)


                              CHAPTER V TRADE BOOKS

ARTICLE 29 (KINDS OF AND PRINCIPLES TO MAKE TRADE BOOKS)

<PAGE>


         (1) In order to make clear the situation of property, profit and loss
         in the business, the merchant shall prepare an account book and balance
         sheet.

         (2) Except as otherwise provided by this Act, the trade books shall be
         made in accordance with the generally fair and proper accounting
         practices.
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 30 (METHOD TO MAKE TRADE BOOKS)


         (1) In an account book, there shall be entered transactions and other
         particulars having effect on property in business.

         (2) A merchant shall, at the time of commencement of his business and
         thereafter at a fixed time, at least once a year, prepare a balance
         sheet based on the account books and those who prepared it should write
         his name and affix his seal or sign thereon, and a company shall
         prepare such a balance sheet in the same manner as a merchant at the
         time of its formation and at the end of each period for the settlement
         of accounts. (Amended by Act No. 5053, Dec. 29, 1995)
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 31 (PRINCIPLES FOR VALUATION OF ASSETS)

         Assets to be entered in an account book shall be valued as follows:

         1.The current assets shall be valued on the basis of the acquisition
         cost, manufacturing cost or current price: Provided, That if the
         current price is remarkably lower than the acquisition cost or
         manufacturing cost, the valuation shall be made according to the
         current price; and

         2.The fixed assets shall be valued on the basis of the acquisition cost
         or manufacturing cost, less a reasonable depreciation, but when any
         unexpected


<PAGE>

         diminution has occurred, a reasonable reduction shall be made.
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 32 (PRODUCTION OF TRADE BOOKS)

         The court may, on application or by its own initiative, order a party
         to an action to produce his trade books or any part thereof.


ARTICLE 33 (PRESERVATION OF TRADE BOOKS, ETC.)


         (1) Every merchant shall preserve his trade books, and all important
         documents relating to his business, for a period of ten years:
         Provided, That the slips or similar documents shall be kept for five
         years. (Amended by Act No. 5053, Dec. 29, 1995)

         (2) The period mentioned in the preceding paragraph shall be computed
         in the case of trade books as from the time at which the book has been
         closed.

         (3) The books and documents as referred to in paragraph (1) may be
         preserved by means of the microfilms and other data processing systems.
         (Newly Inserted by Act No. 5053, Dec. 29, 1995)

         (4) In case where the books and documents are preserved under paragraph
         (3), the method of preservation and other necessary matters shall be
         determined by the Presidential Decree. (Newly Inserted by Act No. 5053,
         Dec. 29, 1995)


                       CHAPTER VI COMMERCIAL REGISTRATION

ARTICLE 34 (GENERAL RULES)

         Matters as required to be registered under this Act shall, on the
         application of

<PAGE>

         the party concerned, be entered in the commercial register maintained
         by the court having jurisdiction over the place of business office.


ARTICLE 34-2 (COMMERCIAL REGISTRATION BY DATA PROCESSING SYSTEM)


         (1) The affairs concerning the commercial registration may be carried
         out wholly or partially by the data processing system.

         (2) The procedures of the commercial registration affairs as referred
         to in paragraph (1) shall be determined by the Supreme Court
         Regulations.
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 35 (REGISTRATION AT PLACE OF BRANCH OFFICE)

         Matters as required to be registered at the place of the principal
         office shall, except as otherwise provided in this Act, be registered
         also at the place of each branch office.


ARTICLE 36
         Deleted. (by Act No. 5053, Dec. 29, 1995)


ARTICLE 37 (EFFECT OF REGISTRATION)


         (1) Matters as required to be registered shall not be effective as to
         any third person acting in good faith without registering them.

         (2) Even after the registration is made, if the third person fails to
         know it for any justifiable reason, the provisions of paragraph (1)
         shall be applicable.
         [This Article Wholly Amended by Act No. 5053, Dec. 29, 1995]

<PAGE>

ARTICLE 38 (EFFECT OF REGISTRATION AT LOCATION OF BRANCH OFFICE)

         In case where matters required to be registered at the place of a
         branch office have not been registered, the provisions of the preceding
         Article shall apply only to transactions at such branch office.


ARTICLE 39 (FALSE REGISTRATION)

         A person who has either intentionally or negligently registered any
         matters which are different from the truth shall assert the difference
         of such matters to a third person acting in good faith.


ARTICLE 40 (REGISTRATION OF CHANGES OR EXTINGUISHMENT)

         If any change has occurred to any of the matters registered, or if any
         of such matters have been extinguished, the party concerned shall
         effect registration of such change or extinguishment without delay.


                        CHAPTER VII TRANSFER OF BUSINESS

ARTICLE 41 (PROHIBITION OF COMPETITIVE BUSINESS OF TRANSFEROR)


         (1) When a person has transferred his business, he shall neither, for a
         period of ten years, carry on the same kind of business in the same
         Seoul Special Metropolitan City, Metropolitan City, or Shi/Kun, nor in
         any adjacent Seoul Special Metropolitan City, Metropolitan City, or
         Shi/Kun, unless the parties have made any specific agreement. (Amended
         by Act No. 3724, Apr. 10, 1984; Act No. 4796, Dec. 22, 1994; Act No.
         5053, Dec. 29, 1995)

         (2) If the transferor has made an agreement not to carry on the same
         kind of


<PAGE>

         business, such agreement shall be valid, only in the same Seoul Special
         Metropolitan City, Metropolitan City, Shi/Kun and in any adjacent Seoul
         Special Metropolitan City, Metropolitan City, Shi/Kun, and only for a
         period not exceeding twenty years. (Amended by Act No. 3724, Apr. 10,
         1984; Act No. 4796, Dec. 22, 1994; Act No. 5053, Dec. 29, 1995)


ARTICLE 42 (LIABILITY OF BUSINESS TRANSFEREE WHO CONTINUES TO USE TRADE NAME)


         (1) If the transferee of a business continues to use the trade name of
         the transferor, he shall also be liable to effect performance in
         respect of any claim of a third person arising from the business of the
         transferor.

         (2) The provisions of the preceding paragraph shall not apply in cases
         where the transferee has, without delay after the transfer of the
         business, effected the registration to the effect that he shall not be
         liable for any obligation of the transferor. The same shall apply to a
         third person to whom both the transferor and the transferee have,
         without delay after the transfer of the business, dispatched notice to
         the above effect and who has received such notice.


ARTICLE 43 (PERFORMANCE OF OBLIGATIONS TO BUSINESS TRANSFEREE)

         In the case mentioned in paragraph (1) of the preceding Article, a
         performance made to the transferee in respect of any obligation that
         has arisen from the business of the transferor shall be valid, in cases
         where the obligor effecting the performance has acted in good faith and
         without gross negligence.


ARTICLE 44 (LIABILITY OF BUSINESS TRANSFEREE WHO HAS MADE ADVERTISEMENT OF
OBLIGATION ACCEPTANCE)

         If, in cases where the transferee does not continue to use the
         transferor's trade name, he has made an advertisement to the effect
         that he will be liable for any obligation arising from the business of
         the transferor, the transferee shall also

<PAGE>

         be liable to effect performance of such obligation.


ARTICLE 45 (DURATION OF LIABILITY OF BUSINESS TRANSFEROR)

         If the transferee is liable for any obligation of the transferor in
         accordance with the provisions of Article 42 (1) or of the preceding
         Article, the obligation of the transferor in respect of a third person
         cease to exist after the lapse of two years subsequent to the transfer
         of the business or to an advertisement.


                          PART II COMMERCIAL ACTIVITIES

                           CHAPTER I COMMON PROVISIONS

ARTICLE 46 (BASIC COMMERCIAL ACTIVITIES)

         The following activities which are effected as business are called
         commercial activities: Provided, That this shall not apply to such
         activities as are effected by persons who manufacture Articles or
         render services solely for the purpose of earning wages: (Amended by
         Act No. 5053, Dec. 29, 1995)

         1.Sales of movables, immovables, valuable instruments and any other
         properties;

         2.Lease of movables, immovables, valuable instruments, and any other
         properties;

         3.Activities relating to the manufacturing, processing, or repairing;

         4.Activities relating to the supply of electricity, electric wave, gas,
         or water;

         5.Acceptance of contracts to complete works or to supply service;

         6.Activities relating to publishing, printing, or photographing;

<PAGE>

         7.Activities relating to advertisements, communications, or
         information;

         8.Receiving and giving the credit, exchange, and other financial
         transaction;

         9.Activities utilizing facilities to accomodate visitors;

         10.Acceptance of agency for commercial transactions;

         11.Activities relating to brokerage;

         12.Activities relating to commission agency and any other
         intermediation;

         13.Acceptance of carriages;

         14.Acceptance of bailments;

         15.Acceptance of trusts;

         16.Mutual savings accounts and other similar act;

         17.Insurance;

         18.Activities relating to picking of minerals or soil and stone;

         19.Act concerning financial lease of machines, equipment and other
         property;

         20.Act concerning business by a consent to the use of trade name,
         trademark, etc.; and

         21.Act concerning purchase, recovery, etc. of any business claims.


ARTICLE 47 (SUBSIDIARY COMMERCIAL ACTIVITIES)

<PAGE>

         (1) Activities effected by a merchant for the purpose of his business
         shall be deemed to be commercial activities.

         (2) The activities of a merchant shall be presumed to be effected for
         the purpose of his business.


ARTICLE 48 (METHODS OF AGENCY)

         An activity by an agent for effecting commercial activities shall be
         effective for his principal, even though the agent has not disclosed
         the fact that he is acting on behalf of the principal: Provided, That
         when the other party did not know that the transaction was effected on
         behalf of the principal, he may demand performance to the agent.


ARTICLE 49 (MANDATE)

         A person who has received a mandate for effecting commercial activities
         may effect activities for which he has not received any specific
         mandate in so far as such activities are not contrary to the essence of
         the mandate.


ARTICLE 50 (CONTINUATION OF AGENCY AUTHORITY)

         The agency authority arising from a mandate for effecting commercial
         activities shall not be extinguished for the reason of the death of the
         principal.


ARTICLE 51 (BINDING FORCE OF OFFER OF CONTRACT INTER PRESENTES)

         An offer to enter into a contract made inter presentes, shall lapse, if
         not immediately accepted by the offeree.


ARTICLE 52 (BINDING FORCE OF OFFER OF CONTRACT INTER ABSENTEES)

<PAGE>

         (1) An offer to enter into a contract in respect of which no period of
         acceptance has been fixed, when made inter absentees, shall lapse, if
         notice of its acceptance is not dispatched by the offeree within a
         reasonable period.

         (2) The provisions of Article 530 of the Civil Act shall apply mutatis
         mutandis to the case mentioned in the preceding paragraph.


ARTICLE 53 (DUTY TO DISPATCH NOTICE OF ACCEPTANCE OR REJECTION)

         When a merchant has received an offer to enter into a contract which
         falls within any of the branches of the business carried on by him from
         a person with whom he is in regular business relations, he shall
         dispatch notice of acceptance or rejection without delay. If he has
         neglected to dispatch such notice, he shall be deemed to have accepted
         the offer.


ARTICLE 54 (LEGAL RATE OF INTEREST IN COMMERCIAL ACTIVITIES)

         The legal rate of interest on obligations resulting from commercial
         activity shall be six percent per annum. (Amended by Act No. 1212, Dec.
         12, 1962)


ARTICLE 55 (DEMAND FOR LEGAL INTEREST)


         (1) If a loan for consumption has been effected between merchants, the
         lender may demand the payment of legal interest thereon.

         (2) If a merchant has made substituted donation for another person,
         within the scope of his own business, he may demand legal interest
         thereon from the day on which the substituted donation was made.

<PAGE>


ARTICLE 56 (PLACE OF PERFORMANCE OF OBLIGATION ARISING OUT OF TRANSACTION OF
BRANCH OFFICE)

         If the place of performance of an obligation arising from a activity at
         a branch office has not been specified either by the nature of the
         activity or by any declaration of intention by the parties, the place
         of performance of any obligations other than the delivery of a specific
         thing shall be deemed to be the place of such branch office.


ARTICLE 57 (JOINT AND SEVERAL OBLIGATIONS OF OBLIGORS AND GUARANTORS)


         (1) If two or more persons have assumed an obligation through a
         transaction which is a commercial activity in respect of one or all of
         them, they shall be liable jointly and severally for the obligation.

         (2) In cases where there is a guarantor, if the guaranty itself is a
         commercial activity, or if the principal obligation has arisen out of a
         commercial activity, the principal obligor and the guarantor shall
         jointly and severally be liable for the obligation.


ARTICLE 58 (MERCANTILE LIEN)

         If a claim which has arisen from a commercial activity between
         merchants has become due, the obligee may, until he has obtained
         performance thereof, retain things or valuable instruments belonging to
         the obligor which have come into his possession through a commercial
         activity with the obligor. This shall not apply, however, in cases
         where there is any specific agreement between the parties.


ARTICLE 59 (ADMISSION OF FORFEITED PLEDGE)

         The provisions of Article 339 of the Civil Act shall not apply to a
         pledge to secure an obligation arising out of a commercial activity.

<PAGE>

ARTICLE 60 (DUTY TO HOLD GOODS IN CUSTODY)

         In case a merchant has received a sample or any other goods with an
         offer to enter into a contract which falls within any of the class of
         the business carried on by him, he shall, even though he has refused
         the offer, hold such goods in his custody at the expense of the
         offeror. This shall not apply, however, in cases where the value of the
         goods is insufficient to cover the expenses of custody, or where he
         might sustain damage through such custody.


ARTICLE 61 (MERCHANT RIGHT TO DEMAND REMUNERATION)

         A merchant who has performed, on behalf of another person, an act
         within the scope of his own business may demand a reasonable
         remuneration in respect of such an act.


ARTICLE 62 (LIABILITY OF MERCHANT WHO ACCEPTED DEPOSIT OF GOODS)

         A merchant who has accepted deposit of goods within the scope of his
         own business, even though he does not receive any remuneration thereof,
         shall exercise the care of a good manager.


ARTICLE 63 (BUSINESS HOURS AND PERFORMANCE OF OBLIGATION OR DEMAND THEREOF)

         Where business hours have been fixed by Acts and subordinate statutes,
         or customs, the performance of an obligation or a demand for such
         performance shall be made only during such hours.


ARTICLE 64 (EXTINCTIVE PRESCRIPTION FOR COMMERCIAL CLAIM)

         Except as otherwise provided in this Act, a claim which has arisen
         through a

<PAGE>

         commercial activity shall be extinguished by prescription if it is not
         exercised within five years: Provided, That if a shorter period for
         prescription is provided by other Acts and subordinate statutes, such
         provision shall apply.


ARTICLE 65 (VALUABLE INSTRUMENTS AND MUTATIS MUTANDIS APPLICATION)

         The provisions of Articles 508 through 525 of the Civil Act shall apply
         to valuable instruments issued for the purpose of payment of money,
         things, or other valuable instruments, and further the provisions of
         Article 12 (1) and (2) of the Bills of Exchange and Promissory Notes
         Act shall apply mutatis mutandis to the aforesaid valuable instruments.
         (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 66 (QUASI COMMERCIAL TRANSACTIONS)

         The provisions of this Chapter shall apply mutatis mutandis to the
         transactions effected by merchants under the provisions of Article 5.


                                 CHAPTER II SALE

ARTICLE 67 (RIGHTS OF SELLER FOR DEPOSIT AND AUCTION OF SUBJECT-MATTER)


         (1) If, in the case of a sale between merchants, the buyer refuses or
         is unable to take delivery of the subject-matter of such sale, the
         seller may deposit it or may sell it by auction after he has given
         peremptory notice to accept within a reasonable period fixed by him. In
         such case, he shall dispatch notice of that fact to the buyer without
         delay.

         (2) If, in the case mentioned in the preceding paragraph, the seller is
         unable to give peremptory notice to the buyer, or the subject-matter is
         likely to lost or injured, he may sell it by auction without giving
         peremptory notice.


<PAGE>

         (3) In cases where the seller has sold the subject-matter of the sale
         by auction in accordance with the provisions of the preceding two
         paragraphs, he shall deposit the balance after deducting cost of the
         auction from them: Provided, That he may appropriate the whole or a
         part of such proceeds to the purchase price.


ARTICLE 68 (RESCISSION OF CONTRACT OF SALE AT FIXED TIME)

         In a sale between merchants, if, according to the nature of the sale or
         any declaration of intention of the parties, the purpose of the
         contract cannot be attained unless it is performed at a fixed time or
         within a fixed period, and one of the parties has allowed the time to
         elapse without performance on his part, the other party shall be deemed
         to have rescinded the contract unless he immediately demands
         performance.


ARTICLE 69 (BUYER'S DUTY TO EXAMINE SUBJECT-MATTER AND TO NOTIFY DEFECTS
           THEREIN)


         (1) In the case of a sale between merchants, the buyer shall, upon
         taking delivery of the subject-matter, examine it without delay, and if
         he discovers any defects therein or any deficiency in quantity, he
         shall immediately dispatch notice thereof to the seller, otherwise, he
         has no right to rescind the contract, to demand a reduction in the
         price or to claim damages thereby. The same shall apply in cases where,
         within six months, the buyer discovers in the subject-matter of the
         sale a defect which was not immediately discoverable.

         (2) The provisions of the preceding paragraph shall not apply to the
         seller acting in bad faith.


ARTICLE 70 (BUYER'S DUTY OF CUSTODY OR DEPOSIT OF SUBJECT-MATTER)


         (1) In the case mentioned in the preceding Article, the buyer shall,
         even though


<PAGE>

         he has rescinded the contract, hold the subject-matter of the sale in
         his own custody or deposit it at the seller's expense: Provided, That
         if it is likely to be lost or injured, he shall, with the permission of
         the court, sell it by auction, and shall hold the proceeds thereof in
         his own custody or deposit them.

         (2) When the buyer has effected a sale by auction in accordance with
         the provisions of the preceding paragraph, he shall dispatch notice of
         the fact to the seller without delay.

         (3) If the delivery place of the goods concerned is in the same Seoul
         Special Metropolitan City, Metropolitan City or Shi/Kun as the business
         office or domicile of the seller, the provisions of paragraphs (1) and
         (2) shall not be applicable. (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 71 (IDEM-CASE WHERE QUANTITY IS IN EXCESS)

         The provisions of the preceding Article shall apply mutatis mutandis to
         the difference or exceeded parts, if the goods delivered by the seller
         to the buyer are different from the subject-matter of the sale or the
         quantity of the goods delivered exceed that of the sale.


                           CHAPTER III MUTUAL ACCOUNT

ARTICLE 72 (DEFINITION)

         A mutual account is formed when, in cases where merchants or a merchant
         and a non-merchant regularly transact with each other, they agree to
         set off the total amounts of the claims and of the obligations arising
         from their transactions within a fixed period and to pay the balance
         thereof.


ARTICLE 73 (SPECIAL PROVISIONS CONCERNING CLAIMS AND OBLIGATIONS REPRESENTED BY
COMMERCIAL PAPERS)

<PAGE>

         In case where claims or obligations based upon a bill or any other
         commercial papers have been entered in the mutual account, and the
         obligor on such paper has failed to perform, the parties may remove the
         items relating to such obligations out of the mutual account.


ARTICLE 74 (PERIOD OF MUTUAL ACCOUNT)

         If the parties have not determined the period in respect of which the
         set-off is to be effected, such period shall be six months.


ARTICLE 75 (ACKNOWLEDGEMENT OF AND OBJECTIONS TO STATEMENT OF ACCOUNT)

         When the parties have acknowledged a statement of account containing
         the various items of claims and obligations, they may not thereafter
         raise objections regarding any such items: Provided, That this shall
         not apply where there is an error or omission therein.


ARTICLE 76 (LEGAL INTEREST IN REGARD TO RIGHT TO BALANCE)


         (1) In regard to the balance resulting from the set-off, the creditor
         may claim legal interest thereon from the day on which the account was
         closed.

         (2) Irrespective of the provisions of the preceding paragraph, the
         parties may agree to stipulate the interest on each item from the day
         on which it was entered in the mutual account.


ARTICLE 77 (TERMINATION)

         Each party may terminate the mutual account at any time. In such case,
         he may immediately close the mutual account and demand payment of the
         balance.

<PAGE>

                       CHAPTER IV UNDISCLOSED ASSOCIATION

ARTICLE 78 (DEFINITION)

         An undisclosed association is formed when the parties agree that one of
         them shall make a contribution toward the business of the other and
         they shall divide any profits accruing from such business.


ARTICLE 79 (CONTRIBUTION BY UNDISCLOSED PARTNER)

         The contribution made in terms of money or property by the undisclosed
         partner shall be regarded as the property of the proprietor of the
         business.


ARTICLE 80 (RELATION BETWEEN UNDISCLOSED PARTNER AND THIRD PERSON)

         The undisclosed partner neither acquires rights nor incurs obligations
         with regard to the third persons through the acts of the proprietor.


ARTICLE 81 (LIABILITY FOR HAVING CONSENTED TO USE NAME OR TRADE NAME)

         If the undisclosed partner has consented to the use of his name in the
         trade name of the proprietor of the business, or to the use of his own
         trade name as that of such proprietor, he shall be jointly and
         severally liable with the proprietor for any obligations subsequent to
         such use.


ARTICLE 82 (DIVIDEND OF PROFITS AND BEARING PART OF LOSS)


         (1) If the contribution of the undisclosed partner has been diminished
         by losses,

<PAGE>

         he may not demand any dividend of profits until such loss has been
         compensated.

         (2) Even if the loss has exceeded the amount of the contribution, the
         undisclosed partner shall not be bound to return the profits which he
         has taken or to increase the capital.

         (3) The provisions of the preceding two paragraphs shall not apply in
         cases where there is an agreement between the parties.


ARTICLE 83 (TERMINATION OF CONTRACT)


         (1) If the duration of an undisclosed association has not been fixed by
         the contract of association, or if it has been agreed thereby that such
         association shall continue to exist during the life of one of the
         parties, either party may terminate the contract at the end of any
         business year: Provided, That the termination shall be notified to the
         other party six months prior to the termination.

         (2) Where unavoidable reasons exist, either party may terminate the
         contract at any time, irrespective of whether the duration of the
         association has been fixed or not.


ARTICLE 84 (TERMINATION OF CONTRACT)

         A contract of undisclosed association shall be terminated by any of the
         following reasons:

         1.Cessation or transfer of the business;

         2.Death of, or adjudication of incompetency against, the proprietor of
         the business; and

         3.Bankruptcy of the proprietor of the business or of the undisclosed
         party.

<PAGE>

ARTICLE 85 (EFFECT OF TERMINATION OF CONTRACT)

         Upon the termination of a contract of undisclosed association, the
         proprietor of the business shall return to the undisclosed partner the
         value of his contribution. In case, however, the contribution has been
         diminished by losses, only the balance need to be returned.


ARTICLE 86 (APPLICABLE PROVISIONS)

         The provisions of Articles 272, 277 and 278 shall apply mutatis
         mutandis to the undisclosed partner.


                           CHAPTER V COMMERCIAL AGENTS

ARTICLE 87 (DEFINITION)

         A person who makes it his business to act on behalf of a particular
         merchant not as an employee of any person but as agent or broker in
         transactions falling within the class of business carried on by
         principal, is called a commercial agent.


ARTICLE 88 (DUTY TO NOTIFY)

         When a commercial agent has acted as agent or broker in any
         transactions, he shall dispatch a notice thereof to the principal
         without delay.


ARTICLE 89 (PROHIBITION OF COMPETITIVE BUSINESS)


         (1) Without the permission of the principal, a commercial agent shall
         not effect,


<PAGE>

         for his own account or for the account of a third person, any
         transaction which falls within the class of business performed by the
         principal, or become a member with unlimited liability or a director of
         a company whose purpose is to engage in the same kind of business of
         the principal.

         (2) The provisions of Article 17 (2) through (4) shall apply mutatis
         mutandis if a commercial agent has been in contravention of the
         provisions of the preceding paragraph.


ARTICLE 90 (POWER TO RECEIVE NOTICES)

         A commercial agent entrusted with the sale of goods or with the
         brokerage relating thereto shall be entitled to receive notice of
         defects in the subjectmatter of the sale or deficiencies in their
         quantity, and any other notice relating to the performance of the
         contract for sale.


ARTICLE 91 (LIEN OF COMMERCIAL AGENT)

         A commercial agent may retain things or valuable instrument which he
         holds in his possession on behalf of the principal, in respect of any
         claim which has arisen from his agency or brokerage in a transaction
         and which has become due, until he has obtained performance thereof:
         Provided, That this shall not apply if there is any different agreement
         between the parties.


ARTICLE 92 (TERMINATION OF CONTRACT)


         (1) If the parties have not fixed the duration of the contract, either
         of them may terminate the contract by giving notice two-month prior to
         it.

         (2) The provisions of Article 83 (2) shall apply mutatis mutandis to
         the commercial agents.

<PAGE>

ARTICLE 92-2 (CLAIM FOR COMPENSATION BY COMMERCIAL AGENT)


         (1) If the principal obtains new customers or his business transaction
         has increased remarkably through his commercial agent's activities, and
         he gains thereby any profits even after the contract is terminated, the
         agent may claim a reasonable compensation to the principal, except when
         the contract is terminated by any reason attributable to him.

         (2) The amount of the compensation as referred to in paragraph (1) may
         not exceed the average yearly remuneration in respect of the period of
         the last five years before the contract is terminated. If the duration
         of the contract is less than five years, it shall be based on the
         average yearly remuneration for such period.

         (3) The claim for compensation as referred to in paragraph (1) shall be
         extinguished upon the expiration of the period of six months after the
         contract is terminated.
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 92-3 (DUTY OF COMMERCIAL AGENT TO KEEP TRADE SECRET)

         The commercial agent shall keep any trade secret of the principal which
         he has learned in connection with the contract, even after the contract
         is terminated. [This Article Newly Inserted by Act No. 5053, Dec. 29,
         1995]


                              CHAPTER VI BROKERAGE

ARTICLE 93 (DEFINITION)

         A person who makes it his business to act as intermediary in commercial
         activities between other persons is called a broker.

<PAGE>

ARTICLE 94 (BROKER'S POWER TO ACCEPT PERFORMANCE ON BEHALF OF PARTIES)

         A broker may not accept, on behalf of the parties, either payment or
         any other performance in connection with the transaction in which he
         has acted as intermediary: Provided, That this shall not apply if there
         is any special agreement or custom.


ARTICLE 95 (DUTY TO KEEP SAMPLE)

         If a broker has received a sample in connection with an activity in
         which he has acted as intermediary, he shall keep it in his custody
         until the activity has been completed.


ARTICLE 96 (DUTY TO DELIVER CONTRACT DOCUMENTS)


         (1) When a transaction has been effected between the parties, the
         broker shall, without delay, prepare documents containing the name or
         trade name of each party, the date and a summary of such contract, and
         after writing his name and affixing his seal or signing thereon, shall
         deliver such documents to each party. (Amended by Act No. 5053, Dec.
         29, 1995)

         (2) Except in cases where performance is to be effected by the parties
         immediately, the broker shall, after having caused each party to write
         their names and affix their seals or sign on the documents mentioned in
         the preceding paragraph, deliver it to the other party. (Amended by Act
         No. 5053, Dec. 29, 1995)

         (3) If, in cases mentioned in paragraphs (1) and (2), one of the
         parties does not accept, write his name and affix his seal or sign on
         the document, the broker shall dispatch notice thereof to the other
         party without delay. (Amended by Act No. 5053, Dec. 29, 1995)

<PAGE>

ARTICLE 97 (DUTY TO MAINTAIN BOOKS)


         (1) The broker shall enter in his books the particulars mentioned in
         the preceding Article.

         (2) Either party may at any time demand of the broker the delivery of a
         copy of his books in connection with the activity in which the broker
         has acted as intermediary for him.


ARTICLE 98 (DUTY NOT TO DISCLOSE NAME OR TRADE NAME)

         If either party has demanded the broker not to disclose his full name
         or his trade name to the other party, the broker shall not enter such
         full name or trade name in the document mentioned in Article 96 (1) and
         in the copy mentioned in paragraph (2) of the preceding Article which
         are to be delivered to the other party.


ARTICLE 99 (RESPONSIBILITY OF BROKER)

         If the broker has not disclosed voluntarily, or in accordance with the
         provisions of the preceding Article, the full name or trade name of one
         of the parties to the other party, the latter may demand the broker to
         perform the terms of contract.


ARTICLE 100 (RIGHT TO DEMAND REMUNERATION)


         (1) The broker shall not demand remuneration unless he has complied
         with the formalities prescribed in Article 96.

         (2) The broker's remuneration shall be borne by both parties in equal

<PAGE>

         proportions.


                          CHAPTER VII COMMISSION AGENCY

ARTICLE 101 (DEFINITION)

         A person who makes it his business to effect sales and purchases of
         goods or of valuable instruments in his own name for the account of
         other person is called a commission agent.


ARTICLE 102 (STATUS OF COMMISSION AGENT)

         By a sale and purchase effected for his principal, the commission agent
         directly acquires rights and incurs obligations with regard to the
         other party to the transaction.


ARTICLE 103 (OWNERSHIP OF GOODS CONSIGNED)

         Goods or valuable instruments which have been received by the
         commission agent from his principal, or goods, valuable instruments or
         claims acquired through sales and purchases by the commission agent,
         are deemed to belong to the principal so far as the principal and the
         commission agent or the principal and the commission agent's creditor
         are concerned.


ARTICLE 104 (DUTY TO NOTIFY SALE OR PURCHASE AND TO SUBMIT STATEMENT OF ACCOUNT)

         If a commission agent has effected the sales or purchases consigned to
         him, he shall dispatch notice of a summary of the contract and of
         domicile and full name of the other partner, and he shall submit the
         statement of account thereof to his principal without delay.

<PAGE>

ARTICLE 105 (LIABILITY OF COMMISSION AGENT TO SECURE PERFORMANCE)

         If the other party does not perform his obligation arising from sales
         or purchases which a commission agent has effected for his principal,
         the commission agent himself shall be liable for performance thereof:
         Provided, That this shall not apply where any special agreement or
         custom exists.


ARTICLE 106 (DUTY TO OBSERVE DESIGNATED PRICE)


         (1) If a commission agent has sold at a lower price or bought at a
         higher price than the price designated by his principal and the
         commission agent bears the difference, the sales or purchase shall be
         binding upon the principal.

         (2) When a commission agent has sold at a higher price or bought at a
         lower price than the price designated by his principal, the difference
         shall be deemed to be the profits of the principal unless otherwise
         agreed by the parties.


ARTICLE 107 (RIGHT TO INTERVENTION)


         (1) When a commission agent has received a commission to sell or
         purchase goods having the exchange quotation, he may directly become
         the buyer or seller. In such case, the price shall be determined by
         exchange quotation at the time when notice of sale or purchase was
         dispatched by the commission agent.

         (2) Even in the case mentioned in the preceding paragraph, the
         commission agent may demand remuneration from the principal.


ARTICLE 108 (EFFECT OF DAMAGE OR DEFECTS, ETC. IN CONSIGNED GOODS)

<PAGE>

         (1) When the commission agent becomes aware of, after having taken over
         the subject-matter of sale through a commission agency, the fact that
         there is damage or defect in the goods, or there is a fear of
         decomposition or decay of the goods, or commercial circumstances which
         show decline of commodity prices, he shall without delay dispatch a
         notice thereof to his principal.

         (2) If, in the case of the preceding paragraph, the commission agent is
         unable to receive the instruction of his principal or such instruction
         is delayed, the commission agent may take an adequate measure for the
         benefit of his principal.


ARTICLE 109 (RIGHT TO PLACE GOODS IN PUBLIC DEPOSITORY OR ON AUCTION)

         The provisions of Article 67 shall apply mutatis mutandis, if, in cases
         where the commission agent has received a consignment to buy the goods,
         the principal refuses or is unable to accept delivery of goods so
         purchased.


ARTICLE 110 (IN CASE CONSIGNOR OF PURCHASE IS MERCHANT)

         If the principal who is a merchant consigned the purchase in connection
         with business, the provisions of Articles 68 through 71 shall apply
         mutatis mutandis to the relation between a principal and commission
         agent.


ARTICLE 111 (APPLICABLE PROVISIONS)

         The provisions of Article 91 shall apply mutatis mutandis to a
         commission agent.


ARTICLE 112 (APPLICATION OF PROVISIONS CONCERNING MANDATE)

         In addition to the provisions of this Chapter, the provisions relating
         to mandate shall apply to the relations between a principal and a
         commission agent.

<PAGE>

ARTICLE 113 (QUASI-COMMISSION AGENT)

         The provisions of this Chapter shall apply mutatis mutandis to persons
         who make it their business to effect, in their own name, for the
         account of the other person, activities other than sales or purchases.


                         CHAPTER VIII FORWARDING AGENCY

ARTICLE 114 (DEFINITION)

         A person who makes it his business to act in his own name as
         intermediation for the carriage of goods is called a forwarding agent.


ARTICLE 115 (LIABILITY FOR DAMAGES)

         A forwarding agent shall not be relieved of liability for damages
         caused by any loss of, injury to, or delay in arrival of the goods
         unless he proves that neither he nor any of his employee has neglected
         care in connection with the receipt, delivery and custody of the goods,
         the selection of a carrier or a forwarding agent other than himself,
         and other matters relating to the carriage.


ARTICLE 116 (RIGHT TO INTERVENTION)


         (1) A forwarding agent may himself undertake the carriage, unless
         otherwise agreed by the parties. In such cases, the forwarding agent
         shall have the same rights and duties as a carrier.

         (2) When a forwarding agent has produced a land bill of lading upon
         demand of the principal, he shall be deemed to have undertaken the
         carriage of the goods for himself.

<PAGE>

ARTICLE 117 (SUBROGATION OF SUCCESSIVE FORWARDING AGENTS)


         (1) In cases where two or more persons successively act as forwarding
         agents in the carriage of goods, each succeeding agent is liable to
         exercise the rights of his predecessors in lieu of them.

         (2) If, in the case mentioned in the preceding paragraph, a succeeding
         agent makes payment to his predecessor, he shall acquire the rights of
         such predecessor.


ARTICLE 118 (ACQUISITION OF CARRIER'S RIGHTS)

         In the case mentioned in the preceding Article, when a forwarding agent
         has made payment to a carrier, he shall acquire the rights of such
         carrier.


ARTICLE 119 (RIGHT TO DEMAND REMUNERATION)


         (1) A forwarding agent may demand remuneration immediately after he has
         delivered the goods to the carrier.

         (2) Where the amount of the freight has been fixed by the contract of a
         forwarding agency, a forwarding agent shall not demand any other
         remuneration unless otherwise agreed by the parties.


ARTICLE 120 (LIEN)

         A forwarding agent may retain the goods only in respect of the
         remuneration, freight and other substituted donations for another
         person or advances made for his principal in connection with such
         goods.

<PAGE>


ARTICLE 121 (PRESCRIPTION FOR LIABILITY OF FORWARDING AGENT)


         (1) The liability of a forwarding agent shall be extinguished by
         prescription upon the lapse of one year from the day on which the
         consignee of the goods has received the goods.

         (2) In case the goods have been totally lost, the period mentioned in
         the preceding paragraph shall be computed from the date on which such
         goods should have been delivered. (Amended by Act No. 1212, Dec. 12,
         1962)

         (3) The provisions of the preceding two paragraphs shall not apply as
         to the cases where the forwarding agent or his employee has acted in
         bad faith.


ARTICLE 122 (PRESCRIPTION FOR CLAIM OF FORWARDING AGENT)

         The claim of a forwarding agent against the principal or consignee
         shall be extinguished by prescription if it is not exercised for one
         year.


ARTICLE 123 (APPLICABLE PROVISIONS)

         In addition to the provisions of this Chapter, the provisions relating
         to the commission agent shall apply mutatis mutandis to the forwarding
         agent.


ARTICLE 124 (IDEM)

         The provisions of Articles 136, 140 and 141 shall apply mutatis
         mutandis to the forwarding agency.


                               CHAPTER IX CARRIAGE

<PAGE>

ARTICLE 125 (DEFINITION)

         For the purpose of this Act, "carrier" means a person who makes it his
         business to carry goods or passengers by land or on lakes and rivers,
         and in ports and bays.


                           SECTION 1 CARRIAGE OF GOODS

ARTICLE 126 (WAY-BILL)


         (1) The consignor shall, upon demand by the carrier, furnish him with a
         way-bill.

         (2) A way-bill shall contain the following particulars and the
         consignor shall write his name and affix his seal or sign thereon:
         (Amended by Act No. 5053, Dec. 29, 1995)

         1.The kind and weight or bulk of the goods, and the description, number
         and marks of the packages;

         2.The destination;

         3.The name or trade name, place of the business or domicile of the
         consignee and the carrier;

         4.The freight and the distinction between advance payment and payment
         after arrival; and

         5.The place where and the date on which the way-bill is made.


ARTICLE 127 (LIABILITY FOR FALSE ENTRY IN WAY-BILL)

<PAGE>

         (1) In case the consignor has entered a false or inaccurate statement
         in a way-bill, he shall be liable for the damages arising therefrom to
         the carrier.

         (2) The provision of the preceding paragraph shall not apply in cases
         where the carrier has acted in bad faith.


ARTICLE 128 (ISSUANCE OF LAND BILL OF LADING)


         (1) The carrier shall, upon demand by the consignor, deliver to him a
         land bill of lading.

         (2) A land bill of lading shall contain the following particulars and
         the carrier shall write his name and affix his seal or sign on it:
         (Amended by Act No. 5053, Dec. 29, 1995)

         1.The particulars mentioned in subparagraphs 1 through 3 of Article 126
         (2);

         2.The name or trade name, place of business or domicile of the
         consignor;

         3.The freight and any other expenses relating to goods, and the
         distinction between advance payment or payment after arrival; and

         4.The place where and the date on which the land bill of lading is made


ARTICLE 129 (EXCHANGE ABILITY OF LAND BILL OF LADING)

         If a land bill of lading has been made, no demand for delivery of the
         goods shall be permitted unless the land bill of lading is exchanged
         with the goods.


ARTICLE 130 (LAND BILL OF LADING AS INSTRUMENT TO ORDER)

<PAGE>

         Even in cases where a land bill of lading is an instrument to a
         specified person, it may be transferred by endorsement: Provided, That
         this shall not apply if the land bill of lading itself contains a
         stipulation forbidding endorsement.


ARTICLE 131 (LAND BILL OF LADING-EFFECT OF STIPULATIONS OF BILL)

         When a land bill of lading has been drawn, matters relating to the
         carriage shall, as between the carrier and the holder of the land bill
         of lading, be governed by the stipulations of the land bill of lading.


ARTICLE 132 (LAND BILL OF LADING-DISPOSITION OF GOODS)

         Where a land bill of lading has been made, disposition of the goods
         shall be effected only by means of using the land bill of lading.


ARTICLE 133 (LAND BILL OF LADING ACQUISITION OF RIGHTS)

         If a land bill of lading has been delivered to a person who is entitled
         thereby to receive the goods, such delivery shall have the same effect
         as delivery of the goods themselves in respect of the acquisition of
         rights over the goods.


ARTICLE 134 (LOSS OF GOODS AND FREIGHT)


         (1) If the whole or a part of the goods have been lost by reason for
         which the consignor is not liable, the carrier may not demand freight
         thereof. If the carrier has already received the whole or a part of
         such freight, he shall refund it.

         (2) If the whole or a part of the goods have been lost by reasons of
         their own nature or inherent defects or by the negligence of the
         consignor, the carrier may demand the full amount of the freight.

<PAGE>

ARTICLE 135 (LIABILITY FOR DAMAGES)

         A carrier shall not be relieved of liability for damages which have
         resulted from any loss of, injury to or delay in arrival of the goods
         unless he proves that neither he, the forwarding agent, any of his
         employees nor any other person employed in respect of the carriage has
         neglected care in connection with the receipt, delivery, custody and
         carriage of the goods.


ARTICLE 136 (LIABILITY FOR VALUABLES)

         With respect to money, valuable instruments and other valuables, a
         carrier shall be liable for damages only if the consignor has expressly
         stated their description and value when entrusting him with the
         carriage.


ARTICLE 137 (AMOUNT OF DAMAGES)


         (1) If the goods have been lost totally or have been delayed in
         arrival, the amount of damages shall be determined by the price
         prevailing at the destination on the day on which they should have been
         delivered.

         (2) In case of a partial loss of or injury to the goods, the amount of
         damages shall be determined by the price prevailing at the destination
         on the day on which they have been delivered.

         (3) Where the loss of, injury to and delay in arrival of the goods have
         arisen from the willfulness of or gross negligence of the carrier, he
         shall be liable for all damages.

         (4) Any freight and other expenses, the payment of which has been
         obviated by any loss of or injury to the goods, shall be deducted from
         the amount of the damages mentioned in the preceding three paragraphs.

<PAGE>

ARTICLE 138 (JOINT AND SEVERAL LIABILITY AND RIGHT OF INDEMNIFICATION OF
SUCCESSIVE CARRIER)


         (1) If two or more persons successively participate in the carriage,
         they shall jointly and severally be liable for damages arising from any
         loss of, injury to, or delay in arrival of the goods.

         (2) Where the damages were paid by one of the carriers in accordance
         with the provisions of the preceding paragraph, such carrier shall have
         the right of indemnification against the carrier who has committed an
         act which was the cause of the damage.

         (3) If, in the case of the preceding paragraph, the carrier who has
         committed an act which was the cause of the damage cannot be
         ascertained, each carrier shall compensate for damages in proportion to
         the amount of the freight of goods: Provided, That he is not bound to
         bear share of the damages if he has proved that such damages have not
         occurred in his part of the carriage.


ARTICLE 139 (RIGHT TO DEMAND DISPOSITION OF GOODS)


         (1) The consignor, or the holder of the land bill of lading in case the
         land bill of lading is issued, may demand of the carrier the
         discontinuance of the carriage, the return of the goods or any other
         disposition thereof. In such case the carrier may demand payment of
         freight in proportion to the carriage already effected as well as of
         any substituted donation for another person and other expenses due to
         such disposition.

         (2) Deleted. (by Act No. 5053, Dec 29, 1995)


ARTICLE 140 (STATUS OF CONSIGNEE)

<PAGE>

         (1) When the goods have arrived at the destination, the consignee shall
         acquire the same right as that of the consignor.

         (2) When the consignee requests the delivery of the goods after it
         arrives at the destination, the right of the consignee shall have the
         preference to that of the consignor. (Newly Inserted by Act No. 5053,
         Dec. 29, 1995)


ARTICLE 141 (DUTY OF CONSIGNEE)

         When the consignee has received the goods, he is obligated to pay the
         freight and any other expenses in respect of carriage, as well as any
         substituted donation for another person, to the carrier.


ARTICLE 142 (RIGHT TO DEPOSIT OR TO REFER TO AUCTION IN CASE CONSIGNEE IS
UNKNOWN)


         (1) If the consignee cannot be ascertained, the carrier may deposit the
         goods to the public depository.

         (2) In the case as referred to in paragraph (1), if the carrier give a
         peremptory notice to the consignor demanding instruction for the
         disposal of the goods, with a reasonable period fixed, but the
         consignor fails to give any instruction within such period, the carrier
         may sell the goods by auction. (Amended by Act No. 5053, Dec 29, 1995)

         (3) If the carrier deposits or sells by auction the goods under
         paragraph (1) and (2), he shall dispatch notice thereof without delay
         to the consignor (Amended by Act No. 5053, Dec 29, 1995)


ARTICLE 143 (IN CASE OF REFUSAL OF RECEIVING GOODS OR WHERE RECEIVING IS
IMPOSSIBLE)

<PAGE>

         (1) The provisions mentioned in the preceding Article shall apply
         mutatis mutandis in cases where the consignee refuses to receive the
         goods or he is unable to receive them.

         (2) For selling the goods by auction, the carrier shall give a
         peremptory notice to the consignee demanding him to receive the goods
         with a reasonable period fixed, before giving a peremptory notice to
         the consignor. (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 144 (PUBLIC NOTIFICATION)


         (1) If the consignor, the holder of land bill of lading, or the
         consignee can not be ascertained, the carrier shall, for the benefit of
         the holder of the right over the goods, publicly notify, by fixing a
         period of six months or more, that holder of the right should assert
         his right within such period.

         (2) The public notification mentioned in the preceding paragraph shall
         be made twice or more through Gazette or daily newspaper. (Amended by
         Act No. 3724, Apr. 10, 1984)

         (3) If, even after the public notification under paragraphs (1) and (2)
         has been made by the carrier, no person asserts his right within the
         prescribed period, the carrier may sell the goods by auction.


ARTICLE 145 (APPLICABLE PROVISIONS)

         The provisions of Article 67 (2) and (3) shall apply mutatis mutandis
         to sales by auction mentioned in the preceding three Articles.


ARTICLE 146 (EXTINGUISHMENT OF CARRIER'S LIABILITY)

<PAGE>

         (1) The liability of the carrier shall be extinguished when the
         consignee or the holder of a land bill of lading has received the
         goods without any reservation and has paid the freight and other
         expenses. This, however, shall not apply as to the case where there is
         injury to or partial loss of goods which are not immediately
         discoverable and the consignee dispatches notice thereof to the
         carrier within two weeks from the date of delivery.

         (2) The provisions mentioned in the preceding paragraph shall not apply
         if the carrier or his employee has acted in bad faith.

ARTICLE 147 (APPLICABLE PROVISIONS)

         The provisions of Articles 117, and 120 through 122 shall apply mutatis
mutandis to the carrier.

              SECTION 2 CARRIAGE OF PASSENGERS

ARTICLE 148 (LIABILITY FOR DAMAGES SUSTAINED BY PASSENGER)

         (1) A carrier shall not be relieved of liability for damages from any
         injury sustained by a passenger arising from the carriage unless the
         carrier proves that neither he nor any of his employees has neglected
         care in connection with the carriage.

         (2) In determining the amount of damages, the court shall take into
         account the circumstances of the injured party and of his family.

ARTICLE 149 (LIABILITY FOR LUGGAGE DEPOSITED TO CARRIER)

         (1) A carrier of passengers shall, as regards any luggage deposited
         from a

<PAGE>

         passenger, incur the same liability as that of a carrier of goods, even
         though he has not taken freight in respect thereto.

         (2) If the passenger does not demand delivery of his luggage within ten
         days from the date on which the luggage has arrived at the destination,
         the provisions of Article 67 shall apply mutatis mutandis: Provided,
         That neither a notice nor a peremptory notice need to be given to a
         passenger whose domicile or temporary domicile is not known.

ARTICLE 150 (LIABILITY FOR LUGGAGE NOT DEPOSITED TO CARRIER)

         A carrier shall not be liable for damages from any loss of or injury to
         such luggage which has not been deposited to him by a passenger if the
         negligence of a carrier, or of any of his employees does not exist.

            CHAPTER X PUBLIC ENTERTAINMENT BUSINESS

ARTICLE 151 (DEFINITION)

         Any person who makes it his business to make transactions by facilities
         to which guests come together such as a theater, hotel, restaurants, or
         others is called a public entertainment businessman.

ARTICLE 152 (LIABILITY OF PUBLIC ENTERTAINMENT BUSINESSMAN)

         (1) A public entertainment businessman shall not be relieved of
         liability for damages which have resulted from the loss of or injury to
         the Articles kept in his custody through bailment by the guest unless
         he proves that such loss or injury was caused by force majeure.

<PAGE>

         (2) A public entertainment businessman shall be liable, even if any
         thing has not been bailed to him by a guest, for damages of the
         personal effects of a guest in the facility, if such personal effects
         were lost or injured due to negligence of the public entertainment
         businessman or any of his employees.

         (3) The public entertainment businessman shall not be relieved of the
         liability mentioned in the preceding two paragraphs, even if a notice
         is posted to the effect that the public entertainment businessman is
         not liable for loss of or injury to the guest's personal effects.

ARTICLE 153 (LIABILITY FOR VALUABLES)

         With respect to money, valuable instruments and other valuables, a
         public entertainment businessman shall not be liable for damages from
         any loss or injury if a guest does not expressly state the description
         and value of his personal effects when he bails them into such
         businessman.

ARTICLE 154 (PRESCRIPTION OF LIABILITY OF PUBLIC ENTERTAINMENT BUSINESSMAN)

         (1) The liabilities mentioned in the preceding two Articles shall be
         extinguished by prescription if six months have elapsed after the
         public entertainment businessman has returned the bailed articles to
         the guest, or personal effects has been taken back by the guests.

         (2) The period mentioned in the preceding paragraph shall be computed
         from the date on which the guest has left the facility, if an entire
         Article was lost.

         (3) The provisions of the preceding two paragraphs shall not apply as
         to the case a public entertainment businessman or his employee has
         acted in bad faith.

<PAGE>

            CHAPTER XI WAREHOUSING

ARTICLE 155 (DEFINITION)

         A person who makes it his business to keep goods in custody in a
         warehouse for another person is called a warehouseman.


ARTICLE 156 (ISSUANCE OF WAREHOUSE RECEIPT)


         (1) A warehouseman shall, upon demand by the bailor, deliver a
         warehouse receipt to him.

         (2) A warehouse receipt shall contain the followings and a warehouseman
         shall write his name and affix his seal or sign thereon: (Amended by
         Act No. 5053, Dec. 29, 1995)

         1.The description, quality, quantity of the goods bailed, and the
         description, number and marks of the packages;

         2.The name or trade name, place of the business or domicile of the
         bailor;

         3.The place of storage;

         4.The charges for storage;

         5.The period for storage, if such has been fixed;

         6.The insured amount, the duration of insurance, the name or trade
         name, and place of business or domicile of the insurer, in case the
         goods bailed have been insured; and

         7.The place where and the date on which a warehouse receipt has been
         made.



<PAGE>

ARTICLE 157 (APPLICABLE PROVISIONS)

         The provisions of Articles 129 through 133 shall apply mutatis mutandis
         to warehouse receipts.


ARTICLE 158 (DEMAND OF WAREHOUSE RECEIPT CONCERNING PORTION OF GOODS DIVIDED)


         (1) The holder of a warehouse receipt may return such instrument and
         may demand of the warehouseman to divide the goods bailed and deliver
         him with a warehouse receipts in respect of each portion of the goods
         thus divided.

         (2) The expenses relating to the division of the goods bailed and the
         delivery of the instruments, in accordance with the provisions of the
         preceding paragraph, shall be borne by the holder of the instruments.


ARTICLE 159 (PLEDGE BY WAREHOUSE RECEIPT AND TAKING PART OF GOODS OUT OF
WAREHOUSE)

         If, in case the goods bailed have been pledged with a warehouse
         receipt, the pledgee has given his consent, the bailor may demand the
         return of a part of the goods bailed even prior to the time for
         performance of obligation. In such cases the warehouseman shall enter
         the description, quality and quantity of the goods thus returned in the
         warehouse receipt.


ARTICLE 160 (LIABILITY FOR DAMAGES)

         A warehouseman shall not be relieved of liability for damages from any
         loss of or injury to the goods bailed unless he proves that neither he
         nor any of his employees has neglected care in connection with the
         custody thereof.


ARTICLE 161 (RIGHT OF EXAMINATION OF GOODS BAILED, TAKING AWAY SAMPLES AND

<PAGE>

DISPOSITION FOR PRESERVATION)

         A bailor or the holder of a warehouse receipt may, at any time during
         business hours, demand of the warehouseman that he be allowed to
         examine the goods bailed, to take away samples thereof, or to take any
         measures necessary for the preservation thereof.


ARTICLE 162 (RIGHT TO DEMAND STORAGE CHARGES FOR STORAGE)


         (1) A warehouseman shall not demand payment of charges for storage, or
         any other expenses and substituted donation for another person except
         at the time when the goods bailed are taken out of the warehouse:
         Provided, That he may demand such payment, even prior to the taking out
         of the warehouse, with the lapse of the period for storage.

         (2) In case a part of the goods is taken out, he may demand payment of
         charges for storage, other expenses and substituted donation for
         another person in proportion thereto.


ARTICLE 163 (PERIOD OF BAILMENT)


         (1) If the period of bailment has not been fixed by the parties, the
         warehouseman may return the goods bailed any time after six months has
         elapsed from the date on which he received them.

         (2) In the case mentioned in the preceding paragraph, in order to
         return the goods bailed, an advance notice shall be given two weeks
         prior to their return.


ARTICLE 164 (PERIOD OF BAILMENT-UNAVOIDABLE CIRCUMSTANCES)

         If unavoidable reasons exist, the warehouseman may return the goods
         bailed at

<PAGE>

         any time irrespective of the provisions of the preceding Article.


ARTICLE 165 (APPLICABLE PROVISIONS)

         The provisions of Article 67 (1) and (2), shall apply mutatis mutandis
         in cases where the bailor or the holder of a warehouse receipt refuses
         the receipt of the goods bailed, or is unable to receive them.


ARTICLE 166 (PRESCRIPTION FOR LIABILITY OF WAREHOUSEMAN)


         (1) The liability of a warehouseman, which has arisen from any loss of
         or injury to the goods bailed, shall be extinguished by prescription
         after one year has elapsed from the date on which the goods have been
         taken out of the warehouse.

         (2) The period mentioned in the preceding paragraphs shall, in case of
         a total loss of the goods bailed, be computed from the date on which
         the warehouseman dispatches notice of such loss to the bailor and the
         holder of a warehouse receipt who is known to him.

         (3) The provisions mentioned in the preceding two paragraphs shall not
         apply in cases where a warehouseman or any of his employees has acted
         in bad faith.


ARTICLE 167 (PRESCRIPTION FOR CLAIM OF WAREHOUSEMAN)

         The claim of a warehouseman against the bailor or the holder of a
         warehouse receipt shall be extinguished by prescription unless it is
         exercised for one year from the date on which the goods have been taken
         out of the warehouse.


ARTICLE 168 (APPLICABLE PROVISIONS)

         The provisions of Articles 108 and 146 shall apply mutatis mutandis to
         a

<PAGE>

         warehouseman. (Amended by Act No. 1212, Dec. 12, 1962)


         PART III COMPANIES

         CHAPTER I COMMON PROVISIONS

ARTICLE 169 (DEFINITION)

         The term "company" as used in this Act means an association
         incorporated for the purpose of engaging in commercial activities
         and/or any other profitmaking activities.


ARTICLE 170 (KINDS OF COMPANIES)

         Companies are categorized into four kinds, namely, partnership
         companies, limited partnership companies, stock companies and limited
         liability companies.


ARTICLE 171 (COMPANY AS JURISTIC PERSON AND DOMICILE OF COMPANY)


         (1) A company shall be a juristic person.

         (2) The domicile of a company shall be at the place of its principal
         office.


ARTICLE 172 (INCORPORATION OF COMPANY)

         A company shall come into existence upon the registration of its
         incorporation at the place of its principal office.



<PAGE>

ARTICLE 173 (RESTRICTION ON LEGAL CAPACITY)

         A company shall not become a member with unlimited liability of another
         company.


ARTICLE 174 (MERGER OF COMPANIES)


         (1) A merger of companies shall be permissible.

         (2) In case where one side of the constituent companies of a merger is
         a stock company or a limited liability company or both sides of them
         are stock companies or limited liability companies, the surviving
         company or the newly incorporated company in consequence of the merger
         shall be a stock company or a limited liability company.

         (3) A company after its dissolution may be involved only in a merger
         whereby it is merged into an existing company and the latter company
         survives after merger.


ARTICLE 175 (IDEM-INCORPORATORS)


         (1) In case where a new company is to be incorporated in consequence of
         a merger, the execution of its articles of incorporation and the
         performance of any other activities relating to its incorporation shall
         be effected jointly by incorporators appointed by each of constituent
         companies.

         (2) Articles 230, 434 and 585 shall apply mutatis mutandis to the
         appointment under paragraph (1).


ARTICLE 176 (DISSOLUTION ORDER AGAINST COMPANY)

<PAGE>

         (1) The court may, upon the application by an interested person or by
         the public prosecutor or ex officio, order that a company be dissolved,
         in any of the following cases:

         1.Where the company was incorporated for an illegal purpose;

         2.Where a company, without justifiable reasons, failed to commence its
         business within one year after its establishment or discontinued its
         business for a period of at least one year; or

         3.Where a director or a member managing the affairs of the company
         violated Acts or subordinate statutes or the articles of incorporation
         of the company, as a result of which it is deemed impermissible for the
         company to continue its existence.

         (2) In case where an application mentioned in paragraph (1) has been
         filed, the court may, at the request of an interested party or of the
         public prosecutor or ex officio, appoint an administrator or take any
         other necessary measures for the preservation of the company's
         properties, even before issuing the dissolution order.

         (3) In case where an application mentioned in paragraph (1) has been
         filed by an interested person, the court may, upon the request of the
         company, order the applicant to furnish adequate security.

         (4) In order to make the request mentioned in paragraph (3), the
         company shall meet the minimal showing with respect to the fact that
         the application was filed in bad faith.


ARTICLE 177 (STARTING POINT OF RECKONING OF REGISTRATION PERIOD)

         If any matter to be registered in accordance with this Part requires
         permission or authorization of government authorities, the period
         within which the registration should be made shall commence to run from
         the date of the arrival

<PAGE>

         of the document of such permission or authorization.


         CHAPTER II PARTNERSHIP COMPANY

         SECTION 1 INCORPORATION

ARTICLE 178 (EXECUTION OF ARTICLES OF INCORPORATION)

         In order to incorporate a partnership company, articles of
         incorporation shall be executed jointly by at least two members of the
         company.


ARTICLE 179 (ABSOLUTE PARTICULARS TO BE ENTERED IN ARTICLES OF INCORPORATION)

         The articles of incorporation of a partnership company shall contain
         the following items and all members shall write their names and affix
         their seals or shall sign thereon: (Amended by Act No. 5053, Dec. 29,
         1995)

         1.Purposes;

         2.Trade name;

         3.Name, resident registration number and domicile of each member;

         4.Subject-matter, value, or the basis for valuation of the contribution
         to be made by each member;

         5.Place of the principal office; and

         6.Date of execution of the articles of incorporation.


ARTICLE 180 (REGISTRATION OF INCORPORATION)


<PAGE>

         The registration of incorporation of a partnership company shall
         contain the following particulars: (Amended by Act No. 5053, Dec. 29,
         1995)

         1.Matters set forth in subparagraphs 1 through 3 and 5 of Article 179
         and the place of a branch office, if any: Provided, That if a member
         representing the company was designated, the domicile of other members
         shall be excluded;

         2.Subject-matter of the contribution of each member and, in case of a
         contribution in kind, its value and the part already effected;

         3.Period of duration or the reasons for dissolution, if such period or
         such reasons were determined;

         4.Name of the member representing the company, if such member was
         designated; and

         5.A provision, if any, to the effect that the company are represented
         jointly by two or more members.


ARTICLE 181 (REGISTRATION OF ESTABLISHMENT OF BRANCH OFFICE)


         (1) If a branch office is established simultaneously with the
         incorporation of the company, matters set forth in Article 180
         (excluding the places of other branch offices) shall be registered at
         the place of such branch office within two weeks after the registration
         of incorporation was effected. (Amended by Act No. 5053, Dec. 29, 1995)

         (2) If a branch office is established after the incorporation of the
         company, the place and establishment date of such branch office shall
         be registered within two weeks at the place of the principal office,
         and the matters set forth in Article 180 (excluding the places of other
         branch offices) shall be registered within three weeks at the place of
         such branch office. (Amended by Act No. 5053, Dec. 29, 1995)


<PAGE>

         (3) Deleted. (by Act No. 5053, Dec. 29, 1995)


ARTICLE 182 (REGISTRATION OF TRANSFER OF PRINCIPAL OFFICE AND BRANCH OFFICE)


         (1) If a company transfers its principal office, the new place and the
         transfer date shall be registered within two weeks at the previous
         place and the matters set forth in Article 180 (excluding the places of
         other branch offices) shall be registered within two weeks at the new
         place. (Amended by Act No. 5053, Dec. 29, 1995)

         (2) If a company transfers its branch office, the new place and the
         transfer date shall be registered within two weeks at the place of the
         principal office and at the previous place of such branch office and
         the matters set fort in Article 180 (excluding the places of other
         branch offices) shall be registered within two weeks at the new place.
         (Amended by Act No.
         5053, Dec. 29, 1995)

         (3) Deleted. (by Act No. 5053, Dec. 29, 1995)


ARTICLE 183 (REGISTRATION OF ALTERATIONS)

         If a change occurred in any of the matters mentioned in Article 180,
         such alteration shall be registered within two weeks at the place of
         the principal office and within three weeks at the place of each branch
         office, respectively.


ARTICLE 183-2 (REGISTRATION OF TEMPORARY DISPOSITION, ETC. FOR BUSINESS
MANAGEMENT)

         Where the employees' business management is suspended, a temporary
         disposition for appointing the agent for business management is made,
         or such temporary disposition is altered or canceled, the registration
         thereof shall be made at the registry in the place where the head and
         branch offices are located.

         [This Article Newly Inserted by Act No. 6545, Dec. 29, 2001]

<PAGE>


ARTICLE 184 (ACTION FOR NULLIFICATION OR REVOCATION OF INCORPORATION)


         (1) The nullity of the incorporation of a company may be asserted only
         by a member of the company and the revocation of the incorporation of a
         company may be asserted only by a person who has the right to revoke
         the incorporation, in both cases only by means of an action to be filed
         within two years after the date of the incorporation.

         (2) Article 140 of the Civil Act shall apply mutatis mutandis to the
         revocation of the incorporation mentioned in paragraph (1).


ARTICLE 185 (ACTION FOR REVOCATION OF INCORPORATION BY CREDITORS)

         If a member has incorporated a company with the knowledge that he would
         thereby prejudice his creditors, the creditors may demand the
         revocation of the incorporation of the company by means of an action
         filed against the member and the company.


ARTICLE 186 (EXCLUSIVE JURISDICTION)

         The actions mentioned in Articles 184 and 185 shall be subject to the
         exclusive jurisdiction of the district court governing the place of the
         principal office of the company.


ARTICLE 187 (PUBLIC NOTICE OF FILING OF ACTION)

         If an action was filed for nullification or revocation of the
         incorporation of a company, the company concerned shall give public
         notice thereof without delay.



<PAGE>

ARTICLE 188 (COMBINED HEARING OF ACTIONS)

         If two or more actions were filed for nullification or revocation of
         the incorporation of a company, the court shall hear the actions
         jointly.


ARTICLE 189 (CORRECTION OF DEFECTS AND DISMISSAL OF ACTION)

         The court may dismiss an action for nullification or revocation of the
         incorporation of a company, if the defects which were the cause for
         such action have been remedied in the course of the hearing and the
         court considers it improper to nullify or revoke the incorporation of
         the company in light of the present condition of the company and all
         other circumstances.


ARTICLE 190 (EFFECT OF JUDGMENT)

         A judgment affirming the nullification or revocation of the
         incorporation of a company shall be effective against any third person:
         Provided, That it shall not affect the rights and duties which have
         arisen between the company and its members as well as third persons
         before the judgment becomes final and conclusive.


ARTICLE 191 (LIABILITY OF PLAINTIFF WHO LOST)

         If the plaintiffs in an action for nullification or revocation of the
         incorporation of a company have lost in such action and it is found
         that they wilfully or by gross negligence filed such action, they shall
         be jointly and severally liable for damages against the company.


ARTICLE 192 (REGISTRATION OF NULLIFICATION OR REVOCATION OF INCORPORATION)

         Where a judgment affirming the nullification or revocation of the
         incorporation of a company has become final and conclusive, such fact
         shall be registered at the

<PAGE>

         place of the principal office and branch offices of the company.


ARTICLE 193 (EFFECT OF JUDGMENT AFFIRMING NULLIFICATION OR REVOCATION OF
INCORPORATION)


         (1) Where a judgment affirming the nullification or revocation of the
         incorporation of a company has become final and conclusive, the company
         shall be liquidated as if the company had been dissolved.

         (2) In case of paragraph (1), the court may appoint a liquidator upon
         the application by any member of the company and by any other
         interested person.


ARTICLE 194 (NULLIFICATION OR REVOCATION OF INCORPORATION AND CONTINUANCE OF
COMPANY)


         (1) If a judgment affirming the nullification or revocation of the
         incorporation of a company has become final and conclusive and the
         cause of such nullification or revocation exists only with a particular
         member, the company may continue to exist with the unanimous consent of
         all the other members.

         (2) In case of paragraph (1), the member in respect of whom the cause
         of the nullification or revocation exists shall be deemed to have
         retired from the company.

         (3) The provisions of Article 229 (2) and (3) shall apply mutatis
         mutandis to the cases under paragraphs (1) and (2) above.


         SECTION 2 INTERNAL RELATIONSHIP OF A COMPANY

ARTICLE 195 (APPLICABLE PROVISIONS)


<PAGE>

         Unless otherwise provided by the articles of incorporation or by this
         Act, the provisions concerning partnerships of the Civil Act shall
         apply mutatis mutandis to the internal relationship of a partnership
         company.


ARTICLE 196 (CONTRIBUTION OF CLAIM RIGHTS)

         A member who has transferred a claim right to the company as his
         contribution shall be responsible for payment of the amount of such
         claim, if the obligor fails to pay for such claim by the time for
         performance. In this case, the member shall not only pay for the
         interests but also shall be liable for any damages sustained thereby.


ARTICLE 197 (TRANSFER OF SHARE)

         No member shall, without the consent of all the other members, transfer
         all or a part of his share in the company to other persons.


ARTICLE 198 (PROHIBITION OF COMPETITIVE BUSINESS BY MEMBERS)


         (1) No member shall, without the consent of all the other members,
         effect for his own account or for the account of a third person any
         transaction which falls within the class of business carried on by the
         company or become a member with unlimited liability or a director of
         another company whose business purpose is the same kind of business as
         the company.

         (2) In case where any member has effected a transaction violating
         paragraph (1), the company may regard such transaction as effected for
         the account of the company if such transaction was effected for that
         member's own account, and the company may demand that member to
         transfer any profit accrued therefrom if such transaction was effected
         for the account of a third person. (Amended by Act No. 1212, Dec. 12,
         1962)


<PAGE>

         (3) Paragraph (2) shall not affect any claim for damages by the company
         against the member concerned.

         (4) The claim rights mentioned in paragraphs (2) and (3) shall be
         exercised by a resolution adopted by affirmative votes of a majority of
         other members of the company and shall lapse by the passage of two
         weeks from the day on which any one of other members has become aware
         of such transaction or by the passage of one year from the day on which
         such transaction was effected.


ARTICLE 199 (SELF-TRANSACTIONS OF MEMBERS)

         A member may effect a transaction with the company for his own account
         or for the account of a third person only if a resolution approving
         such has been adopted by affirmative votes of a majority of other
         members of the company. In this case, Article 124 of the Civil Act
         shall not apply.


ARTICLE 200 (RIGHT AND DUTY OF MANAGEMENT OF AFFAIRS)


         (1) Unless otherwise provided by the articles of incorporation, each
         member has the right and duty to manage the affairs of the company.

         (2) If other members raise an objection in respect to a management of
         affairs by respective member, that member shall immediately cease such
         act and follow a decision of a majority of all the members.


ARTICLE 200-2 (AUTHORITY OF AGENT FOR BUSINESS MANAGEMENT)


         (1) An agent for business management under Article 183-2 shall, unless
         otherwise stipulated in the temporary disposition order, not perform
         any act which does not fall under regular businesses of a corporation:
         Provided, That

<PAGE>

         the same shall not apply to the case where a permit has been obtained
         from the court.

         (2) Where an agent for business management has committed an act in
         contravention of the provisions of paragraph (1), the company shall be
         responsible for bona fide third person.
         [This Article Newly Inserted by Act No. 6545, Dec. 29, 2001]


ARTICLE 201 (MANAGING MEMBERS)


         (1) If one or more members are designated by the articles of
         incorporation as managing members, those members shall have the right
         and duty to manage the affairs of a company.

         (2) If other managing members raise an objection in respect to an act
         of management by an managing member, that member shall immediately
         cease such act and follow a decision of a majority of all the managing
         members.


ARTICLE 202 (JOINT MANAGING MEMBERS)

         Where several members are designated by the articles of incorporation
         to jointly manage the affairs of the company, any act of management
         shall not be taken without the consent of all such joint managing
         members: Provided, That this shall not apply if there is a fear of
         delay.


ARTICLE 203 (APPOINTMENT AND REMOVAL OF MANAGER)

         Unless otherwise provided by the articles of incorporation, the
         appointment and dismissal of a manager shall be decided by a majority
         of all the members, even where managing members were designated.



<PAGE>

ARTICLE 204 (AMENDMENT OF ARTICLES OF INCORPORATION)

         The consent of all the members shall be required in order to amend the
         articles of incorporation.


ARTICLE 205 (ADJUDICATION OF FORFEITURE OF POWER AGAINST MANAGING MEMBER)


         (1) If a managing member is clearly unfit for management of the company
         or he has breached his material duties, the court may, upon the
         application of a member, adjudicate the forfeiture of the power against
         such managing member.

         (2) When a judgment mentioned in paragraph (1) has become final and
         conclusive, such fact shall be registered at the place of the principal
         office and branch offices of the company.


ARTICLE 206 (APPLICABLE PROVISIONS)

         Article 186 shall apply mutatis mutandis to an action mentioned in
         Article 205.


         SECTION 3 EXTERNAL RELATIONSHIP OF A COMPANY

ARTICLE 207 (REPRESENTATION OF COMPANY)

         If a company has not designated managing members in charge of the
         management of affairs by the articles of incorporation, each of the
         members shall represent the company. If several executive members were
         designated to take charge of the management, each of them shall
         represent the company: Provided, That the company may specifically
         designate a person who shall represent the company from among such
         managing members, by the articles of

<PAGE>

         incorporation or with the unanimous consent of all the members.


ARTICLE 208 (JOINT REPRESENTATION)


         (1) A company may, either by the articles of incorporation or with the
         unanimous consent of all the members, provide that two or more members
         shall jointly represent the company.

         (2) Even in case of paragraph (1), any declaration of intention made by
         a third person to the company shall be effective by giving such
         declaration of the intention to any one of the joint representative
         members.


ARTICLE 209 (AUTHORITIES OF REPRESENTATIVE MEMBER)


         (1) The representative member shall be authorized to do all judicial or
         extra-judicial acts relating to the business of the company.

         (2) Any restriction placed on the authorities mentioned in paragraph
         (1) may not be asserted against a third person acting in good faith.


ARTICLE 210 (LIABILITY FOR DAMAGES)

         In case where the representative member has caused damages to another
         person by his act of the business administration of the company, the
         company and such representative member shall be jointly and severally
         liable for such damages.


ARTICLE 211 (REPRESENTATION IN LEGAL ACTIONS BETWEEN COMPANY AND MEMBERS)

         If no representative member exists in case of an action filed by a
         company

<PAGE>

         against its member or an action filed by a member of a company against
         the company, a member who shall represent the company on such action
         shall be selected by a resolution of a majority of all the other
         members.


ARTICLE 212 (LIABILITY OF MEMBERS)


         (1) If the assets of a company are insufficient to fully satisfy all
         its obligations, all the members shall be jointly and severally liable
         for the performance of the obligations.

         (2) Paragraph (1) shall also apply if a compulsory execution on the
         company's assets has proved ineffective.

         (3) Paragraph (2) shall not apply if any member proves that the company
         is capable of performing its obligations and that the execution can
         easily be effected.


ARTICLE 213 (LIABILITY OF INCOMING MEMBER)

         A member admitted to a company after its establishment shall assume the
         same liability as other members with respect to the obligations of the
         company incurred prior to his admission.


ARTICLE 214 (DEFENSES OF MEMBERS)


         (1) In case where a claim is raised against members with respect to the
         company's obligations, they may oppose to the claimant by any defense
         which the company might have asserted.

         (2) If the company has a right of set-off, cancellation or rescission
         against the claimant, members may refuse performance in respect of a
         claim under

<PAGE>

         paragraph (1).


ARTICLE 215 (LIABILITY OF MEMBER BY ESTOPPEL)

         Where a person who is not a member of a company has acted in a manner
         to induce others to misconceive him of a true member, he shall assume
         the same liability as true members against any person who has effected
         a transaction with the company on the basis of such misconception.


ARTICLE 216 (APPLICABLE PROVISIONS)

         Articles 205 and 206 shall apply mutatis mutandis to the representative
         members of a company.


         SECTION 4 RETIREMENT OF MEMBERS

ARTICLE 217 (MEMBER'S RIGHT TO RETIRE FROM COMPANY)


         (1) Where the articles of incorporation of a company do not fix the
         duration of the company or they provide that the company shall continue
         to exist during the life of a particular member, any member may retire
         at the end of any business year: Provided, That he shall give an
         advance notice six months prior to the retirement.

         (2) Where unavoidable reasons exist, any member may retire at any time.


ARTICLE 218 (REASONS FOR RETIREMENT OF MEMBERS)

         In addition to Article 217, a member shall retire from the company for
         any of the following reasons:


<PAGE>

         1.Occurrence of any event specified in the articles of incorporation;

         2.Consent of all the members;

         3.Death;

         4.Incompetency;

         5.Bankruptcy; or

         6.Expulsion.


ARTICLE 219 (NOTICE OF SUCCESSION OF RIGHTS AT DEATH OF MEMBER)


         (1) Where the articles of incorporation provide that if a member dies,
         his successors may succeed to the deceased member's rights and duties
         against the company to become a member, the successors shall dispatch a
         notice of either succession or renunciation to the company within three
         months from the day on which he has become aware of the commencement of
         succession.

         (2) If three months have elapsed without the successors's notice
         mentioned in paragraph (1), the successors shall be deemed to have
         renounced the right to become a member.


ARTICLE 220 (ADJUDICATION OF EXPULSION)


         (1) Where any of the following reasons exists in respect of a member,
         the company may, by a resolution of a majority of all the other
         members, demand that the court adjudicate the expulsion of such member:

         1.Where such member failed to perform a duty to contribute;


<PAGE>

         2.Where such member acted in violation of Article 198 (1);

         3.Where such member committed a dishonest act with respect to the
         management of the affairs or the representation of the company, or
         where such member managed the affairs of the company or represented the
         company without authority; or

         4.Where there is any other important reason.

         (2) Articles 205 (2) and 206 shall apply mutatis mutandis to the cases
         under paragraph (1).


ARTICLE 221 (SETTLEMENT OF ACCOUNTS BETWEEN EXPELLED MEMBER AND COMPANY)

         The settlement of accounts between the expelled member and the company
         shall be effected according to the status of the company's property
         when an action for expulsion was filed, and legal interest shall accrue
         therefrom.


ARTICLE 222 (REFUNDMENT OF SHARE)

         A retired member shall be entitled to refundment of his share even
         where his contribution was in the form of personal services or credit:
         Provided, That it shall not be the case if it is provided otherwise by
         the articles of incorporation.


ARTICLE 223 (SEIZURE ON SHARE)

         A seizure upon a member's share on the company shall be effective with
         regard to his right to demand a dividend and a refundment on the share
         for the future.


ARTICLE 224 (DEMAND OF RETIREMENT OF MEMBER BY CREDITOR WHO SEIZED MEMBER'S
SHARE)

<PAGE>

         (1) A creditor who seized a member's share in the company may cause the
         member to retire at the end of a business year: Provided, That he shall
         give an advance notice to the company and the member concerned six
         months prior to the retirement.

         (2) The advance notice mentioned in the proviso of paragraph (1) shall
         lose its effect when the member concerned performs his obligations or
         furnishes an adequate security.


ARTICLE 225 (LIABILITY OF RETIRED MEMBER)


         (1) A retired member shall be liable, as if he continued to be a
         member, for the obligations of the company incurred before the
         registration of his retirement has been effected at the place of the
         principal office, for the period of two years subsequent to the above
         registration.

         (2) The provision of paragraph (1) shall apply mutatis mutandis to a
         member who has transferred his share in the company to other persons.


ARTICLE 226 (RETIRED MEMBER'S RIGHT TO DEMAND CHANGE IN CORPORATE NAME)

         In case where the name of a retired member has been used in the
         company's trade name, such member may demand of the company the
         cessation of such name.


         SECTION 5 DISSOLUTION OF COMPANY

ARTICLE 227 (REASONS FOR DISSOLUTION)

         A company shall be dissolved for any of the following reasons:


<PAGE>

         1.Expiration of the duration of the company or occurrence of any events
         specified in the articles of incorporation;

         2.Consent of all the members;

         3.Where there is only one member left;

         4.Merger;

         5.Bankruptcy; or

         6.Order or judgment of the court.


ARTICLE 228 (REGISTRATION OF DISSOLUTION)

         In case of the dissolution of a company for reasons other than merger
         or bankruptcy, such fact shall be registered within two weeks at the
         place of the principal office and within three weeks at the place of
         each branch office, both period starting from the day on which the
         reason for dissolution comes into existence.


ARTICLE 229 (CONTINUANCE OF COMPANY)


         (1) In cases of subparagraphs 1 and 2 of Article 227, the company may
         continue to exist with the consent of all or some of the members:
         Provided, That the dissenting members shall be deemed to have retired.

         (2) In case of subparagraph 3 of Article 227, the company may continue
         to exist by admitting a new member.

         (3) In case of paragraphs (1) and (2), if the registration of
         dissolution was already effected, the continuance of existence of a
         company shall be registered

<PAGE>

         within two weeks at the place of the principal office and within three
         weeks at the place of each branch office.

         (4) Article 213 shall apply mutatis mutandis to the liabilities of a
         incoming member pursuant to paragraph (2).


ARTICLE 230 (RESOLUTION OF MERGER)

         The consent of all the members shall be required for a merger of a
         company.


ARTICLE 231

         Deleted. (by Act No. 3724, Apr. 10, 1984)


ARTICLE 232 (OBJECTIONS BY CREDITORS)


         (1) Within two weeks from the date of the resolution on a merger, the
         company shall give to its creditors a public notice demanding the
         submission of an objection, if any, against the merger within a
         specified period of time and shall give a peremptory notice to the
         respective creditors known to the company. In this case, the said
         period shall be no less than one month. (Amended by Act No. 3724, Apr.
         10, 1984; Act No. 5591, Dec. 28, 1998)

         (2) A creditor who fails to raise an objection within the period set
         forth in paragraph (1) shall be deemed to have approved the merger.

         (3) If a creditor has raised an objection, the company shall perform
         his obligations to the creditor or furnish adequate security, or
         entrust a property of reasonable value to a trust company to the same
         purpose.


ARTICLE 233 (REGISTRATION OF MERGER)


<PAGE>

         In case of a merger, the registration of alteration by the surviving
         company, the registration of dissolution by the merged company and the
         registration of newly incorporated company in consequence of a merger
         shall be effected within two weeks at the place of the principal office
         and within three weeks at the place of each branch office.


ARTICLE 234 (TAKING EFFECT OF MERGER)

         A merger of companies shall take effect when the surviving company or
         the newly company incorporated in consequence of a merger has effected
         registration set forth in Article 233 at the place of its principal
         office.


ARTICLE 235 (EFFECT OF MERGER)

         The surviving company or the newly incorporated company in consequence
         of a merger shall succeed to the rights and duties of the merged
         company.


ARTICLE 236 (FILING OF ACTION FOR NULLIFICATION OF MERGER)


         (1) The nullification of a merger of companies shall be asserted only
         by an action, the plaintiff of which is limited to the members,
         liquidators, trustee in bankruptcy of respective company or by those
         creditors who do not approve such merger.

         (2) The action under paragraph (1) shall be filed within six months
         from the date of the registration under Article 233.


ARTICLE 237 (APPLICABLE PROVISIONS)

         Article 176 (3) and (4) shall apply mutatis mutandis where the
         creditors of a company have filed an action under Article 236.



<PAGE>

ARTICLE 238 (REGISTRATION OF NULLIFICATION OF MERGER)

         When a judgment affirming the nullification of merger has become final
         and conclusive, the registration of alteration by the surviving
         company, the registration of restitution by the merged company and the
         registration of dissolution by the newly incorporated company in
         consequence of the merger shall be effected at the place of the
         principal office and each branch office.


ARTICLE 239 (FINAL JUDGMENT OF NULLIFICATION AND REVERSION OF RIGHTS AND DUTIES
OF COMPANIES)


         (1) When a judgment affirming the nullification of merger has become
         final and conclusive, the companies which have effected a merger shall
         be jointly and severally liable to discharge any obligation that the
         surviving company or the newly incorporated company in consequence of
         the merger has incurred after the merger.

         (2) Any property which has been acquired after the merger by the
         surviving company or the newly incorporated company in consequence of
         the merger shall be co-owned in common by the companies which have
         effected the merger.

         (3) If, in case of paragraphs (2) and (3), the companies have failed to
         determine the proportions of assuming the liabilities or the
         proportions of the common ownership, the court shall, upon the
         application of such companies, determine those proportions, by taking
         into account the status of the property of each company as of the time
         of the merger and all other circumstances.


ARTICLE 240 (APPLICABLE PROVISIONS)

         Articles 186 through 191 shall apply mutatis mutandis to the action for
         nullification of merger.



<PAGE>

ARTICLE 241 (DEMAND FOR DISSOLUTION BY MEMBERS)


         (1) Where unavoidable reasons exist, any member may apply to the court
         for dissolution of the company.

         (2) Articles 186 and 191 shall apply mutatis mutandis to the case under
         paragraph (1).


ARTICLE 242 (CHANGE OF ORGANIZATION)


         (1) With the consent of all the members a partnership company may be
         transformed into a limited partnership company either by making a
         particular member become a member with limited liability or by
         admitting a new member with limited liability.

         (2) paragraph (1) shall apply mutatis mutandis to the continuance of
         existence of a company pursuant to Article 229 (2).


ARTICLE 243 (REGISTRATION OF CHANGE OF ORGANIZATION)

         When a partnership company has been transformed into a limited
         partnership company, the registration of dissolution by the partnership
         company and the registration of incorporation by the limited
         partnership company shall be effected within two weeks at the place of
         the principal office and within three weeks at the place of each branch
         office.


ARTICLE 244 (LIABILITY OF PERSON WHO HAS BECOME MEMBER WITH LIMITED LIABILITY IN
CONSEQUENCE OF CHANGE OF ORGANIZATION)


<PAGE>

         A person who has been a member of a partnership company but now becomes
         a member with limited liability in accordance with Article 242,
         paragraph (1) shall not be relieved of the unlimited liability with
         respect to the obligations of the company which had been incurred
         before the registration under Article 243 was effected at the place of
         the principal office, for the period of two years subsequent to the
         said registration.


         SECTION 6 LIQUIDATION

ARTICLE 245 (COMPANY IN PROCESS OF LIQUIDATION)

         To the extent of the objectives of the liquidation, a company shall be
         deemed to continue to exist even after its dissolution.


ARTICLE 246 (WHERE SEVERAL SUCCESSORS OF SHARE EXIST)

         Where there are two or more successors upon the death of a member after
         dissolution of a company, they shall designate one person from among
         themselves to exercise the rights of a member in connection with the
         liquidation. If there is no such designation, the company's notice or
         peremptory notice made upon any one of the successors shall be
         effective upon all the successors.


ARTICLE 247 (VOLUNTARY LIQUIDATION)


         (1) The method of disposal of the properties of a dissolved company may
         be determined by the articles of incorporation or with the consent of
         all the members. In this case, an inventory and a balance sheet shall
         be prepared within two weeks from the day on which the reason for
         dissolution occurred.

         (2) Paragraph (1) shall not apply in case of the dissolution of a
         company pursuant to subparagraph 3 or 6 of Article 227.


<PAGE>

         (3) Article 232 shall apply mutatis mutandis to the case under
         paragraph (1).

         (4) If, in case of paragraph (1), there is any person who has seized a
         member's share in the company, the consent of such person shall be
         obtained.

         (5) The company under paragraph (1) shall register the completion of
         liquidation within two weeks at the place of its principal office and
         within three weeks at the place of its branch office after the disposal
         of properties is completed.
         (Newly Inserted by Act No. 5053, Dec. 29, 1995)


ARTICLE 248 (VOLUNTARY LIQUIDATION AND PROTECTION OF CREDITORS)


         (1) If a company has harmed its creditors by disposing of its
         properties in violation of Article 247 (3), the creditors may apply to
         the court for the revocation of such disposal

         (2) Article 186 of this Act and the proviso of Article 406 (1), (2) and
         407 of the Civil Act shall apply mutatis mutandis to the application
         for the revocation mentioned in paragraph (1).


ARTICLE 249 (PROTECTION OF CREDITORS WHO HAVE SEIZED SHARE)

         If a company has disposed of its properties in violation of Article 247
         (4), the creditor who has seized a member's share in the company may
         demand that the company pay an amount equivalent to the value of such
         share. In this case, Article 248 shall apply mutatis mutandis.


ARTICLE 250 (LEGAL LIQUIDATION)

         If the method of disposal of the properties of a dissolved company has
         not been determined pursuant to Article 247 (1), liquidation shall be
         carried out in

<PAGE>

         accordance with Articles 251 through 265 except for the cases of a
         merger and a bankruptcy.


ARTICLE 251 (LIQUIDATOR)


         (1) In case of the dissolution of a company, a liquidator shall be
         appointed by a majority vote of all the members.

         (2) When a liquidator has not been appointed, the managing member shall
         become a liquidator.


ARTICLE 252 (LIQUIDATOR APPOINTED BY COURT)

         In case of the dissolution of a company pursuant to subparagraph 3 or 6
         of Article 227, the court shall appoint a liquidator on the application
         of members, any interested person or the public prosecutor or ex
         officio.


ARTICLE 253 (REGISTRATION OF LIQUIDATORS)


         (1) The following particulars shall be registered within two weeks at
         the place of the principal office and within three weeks at the place
         of each branch office, which periods shall commence to run from the day
         of appointment of a liquidator if a liquidator has been appointed or
         from the day of the dissolution if the managing member has become a
         liquidator: (Amended by Act, No. 5053, Dec. 29, 1995)

         1.Name, resident registration number and address of the liquidator:
         Provided, That if a representative liquidator has been appointed from
         among several liquidators, addresses of liquidators other than the
         representative liquidators shall be excluded;


<PAGE>

         2.Name of the representative liquidator if such has been appointed; and

         3.Provisions to the effect that two or more liquidators shall jointly
         represent the company, if so determined.

         (2) Article 183 shall apply mutatis mutandis to the registration under
         paragraph (1). (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 254 (DUTIES AND POWERS OF LIQUIDATORS)


         (1) A liquidator shall have the following duties:

         1.To wind up pending affairs;

         2.To collect claims and to perform obligations;

         3.To dispose of assets for realization; and

         4.To distribute surplus assets.

         (2) Where there are two or more liquidators, acts of conduct in
         connection with the duties of liquidation shall be determined by a
         resolution of a majority vote of them.

         (3) The representative liquidator is authorized to do all judicial or
         extrajudicial acts in connection with the duties mentioned in paragraph
         (1).

         (4) Article 93 of the Civil Act shall apply mutatis mutandis to a
         partnership company.


ARTICLE 255 (REPRESENTATION OF COMPANY BY LIQUIDATOR)

<PAGE>

         (1) In case where the managing member has become a liquidator, he shall
         represent the company as heretofore provided.

         (2) In case the court appoints two or more liquidators, the court may
         designate one who is to represent the company or may decide joint
         representation by several of them.


ARTICLE 256 (DUTIES OF LIQUIDATOR)


         (1) A liquidator shall, without delay after his inauguration,
         investigate the status of the company's properties, prepare an
         inventory list and a balance sheet and deliver copies thereof to
         respective members.

         (2) A liquidator shall report on the progress of the liquidation at any
         time that any member requests him to do so.


ARTICLE 257 (TRANSFER OF BUSINESS)

         In case where a liquidator intends to transfer whole or part of the
         business of the company, a resolution of a majority vote of all the
         members shall be required.


ARTICLE 258 (IMPOSSIBILITY OF FULL SATISFACTION OF OBLIGATIONS AND DEMAND FOR
CONTRIBUTION)


         (1) If the existing properties of a company are insufficient to fully
         satisfy its obligations, a liquidator may demand the members to make
         their contributions irrespective of the time for performance.

         (2) The amount of contribution in paragraph (1) shall be determined in
         proportion to the ratio of contribution by respective members.



<PAGE>

ARTICLE 259 (PERFORMANCE OF OBLIGATIONS)


         (1) A liquidator may perform the obligations of the company which have
         not yet come due.

         (2) In case of paragraph (1), an obligation in respect of which no
         interest was stipulated, the amount of the obligation deducted by the
         legal interest up to the time for performance shall be paid.

         (3) Paragraph (2) shall apply mutatis mutandis to an obligation in
         respect of which the stipulated interest is less than the legal
         interest rate.

         (4) In case of paragraph (1), conditional obligations, obligations with
         uncertain duration and any other claims against the company whose value
         is uncertain shall be discharged according to the valuation of an
         expert appointed by the court.


ARTICLE 260 (DISTRIBUTION OF SURPLUS ASSETS)

         A liquidator shall not distribute the properties of the company to its
         members until all the obligations of the company have been discharged
         completely: Provided, That he may distribute the surplus assets after
         reserving the properties necessary for the discharge of such obligation
         in dispute.


ARTICLE 261 (REMOVAL OF LIQUIDATOR)

         A liquidator appointed by the members may be dismissed by a resolution
         of a majority vote of all the members.


ARTICLE 262 (IDEM)


<PAGE>

         If a liquidator is clearly unfit for performing his duties or he has
         breached his material duties, the court may, upon the application of a
         member or any interested person, dismiss such liquidator.


ARTICLE 263 (TERMINATION OF DUTIES OF LIQUIDATOR)


         (1) When the duties of a liquidator have completed, he shall without
         delay prepare a statement of account and deliver a copy thereof to each
         member for approval.

         (2) If a member who received the statement of account in paragraph (1)
         has failed to raise an objection thereto within one month, he shall be
         deemed to have approved it: Provided, That it shall not be the case
         where a liquidator has committed some dishonest act.


ARTICLE 264 (REGISTRATION OF COMPLETION OF LIQUIDATION)

         Upon the completion of liquidation, a liquidator shall register such
         fact within two weeks at the place of the principal office and within
         three weeks at the place of each branch office from the day by the
         approval of all the members in accordance with Article 263.


ARTICLE 265 (MUTATIS MUTANDIS APPLICABLE PROVISIONS)

         Articles 183-2, 199, 200-2, 207, 208, 209 (2), 210, 382 (2), 399 and
         401 shall apply mutatis mutandis to liquidators. [This Article Wholly
         Amended by Act No. 6545, Dec. 29, 2001]


ARTICLE 266 (PRESERVATION OF BOOKS AND DOCUMENTS)

<PAGE>

         (1) The books and records as well as important documents relating to
         the business and liquidation of a company shall be preserved for ten
         years after the completion of liquidation is registered at the place of
         the principal office: Provided, That the slips or similar documents
         shall be preserved for five years. (Amended by Act No. 5053, Dec. 29,
         1995)

         (2) In case of paragraph (1), the custodian and the method of
         preservation shall be determined by a resolution of a majority vote of
         all the members. (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 267 (EXTINCTIVE PRESCRIPTION FOR MEMBER'S LIABILITY)


         (1) A member's liability under Article 212 shall extinguish when five
         years have elapsed from the day of the registration of dissolution at
         the place of the principal office.

         (2) Even after the lapse of the period mentioned in paragraph (1) if
         there remains surplus assets which have not been distributed, creditors
         of a company may demand the performance of obligations in respect of
         such surplus assets.


         CHAPTER III LIMITED PARTNERSHIP COMPANY

ARTICLE 268 (ORGANIZATION OF COMPANY)

         A limited partnership company shall be composed of members with
         unlimited liability and members with limited liability.


ARTICLE 269 (APPLICABLE PROVISIONS)


<PAGE>

         Unless otherwise provided in this Chapter, the provisions governing
         partnership companies shall apply mutatis mutandis to limited
         partnership companies.


ARTICLE 270 (ABSOLUTE PARTICULARS TO BE ENTERED IN ARTICLES OF INCORPORATION)

         The articles of incorporation of a limited partnership company shall
         state all the particulars mentioned in Article 179 and shall
         additionally specify whether the liability of each member is limited or
         unlimited.


ARTICLE 271 (MATTERS TO BE REGISTERED)

         With respect to the registration of incorporation of a limited
         partnership company, it shall be registered whether each partner's
         responsibility is limited or not, in addition to the matters as set
         forth in Article 180.

         [This Article Wholly Amended by Act No. 5053, Dec. 29, 1995]


ARTICLE 272 (CONTRIBUTION BY MEMBER WITH LIMITED LIABILITY)

         Members with limited liability shall not contribute personal services
         or credits.


ARTICLE 273 (RIGHT AND DUTY OF MANAGEMENT OF AFFAIRS)

         Unless otherwise provided in the articles of incorporation, every
         member with unlimited liability shall have the right and duty to manage
         the affairs of the company.


ARTICLE 274 (APPOINTMENT AND DISMISSAL OF MANAGER)

         The appointment and removal of a manager shall be decided by a
         resolution of a majority vote of members with unlimited liability even
         where managing members

<PAGE>

         were designated.


ARTICLE 275 (FREEDOM OF ENGAGING IN COMPETITIVE BUSINESS BY MEMBER WITH LIMITED
LIABILITY)

         A member with limited liability may, without the consent of the other
         members, effect for his own account or for the account of a third
         person any transaction which falls within the class of business carried
         on by the company or become a member with unlimited liability or a
         director of another company whose business purpose is the same kind of
         business as the company.


ARTICLE 276 (TRANSFER OF SHARE OF MEMBER WITH LIMITED LIABILITY)

         With the consent of all the members with unlimited liability, a member
         with limited liability may transfer to another person the whole or a
         part of his share in the company. The same shall apply even where such
         transfer is to be accompanied by an amendment of the articles of
         incorporation.


ARTICLE 277 (RIGHT OF MONITORING OF MEMBER WITH LIMITED LIABILITY)


         (1) A member with limited liability may, at the end of each business
         year but only during business hours, inspect the account books, a
         balance sheet and other documents of the company and may investigate
         its business and the state of its property. (Amended by Act No. 3724,
         Apr. 10, 1984)

         (2) Where any material reason exists, a member with limited liability
         may, with the permission of the court, conduct the inspection and
         investigation mentioned in paragraph (1) at any time.


ARTICLE 278 (PROHIBITION ON MANAGEMENT AND REPRESENTATION BY MEMBER WITH LIMITED
LIABILITY)


<PAGE>

         A member with limited liability shall neither manage the affairs of the
         company nor represent the company.


ARTICLE 279 (LIABILITY OF MEMBER WITH LIMITED LIABILITY)


         (1) A member with limited liability shall be liable to perform the
         obligations of the company to the extent of the amount of his
         contribution deducting the amount which has been paid already.

         (2) If any dividends were distributed notwithstanding that no profit
         has accrued to the company, such amount shall be added in determining
         the liability for performance.


ARTICLE 280 (LIABILITY IN CASE OF DECREASE IN CONTRIBUTION)

         In case where a member with limited liability reduces his
         contributions, he shall not be relieved of the liabilities under
         Articles 278 and 279 with regard to any obligation of the company which
         has been incurred prior to the registration of such reduction at the
         place of the principal office, for the period of two years after such
         registration has been effected.


ARTICLE 281 (LIABILITY OF MEMBER WITH UNLIMITED LIABILITY BY ESTOPPEL)


         (1) Where a member with limited liability has acted in a manner to
         induce others to misconceive him of a member with unlimited liability,
         he shall assume the same liability as a member with unlimited liability
         against any person who has effected a transaction with the company due
         to such misconception.

         (2) Paragraph (1) shall apply mutatis mutandis where a member with
         limited liability has acted in a manner to mislead others as to the
         extent of his liability.

<PAGE>

ARTICLE 282 (LIABILITY OF MEMBER WHOSE LIABILITY HAS BEEN CHANGED)

         Article 213 shall apply mutatis mutandis where a member with limited
         liability has become a member with unlimited liability and Article 225
         shall apply mutatis mutandis where a member with unlimited liability
         has become a member with limited liability.


ARTICLE 283 (DEATH OF MEMBER WITH LIMITED LIABILITY)


         (1) Upon the death of a member with limited liability, his successor
         shall succeed to the share of the deceased in the company and shall
         become a member.

         (2) Where, in case of paragraph (1), there are two or more successors,
         they shall appoint from among themselves one person who shall exercise
         the right of the member. If there is no such appointment, the company's
         notice or peremptory notice made upon any one of the successors shall
         be effective upon all the successors.


ARTICLE 284 (INCOMPETENCY OF MEMBER WITH LIMITED LIABILITY)

         A member with limited liability shall not be subject to retirement,
         even if he is adjudged incompetent.


ARTICLE 285 (DISSOLUTION AND CONTINUANCE OF COMPANY)


         (1) A limited partnership company shall be dissolved if either all the
         members with unlimited liability or all the members with limited
         liability have retired from the company.


<PAGE>

         (2) The members, either with unlimited liability or with limited
         liability, remaining in case of paragraph (1), may, with the unanimous
         consent among themselves, continue the company by admitting a member
         with limited liability or a member with unlimited liability.

         (3) Articles 213 and 229 (3) shall apply mutatis mutandis to the cases
         under paragraph (2).


ARTICLE 286 (CHANGE OF ORGANIZATION)


         (1) With the consent of all the members, a limited partnership company
         may transform its organization to a partnership company and continue to
         exist.

         (2) In case where all the members with limited liability have retired
         from the company, the members with unlimited liability may, with the
         unanimous consent among themselves, transform its organization to a
         partnership company and continue to exist.

         (3) In cases of paragraphs (2) and (3), the registration of dissolution
         shall be effected by the limited partnership company, and the
         registration of incorporation shall be effected by the partnership
         company, within two weeks at the place of the principal office and
         within three weeks at the place of each branch office.


ARTICLE 287 (LIQUIDATOR)

         A liquidator of a limited partnership company shall be appointed by a
         majority vote of the members with unlimited liability. If there is no
         such appointment, the managing member who has been in charge of the
         management shall become a liquidator.



<PAGE>

         CHAPTER IV STOCK COMPANY

         SECTION 1 INCORPORATION

ARTICLE 288 (PROMOTERS)

         In order to incorporate a stock company, the promoters shall prepare
         the articles of incorporation. [This Article Wholly Amended by Act No.
         6488, Jul. 24, 2001]


ARTICLE 289 (PREPARATION OF ARTICLES OF INCORPORATION, ABSOLUTE PARTICULARS TO
BE ENTERED THEREIN)


         (1) The promoters shall prepare the articles of incorporation and enter
         the following particulars therein, and each of them shall write his
         name and affix his seal or sign on it: (Amended by Act No. 3724, Apr.
         10, 1984; Act No. 5053, Dec. 29, 1995; Act No. 6488, Jul. 24, 2001)

         1.Purpose;

         2.Trade name;

         3.Total number of shares authorized to be issued;

         4.Par value per share;

         5.Number of shares to be issued at the time of incorporation;

         6.Place of principal office;

         7.Method of public notice;


<PAGE>

         8.Name, residence registration number and address of each promoter; and

         9.Deleted. (by Act No. 3724, Apr. 10, 1984)

         (2) The number of shares to be issued at the time of incorporation
         shall be no less than a fourth of the total number of shares authorized
         to be issued by the company. (Amended by Act No. 3724, Apr. 10, 1984)

         (3) Public notices by a company shall be given by inserting them in the
         Gazette or in a daily newspaper in which matters relating to current
         events are published.


ARTICLE 290 (PARTICULARS OF ABNORMAL INCORPORATION)

         The following matters shall be effective by being stated in the
         articles of incorporation:

         1.Any special benefits to be received by promoters and names of such
         promoters;

         2.Name of the person who is to make a contribution in kind, the type
         quantity and value of the subject-matter of such contribution in kind
         and the class and number of shares to be given in consideration
         thereof;

         3.The class, number and value of the property which was agreed to be
         transferred to the company after its incorporation and the name of the
         transferor; and

         4.The expenses for incorporation which are to be borne by the company
         and the amount of promoter's compensation.


ARTICLE 291 (DETERMINATION OF MATTERS CONCERNING ISSUANCE OF SHARES AT TIME OF
INCORPORATION)

         In connection with the shares to be issued at the time of
         incorporation, unless

<PAGE>

         otherwise provided in the articles of incorporation, the following
         matters shall be determined with the unanimous agreement among the
         promoters:

         1.Class and number of shares; and

         2.If the company is to issue shares at the price higher than the par
         value, the number of such shares and the price.


ARTICLE 292 (AUTHENTICATION OF ARTICLES OF INCORPORATION)

         The articles of incorporation shall take effect upon the authentication
         by a notary public.


ARTICLE 293 (SUBSCRIPTION OF SHARES BY PROMOTERS)

         Each promoter shall subscribe for shares in writing.


ARTICLE 294

         Deleted. (by Act No. 5053, Dec. 29, 1995)


ARTICLE 295 (PAYMENT OF SUBSCRIPTION PRICE AND PERFORMANCE OF CONTRIBUTION IN
KIND IN PROMOTION OF INCORPORATION)


         (1) In case where the promoters have subscribed for all of the shares
         to be issued at the time of incorporation, they shall without delay
         make full payment of the subscription price. In this case, they shall
         designate the bank or other financial institution at which the
         subscription price is to be paid and the place of payment. (Amended by
         Act No. 5053, Dec. 29, 1995)

         (2) A promoter who is to make a contribution in kind shall deliver the
         pertinent property, without delay, on the date fixed for the payment of
         the subscription

<PAGE>

         price, and if registration, recording or the creation or transfer of a
         right is required, he shall prepare completely the documents thereon
         and deliver them to the company.


ARTICLE 296 (APPOINTMENT OF OFFICERS IN PROMOTION OF INCORPORATION)


         (1) When the payment of subscription price and the performance of
         contribution in kind are completed in accordance with Article 295, the
         promoters shall without delay appoint the directors and auditors by a
         majority vote.

         (2) The promoters shall have one vote for each share which they have
         subscribed for.


ARTICLE 297 (PREPARATION OF MINUTES BY PROMOTERS)

         The promoters shall prepare and write their names and affix their seals
         or sign on the minutes of their meeting, in which the proceedings of
         deliberation and the results thereof shall be entered. (Amended by Act
         No. 5053, Dec. 29, 1995)


ARTICLE 298 (INVESTIGATION AND REPORTING BY DIRECTORS AND AUDITORS, AND REQUEST
FOR APPOINTMENT OF INSPECTOR)


         (1) The directors and auditors shall, without delay after their
         appointment, investigate whether or not all matters concerning the
         incorporation of the company have complied with the Acts, subordinate
         statutes and the articles of incorporation, and report the results
         thereof to the promoters.

         (2) Any director and auditor who was a promoter, contributor in kind or
         party to a contract whereby the company is to take over a property
         after its incorporation shall not participate in the investigation and
         reporting mentioned in paragraph (1).


<PAGE>

         (3) If all of the directors and auditors are subject to paragraph (2),
         the directors shall have a notary public make the investigation and
         reporting mentioned in paragraph (1).

         (4) In case where the articles of incorporation provide for any matter
         set forth in Article 290, the directors shall request the court to
         appoint an inspector for the purpose of conducting the investigation on
         such matter: Provided, That this shall not apply to the case of Article
         299-2.
         [This Article Wholly Amended by Act No. 5053, Dec. 29, 1995]


ARTICLE 299 (INVESTIGATION AND REPORTING BY INSPECTOR)


         (1) The inspector shall investigate any matter set forth in Article 290
         and whether or not the contribution in kind pursuant to Article 295 has
         been fulfilled and shall report the results thereof to the court.
         (Amended by Act No. 5053, Dec. 29, 1995)

         (2) The inspector shall, without delay after he has prepared a report
         of investigation under paragraph (1), deliver a copy of it to each
         promoter.

         (3) Where any statement in the report of investigation is contrary to
         the true fact, the promoters may produce an explanatory note thereon to
         the court.


ARTICLE 299-2 (CERTIFICATION OF CONTRIBUTION IN KIND, ETC.)

         With respect to the matters set forth in subparagraphs 1 and 4 of
         Article 290 the investigation and reporting by a notary public may
         substitute for the investigation of the inspector mentioned in Article
         299 (1) and with respect to the matters set forth in subparagraphs 2
         and 3 of Article 290 and the fulfillment of contribution in kind
         pursuant to Article 295, the appraisal by a certified appraiser may
         substitute for the investigation of the inspector mentioned in Article
         299 (1). In this case, the notary public or appraiser shall report on
         the

<PAGE>

         results of the investigation or appraisal to a court. (Amended by Act
         No. 5591, Dec. 28, 1998)
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 300 (DISPOSITION OF ALTERATION BY COURT)


         (1) If the court has found any of the matters falling with Article 290
         to be improper after examining the reports on investigation by an
         inspector or notary public or the results of appraisal by an appraiser
         and an explanatory note of the promoters, it may alter the same and
         notify each promoter thereof. (Amended by Act No. 5591, Dec. 28, 1998)

         (2) A promoter who disagrees to an alteration under paragraph (1) may
         revoke the subscription of his shares. In this case, the procedures for
         the incorporation may be continued through amending the articles of
         incorporation. (Amended by Act No. 5591, Dec. 28, 1998)

         (3) If no promoter revokes the subscription of his shares within two
         weeks after receiving the notification from the court, the articles of
         incorporation shall be deemed to have been amended in accordance with
         the notification. (Amended by Act No. 5591, Dec. 28, 1998)


ARTICLE 301 (OFFERING OF SHARES IN CASE OF SUBSCRIPTIVE INCORPORATION)

         Where the promoters do not subscribe for all the shares issued at the
         time of incorporation, they shall offer shares for subscription.


ARTICLE 302 (OFFER OF SHARE SUBSCRIPTION AND PARTICULARS TO BE ENTERED IN
SUBSCRIPTION FORM)


         (1) A person who intends to subscribe for shares shall complete two
         copies of

<PAGE>

         subscription form, in which the class and number of shares for which he
         is to subscribe and his address are stated, and shall write his name
         and affix his seal or shall sign thereon. (Amended by Act No. 5053,
         Dec. 29, 1995)

         (2) The promoters shall prepare the subscription form, in which the
         following particulars shall be stated: (Amended by Act No. 1212, Dec.
         12, 1962; Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29, 1995)

         1.Date on which the articles of incorporation were authenticated, and
         the name of the notary public;

         2.Matters set forth in Articles 289 (1) and 290;

         3.Duration or reasons for dissolution of the company, if determined;

         4.Class and number of shares subscribed by promoters;

         5.Matters mentioned in Article 291;

         5-2.A provision that transfer of shares shall be subject to the
         approval of the board of directors, if so determined;

         6.Distribution of interest prior to the commencement of business, if so
         determined;

         7.Redemption of shares out of profits to be distributed to
         shareholders, if so determined;

         8.A statement to the effect that the subscription of shares may be
         cancelled if the inaugural general meeting is not closed by a fixed
         date;

         9.Bank and any other financial institution in charge of the payment of
         the subscription price and the place of payment; and

         10.Name, address and business office of a transfer agent, if any.


<PAGE>

         (3) The proviso of Article 107 (1) of the Civil Act shall not apply to
         the offer of share subscription. (Amended by Act No. 1212, Dec. 12,
         1962)


ARTICLE 303 (DUTIES OF SUBSCRIBERS)

         A person who has subscribed for shares shall be responsible for the
         payment of the subscription price in accordance with the number of
         shares allotted to him by the promoters.


ARTICLE 304 (NOTICE OR PEREMPTORY NOTICE TO SUBSCRIBERS, ETC.)


         (1) Any notice or peremptory notice against a person who has subscribed
         for shares or who has applied for subscription for shares may be
         delivered to his address stated in the certificate of the share
         subscription or the subscription form for shares or to the address
         notified to the company by such person.

         (2) The notice or peremptory notice under paragraph (1) shall be deemed
         to have delivered at the time when it would normally have arrived.


ARTICLE 305 (PAYMENT OF SUBSCRIPTION PRICE FOR SHARES)


         (1) When all the shares to be issued at the time of incorporation have
         been subscribed for, the promoters shall without delay have the
         subscription price be paid fully by the subscribers.

         (2) The payment under paragraph (1) shall be made at the place as
         prescribed in the subscription form for shares.

         (3) Article 295 (2) shall apply mutatis mutandis to the cases under
         paragraph (1).

<PAGE>

ARTICLE 306 (CHANGE OF DEPOSITORY, ETC. OF PAYMENT)

         The change of the depository at which the subscription price shall be
         paid in and of the place of payment shall be subject to approval of the
         court.


ARTICLE 307 (PROCEDURES FOR FORFEITURE OF SUBSCRIBER'S RIGHTS)


         (1) In case where a person who has subscribed for shares fails to make
         the payment in accordance with Article 305, the promoters shall fix a
         certain date and shall, before two weeks prior to such date, give such
         person a notice to the effect that such person's right shall be
         forfeited if he fails to make the payment by such date.

         (2) If the person who received the notice under paragraph (1) fails to
         perform the payment by such date, his rights shall be forfeited. In
         this case, the promoters may again offer such shares for subscription.

         (3) Paragraphs (2) and (3) shall not affect any claim for damages
         against the person concerned who has subscribed for shares.


ARTICLE 308 (INAUGURAL GENERAL MEETING)


         (1) Where the payment pursuant to Article 305 and the performance of
         the contribution in kind have been completed, the promoters shall
         without delay convene an inaugural general meeting.

         (2) Articles 363 (1) and (2), 364, 368 (3) and (4), 368-2, 369 (1), 371
         (2), 372, 373, 376 through 381 and 435 shall apply mutatis mutandis to
         the inaugural general meeting. (Amended by Act No. 3724, Apr. 10, 1984)


ARTICLE 309 (RESOLUTIONS AT INAUGURAL GENERAL MEETING)


<PAGE>

         At the inaugural general meeting, resolutions shall be adopted by
         affirmative votes of at least two-thirds of the total votes of
         attending subscribers and also by affirmative votes representing a
         majority of the total number of shares which have been subscribed.


ARTICLE 310 (INVESTIGATION IN CASE OF ABNORMAL INCORPORATION)


         (1) If any matter set forth in Article 290 has been determined by the
         articles of incorporation, the promoters shall request the court for
         the appointment of an inspector to investigate such matters.

         (2) A written report of the inspector mentioned in paragraph (1) shall
         be submitted to the inaugural general meeting.

         (3) The proviso of Article 298 (4) and Article 299-2 shall apply
         mutatis mutandis to the investigation under paragraph (1). (Newly
         Inserted by Act No. 5053, Dec. 29, 1995)


ARTICLE 311 (REPORTING BY PROMOTERS)


         (1) The promoters shall report in writing on the matters relating to
         the incorporation of the company, at the inaugural general meeting.

         (2) The written report under paragraph (1) shall specify the following:

         1.General circumstances concerning subscription of shares and payment
         of subscription price; and

         2.Actual conditions regarding matters mentioned in Article 290.

<PAGE>
ARTICLE 312 (ELECTION OF OFFICERS)

         At the inaugural general meeting, directors and auditors shall be
         elected.


ARTICLE 313 (INVESTIGATION AND REPORTING BY DIRECTORS AND AUDITORS)


         (1) The directors and auditors shall, without delay after their
         inauguration, investigate whether all matters concerning the
         incorporation of the company have complied with Acts, subordinate
         statutes and the article of incorporation and shall report the results
         thereof to the inaugural general meeting. (Amended by Act No. 5053,
         Dec. 29, 1995)

         (2) Article 298 (2) and (3) shall apply mutatis mutandis to the
         investigation and reporting under paragraph (1). (Amended by Act No.
         5053, Dec. 29, 1995)

         (3) Deleted. (by Act No. 5053, Dec. 29, 1995)


ARTICLE 314 (ALTERATION OF MATTERS CONCERNING ABNORMAL INCORPORATION)


         (1) If the inaugural general meeting finds any of the matters falling
         under Article 290 to be improper, it may alter them.

         (2) Article 300 (2) and (3) shall apply mutatis mutandis to the cases
         under paragraph (1).


ARTICLE 315 (CLAIM FOR DAMAGES AGAINST PROMOTERS)

         Article 314 shall not affect any claim for damages against the
         promoters.


ARTICLE 316 (RESOLUTIONS OF AMENDING ARTICLES OF INCORPORATION AND ABANDONING

<PAGE>

INCORPORATION)


         (1) At the inaugural general meeting, a resolution calling for amending
         the Articles of incorporation or abandoning the incorporation of the
         company may be adopted.

         (2) A resolution under paragraph (1) may be adopted even where such
         matter has not been stated in the convocation notice for the meeting.


ARTICLE 317 (REGISTRATION OF INCORPORATION)


         (1) The registration of incorporation of a stock company shall be
         effected within two weeks from the day on which the procedures in
         accordance with Articles 299 and 300 have been completed in cases where
         the promoters subscribed for all the shares issued at the time of
         incorporation, and within two weeks from the day on which the inaugural
         general meeting has been closed or from the day on which the procedures
         in accordance with Article 314 has been completed in cases where the
         promoters have offered shares for subscription.

         (2) For the registration under paragraph (1), the following matters
         shall be registered: (Amended by Act No. 3724, Apr. 10, 1984; Act No.
         5053, Dec. 29, 1995; Act No. 6086, Dec. 31, 1999)

         1.Matters set forth in Article 289 (1) 1 through 4, 6 and 7;

         2.Total amount of the capital;

         3.Total number and class of the issued and outstanding shares and
         contents and number of each class of shares;

         3-2.Provision that the transfer of shares shall be subject to the
         approval of the board of director, if so determined;


<PAGE>

         3-3.Provision under which stock option is granted, if so decided;

         3-4.Places of branch offices;

         4.Duration or reasons for dissolution of the company, if determined;

         5.Dividend of interest prior to the commencement of business, if so
         determined;

         6.Redemption of shares out of profits to be distributed to
         shareholders, if so determined;

         7.Matters set forth in Article 347, if convertible shares are issued;

         8.Name and residence registration number of each director and auditor;

         9.Name, residence registration number and address of the representative
         director;

         10.Provision that two or more representing directors shall jointly
         represent the company, if so determined;

         11.Trade name and the principal office of a transfer agent, if any; and

         12.Name and resident registration number of each auditor of the audit
         committee, if such committee has been set up.

         (3) Matters set forth in paragraph (2) 1, 4, 9 and 10 shall be
         registered for the registration to be made in case of establishing a
         new branch or transferring a branch, at the place of such newly
         established branch or the changed place of such transferred branch, as
         the case may be. (Newly Inserted by Act No. 5053, Dec. 29, 1995)

         (4) Articles 181 through 183 shall apply mutatis mutandis to the
         registration of a stock company.

<PAGE>

ARTICLE 318 (CERTIFICATION AND LIABILITY BY DEPOSITORY FOR SUBSCRIPTION PRICE
            PAID IN)


         (1) A bank and other financial institution which have had the custody
         of the subscription price paid shall deliver the certification as to
         the amount of money which are in its custody on demand by a promoter or
         a director.

         (2) The bank and other financial institution under paragraph (1) may
         not assert, in respect of the amount of money duly certified to be in
         its custody, non-performance, in whole or in part, of such payment or
         any restriction upon the return of such amount against the company.


ARTICLE 319 (TRANSFER OF RIGHTS DERIVING FROM SHARE SUBSCRIPTION)

         The transfer of any right deriving from the subscription of shares
         shall not be effective against the company.


ARTICLE 320 (RESTRICTIONS ON ASSERTING NULLITY OR REVOCATION OF SHARE
            SUBSCRIPTION)


         (1) Once the company comes into existence, no subscriber may assert the
         nullity of his subscription by reason of defects in any requirement as
         to the subscription form for shares, nor may revoke his subscription on
         the ground of fraud, duress or mistake.

         (2) The same shall apply even before the company comes into existence,
         if the subscriber has attended, and has exercised his rights at, the
         inaugural general meeting.


ARTICLE 321 (PROMOTER'S WARRANTY LIABILITY FOR SUBSCRIPTION AND PAYMENT)


         (1) In case where, after the company comes into existence, any shares
         issued at

<PAGE>

         the time of incorporation of the company are found to have not been
         subscribed or the subscription for certain shares has been revoked, the
         promoters shall be deemed to have subscribed for such shares jointly.

         (2) In case where, after the company comes into existence, shares upon
         which payment of the subscription price in accordance with Article 295
         (1) or 305 (1) has not been completed, the promoters shall make such
         payment jointly and severally.

         (3) Article 315 shall apply mutatis mutandis to the cases under
         paragraphs (2) and (3).


ARTICLE 322 (PROMOTER'S LIABILITY FOR DAMAGES)


         (1) If promoters have neglected to perform their duties in connection
         with the incorporation of the company, they shall be jointly and
         severally liable for damages to the company.

         (2) If promoters have failed to perform their duties wilfully or by
         gross negligence, they shall be jointly and severally liable for
         damages to third persons.


ARTICLE 323 (JOINT AND SEVERAL LIABILITY OF PROMOTERS AND OFFICERS)

         If the directors or auditors have neglected to perform their duties
         under Article 313 (1) and are thereby liable for damages to the company
         or to third persons and if the promoters are also liable therefor, the
         directors, auditors and promoters shall be liable for such damages
         jointly and severally.


ARTICLE 324 (RELEASE OF PROMOTER'S LIABILITY AND DERIVATIVE SUITS BY
            SHAREHOLDERS)

         Articles 400, and 403 through 406 shall apply mutatis mutandis to the
         promoters.

<PAGE>

ARTICLE 325 (INSPECTOR'S LIABILITY FOR DAMAGE)

         If an inspector appointed by the court has failed to perform his duties
         wilfully or by gross negligence, he shall be liable for damages to the
         company or to third persons.


ARTICLE 326 (PROMOTER'S LIABILITY WHERE COMPANY FAILS TO COME INTO EXISTENCE)


         (1) If the company fails to come into existence, the promoters shall be
         jointly and severally liable for all acts conducted in connection with
         the incorporation of the company.

         (2) In case of paragraph (1), the promoters shall assume any
         expenditures incurred in connection with the incorporation of the
         company.


ARTICLE 327 (LIABILITY OF SELF-STYLED PROMOTER)

         A person who has consented to have his name and any statement
         indicating his participation in the incorporation of the company
         entered in the application form for subscription and/or in any other
         documents which has been issued in connection with the offering of
         shares for subscription shall assume the same liability as that of a
         promoter.


ARTICLE 328 (ACTION FOR NULLITY OF INCORPORATION)


         (1) The nullity of the incorporation of a company may be contended only
         by the shareholders, directors or auditors and only by means of an
         action which shall be filed within two years from the day on which the
         company comes into existence. (Amended by Act No. 3724, Apr. 10, 1984)


<PAGE>

         (2) Articles 186 through 193 shall apply mutatis mutandis to the action
         mentioned in paragraph (1).


         SECTION 2 SHARES

         SUB-SECTION 1 SHARES AND SHARE CERTIFICATES

ARTICLE 329 (FORMATION OF CAPITAL AND PAR VALUE PER SHARE)


         (1) The capital of a stock company shall be no less than fifty million
         won. (Newly Inserted by Act No. 3724, Apr. 10, 1984)

         (2) The capital of a stock company shall be divided into shares.

         (3) The par value per share shall be equal.

         (4) The par value per share shall be at least one hundred won. (Amended
         by Act No. 5591, Dec. 28, 1998)


ARTICLE 329-2 (SHARE SPLIT)


         (1) A company may split shares by a resolution by a general meeting of
         shareholders under Article 434.

         (2) In case of paragraph (1), the par value per share after the split
         shall not be less than the amount under Article 329 (4).


<PAGE>

         (3) The provisions of Articles 440 through 444 shall apply mutatis
         mutandis to a share split under paragraph (1).
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 330 (RESTRICTIONS ON ISSUANCE OF SHARE BELOW PAR)

         Shares may not be issued at a price less than the par value: Provided,
         That this shall not apply to the case of Article 417. (Amended by Act
         No. 1212, Dec. 12, 1962)


ARTICLE 331 (LIABILITY OF SHAREHOLDER)

         The liability of a shareholder shall be limited to the subscription
         price which he has paid for his shares.


ARTICLE 332 (LIABILITY OF PERSON WHO SUBSCRIBED FOR SHARES IN FICTITIOUS NAME OR
            IN OTHER PERSON'S NAME)


         (1) A person who has subscribed for shares either in the name of a
         fictitious person or in the name of other person without such other
         person's consent shall assume the same liability as the subscriber.

         (2) A person who has subscribed for shares in the name of other person
         with such other person's consent shall take a joint and several
         liability with such other person for the payment of subscription price
         for shares.


ARTICLE 333 (CO-OWNERSHIP OF SHARES)


         (1) Persons who have subscribed for shares jointly shall be jointly and
         severally liable for the payment of the subscription price.


<PAGE>

         (2) Where a share belongs to a co-ownership of two or more persons,
         they shall designate one from among themselves who is to exercise the
         rights of a shareholder.

         (3) Where no one is designated to exercise the rights of a shareholder,
         a notice or peremptory notice required to be given to the co-owners may
         be given to any one of them.


ARTICLE 334 (PROHIBITION OF SET-OFF BY SHAREHOLDER AGAINST COMPANY)

         A shareholder may not assert a set-off against the company as regards
         to payment of the subscription price for shares.


ARTICLE 335 (TRANSFERABILITY OF SHARES)


         (1) Shares shall be transferable to other persons: Provided, That the
         articles of incorporation may subject the transfer of shares to the
         requirement of an approval of the board of directors. (Amended by Act
         No. 5053, Dec. 29, 1995)

         (2) The transfer of shares which is not approved by the board of
         directors in contravention of the proviso of paragraph (1) shall have
         no effect against the company. (Newly Inserted by Act No. 5053, Dec.
         29, 1995)

         (3) The transfer of shares made before the issuance of share
         certificates shall have no effect against the company: Provided, That
         it shall not be the case if six months have passed since the date of
         the formation of the company or the date of the payment of the
         subscription price for new shares. (Amended by Act No. 3724, Apr. 10,
         1984)


ARTICLE 335-2 (REQUEST FOR APPROVAL OF TRANSFER)

<PAGE>

         (1) In case where the transfer of shares requires the approval of the
         board of directors, the shareholder intending to transfer his shares
         may request in writing the company to approve the transfer, by
         specifying the contemplated transferee and the class and number of the
         shares to be transferred.

         (2) The company shall notify in writing the shareholder of whether or
         not it approves the transfer, within one month after the request under
         paragraph (1) is made.

         (3) If the company fails to notify the shareholder of its refusal
         within the period set forth in paragraph (2), the board of directors
         shall be deemed to have approved the transfer of shares.

         (4) The shareholder who received the notification of the refusal to
         approve the transfer as referred to in paragraph (2) may request the
         company to designate the alternative transferee or to purchase the
         shares, within twenty days after receiving the notification.
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 335-3 (REQUEST FOR DESIGNATION OF ALTERNATIVE TRANSFEREE)


         (1) If a shareholder requests the company to designate an alternative
         transferee, the board of directors shall designate one and notify in
         writing the shareholder and the designated person thereof, within two
         weeks after the request is made.

         (2) If the board of directors fails to notify the shareholder of the
         designation of the alternative transferee within the period set forth
         in paragraph (1), the board of directors shall be deemed to have
         approved the transfer of shares.
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 335-4 (CLAIM FOR SALE BY DESIGNATED TRANSFEREE)

<PAGE>

         (1) Any person designated as the alternative transferee in accordance
         with Article 335-3 (1) may request in writing the shareholder who made
         the request for such designation to sell the shares to him within ten
         days after he receives the notification of such designation.

         (2) Article 335-3 (2) shall apply mutatis mutandis to the cases where
         the person designated as the alternative transferee fails to make the
         request for sale within the period set forth in paragraph (1).
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 335-5 (DETERMINATION OF SALE PRICE)


         (1) In case of Article 335-4, the sale price of the shares concerned
         shall be determined through a negotiation between the shareholder and
         the person requesting for sale. (Amended by Act No. 6488, Jul. 24,
         2001)

         (2) In case where a negotiation under paragraph (1) is not effected
         within 30 days from the date of receiving the request under Article
         335-4 (1), the provisions of Article 374-2 (4) and (5) shall apply
         mutatis mutandis. (Amended by Act No. 6488, Jul. 24, 2001)
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 335-6 (APPRAISAL RIGHTS OF SHAREHOLDERS)

         Article 374-2 (2) through (5) shall apply mutatis mutandis where the
         shareholder requests the company to purchase the shares in accordance
         with Article 335-2 (4). (Amended by Act No. 6488, Jul. 24, 2001)
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 335-7 (REQUEST FOR APPROVAL BY TRANSFEREE OF SHARES)

<PAGE>

         (1) In case where the transfer of shares is subject to the approval of
         the board of directors, any person who has acquired the shares may
         request in writing the company to approve such acquisition, by
         specifying the class and number of the acquired shares.

         (2) Articles 335-2 (2) through (4), and 335-3 through 335-6 shall apply
         mutatis mutandis to the cases under paragraph (1).
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 336 (METHOD OF TRANSFER OF SHARES)


         (1) Share certificates shall be delivered for the transfer of shares.

         (2) A possessor of a share certificate shall be presumed as a due
         holder thereof.
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 337 (REQUIREMENTS FOR SETTING UP OF TRANSFER OF REGISTERED SHARES
            AGAINST COMPANY)


         (1) The transfer of a registered share shall not be asserted against
         the company, unless the name and address of the transferee have been
         entered in the register of shareholders.

         (2) A company may designate a transfer agent in accordance with the
         articles of incorporation. In this case, if the transfer agent has
         entered the name and address of the transferee in the part of a set of
         the register of shareholders, the entry of a change of holders under
         paragraph (1) shall be deemed to have been duly effected. (Newly
         Inserted by Act No. 3724, Apr. 10, 1984)


ARTICLE 338 (PLEDGING OF REGISTERED SHARES)

<PAGE>

         (1) In order to have a registered share pledged, the share certificate
         shall be delivered to the pledgee.

         (2) Without being in possession of the share certificate, a pledgee
         shall not assert his pledge right against third persons.


ARTICLE 339 (SUBROGATION OF PLEDGE)

         In case of redemption, consolidation, split or conversion of shares, a
         pledge over the original shares may be extended to the money or shares
         which the original shareholder is to receive in consequence thereof.
         (Amended by Act No. 5591, Dec. 28, 1998)


ARTICLE 340 (REGISTERED PLEDGE ON REGISTERED SHARES)


         (1) If, in case of a pledge created over a registered share, the
         company has, at the request of the pledgee, enter the name and address
         of the pledgee in the register of shareholders and enter his name in
         the share certificate, the pledgee may receive from the company the
         dividends of profits or interest, the distribution of surplus assets or
         money mentioned in Article 339, and may apply them to the discharge of
         claims due to him in preference to other creditors.

         (2) Article 353 (3) of the Civil Act shall apply mutatis mutandis to
         the cases under paragraph (1) above.

         (3) A pledgee under paragraph (1) may demand that the company deliver
         the share certificate of the share mentioned in Article 340.


ARTICLE 340-2 (STOCK OPTION)

<PAGE>

         (1) The company may, under the conditions as prescribed by the articles
         of incorporation, grant by the resolution of the general shareholders'
         meeting as provided in Article 434 the option of purchasing new shares
         or shares it owns (hereafter referred to as "stock option") at a fixed
         price established in advance (hereafter referred to as "exercising
         price for stock option") to its directors, auditors or other employees
         who will, or will be able to contribute to the promotion of its
         incorporation and management, technological innovation, etc.: Provided,
         That, in case the exercising price for stock option is lower than
         substantial price of the stock concerned, the company may compensate
         for the relevant difference by cash or transfer its own shares
         equivalent to the relevant difference. In this case, the substantial
         stock price shall be appraised as of the date of exercising the stock
         option.

         (2) The stock option as referred to in paragraph (1) shall not be
         granted to the persons who fall under any of the following
         subparagraphs:

         1.A stockholder who holds 10/100 or more of the total outstanding
         shares of the company excluding the nonvoting shares;

         2.A person who actually exercises an influence over such major
         management matters of the company as the appointment or dismissal of
         directors and auditors, etc.; and

         3.Spouse and lineal ascendents or descendents of the person falling
         under subparagraphs 1 and 2.

         (3) The number of new shares to be issued or the company's own shares
         to be transferred under paragraph (1) shall not exceed 10/100 of the
         total outstanding shares of the company.

         (4) The exercising price for stock option as referred to in paragraph
         (1) shall be in excess of the prices falling under any of the following
         subparagraphs:

         1.In the case of issuing new shares, the higher amount between their
         substantial price as of the date of granting the stock option and their
         face value; and


<PAGE>

         2.In the case of transferring the company's own shares, their
         substantial price as of the date of granting the stock option.
         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]


ARTICLE 340-3 (GRANTING STOCK OPTION)


         (1) The following particulars shall be entered in the provisions of the
         articles of incorporation concerning the stock option as referred to in
         Article 340-2 (1):

         1.An intention that a stock option may be granted in specified cases;

         2.Categories and the number of shares to be issued or transferred in
         the case of exercising the stock option;

         3.Qualifications of a person to whom a stock option is to be granted;

         4.Exercising period of the stock option; and

         5.An intention that the granting of the stock option may be revoked by
         a resolution of the board of directors in specified cases.

         (2) In adopting at the general shareholders' meeting a resolution
         concerning the granting of stock option as referred to in Article 340-2
         (1), the following matters shall be determined:

         1.Names of the persons who are to be granted the stock option;

         2.Method of granting the stock option;

         3.Matters concerning the exercising price for stock option and an
         assessment thereof;

         4.Exercising period of the stock option; and


<PAGE>

         5.Categories and the number of shares to be issued or transferred, in
         the case of exercising the stock option, to each of the persons to be
         granted the stock option.

         (3) The company shall enter into contract with the optionee who has
         been granted the stock option under a resolution by the general
         shareholders' meeting as referred to in paragraph (2), and prepare a
         written contract thereon within a reasonable period of time.

         (4) The company shall keep the written contract under paragraph (3) in
         its principal office until the expiration of exercising period of the
         stock option so as to ensure that the shareholders are able to peruse
         it during the office hours.
         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]


ARTICLE 340-4 (EXERCISE OF STOCK OPTION)


         (1) The stock option under Article 340-2 (1) may be exercised only when
         the stock optionee holds office or post in the company for more than
         two years since the date when the matters as referred to in
         subparagraphs of Article 340-3 (2) are determined by a resolution of
         the general shareholders' meeting.

         (2) The stock option as referred to in Article 340-2 (1) shall not be
         transferable: Provided, That, in the case of the death of optionee
         entitled to exercise the stock option, his heir thereto may exercise
         it.

         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]


ARTICLE 340-5 (APPLICABLE PROVISIONS)

         Article 350 (2), the latter part of Article 350 (3), Articles 351 and
         516-8 (1), (3) and (4), and the former part of Article 516-9 shall
         apply mutatis mutandis to the case of issuing new shares upon
         exercising the stock option.
         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]



<PAGE>

ARTICLE 341 (ACQUISITION OF COMPANY'S OWN SHARES)

         A company may not acquire its own shares on its own account, except in
         the following cases: (Amended by Act No. 3724, Apr. 10, 1984; Act No.
         5053, Dec. 29, 1995)

         1.In case of the retirement of shares;

         2.In case of the merger of companies or of the acquisition of the
         entire business of another company;

         3.Where it is necessary to do so for achieving the objective in the
         course of exercising the rights of the company;

         4.Where it is necessary to deal with the fractional shares; and

         5.In case of the exercise of appraisal rights by the shareholder.


ARTICLE 341-2 (ACQUISITION OF COMPANY'S OWN SHARES FOR GRANTING STOCK OPTION)


         (1) In the case of acquiring its own shares for the purpose of
         transferring them under Article 340-2 (1) or of acquiring them by
         transfer from outgoing directors, auditors or other employees, the
         company may, on its own account, acquire its own shares within the
         limit not exceeding 10/100 of the total outstanding shares: Provided,
         That the total amount for these acquisitions shall be within the limit
         whereby the dividends under Article 462 (1) may be paid.

         (2) In case where the company acquires its own shares as referred to in
         paragraph (1) for value from a shareholder who holds shares exceeding
         10/100 of the total outstanding shares, a resolution under Article 434
         shall be adopted by the general shareholders' meeting with respect to
         matters falling under any of the following subparagraphs. In this case,
         the company shall acquire the

<PAGE>

         relevant shares within six months after the resolution by the general
         shareholders' meeting:

         1.Name of the shareholder intending to transfer his shares;

         2.Categories and numbers of the shares to be acquired; and

         3.Values of the shares to be acquired.

         (3) In case of acquiring its own shares pursuant to paragraph (1), the
         company shall dispose of the shares in a reasonable period of time.

         (4) The provision of Article 433 (2) shall apply mutatis mutandis to
         the general shareholders' meeting under paragraph (2).
         [This Article Newly Inserted by Act No. 6068, Dec. 31, 1999]


ARTICLE 341-3 (CREATION OF PLEDGE ON COMPANY'S OWN SHARES)

         A company may not create a pledge on its own shares in excess of a
         twentieth of the total number of issued and outstanding shares:
         Provided, That such ceiling shall not apply in case of subparagraphs 2
         and 3 of Article 341.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 342 (DISPOSITION OF COMPANY'S OWN SHARES)

         In case of subparagraph 1 of Article 341, the company shall, without
         delay, proceed to the cancellation of the shares, and in the cases of
         subparagraphs 2 through 5 of Article 341, and the proviso of Article
         341-3, it shall dispose of the shares or the pledge within a reasonable
         period of time. (Amended by Act No. 3724, Apr. 10, 1984; Act No. 5053,
         Dec. 29, 1995; Act No. 6068, Dec. 31, 1999)


ARTICLE 342-2 (ACQUISITION OF PARENT COMPANY'S SHARES BY SUBSIDIARY COMPANY)

<PAGE>

         (1) In case where a company (hereafter referred to as the "parent
         company") holds more than 50/100 of the total issued and outstanding
         shares in another company (hereafter referred to as the "subsidiary
         company"), the subsidiary company may not acquire shares in the parent
         company, except in the following cases: (Amended by Act No. 6488, Jul.
         24, 2001)

         1.In case of the all-inclusive exchange and all-inclusive transfer of
         stocks, the merger of companies or the acquisition of the entire
         business of another company; and

         2.Where it is necessary to do so for achieving the objective in the
         course of exercising the rights of the company.

         (2) In case of paragraph (1), the subsidiary company shall dispose of
         the shares of the parent company within six months after it has
         acquired them.

         (3) If a parent company and its subsidiary company in aggregate hold,
         or a subsidiary company by itself holds, more than 50/100 of the total
         issued and outstanding shares in another company, such another company
         shall be deemed as a subsidiary company of the parent company for the
         purpose of the application of this Act. (Amended by Act No. 6488, Jul.
         24, 2001)
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 342-3 (ACQUISITION OF ANOTHER COMPANY'S SHARES)

         If a company acquires more than 10/100 of the total issued and
         outstanding shares in another company, it shall without delay notify
         such another company thereof.
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 343 (RETIREMENT OF SHARES)



<PAGE>

         (1) Shares may be retired only in accordance with the provisions
         relating to the reduction of capital: Provided, That this shall not
         apply to the case of the retirement of shares effected out of profits
         to be distributed to shareholders in accordance with the articles of
         incorporation.

         (2) Articles 440 and 441 shall apply mutatis mutandis in case of the
         retirement of shares.


ARTICLE 343-2 (RETIREMENT OF SHARES BY RESOLUTION OF GENERAL MEETING)


         (1) A company may retire the shares after purchasing them under a
         resolution of the regular general meeting pursuant to Article 434, in
         addition to a case under Article 343.

         (2) The kind and total number of shares to be purchased, the total sum
         of acquired values and the available period for share purchases shall
         be determined by a resolution at the general meeting under paragraph
         (1).

         (3) In case of paragraph (2), the total sum of acquired values of
         shares to be purchased shall not exceed the amount obtained by
         subtracting the amount under each subparagraph of Article 462 (1) from
         the net assets value on the balance sheet.

         (4) In case of paragraph (2), the available period for share purchase
         shall not pass the closing date of the general meeting in a settlement
         term, which comes first after the resolution under paragraph (1).

         (5) A company shall not make the share purchase under paragraph (1) in
         case where it is feared that the net assets value on the balance sheet
         for the settlement term of relevant business year falls short of the
         total sum of each subparagraph of Article 462 (1).

         (6) Notwithstanding the net assets value on the balance sheet for the
         settlement term of relevant business year falls short of the total sum
         of each subparagraph

<PAGE>

         of Article 462 (1), if a company retires the shares after purchasing
         them under paragraph (1), the directors are jointly and severally
         liable to indemnify the company against the relevant insufficient
         amount. In such case, the provisions of Article 462-3 (4) (proviso)
         shall apply mutatis mutandis.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 344 (DIFFERENT CLASSES OF SHARES)


         (1) A company may issue two or more classes of shares which are
         different in respect of their particulars as to the dividends of
         profits or interest or the distribution of the surplus assets.

         (2) In case of paragraph (1), the articles of incorporation shall
         provide for the contents and number of each class of shares and shall
         also provide the minimum dividend rate with respect to a class of
         shares having any preferential right as to the dividend of profits.
         (Amended by Act No. 5053, Dec. 29, 1995)

         (3) If the company issues different classes of shares, special
         provisions may be made from class to class with respect to the
         subscription for new shares, the consolidation, split, or retirement of
         shares or the allotment of shares in consequence of a merger or split
         of companies, even where no such matters have been provided in the
         articles of incorporation. (Amended by Act No. 5591, Dec. 28, 1998)


ARTICLE 345 (REDEEMABLE SHARES)


         (1) In case of Article 344, the company may provide that a class of
         shares, having preferential right as to a dividend may be retired out
         of profits.

         (2) In case of paragraph (1), the price, time and method of the
         redemption of shares and the number of redeemable shares shall be
         stated in the articles of incorporation.



<PAGE>

ARTICLE 346 (ISSUANCE OF CONVERTIBLE SHARES)


         (1) If a company issues different classes of shares, the articles of
         incorporation may provide that a shareholder may demand the shares
         subscribed by the shareholder to be converted into shares of another
         class. In this case, the conditions of conversion, the period within
         which the conversion may be demanded, and the number and particulars as
         to shares to be issued in consequence of the conversion shall be
         prescribed.

         (2) The number of shares to be issued in consequence of the conversion
         shall be reserved in each class of shares under Article 344 (2) within
         the period mentioned in paragraph (1).


ARTICLE 347 (PROCEDURES OF ISSUANCE OF CONVERTIBLE SHARES)

         In case of Article 346 (1), the following particulars shall be stated
         in the subscription form for shares or the certificate of preemptive
         rights to new shares: (Amended by Act No. 3724, Apr. 10, 1984)

         1.A statement to the effect that the shares concerned may be converted
         into shares of another class;

         2.Conditions of conversion;

         3.Contents of the shares to be issued in consequence of the conversion;
         and

         4.Period within which the conversion may be demanded.


ARTICLE 348 (ISSUE PRICE OF SHARES TO BE ISSUED IN CONSEQUENCE OF CONVERSION)

         If shares are to be issued in consequence of the conversion, the issue
         price of

<PAGE>

         such new shares shall be that of the shares which existed before the
         conversion.


ARTICLE 349 (DEMAND OF CONVERSION)


         (1) A person demanding the conversion shall submit to the company two
         copies of written demand form together with the share certificates.

         (2) The written demand form mentioned in paragraph (1) shall contain
         the class and number of shares to be converted and the date of the
         demand and the shareholder demanding conversion shall write his name
         and affix his seal or sign on it. (Amended by Act No. 5053, Dec. 29,
         1995)

         (3) Deleted. (by Act No. 5053, Dec. 29, 1995)


ARTICLE 350 (TAKING EFFECT OF CONVERSION)


         (1) Conversion of shares shall take effect at the time when it is
         demanded.

         (2) Any shareholder of the shares converted during the period mentioned
         in Article 354 (1) may not exercise the voting right to such shares at
         the general shareholders' meeting held during such period.

         (3) With regard to a dividend of profit or interest to the shares
         converted pursuant to paragraph (1), the conversion shall be deemed to
         have been effected at the end of the business year in which the
         convertsion is demanded. In this case, the articles of incorporation
         may provide that with respect to a dividend of profit or interest to
         the new shares, the conversion shall be deemed to have been effected at
         the end of the business year immediately before the business year in
         which the conversion is demanded.

         [This Article Wholly Amended by Act No. 5053, Dec. 29, 1995]



<PAGE>

ARTICLE 351 (REGISTRATION OF CONVERSION)

         The registration for changes caused by the conversion of shares shall
         be made at the place of the principal office, within two weeks from the
         last day of the month in which the conversion is demanded.
         [This Article Wholly Amended by Act No. 5053, Dec. 29, 1995]


ARTICLE 352 (PARTICULARS TO BE ENTERED IN REGISTER OF SHAREHOLDERS)


         (1) In case where registered shares are issued, the following
         particulars shall be entered in the register of shareholders: (Amended
         by Act No. 3724, Apr. 10, 1984)

         1.Name and address of each shareholder;

         2.Class and number of shares held by each shareholders;

         2-2.The serial number of such share certificates when the share
         certificates have been issued for shares held by each shareholder; and

         3.Date of acquisition of each share.

         (2) If bearer share certificates are issued, the register of
         shareholders shall state the class, number, serial number and issuance
         date of such certificate.

         (3) If, in case of paragraphs (1) and (2), convertible shares are
         issued, the register of shareholder shall also contain the particulars
         set forth in Article 347.


ARTICLE 353 (EFFECT OF REGISTER OF SHAREHOLDERS)


         (1) Any notice or peremptory notice to a shareholder or a pledgee may
         be effective if sent to the address entered in the register of
         shareholders or other

<PAGE>

         address notified to the company by such person.

         (2) Article 304 (2) shall apply mutatis mutandis to the notice or
         peremptory notice under paragraph (1).


ARTICLE 354 (CLOSURE OF REGISTER OF SHAREHOLDERS AND RECORD DATE)


         (1) In order to fix the person who shall exercise the voting right,
         receive dividends or exercise other rights as a shareholder or a
         pledgee, the company may suspend the alteration of entry in the
         register of shareholders for a specified period or it may deem any
         shareholder or pledgee whose name appears in the register of
         shareholders on a specified date to be the shareholder or pledgee who
         shall be entitled to exercise such rights. (Amended by Act No. 3724,
         Apr. 10, 1984)

         (2) The period mentioned in paragraph (1) shall not exceed three
         months. (Amended by Act No. 3724, Apr. 10, 1984)

         (3) The date mentioned in paragraph (1) shall be determined to be a day
         within three months before the date on which the person may exercise
         the rights as a shareholder or pledgee. (Amended by Act No. 3724, Apr.
         10, 1984)

         (4) If a company has determined the period or the date mentioned in
         paragraph (1), it shall give public notice thereof two weeks in
         advance: Provided, That it shall not be the case where such period or
         date has been designated by the articles of incorporation.


ARTICLE 355 (TIME TO ISSUE SHARE CERTIFICATES)


         (1) A company shall without delay issue share certificates after its
         incorporation or after the date of payment on new shares.


<PAGE>

         (2) No share certificate may be issued before the incorporation or the
         date of payment on new shares.

         (3) Share certificates issued in contravention of paragraph (2) shall
         be null and void: Provided, That this shall not affect any claim for
         damages against those who have issued them.


ARTICLE 356 (PARTICULARS TO BE ENTERED IN SHARE CERTIFICATES)

         Each share certificate shall contain the following particulars and a
         serial number and the representative director shall write his name and
         affix his seal or shall sign thereon: (Amended by Act No. 5053, Dec.
         29, 1995)

         1.Trade name of the company;

         2.Date of incorporation;

         3.Total number of shares authorized to be issued by the company;

         4.Par value per share;

         5.Date of issuance of such certificates, if the shares are issued after
         the incorporation of the company;

         6.Particulars and class of shares, if there are different classes of
         shares;

         6-2.Provision that the transfer of shares shall be subject to the
         approval of the board of directors, if so determined;

         7.Particulars set forth in Article 345 (2), if there are redeemable
         share; and

         8.Particulars set forth in Article 347, if there are convertible
         shares.


ARTICLE 357 (ISSUANCE OF BEARER SHARE CERTIFICATES)

<PAGE>

         (1) A bearer share certificate may be issued only if it is so provided
         in the articles of incorporation.

         (2) A shareholder may at any time demand of the company that a bearer
         share certificate be converted into a registered share certificate.


ARTICLE 358 (EXERCISE OF RIGHTS BY SHAREHOLDERS HOLDING BEARER SHARE
CERTIFICATES)

         The owner of a bearer share certificate may not exercise his rights as
         a shareholder unless he deposits his share certificate with the
         company.


ARTICLE 358-2 (NON-BEARING OF SHARE CERTIFICATES)


         (1) Unless otherwise provided in the articles of incorporation, any
         shareholder may declare to the company that he will not bear share
         certificates as to his registered shares.

         (2) Upon receiving the declaration mentioned in paragraph (1), the
         company shall without delay enter in the register of shareholders and
         part of a set thereof its intention that it will not issue the share
         certificates and notify the shareholder thereof. In this case, the
         company may not issue the share certificates concerned.

         (3) In case of paragraph (1), any share certificates issued previously
         shall be submitted to the company and the company shall invalidate them
         or deposit them with a transfer agent.

         (4) Notwithstanding paragraphs (1) through (3), a shareholder may
         demand at any time that the company issue or return the share
         certificates.

         [This Article Wholly Amended by Act No. 5053, Dec. 29, 1995]



<PAGE>

ARTICLE 359 (BONA FIDE ACQUISITION OF SHARE CERTIFICATES)

         Article 21 of the Check Act shall apply mutatis mutandis to share
         certificates. [This Article Wholly Amended by Act No. 3724, Apr. 10,
         1984]


ARTICLE 360 (JUDGMENT OF NULLIFICATION AND RE-ISSUANCE OF SHARE CERTIFICATES)


         (1) A share certificate may be invalidated by undergoing the procedures
         of public summons.

         (2) A person who has lost his share certificates shall not request the
         company to re-issue them, unless he has obtained a judgment of
         nullification with respect thereto.


         SUB-SECTION 2 ALL-INCLUSIVE SHARE SWAP

ARTICLE 360-2 (INCORPORATION OF COMPLETE PARENT COMPANY BY ALL-INCLUSIVE
TRANSFER OF SHARES)


         (1) A company may become the company possessing the total number of
         issued shares of another company (hereinafter referred to as the
         "complete parent company") by an all-inclusive share swap under the
         provisions of this Sub-Section. In such case, the said another company
         shall be called the "complete subsidiary".

         (2) The shares owned by the shareholders of the company becoming the
         complete subsidiary by an all-inclusive share swap (hereafter in this
         Sub-Section, referred to as the "share swap") shall be transferred to
         the company becoming the complete parent company by the share swap on
         the day of share swap; and the shareholders of the company becoming the
         said complete
<PAGE>
         subsidiary shall become the shareholders of the company becoming the
         said complete parent company by receiving the allocation of new shares
         to be issued by the company becoming the said complete parent company
         for the share swap.
         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]

ARTICLE 360-3 (PREPARATION OF CONTRACT FOR SHARE SWAP AND APPROVAL OF
              SHAREHOLDERS' GENERAL MEETING)


         (1) A company which intends to make a share swap shall prepare a
         contract for share swap and obtain an approval of the shareholders'
         general meeting.

         (2) The resolution for an approval under paragraph (1) shall be
         governed by the provisions of Article 434.

         (3) Matters falling under any of the following subparagraphs shall be
         entered on the share swap contract:

         1.Where the company becoming a complete parent company alters the
         articles of incorporation due to the share swap, the relevant
         provisions;

         2.Matters on the total number and kinds of new shares to be issued by
         the company becoming a complete parent company, and the number of such
         shares by kind, and on the allocation of new shares to the shareholders
         of the company becoming a complete subsidiary;

         3.Matters on the amount of capital to be increased for the company
         becoming a complete parent company, and on the capital reserves;

         4.Where the amount to be paid to the shareholders of the company
         becoming a complete subsidiary is determined, the relevant provisions;

         5.Date of the shareholders' general meeting of each company to make a
         resolution under paragraph (1);


<PAGE>

         6.Date to make a share swap;

         7.Where each company pays a dividend not later than the date of share
         swap or makes a payment of dividend in cash under Article 462-3, the
         relevant limit amount;

         8.Where a company transfers its own stocks under Article 360-6, the
         total number and kinds of stocks to be transferred, and the number of
         such stocks by kind; and

         9.Where the directors, auditors or members of audit committee who are
         to be appointed by the company becoming a complete parent company are
         determined, their names and resident registration numbers.

         (4) A company shall enter the matters falling under any of the
         following subparagraphs on the notification and public notice under
         Article 363:

         1.Major details of a share swap contract;

         2.Details and exercising methods of the appraisal right under Article
         360-5 (1); and

         3.Where one company has a regulation in its articles of incorporation
         to the effect that a share transfer requires an approval of the board
         of directors, and the articles of incorporation of other company does
         not carry such regulations, the purport thereof.
         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-4 (PUBLIC NOTIFICATION OF SHARE SWAP CONTRACT)


         (1) The directors shall keep the documents falling under any of the
         following subparagraphs at the head office from two weeks prior to the
         meeting day of the shareholders' general meeting under Article 360-3
         (1) to the date on which six months elapse since the date of share
         swap:


<PAGE>

         1.Contract for share swap;

         2.Documents carrying the reasons for an allocation of stocks to the
         shareholders of the company becoming a complete subsidiary; and

         3.Final balance sheets and profit and loss statements of each company
         making a share swap prepared on a certain date within six months prior
         to the meeting day of the shareholders' general meeting under Article
         360-3 (1) (in a case of simplified share swap under Article 360-9, the
         date on which the public notice or notification is made under paragraph
         (2) of the same Article).

         (2) The provisions of Article 391-3 (3) shall apply mutatis mutandis to
         the documents under paragraph (1).
         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-5 (APPRAISAL RIGHT OF OPPOSING SHAREHOLDERS)


         (1) The shareholders opposed to a resolution of the board of directors
         on the matter to be approved under Article 360-3 (1) may, if they
         informed in writing the company of their intents to oppose to the said
         resolution prior to the shareholders' general meeting, claim to the
         company for the purchase of shares owned by them in writing, indicating
         the kind and number of such shares, within 20 days since the date of
         resolution of such general meeting.

         (2) The shareholders informed the company in writing of their intents
         to be opposed to the share swap within two weeks since the date of
         public notice or notification under Article 360-9 (2) may claim to the
         company for the purchase of shares owned by them in writing, indicating
         the kind and number of such shares, within 20 days since the expiration
         of such period.

         (3) The provisions of Article 374-2 (2) through (5) shall apply mutatis
         mutandis to the claims for purchase under paragraphs (1) and (2).

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]



<PAGE>

ARTICLE 360-6 (TRANSFER OF TREASURY SHARES SUBSTITUTING ISSUE OF NEW SHARES)

         The company becoming a complete parent company may transfer the
         treasury shares owned by it substituting an issue of new shares in
         making a share swap, which are to be disposed of in a considerable
         period under Article 342, to the shareholders of the company becoming a
         complete subsidiary.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-7 (MAXIMUM LIMIT OF CAPITAL INCREASE OF COMPLETE PARENT COMPANY)


         (1) The capital of the company becoming a complete parent company shall
         not be increased in excess of the amount obtained by subtracting the
         amount falling under any of the following subparagraphs from the
         current net assets amount of the company becoming a complete subsidiary
         on the date of share swap:

         1.Amount to be paid to the shareholders of the company becoming a
         complete subsidiary; and

         2.Total sum of book values of the shares to be transferred to the
         shareholders of the company becoming a complete subsidiary under
         Article 360-6.

         (2) In case where the company becoming a complete parent company
         already owns the shares of the company becoming a complete subsidiary
         prior to share swap, the capital of the company becoming the complete
         parent company shall not be increased in excess of the limit of amount
         obtained by subtracting the amount falling under each subparagraph of
         paragraph (1) from the amount derived from multiplying the current net
         assets value of the company becoming the complete subsidiary on the
         date of share swap by the rate of the number of shares to be
         transferred to the company becoming the complete parent company due to
         a share swap with the total number of shares issued by the relevant
         company.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]
<PAGE>


ARTICLE 360-8 (PROCEDURES FOR INVALIDATION OF SHARE CERTIFICATES)


         (1) The company becoming a complete subsidiary due to a share swap
         shall, where its shareholders' general meeting has made an approval
         under Article 360-3 (1), make a public notice on the matters falling
         under any of the following subparagraphs one month before the date of
         share swap, and notify the shareholders listed in the share register
         and the pledgees respectively:

         1.Purport of an approval under Article 360-3 (1);

         2.Purport that the share certificates shall be submitted to the company
         not later than the day preceding the date of share swap; and

         3.Purport that the share certificates shall become invalid on the date
         of share swap.

         (2) The provisions of Articles 442 and 444 shall apply mutatis mutandis
         to the case where an approval is made under Article 360-3 (1),

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-9 (SIMPLIFIED SHARE SWAP)


         (1) In case where there exists a consent by all shareholders of the
         company becoming a complete subsidiary or where the company becoming a
         complete parent company owns 90/100 or more of the total number of
         shares issued by the company becoming the complete subsidiary, an
         approval of the shareholder's general meeting of the company becoming
         the complete subsidiary may substitute for an approval of the board of
         directors.

         (2) The company becoming a complete subsidiary shall, in the case of
         paragraph (1), make a public notice to the effect that a share swap is
         to be made without

<PAGE>

         obtaining an approval of the shareholders' general meeting within two
         weeks since the preparation of a share swap contract, or notify the
         shareholders thereof: Provided, That this shall not apply to the case
         where there exists a consent of all shareholders.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-10 (SMALL-SCALE SHARE SWAP)


         (1) In case where total number of new shares issued for a share swap by
         the company becoming a complete parent company is not in excess of
         5/100 of total number of shares issued by the relevant company, an
         approval of the shareholders' general meeting under Article 360-3 (1)
         of the relevant company may substitute for an approval of the board of
         directors: Provided, That this shall not apply to the case where the
         amount to be paid to the shareholders of the company becoming a
         complete subsidiary, if so determined, is in excess of 2/100 of the
         current net assets value of the company becoming the complete parent
         company on its final balance sheet as provided in Article 360-4 (1) 3.

         (2) The shares to be transferred to the shareholders of the company
         becoming a complete subsidiary under Article 360-6 shall be deemed the
         new shares to be issued for a share swap, in applying the provisions of
         paragraph (1).

         (3) In a case of the text of paragraph (1), the share swap contract
         shall include the purport that the company becoming a complete parent
         company may make a share swap without obtaining an approval of the
         shareholders' general meeting under Article 360-3 (1), and shall not
         include the matters listed in paragraph (3) 1 of the said Article.

         (4) The company becoming a complete parent company shall make a public
         notice on the business title and head office of the company becoming a
         complete subsidiary, the date of share swap and the purport that a
         share swap is to be made without obtaining an approval under Article
         360-3 (1), or notify the shareholders thereof, within two weeks since
         the preparation of a share swap contract.


<PAGE>

         (5) In case where the shareholder possessing the shares equivalent to
         20/100 or more of the total number of shares issued by the company
         becoming a complete parent company notifies of his intent to be opposed
         to the share swap under the text of paragraph (1), the share swap under
         this Article shall not be made.

         (6) In a case of the text of paragraph (1), where the provisions of
         Article 360-4 (1) is applicable to the company becoming a complete
         parent company, the term "two weeks prior to the meeting days of
         shareholders' general meeting under Article 360-3 (1)" in other
         portions than each subparagraph of the same paragraph of the same
         Article, and "the meeting days of shareholders' general meeting under
         Article 360-3 (1)" in subparagraph 3 of the same paragraph of the same
         Article shall be "the date of a public notice or notification under
         paragraph (4) of this Article", respectively.

         (7) In a case of the text of paragraph (1), the provisions of Article
         360-5 shall not be applicable.
         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-11 (MUTATIS MUTANDIS APPLICATION OF REGULATIONS FOR FRACTIONAL
               SHARES)


         (1) The provisions of Article 443 shall apply mutatis mutandis to the
         case of share swap of a company.

         (2) The provisions of Articles 339 and 340 (3) shall apply mutatis
         mutandis to the pledge for the shares of the company becoming a
         complete subsidiary in a case of share swap.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-12 (POST PUBLIC NOTICE OF DOCUMENTS CARRYING MATTERS ON SHARE SWAP)


         (1) The directors shall keep the documents carrying the matters falling
         under

<PAGE>

         any of the following subparagraphs at the head office for six weeks
         from the date of share swap:

         1.Date of share swap;

         2.Current net assets value of the company becoming a complete
         subsidiary on the date of share swap;

         3.Number of shares of a complete subsidiary transferred to a complete
         parent company due to a share swap; and

         4.Other matters on the share swap.

         (2) The provisions of Article 391-3 (3) shall apply mutatis mutandis to
         the documents under paragraph (1).

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-13 (TENURE OF DIRECTOR AND AUDITOR OF COMPLETE PARENT COMPANY)

         The directors and auditors of the company becoming a complete parent
         company due to a share swap who have taken office before the share swap
         shall retire from office on the closing date of the general meeting in
         a settlement term, which comes first after the date of the share swap.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-14 (LITIGATION OVER INVALIDITY OF SHARE SWAP)


         (1) Any shareholder, director, auditor, member of audit committee or
         liquidator of each company may claim the invalidity of share swap by
         only a litigation within six months since the date of such share swap.

         (2) The litigation under paragraph (1) shall be under an exclusive
         jurisdiction of the district court having jurisdiction over the
         location of head office of the

<PAGE>

         company becoming a complete parent company.

         (3) When the judgment invalidating a share swap becomes final, the
         company becoming a complete parent company shall transfer the shares of
         the company becoming a complete subsidiary, which have been owned by
         it, to the shareholders of new shares issued for a share swap or those
         transferred under Article 360-6.

         (4) The provisions of Articles 187 through 189, 190 (text), 191, 192,
         377 and 431 shall apply mutatis mutandis to the litigation under
         paragraph (1), and those of Articles 339 and 340 (3) to the case of
         paragraph (3), respectively.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


         SUB-SECTION 3 ALL-INCLUSIVE TRANSFER OF SHARES

ARTICLE 360-15 (ESTABLISHMENT OF COMPLETE PARENT COMPANY DUE TO ALL-INCLUSIVE
SHARE TRANSFER)


         (1) A company may establish a complete parent company due to an
         all-inclusive share transfer under this Sub-Section (hereafter in this
         Sub-Section, referred to as the "share transfer"), and become a
         complete sub-sidiary.

         (2) The shares of a company becoming a complete subsidiary due to the
         share transfer, which are owned by its shareholders, shall be
         transferred to a complete parent company established due to the share
         transfer, and the shareholders of the relevant complete subsidiary
         shall become the shareholders of the relevant complete parent company
         by receiving an allocation of shares issued by the relevant complete
         parent company for the share transfer.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]

<PAGE>


ARTICLE 360-16 (APPROVAL OF SHARE TRANSFER BY SHAREHOLDERS' GENERAL MEETING)


         (1) A company intending to transfer the shares shall prepare a plan for
         share transfer stating matters falling under any of the following
         subparagraphs, and obtain an approval of the shareholders' general
         meeting:

         1.Provisions of the articles of incorporation of a complete parent
         company to be established;

         2.Kind and number of the shares issued for a share transfer by a
         complete parent company to be established, and matters on the share
         allocation to the shareholders of a company becoming a complete
         subsidiary;

         3.Matters on the equity capital value and capital reserves of a
         complete parent company to be established;

         4.Where the amount to be paid to the shareholders of a company becoming
         a complete subsidiary is determined, the provisions therefor;

         5.Time of the share transfer;

         6.Where a company becoming a complete subsidiary distributes profits
         not later than the date of share transfer, or makes the profit
         distribution by cash under Article 462-3, the relevant limit;

         7.Names and resident registration numbers of the directors, auditors or
         the members of the audit committee of a complete parent company to be
         established; and

         8.Where a company jointly establish a complete parent company due to
         the share transfer, the purport thereof.

         (2) The resolution for an approval under paragraph (1) shall be
         governed by Article 434.


<PAGE>

         (3) The provisions of Article 360-3 (4) shall apply mutatis mutandis to
         the approval of shareholders' general meeting in the case of paragraph
         (1).

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-17 (PUBLIC NOTICE OF DOCUMENTS SUCH AS PLANS FOR SHARE TRANSFER,
               ETC.)


         (1) The directors shall keep the documents falling under any of the
         following subparagraphs at the main office from two weeks prior to the
         meeting days of shareholders' general meeting under Article 360-16 (1)
         to the date on which six months elapse since the date of share
         transfer:

         1.Plans for share transfer under Article 360-16 (1);

         2.Documents stating the reasons for share allocation to the
         shareholders of a company becoming a complete subsidiary; and

         3.Final balance sheet and profit and loss statement of a company
         becoming a complete subsidiary which are prepared on a certain date
         within six months prior to the meeting days of shareholders' general
         meeting under Article 360-16 (1).

         (2) The provisions of Article 391-3 (3) shall apply mutatis mutandis to
         the documents under paragraph (1).

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-18 (LIMIT OF EQUITY CAPITAL OF COMPLETE PARENT COMPANY)

         The equity capital of a complete parent company to be established shall
         not exceed the amount obtained by subtracting the amount to be paid to
         the shareholders of a company becoming a complete subsidiary on the
         date of share transfer from the current net assets value of the said
         company.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]

<PAGE>

ARTICLE 360-19 (PROCEDURES FOR INVALIDATION OF SHARE CERTIFICATES)


         (1) The company becoming a complete subsidiary due to share transfer
         shall, where it has made a resolution under Article 360-16 (1),
         publicly notify the matters falling under any of the following
         subparagraphs, and notify the shareholders and pledgees listed in the
         share registry, respectively:

         1.Purport that a resolution has been made under Article 360-16 (1);

         2.Purport that the share certificates shall be submitted to a company
         within the period specified for over one month; and

         3.Purport that the shares shall become invalid on the date of share
         transfer.

         (2) The provisions of Articles 442 and 444 shall apply mutatis mutandis
         to the case where a resolution under Article 360-16 (1) has been made.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-20 (REGISTRATION DUE TO SHARE TRANSFER)

         Where a share transfer is made, the matters provided in Article 317 (2)
         shall be registered within two weeks at the location of main office of
         the established complete parent company, and within three weeks at the
         location of its branch offices.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]

ARTICLE 360-21 (EFFECTIVE PERIOD OF SHARE TRANSFER)

         Any transfer of shares shall become effective by a registration under
         Article 360-20 by the complete parent company established due to such
         transfer at the location of its main office.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]
<PAGE>


ARTICLE 360-22 (MUTATIS MUTANDIS APPLICATION OF SHARE TRANSFER PROVISIONS)

         The provisions of Articles 360-5, 360-11 and 360-12 shall apply mutatis
         mutandis to the case of share transfer.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 360-23 (LITIGATION OVER INVALIDITY OF SHARE TRANSFER)


         (1) Any shareholder, director, auditor, member of audit committee or
         liquidator of each company may claim the invalidity of share transfer
         by only a litigation within six months since the date of share
         transfer.

         (2) The litigation under paragraph (1) shall be under an exclusive
         jurisdiction of the district court having jurisdiction over the
         location of head office of the company becoming a complete parent
         company.

         (3) When the judgment invalidating a share transfer becomes final, the
         company becoming a complete parent company shall transfer the shares of
         the company becoming a complete subsidiary, which have been owned by
         it, to the shareholders of new shares issued for a share transfer.

         (4) The provisions of Articles 187 through 193 and 377 shall apply
         mutatis mutandis to the litigation under paragraph (1), and those of
         Articles 339 and 340 (3) to the case of paragraph (3), respectively.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


         SECTION 3 ORGANS OF COMPANY

         SUB-SECTION 1 GENERAL SHAREHOLDERS'

<PAGE>

         MEETING

ARTICLE 361 (POWER OF GENERAL SHAREHOLDERS' MEETING)

         At general shareholders' meetings, resolutions may be adopted as to
         matters provided by this Act or the articles of incorporation.


ARTICLE 362 (DECISION OF CONVOCATION)

         The convocation of a general meeting shall be determined by the board
         of directors unless otherwise provided by this Act.


ARTICLE 363 (NOTICE AND PUBLIC NOTICE OF CONVOCATION)


         (1) The notice for convocation of a general meeting shall be dispatched
         in writing or by an electronic data to each shareholder at least two
         weeks prior to the day set for such meeting: Provided, That if such
         notice has not arrived at the address of a shareholder entered on the
         register of shareholders for three consecutive years, the company shall
         not be required to give such notice to that shareholder. (Amended by
         Act No. 5053, Dec. 29, 1995; Act No. 6488, Jul. 24, 2001)

         (2) The written notice under paragraph (1) shall state the
         subject-matters of the meeting.

         (3) If the company has issued bearer share certificate, it shall give
         public notice stating its intention that the general meeting is to be
         held and the subject-matters of the meeting, at least three weeks prior
         to the day set for such meeting.

         (4) Paragraphs (1) through (3) shall not apply with respect to the
         shareholders who are not entitled to vote.



<PAGE>

ARTICLE 363-2 (SHAREHOLDERS' RIGHT TO MAKE PROPOSAL)


         (1) Shareholders who hold no less than 3/100 of the total issued shares
         other than nonvoting shares may make a proposal to make a matter an
         object of a general shareholders meeting (hereafter referred to as a
         "shareholders' proposal") to directors in writing at least six weeks
         prior to the day set for such meeting.

         (2) Shareholders under paragraph (1) may request that directors record
         the summary of the proposal submitted by the shareholders in addition
         to the subject-matters of the meeting in a notice and public notice
         under Article 363 in writing at least six weeks prior to the day set
         for such meeting.

         (3) Where there is a shareholders' proposal under paragraph (1),
         directors shall report to the board of directors, which shall accept
         the proposal as the subject-matters of the general meeting of
         shareholders, unless its contents are in breach of Acts, subordinate
         statutes, or the articles of incorporation. In this case, the
         shareholders who made the proposal shall, on their request, be given an
         opportunity to explain the proposal at the general meeting.

         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 364 (PLACE OF CONVOCATION)

         Unless otherwise provided in the articles of incorporation, a general
         meeting shall be convened at the place of the principal office or at
         some place adjacent thereto.


ARTICLE 365 (CONVOCATION OF GENERAL MEETING)


         (1) An ordinary general meeting shall be convened at least once a year
         at a


<PAGE>
         fixed time.

         (2) In case where a company has determined the settlement of accounts
         to take place more than two times in a year, a general meeting shall be
         convened with respect to each of such period for the settlement of
         accounts.

         (3) An extraordinary general meeting shall be convened from time to
         time whenever necessary.


ARTICLE 366 (DEMAND FOR CONVOCATION BY MINORITY SHAREHOLDERS)


         (1) Shareholders who hold no less than 3/100 of the total issued and
         outstanding shares may demand the convocation of an extraordinary
         general meeting, by filing with the board of directors a written
         statement of the proposed subject-matters of the meeting together with
         the reasons for the proposed convocation. (Amended by Act No. 5591,
         Dec. 28, 1998)

         (2) If the steps for the convocation of a general meeting are not taken
         promptly after the demand mentioned in paragraph (1), the shareholder
         who made such demand may convene such meeting with the permission of
         the court. (Amended by Act No.
         5591, Dec. 28, 1998)

         (3) At a general meeting held in accordance with paragraphs (1) and
         (2), an inspector may be appointed to investigate the affairs of the
         company and the status of its property. (Amended by Act No. 5591, Dec.
         28, 1998)


ARTICLE 366-2 (MAINTENANCE OF ORDER AT GENERAL MEETING)


         (1) The president of the general meeting shall be elected at the
         general meeting unless otherwise provided by the articles of
         incorporation.

         (2) The president of the general meeting shall have control over the

<PAGE>

         maintenance of order and the proceedings at the general meeting.

         (3) The president of the general meeting may order anyone, who notably
         disturbs the order by intentionally speaking or acting for a
         filibuster, to stop speaking or to retire from the meeting room.

         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]


ARTICLE 367 (APPOINTMENT OF INSPECTOR)

         At a general meeting, an inspector may be appointed to examine the
         documents submitted by the directors and the report of the auditors.


ARTICLE 368 (METHOD OF ADOPTING RESOLUTIONS AND EXERCISE OF VOTING RIGHTS)


         (1) Unless otherwise provided by this Act or articles of incorporation,
         resolutions shall be adopted at the general meetings by affirmative
         votes of a majority of the voting rights of shareholders present
         thereat and representing at least 1/4 of the total issued and
         outstanding shares. (Amended by Act No. 5053, Dec. 29, 1995)

         (2) Persons holding bearer share certificates shall deposit them with
         the company one week prior to the date set for the meeting.

         (3) A shareholder may have a proxy exercise the voting rights on his
         behalf. In this case, the proxy shall submit a document proving his
         power of representation at the general meeting.

         (4) A person who has special interest in the resolution of a general
         meeting may not exercise his voting rights thereupon.


ARTICLE 368-2 (EXERCISE OF VOTE IN DISUNITY)


<PAGE>

         (1) If a shareholder has two or more votes, he may exercise them in
         disunity. In this case, he shall notify the company in writing of his
         intention of so doing and the reasons therefor three days before the
         meeting is to be held.

         (2) The company may reject such exercise of vote in disunity by a
         shareholder, unless he has accepted a trust of shares or he holds the
         shares in behalf of another person.

         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 368-3 (EXERCISE OF VOTING RIGHT IN WRITING)


         (1) Shareholders may exercise their voting rights in writing, without
         attending the general meeting, pursuant to the provisions of the
         articles of incorporation.

         (2) Notice of the convocation of the general meeting shall be
         accompanied by the reference data and the documents necessary for
         shareholders to exercise their voting rights under paragraph (1).

         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]


ARTICLE 369 (VOTES)


         (1) A shareholder shall have one vote for each share.

         (2) The company shall not be entitled to vote in respect of its own
         shares.

         (3) In case a company, its parent company and its subsidiary company
         together or its subsidiary company alone holds more than 1/10 of the
         total issued and outstanding shares in another company, the shares of
         the company or of the parent company held by such another company shall
         not be entitled to vote. (Newly Inserted by Act No. 3724, Apr. 10,
         1984)

<PAGE>

ARTICLE 370 (NON-VOTING SHARES)


         (1) In case where a company issues different classes of shares, the
         articles of incorporation may a shareholder of a certain class of
         shares having preferential rights as to the dividend of profits shall
         not be entitled to vote: Provided, That such shareholder shall be
         entitled to vote from the general meeting subsequent to the general
         meeting where a resolution of disallowing the preferred dividend as
         provided in the articles of incorporation is adopted until the time of
         closing of the general meeting where a resolution of allowing such
         dividend is adopted.

         (2) The total number of the shares having no voting rights as mentioned
         in paragraph (1) shall not exceed 1/4 of the total issued and
         outstanding shares.


ARTICLE 371 (COMPUTATION OF QUORUM AND NUMBER OF VOTES)


         (1) In the computation with respect to resolutions of a general
         meeting, the number of non-voting shares shall be excluded from the
         total number of the issued and outstanding shares.

         (2) In the computation with respect to resolutions of a general
         meeting, the number of votes which cannot be exercised in accordance
         with Article 368 (4) shall be excluded from the number of votes of the
         shareholders present at the meeting.


ARTICLE 372 (RESOLUTION TO POSTPONE OR CONTINUE GENERAL MEETING)


         (1) A general meeting may adopt a resolution for postponement or
         continuation of the meeting.

         (2) In case of Article 363 (1), the provisions of paragraph above shall
         not apply.



<PAGE>

ARTICLE 373 (MINUTES OF GENERAL MEETING)


         (1) Minutes shall be prepared for the proceedings of a general meeting.

         (2) The minutes shall record the summary of proceedings of the meeting
         and the results thereof and the chairman as well as the directors who
         were present at the meeting shall write their names and affix their
         seals or shall sign thereon. (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 374 (RESOLUTION FOR TRANSFER, TAKEOVER OR LEASE OF BUSINESS)


         (1) A resolution as provided for in Article 434 shall be required for a
         company to effect the following Acts: (Amended by Act No. 6488, Jul.
         24, 2001)

         1.Transfer of the whole or an important part of the business of the
         company;

         2.Conclusion, alteration or rescission of a contract for leasing the
         whole business for giving a mandate to manage such business or for
         sharing with another person the entire profits and losses from the
         business or of a similar contract;

         3.Takeover of the whole business of another company; and

         4.Takeover of parts of business of another company which significantly
         affect the company's business.

         (2) In a notice or public notice of the convocation of the general
         shareholders' meeting for any act under paragraph (1), the contents and
         exercising method of appraisal rights as set forth in Article 374-2 (1)
         and (2) shall be specified. (Newly Inserted Act No. 5053, Dec. 29,
         1995)



<PAGE>

ARTICLE 374-2 (APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS)


         (1) If a shareholder who dissent from the subject-matters of resolution
         set forth in Article 374 has notified in writing the company of his
         intention of such dissenting before the general shareholders' meeting
         is held, he may request in writing the company to purchase the shares
         owned by him, which request shall be made within twenty days after the
         resolution is adopted at the general meeting and shall specify the
         class and number of such shares.

         (2) The company shall purchase the shares within two months after
         receiving the request under paragraph (1).

         (3) The purchase price of the shares pursuant to paragraph (2) shall be
         determined through a negotiation between the shareholder and the
         company. (Amended by Act No. 6488, Jul. 24, 2001)

         (4) Where the negotiation under paragraph (3) has not been attained
         within 30 days since the receipt of a request under paragraph (1), the
         company or the shareholder requesting for the purchase of shares may
         request the court to determine the purchase price. (Amended by Act No.
         6488, Jul. 24, 2001)

         (5) Where a court makes a decision on the purchase price of shares
         under paragraph (4), the said court shall compute it by a fair value in
         view of the assets status of the company and other situations. (Newly
         Inserted by Act No. 6488, Jul. 24, 2001) [This Article Newly Inserted
         by Act No. 5053, Dec. 29, 1995]


ARTICLE 375 (EX POST FACTO INCORPORATION)

         Article 374 shall apply mutatis mutandis to a contract whereby a
         company acquires, within two years from its existence, a certain
         property which existed prior to its incorporation and are to be
         continuously used for purposes of its business, for value of no less
         than 5/100 of the capital. (Amended by Act No.

<PAGE>

         5591, Dec. 28, 1998)


ARTICLE 376 (ACTION FOR REVOCATION OF RESOLUTION)


         (1) If the procedures for the convocation of a general meeting or the
         manner of a resolution are in violation of any Acts, subordinate
         statutes or the articles of incorporation or are remarkably unfair or
         the substantive contents of a resolution are contrary to the articles
         of incorporation, the shareholders, directors or auditors may file an
         action for revocation of the resolution, within two months from the
         date of such resolution. (Amended by Act No. 3724, Apr. 10, 1984; Act
         No. 5053, Dec. 29, 1995)

         (2) Articles 186 through 188, the main text of Article 190 and Article
         191 shall apply mutatis mutandis to the actions under paragraph (1).
         (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 377 (DUTY TO FURNISH SECURITY OF SHAREHOLDER FILING ACTION)


         (1) In case of a shareholder filing an action for revocation of a
         resolution, the court may, upon request of the company, order him to
         furnish an appropriate security, unless he is a director or auditor of
         the company. (Amended by Act No. 3724, Apr. 10, 1984)

         (2) Article 176 (4) shall apply mutatis mutandis to the request
         mentioned in paragraph (1).


ARTICLE 378 (REGISTRATION OF REVOCATION OF RESOLUTION)

         If the matters with respect to which a resolution was adopted have been
         registered and a judgment revoking such resolution has become final and
         conclusive, registration thereof shall be effected at the place of the
         principal

<PAGE>

         office and each branch office.


ARTICLE 379 (DISMISSAL OF ACTION BY COURT AT DISCRETION)

         The court may dismiss an action for revocation of a resolution if it
         considers the revocation would be improper by taking into consideration
         the contents of the resolution, the current status of the company and
         all other circumstances.


ARTICLE 380 (ACTION FOR AFFIRMING NULLITY AND NON-EXISTENCE OF RESOLUTION)

         Articles 186 through 188, 190 (the main sentence), 191, 377, and 378
         shall apply mutatis mutandis to an action for affirming the nullity of
         a resolution on the grounds that the contents of the resolution adopted
         at a general meeting are contrary to Acts and subordinate statutes and
         to an action for affirming the non-existence of a resolution on the
         grounds that such material defects exist in the procedures for the
         convocation of a general meeting or in the method of resolution that no
         resolution of the general meeting is deemed to have been existed.
         (Amended by Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29, 1995)


ARTICLE 381 (ACTION FOR REVOCATION OR ALTERATION OF IMPROPER RESOLUTION)


         (1) In case where a remarkably improper resolution is adopted at a
         general meeting where a certain shareholder is unable to vote in
         accordance with Article 368 (4) and the adoption of such resolution
         could have been avoided if he had exercised the voting right, that
         shareholder may file an action for the revocation or alteration of such
         resolution within two months from the date of such resolution.

         (2) Articles 186 through 188, 190 (the main sentence), 191, 377 and 378
         shall apply mutatis mutandis to the action under paragraph (1).
         (Amended by Act No. 5591, Dec. 28, 1998)

<PAGE>

         SUB-SECTION 2 DIRECTORS AND BOARD OF DIRECTORS

ARTICLE 382 (ELECTION, RELATIONSHIP WITH COMPANY)


         (1) Directors shall be elected at a general shareholders' meeting.

         (2) Provisions relating to mandates shall apply mutatis mutandis to the
         relationship between the company and the directors.


ARTICLE 382-2 (CONCENTRATED VOTE)


         (1) Where a general meeting of a company is convened to elect two
         directors or more, shareholders who hold no less than 3/100 of the
         total issued shares other than nonvoting shares may request that the
         company elect directors by means of a concentrated vote, except as
         otherwise prescribed by the articles of incorporation.

         (2) A request under paragraph (1) shall be made in a written statement
         at least seven days prior to the day set for the meeting.

         (3) Where there is a request under paragraph (1), each shareholder
         shall have voting rights per share of the same number as number of
         directors to be elected, with respect to a resolution of election of
         directors, and the voting rights may be exercised by means of a
         concentrated vote for one or several candidates for directors.

         (4) Where directors are to be elected by a vote under paragraph (3),
         the directors shall be elected among and in order of candidates who
         obtain the most

<PAGE>

         votes.

         (5) Where there is a request under paragraph (1), the chairman of the
         meeting shall inform the members.

         (6) A written statement under paragraph (2) shall be kept at the
         principal office until the general meeting is completed and offered for
         the inspection of the shareholders during the business hours.

         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 382-3 (DUTIES OF DIRECTORS TO BE FAITHFUL)

         Directors shall perform their duties faithfully for the good of the
         company in accordance with Acts, subordinate statutes, and the articles
         of incorporation.

         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 382-4 (DUTIES OF DIRECTORS TO KEEP SECRET)

         Directors shall not divulge the business secret of the company, which
         has come to his knowledge during his duties, not only while in the
         office but also after the retirement.

         [This Article Newly Inserted by Act No. 6488, Jul. 24, 2001]


ARTICLE 383 (NUMBER, TERM OF OFFICE)


         (1) Directors shall be at least three in number: Provided, That in case
         of a company of which the total of capital is less than five hundred
         million won, the number of the directors may be one or two. (Amended by
         Act No. 5591, Dec. 28, 1998)

         (2) The terms of office of directors may not exceed three years.
         (Amended by Act No. 3724, Apr. 10, 1984)


<PAGE>

         (3) The terms of office under paragraph (2) may be extended by the
         articles of incorporation up to the closing of the ordinary general
         shareholders' meeting convened in respect of the last period for the
         settlement of accounts within their terms of office. (Amended by Act
         No. 3724, Apr. 10, 1984)

         (4) Where the number of a director is turned into one under the proviso
         of paragraph (1), the term "board of directors" shall be read as
         "general meeting of shareholders" from among the provisions of Articles
         302 (2) 5-2, 317 (2) 3-2, 335 (1) (proviso) and (2), 335-2 (1) and (3),
         335-3 (1) and (2), and 335-7 (1), Article 340-3 (1) 5, subparagraph 6-2
         of Article 356, and Articles 397 (1) and (2), 398, 416 (text), 461 (1)
         (text) and (3), 462-3 (1), 464-2 (1), 469, 513 (2) (text), and 516-2
         (2) (text) (including where this provision shall apply mutatis
         mutandis), respectively, and the term "where the board of directors has
         made a resolution" from the provisions of Article 522-3 (1) shall be
         read as "where the notice for convocation of a general meeting has been
         made under Article 363 (1)". (Newly Inserted by Act No. 5591, Dec. 28,
         1998; Act No. 6086, Dec. 31, 1999)

         (5) Where the number of a director is turned into one under the proviso
         of paragraph (1), the provisions of Articles 390 through 392, 393 (2),
         399 (2), 526 (3), 527 (4), 527-2, 527-3 (1), and 527-5 (2) shall not
         apply. (Newly Inserted by Act No.
         5591, Dec. 28, 1998)

         (6) Where the number of a director is turned into one under the proviso
         of paragraph (1), the director shall represent the company and perform
         the functions of the board of directors under Articles 362, 363-2 (3),
         366 (1), 393 (1), and 412-3 (1).
         (Newly Inserted by Act No. 5591, Dec. 28, 1998)


ARTICLE 384

         Deleted. (by Act No. 5053, Dec. 29, 1995)


ARTICLE 385 (REMOVAL)

<PAGE>

         (1) A director may be removed from office at any time by a resolution
         adopted at a general shareholders' meeting under Article 434: Provided,
         That in case where the term of office of a director was fixed and he is
         removed without cause before the expiration of such term, he may claim
         for damages caused thereby.

         (2) If the removal of a director is rejected at a general shareholders'
         meeting notwithstanding the existence of dishonest acts or any grave
         fact in violation of Acts, subordinate statutes or the articles of
         incorporation in connection with his duties, any shareholder who hold
         no less than 3/100 of the total issued and outstanding shares may
         demand the court to remove the director, within one month from the date
         on which the above resolution of the general meeting was made. (Amended
         by Act No. 5591, Dec. 28, 1998)

         (3) Article 186 shall apply mutatis mutandis in case of paragraph (1).


ARTICLE 386 (VACANCY)


         (1) A director retiring from office due to the expiration of his term
         of office or because of resignation shall continue to have the rights
         and duties of a director until newly elected director inaugurates
         office, if the directors remaining in office would otherwise become
         fewer than the minimum number prescribed by Acts or by the articles of
         incorporation,

         (2) The court may, if it deems it necessary in case of paragraph (1),
         appoint a person who is to temporarily perform the duties of a
         director, upon application by a director, auditor or any other
         interested person. In this case, registration thereof shall be effected
         at the place of the principal office. (Amended by Act No. 5053, Dec.
         29, 1995)


ARTICLE 387 (QUALIFICATION SHARES)


<PAGE>

         If the articles of incorporation provide that any director shall have a
         certain number of shares, the directors shall deposit such number of
         share certificates with the auditors, unless otherwise provided by the
         articles of incorporation.


ARTICLE 388 (REMUNERATION FOR DIRECTOR)

         If the amount of remuneration to be received by directors has not been
         fixed by the articles of incorporation, it shall be determined by the
         resolution at a general shareholders' meeting.


ARTICLE 389 (REPRESENTATIVE DIRECTOR)


         (1) A company shall appoint, by the resolution of the board of
         directors, a director who shall represent the company: Provided, That
         the articles of incorporation may provide that such representative
         director shall be elected at a general shareholders' meeting.

         (2) In the event of paragraph (1), it may be provided that two or more
         representative directors shall jointly represent the company.

         (3) Articles 208 (2), 209, 210 and 386 shall apply mutatis mutandis to
         the representative directors. (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 390 (CONVOCATION OF BOARD MEETING)


         (1) A meeting of the board of directors shall be convened by each
         director: Provided, That it shall not be the case where the board of
         directors has designated the director who is to convene such meeting.

         (2) Any directors who have not been designated as eligible to convene
         the board under the proviso of paragraph (1) may request the director
         so designated to


<PAGE>


         convene it. Where the director so designated refuses the convocation of
         board meeting without any justifiable reasons, other directors may
         convene it. (Newly Inserted by Act No. 6488, Jul. 24, 2001)

         (3) In convening a meeting of the board of directors, the date of such
         meeting shall be fixed and a notice of convocation shall be dispatched
         to each director and auditor at least one week prior to such date:
         Provided, That the above period may be shortened by the articles of
         incorporation. (Amended by Act No. 3724, Apr. 10, 1984)

         (4) When all the directors and auditors agree, a meeting of the board
         of directors may be held at any time without undergoing the procedures
         set forth in paragraph (3). (Amended by Act No. 3724, Apr. 10, 1984;
         Act No. 6488, Jul. 24, 2001)


ARTICLE 391 (METHOD OF RESOLUTION BY BOARD OF DIRECTORS)


         (1) A resolution of the board of directors shall be adopted by the
         presence of a majority of directors in office and the affirmative votes
         of a majority of directors present at the meeting: Provided, That the
         voting requirement may be increased by the articles of incorporation.

         (2) The board of directors may, unless otherwise provided by the
         articles of incorporation, allow all directors to take part in the
         adoption of a resolution by means of a communication system of
         transmitting and receiving visual images and sounds simultaneously,
         without the personal attendance of all or part of them at the meeting.
         In this case, the relevant directors shall be deemed to have attended
         the meeting. (Newly Inserted by Act No. 6086, Dec. 31, 1999)

         (3) Articles 368 (4) and 371 (2) shall apply mutatis mutandis to the
         cases under paragraph (1) above. [This Article Wholly Amended by Act
         No. 3724, Apr. 10, 1984]

<PAGE>

ARTICLE 391-2 (AUDITOR'S POWER TO ATTEND BOARD OF DIRECTORS AND STATE OPINION)


         (1) Auditors may attend meetings of the board of directors and state
         his opinion thereat.

         (2) When any auditor deems that a director acts or is likely to act in
         contravention of Acts, subordinate statutes or the articles of
         incorporation, the auditor shall report such to the board of directors.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 391-3 (MINUTES OF BOARD OF DIRECTORS)


         (1) Minutes shall be prepared with regard to the proceedings of a
         meeting of the board of directors.

         (2) The agenda, gist of the progress, results thereof, dissenters and
         reasons for their dissention shall be entered in the minutes, and the
         directors and auditors present at the meeting shall write their names
         and affix seals, or sign thereon.
         (Amended by Act No. 5053, Dec. 29, 1995; Act No. 6086, Dec. 31, 1999)

         (3) Shareholders may, during office hours, make a request either for
         their perusal of the minutes of the board of directors, or for the copy
         thereof. (Newly Inserted by Act No. 6086, Dec. 31, 1999)

         (4) The company may reject the request under paragraph (3) with an
         explanation of reasons therefor. In this case, shareholders may peruse
         or copy the minutes of the board of directors, by obtaining a permit
         from the court. (Newly Inserted by Act No. 6086, Dec. 31, 1999) [This
         Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 392 (POSTPONEMENT AND CONTINUATION OF BOARD OF DIRECTORS)


<PAGE>

         Article 373 shall apply mutatis mutandis to meetings of the board of
         directors. [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 393 (AUTHORITIES OF BOARD OF DIRECTORS)


         (1) Disposal and transfer of important properties, borrowings of
         large-scale assets, appointment or dismissal of managers, and
         management of affairs such as establishment, transfer or abolition,
         etc. of branch offices shall be made by the resolution of the board of
         directors. (Amended by Act No. 6488, Jul. 24, 2001)

         (2) The board of directors shall supervise the performance of duties by
         the directors.

         (3) Directors may request that the representative director file a
         report on the affairs of other directors or employees with the board of
         directors. (Newly Inserted by Act No. 6488, Jul. 24, 2001)

         (4) Directors shall file a report on the progress of his duties with
         the board of directors more than once in every three months. (Newly
         Inserted by Act No. 6488, Jul. 24, 2001) [This Article Wholly Amended
         by Act No. 3724, Apr. 10, 1984]


ARTICLE 393-2 (COMMITTEES OF BOARD OF DIRECTORS)


         (1) The board of directors may, under the conditions as prescribed in
         the articles of incorporation, establish committees within the board.

         (2) The board of directors may delegate to the committees its power
         other than the matters set forth in the following subparagraphs:

         1.Proposal of matters subject to an approval of the general
         shareholders'

<PAGE>

         meeting;

         2.Appointment or dismissal of the representative director;

         3.Establishment of committees and appointment or dismissal of their
         members; and

         4.Any other matters as prescribed by the articles of incorporation.

         (3) The committee shall be composed of not less than two directors.

         (4) The committee shall notify each of directors of the resolutions it
         has adopted. In this case, any of the directors may, upon receipt of
         the notification, request the convocation of a meeting of the board of
         directors, and the resolutions of the committee may, again, be subject
         to the decision of the board of directors.

         (5) The provisions of Articles 386 (1), 390, 391, 391-3, and 392 shall
         apply mutatis mutandis with respect to the committees.
         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]


ARTICLE 394 (REPRESENTATION IN ACTION BETWEEN COMPANY AND DIRECTORS)


         (1) When a company files an action against a director and vice versa,
         the auditors shall represent the company in connection with such
         action. The same shall apply where a company is in receipt of a demand
         under Article 403 (1).

         (2) In case where a member of the audit committee under Article 415-2
         is a party to an action, the audit committee or a director shall
         request the court to elect a person to represent the company. (Newly
         Inserted by Act No. 6086, Dec. 31, 1999) [This Article Wholly Amended
         by Act No. 3724, Apr. 10, 1984]


ARTICLE 395 (ACTS OF APPARENT REPRESENTATIVE DIRECTOR AND LIABILITY OF COMPANY)


<PAGE>

         A company shall be liable to a third person acting in good faith for
         any act done by a director who has used any title such as president,
         vicepresident, executive director, managing director, etc. from which
         it may be assumed that he has an authority to represent the company
         even where such person has no such authority.


ARTICLE 396 (OBLIGATION TO KEEP ARTICLES OF INCORPORATION, ETC. AND OPEN TO
PUBLIC ACCESS)


         (1) Directors shall keep the articles of incorporation and the minutes
         of the general shareholders' meetings at the principal office and each
         branch office, and shall keep the register of shareholders and the
         register of bonds at the principal office. In this case, if there is a
         transfer agent, the register of shareholders or the register of bonds
         or the duplicates thereof may be kept in the business office of the
         transfer agent. (Amended by Act No. 3724, Apr. 10, 1984; Act No. 6086,
         Dec. 31, 1999)

         (2) Any shareholder or any creditor of the company may demand, at any
         time during business hours, the inspection or the copying of the
         documents set forth in paragraph (1).


ARTICLE 397 (PROHIBITION OF COMPETITIVE BUSINESS)


         (1) No director shall, without the approval of the board of directors,
         effectuate for his own account or for the account of a third person any
         transaction which falls within the class of businesses of the company
         or become a member with unlimited liability or a director of any other
         company whose business purposes are the same as those of the company.
         (Amended by Act No. 5053, Dec. 29, 1995)

         (2) If any director has effectuated a transaction for his own account
         in

<PAGE>

         contravention of paragraph (1), the company may, by the resolution of
         the board of directors, deem such transaction as effectuated for
         account of the company and if he has effectuated a transaction for
         account of a third person, the company may demand the pertinent
         director to transfer any interest accrued therefrom. (Amended by Act
         No. 1212, Dec. 12, 1962; Act No. 5053, Dec. 29, 1995)

         (3) The rights under paragraph (2) shall be extinct with the lapse of
         one year after the day on which such transaction has been effectuated.
         (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 398 (TRANSACTION BETWEEN DIRECTOR AND COMPANY)

         A director may effectuate a transaction with the company for his own
         account or for account of a third person only if he has obtained the
         approval of the board of directors. In this case, Article 124 of the
         Civil Act shall not apply.


ARTICLE 399 (LIABILITY TO COMPANY)


         (1) If directors have acted in violation of any Acts and subordinate
         statutes or of the articles of incorporation or has neglected to
         perform their duties, they shall be jointly and severally liable for
         damages to the company.

         (2) If any act mentioned in paragraph (1) has been done in accordance
         with the resolution of the board of directors, the directors who have
         assented to such resolution shall take the same liability.

         (3) The directors who have participated in the resolution mentioned in
         paragraph (2) and whose dissenting opinion has not been entered in the
         minutes shall be presumed to have assented to such resolution.


ARTICLE 400 (RELEASE OF LIABILITY TO COMPANY)


<PAGE>

         The liability of directors under Article 399 may be released by the
         consent of all shareholders.


ARTICLE 401 (LIABILITY TO THIRD PERSONS)


         (1) If directors have neglected to perform their duties wilfully or by
         gross negligence, they shall be jointly and severally liable for
         damages to third person.

         (2) Article 399 (2) and (3) shall apply mutatis mutandis in case of
         paragraph (1).


ARTICLE 401-2 (LIABILITY OF PERSON WHO INSTRUCTS ANOTHER PERSON TO CONDUCT
BUSINESS)


         (1) A person who falls under any of the following subparagraphs shall
         be deemed to be a director in the application of Articles 399, 401, and
         403 to the duties which he instructs or conducts:

         1.A person who instructs a director to conduct business by using his
         influence over the company;

         2.A person who conducts business in person under the name of a
         director; and

         3.A person other than a director who conducts the business of the
         company by using a title which may be recognized as authorized to
         conduct the business of the company, such as honorary chairman,
         chairman, president, vice-president, executive director, managing
         director, director, or others.

         (2) In case of paragraph (1), a director who is liable for damages to a
         company or third party shall be jointly and severally liable therefor
         with a person under paragraph (1).
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]



<PAGE>

ARTICLE 402 (RIGHT TO INJUNCTION)

         If a director commits an act in contravention of Acts and subordinate
         statutes or the articles of incorporation and such an act is likely to
         cause irreparable damage to the company, the auditor or a shareholder
         who holds no less than 1/100 of the total issued and outstanding shares
         may demand on behalf of the company that the relevant director stop
         such an act.
         (Amended by Act No. 3724, Apr. 10, 1984; Act No. 5591, Dec. 28, 1998)


ARTICLE 403 (DERIVATIVE SUIT BY SHAREHOLDERS)


         (1) Any shareholder who holds no less than 1/100 of the total issued
         and outstanding shares may demand that the company file an action
         against directors to enforce their liability. (Amended by Act No. 5591,
         Dec. 28, 1998)

         (2) The demand under paragraph (1) shall be made in writing, stating
         the reasons thereof. (Amended by Act No. 5591, Dec. 28, 1998)

         (3) If the company has failed to file such action within 30 days from
         the date on which the demand under paragraph (2) was received, the
         shareholder mentioned in paragraph (1) may immediately file such action
         on behalf of the company.

         (4) If irreparable damage may be caused to the company with the lapse
         of the period set forth in paragraph (3), the shareholder mentioned in
         paragraph (1) may immediately file such action, notwithstanding
         paragraph (3). (Amended by Act No.
         5591, Dec. 28, 1998)

         (5) The effect of institution of an action shall not be prejudiced even
         where the number of shares held by a shareholder who files an action
         under paragraphs (3) and (4) comes to be under 1/100 of the total
         issued shares after the institution of the action (excluding where he
         no longer holds the issued shares). (Amended by Act No. 5591, Dec. 28,
         1998)


<PAGE>

         (6) Where an action is filed under paragraphs (3) and (4), the parties
         concerned shall not render the nonsuit, renunciation or admission of
         the claim, or compromise, without permission from a court. (Amended by
         Act No. 5591, Dec. 28, 1998)

         (7) The provisions of Articles 176 (3) and (4), and 186 shall apply
         mutatis mutandis to the action under this Article.


ARTICLE 404 (DERIVATIVE SUIT AND INTERVENTION, NOTICE OF ACTION)


         (1) The company may intervene in the actions under Article 403 (3)
         and (4).

         (2) The shareholder who has filed an action under Article 403 (3) and

         (4) shall immediately effect a notice of an action to the company.


ARTICLE 405 (RIGHTS AND DUTIES OF SHAREHOLDER FILING ACTION)


         (1) If the shareholder who has filed an action pursuant to Article 403
         (3) and (4) wins the case, he may demand the reimbursement by the
         company for the action cost and a reasonable amount of other expenses
         disbursed for the action. In such case, the company which has paid the
         expenses for action shall have a right to indemnity against the
         directors or auditors.
         (Amended by Act No. 1212, Dec. 12, 1962; Act No. 6488, Jul. 24, 2001)

         (2) If the shareholder who has filed an action pursuant to Article 403
         (3) and (4) loses the case, he shall not be liable for damages to the
         company, except for the malicious intent.


ARTICLE 406 (DERIVATIVE SUIT AND ACTION FOR RETRIAL)

<PAGE>

         (1) In case where the plaintiff and defendant in an action under
         Article 403 have caused a judgment to be rendered by their collusion
         for the purpose of fraudulently injuring the rights of the company,
         which is the subject-matter of the case, the company or shareholders
         may institute an action for retrial against the final and conclusive
         judgment.

         (2) The provision of Article 405 shall apply mutatis mutandis to the
         action under paragraph (1).


ARTICLE 407 (SUSPENSION OF EXERCISE OF DUTIES AND APPOINTMENT OF ACTING
DIRECTORS)


         (1) In case where an action for nullifying or revoking a resolution of
         electing a director or for removing a director is filed, the court may,
         upon the application of the parties concerned, render a provisional
         disposition suspending the exercise of duties of such director or
         appointing an acting director. Such disposition may be taken even
         before the institution of merits, if urgent circumstances exist.

         (2) The court may, upon the application by the parties concerned, alter
         or revoke the provisional disposition mentioned in paragraph (1).

         (3) If any disposition set forth in paragraphs (2) and (3) has been
         made, registration thereof shall be effected at the place of the
         principal office and each branch office.


ARTICLE 408 (POWERS OF ACTING DIRECTOR)


         (1) Acting directors under Article 407 may not perform any act falling
         outside the ordinary course of business of the company, unless
         otherwise provided in the order of provisional disposition: Provided,
         That it shall not be the case where permission has been obtained from
         the court.


<PAGE>

         (2) The company shall be liable to a third person acting in good faith,
         even if acting directors have violated paragraph (1).


         SUB-SECTION 3 AUDITORS AND AUDIT COMMITTEE

ARTICLE 409 (ELECTION)


         (1) Auditors shall be elected at a general shareholders' meeting.

         (2) Any shareholder who holds more than 3/100 of the total issued and
         outstanding shares, exclusive of non-voting shares, may not exercise
         his vote in respect of such excess shares beyond the above limit, in
         the election of auditors under paragraph (1). (Amended by Act No. 3724,
         Apr. 10, 1984)

         (3) The articles of incorporation may provide for a lower ratio than
         that referred to in paragraph (2). (Newly Inserted by Act No. 3724,
         Apr. 10, 1984)


ARTICLE 409-2 (RIGHT TO STATE OPINION IN REMOVAL OF AUDITOR)

         The auditor may state his opinion on the removal of the auditor at a
         general shareholders' meeting. [This Article Newly Inserted by Act No.
         5053, Dec. 29, 1995]


ARTICLE 410 (TERM OF OFFICE)

         The term of office of an auditor shall expire upon the closing of the
         ordinary general shareholders' meeting convened in respect of the last
         period for the settlement of accounts within three years after his
         inauguration. (Amended by Act No.
         5053, Dec. 29, 1995)


<PAGE>

         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 411 (PROHIBITION OF CONCURRENTLY ASSUMING OFFICES)

         An auditor may not concurrently assume the office of a director, a
         manager or an employee of the company and its subsidiary company.
         (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 412 (DUTY AND AUTHORITY TO DEMAND REPORTING AND TO INVESTIGATE)


         (1) Auditors shall audit directors' performance of duties.

         (2) Auditors may at any time demand the directors to report on the
         business and may investigate the affairs and the financial conditions
         of the company.

         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 412-2 (DIRECTOR'S DUTY OF REPORTING)

         If a director finds any fact that is likely to inflict a substantial
         loss on the company, he shall immediately report such to auditors.
         [This Article Newly Inserted Act No. 5053, Dec. 29, 1995]


ARTICLE 412-3 (REQUEST FOR CONVOCATION OF GENERAL MEETING)


         (1) An auditor may request the board of directors to convene an
         extraordinary general shareholders' meeting by presenting a written
         statement specifying the proposed subject-matters of the meeting and
         the reason of the convocation.

         (2) Article 336 (2) shall apply mutatis mutandis where an auditor
         convenes a general shareholders' meeting.

<PAGE>

         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 412-4 (AUTHORITY TO INVESTIGATE SUBSIDIARY COMPANY)


         (1) An auditor of the parent company may demand the subsidiary company
         to report on its business, if it is necessary for carrying out his
         duties.

         (2) If, in case of paragraph (1), the subsidiary company fails to make
         a demanded reporting without delay or it is required to verify the
         contents of such reporting, an auditor of the parent company may
         investigate the affairs of the subsidiary company and the status of its
         property.

         (3) The subsidiary company may not refuse the reporting set forth in
         paragraph (1) or the investigation pursuant to paragraph (2), unless
         there is any justifiable reason.
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 413 (DUTY TO EXAMINE AND REPORT)

         Auditors shall examine the agenda and documents to be submitted by
         directors to a general shareholders' meeting and shall at the general
         shareholders' meeting state his opinion as to whether such agenda or
         documents include any matter contrary to Acts, subordinate statutes or
         the articles of incorporation or any remarkably unfair matter.
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 413-2 (PREPARATION OF AUDIT RECORD)


         (1) Auditors shall prepare a record pertaining to the audit.

         (2) The summary of audit process and the results thereof shall be
         recorded in

<PAGE>

         the audit record and the auditors who have carried out such audit shall
         write their names and affix their seals or shall sign thereon. (Amended
         by Act No. 5053, Dec. 29, 1995)

         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 414 (LIABILITY OF AUDITOR)


         (1) If auditors have neglected any of their duties, they shall be
         jointly and severally liable for damages to the company.

         (2) If auditors have neglected their duties wilfully or by gross
         negligence, they shall be jointly and severally liable for damages to
         third persons.

         (3) In case where auditors are liable for damages either to the company
         or to a third person, if directors are likewise liable therefor, the
         auditors and the directors shall be jointly and severally liable for
         the damages.


ARTICLE 415 (PROVISIONS APPLICABLE MUTATIS MUTANDIS)

         The provisions of Articles 382 (2), 382 (4), 385, 386, 388, 400, 401,
         and 403 through 407 shall apply mutatis mutandis to auditors. (Amended
         by Act No. 3724, Apr. 10, 1984; Act No. 6488, Jul. 24, 2001)


ARTICLE 415-2 (AUDIT COMMITTEE)


         (1) The company may, under the conditions as prescribed by the articles
         of incorporation, establish an audit committee constituted by the
         committee under Article 393-2, in lieu of auditors. In the case of the
         establishment of an audit committee, there shall not coexist any
         auditors.

         (2) Notwithstanding Article 393-2 (3), the audit committee shall
         consist of not

<PAGE>

         less than three directors: Provided, That persons falling under any of
         the following subparagraphs shall not exceed 1/3 of the total members
         of the committee:

         1.Any director or employee in the active service of the company, or any
         person who was director or employee thereof within two years from the
         date of appointment as a member of the committee;

         2.In case where the largest shareholder of the company is an
         individual, the individual himself, his spouse and lineal ascendants or
         descendants;

         3.In case where the largest shareholder is a corporation, any director,
         auditor and employee of the corporation;

         4.Spouse and lineal ascendants or descendants of any director of the
         company;

         5.Any director, auditor and employee in the service of the parent or a
         subsidiary company with which the company is affiliated;

         6.Any director, auditor and employee of a corporation which has an
         important interest in the company, such as the mutual relations of
         business dealings; and

         7.Any director, auditor and employee of other company wherein a
         director or an employee of the company serves concurrently as a
         director thereof.

         (3) A resolution of the board of directors on the dismissal of a member
         of the audit committee shall require the concurrent vote of two thirds
         or more of the total number of directors.

         (4) The audit committee shall, from among its members, elect a member
         to represent the committee. In this case, a plural number of members
         may be elected to jointly represent the committee.

         (5) The committee may take professional assistance at the expense of
         the company.


<PAGE>

         (6) The provisions of Articles 296, 312, 367, 387, 391-2 (2), 394 (1),
         400, 402 through 407, 412 through 414, 447-3, 447-4, 450, 527-4, 530-5
         (1) 9, 530-6 (1) 10, and 534 shall be applicable mutatis mutandis with
         respect to the audit committee. In this case, the term "auditor" as
         prescribed in Articles 530-5 (1) 9 and 530-6 (1) 10 shall be read as
         "member of audit committee".
         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]


         SECTION 4 ISSUANCE OF NEW SHARES

ARTICLE 416 (DETERMINATION OF PARTICULARS FOR ISSUANCE)

         In case where a company issues shares after its incorporation, the
         following matters, which are not provided in the articles of
         incorporation, shall be determined by the board of directors: Provided,
         That this shall not apply if it is otherwise provided by this Act, or
         the articles of incorporation provide that they shall be determined at
         a general shareholders's meeting: (Amended by Act No. 3724, Apr. 10,
         1984)

         1.Class and number of new shares;

         2.Issue-price of new shares and the date set for the payment thereon;

         3.Method of subscribing for new shares;

         4.Name of the persons who are to make a contribution in kind and the
         class, quantity, value of such property and the class and number of
         shares to be given therefor;

         5.Matters related to transferability of the shareholder's preemptive
         right to new shares; and

         6.An intent that a certificate for preemptive right to new shares is to
         be issued only upon request of the shareholder and the period wherein
         such request may be made.



<PAGE>

ARTICLE 417 (ISSUANCE OF SHARES AT PRICE BELOW PAR)


         (1) In case where a company issues shares after two years have elapsed
         since its incorporation, the company may issue shares at a price less
         than the par value with a resolution of the general shareholders'
         meeting under Article 434 and with the authorization of the court.

         (2) The minimum issue-price of shares shall be determined by the
         resolution of the general shareholders' meeting mentioned in paragraph
         (1).

         (3) The court may render the authorization after altering the minimum
         issue-price by taking into account the present conditions of the
         company and all the circumstances. In this connection, the court may
         appoint an inspector to investigate the status of the company's
         property and any other necessary matters.

         (4) The shares mentioned in paragraph (1) shall be issued within one
         month from the day on which the authorization of the court has been
         obtained. The court may extend the above period in its authorization.


ARTICLE 418 (CONTENTS OF PREEMPTIVE RIGHTS, DESIGNATION AND PUBLIC NOTICE OF
RECORD DATE FOR ALLOTMENT)


         (1) Each shareholder shall be entitled to the allotment of new shares
         in proportion to the number of shares which he holds. (Amended by Act
         No. 6488, Jul. 24, 2001)

         (2) The company may make an allotment of new shares to other persons
         than the shareholders under the provisions of articles of
         incorporation, notwithstanding the provisons of paragraph (1):
         Provided, That in such case, it shall be limited to the case necessary
         for the achievement of the company's

<PAGE>

         operational objectives, such as an introduction of new technology,
         improvement of financial structures, etc. (Newly Inserted by Act No.
         6488, Jul. 24, 2001)

         (3) The company shall fix a certain record date and shall, at least two
         weeks before such record date, give public notice to the effect that
         shareholders entered on the register of shareholders as of such record
         date shall be entitled to the rights under paragraph (1) and to the
         effect that such preemptive rights are transferable, if applicable:
         Provided, That if the above record date is within the period set forth
         in Article 354 (1), the public notice shall be given at least two weeks
         before the first day of such period. (Newly Inserted by Act No. 3724,
         Apr. 10, 1984)


ARTICLE 419 (PEREMPTORY NOTICE TO HOLDERS OF PREEMPTIVE RIGHTS)


         (1) The company shall notify the holders of preemptive rights of the
         class and number of shares subject to such preemptive rights and that
         their rights shall be forfeited if they fail to apply for the
         subscription for new shares on or before a fixed date. In this case, if
         the matters as set forth in subparagraphs 5 and 6 of Article 416 have
         been determined, the contents thereof shall also be notified.

         (2) If the company has issued bearer share certificates, a public
         notice on matters set forth in paragraph (1) shall be given.

         (3) The notification under paragraph (1) and the public notice under
         paragraph (2) shall be given at least two weeks before the date set
         forth in paragraph (1).

         (4) In case where a holder of preemptive rights fails to apply for the
         subscription for new shares on or before the specified date
         notwithstanding the notification under paragraph (1) or the public
         notice under paragraph (2), his rights shall be forfeited.
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 420 (SUBSCRIPTION FORM FOR SHARES)


<PAGE>

         Directors shall prepare a subscription form for shares, in which the
         following matters shall be contained: (Amended by Act No. 3724, Apr.
         10, 1984)

         1.Particulars set forth in Article 289 (1) 2 through 4;

         2.Matters set forth in Article 302 (2) 7, 9 and 10;

         3.Matters set forth in subparagraphs 1 through 4 of Article 416;

         4.If the company issues shares in accordance with Article 417, the
         conditions of such issuance and the amount yet to be amortized pursuant
         to Article 455;

         5.Restrictions on the preemptive rights of shareholders or a provision
         that the preemptive rights are to be given to a particular third
         person, if applicable; and

         6.Date of the resolution on the issuance of shares.


ARTICLE 420-2 (ISSUANCE OF CERTIFICATES OF PREEMPTIVE RIGHTS)


         (1) In case where a company has provided for the matters set forth in
         subparagraph 5 of Article 416, the company shall issue certificates of
         preemptive rights in accordance with subparagraph 6 of Article 416, if
         applicable or issue them at least two weeks before the date under
         Article 419 (1), as the case may be.

         (2) Certificates of preemptive rights shall contain the serial number
         in addition to the following and the directors shall write their names
         and affix their seals or shall sign thereon: (Amended by Act No. 5053,
         Dec. 29, 1995)

         1.Manifestation of certificates of preemptive rights;

         2.Matters set forth in Article 420;


<PAGE>

         3.Class and number of shares subject to the preemptive rights; and

         4.A statement to the effect that the rights shall be forfeited if the
         subscription for shares is not applied for on or before the specified
         date.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 420-3 (TRANSFER OF PREEMPTIVE RIGHTS)


         (1) Preemptive rights shall be transferred only by the delivery of
         certificates thereof.

         (2) Article 336 (2) of this Act and Article 21 of the Check Act shall
         apply mutatis mutandis to certificates of preemptive rights.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 420-4 (APPLICATION FOR SUBSCRIPTION BY CERTIFICATES OF PREEMPTIVE
              RIGHTS)


         (1) If certificates of preemptive rights have been issued, the
         subscription for shares shall be applied for by the certificates. In
         this case, Article 302 (1) shall be apply mutatis mutandis.

         (2) A person who has lost certificates of preemptive rights may apply
         for the subscription for shares by the subscription form for shares:
         Provided, That such offer shall become ineffective if the application
         for subscription for shares is made by certificates of preemptive
         rights.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 421 (PAYMENT FOR NEW SHARES)

         Directors shall procure the person who has subscribed for new shares to
         pay the full subscription price with respect to each share allotted to
         him on or before

<PAGE>

         the date set for such payment.


ARTICLE 422 (INVESTIGATION ON CONTRIBUTION IN KIND)


         (1) In case of a contribution in kind, directors shall request the
         court for the appointment of an inspector who is to investigate the
         particulars set forth in subparagraph 4 of Article 416. In this case,
         an appraisal by a certified appraiser may substitute for the
         investigation by an inspector. (Amended by Act No. 5591, Dec. 28, 1998)

         (2) If the court considers the particulars set forth in paragraph (1)
         to be improper after examining the report on investigation prepared by
         the inspector or the results of appraisal conducted by an appraiser, it
         may give necessary alteration and inform directors and the person who
         has made the contribution in kind of such alteration. (Amended by Act
         No. 5591, Dec. 28, 1998)

         (3) If the person who has made the contribution in kind has an
         objection to the alteration mentioned in paragraph (2), he may cancel
         his subscription for shares.

         (4) If the person who has made the contribution in kind does not cancel
         his subscription for shares within two weeks after the court informed
         him of alteration, the particulars set forth in paragraph (1) shall be
         deemed to have been altered accordingly. (Amended by Act No. 5591, Dec.
         28, 1998)


ARTICLE 423 (TIME TO BECOME SHAREHOLDER, EFFECT OF FAILURE OF PAYMENT)


         (1) If a person who has subscribed for new shares pays for the
         subscription price or performs the contribution in kind, he shall have
         the rights and duties of a shareholder from the next day after the date
         set for the payment. In this case, the second sentence of Article 350
         (3) shall apply mutatis mutandis. (Amended by Act No. 3724, Apr. 10,
         1984; Act No. 5053, Dec. 29, 1995)


<PAGE>

         (2) If a person who has subscribed for new shares fails to pay for the
         subscription price or to perform the contribution in kind on or before
         the date set for the payment, his right shall be forfeited.

         (3) Paragraph (2) shall not affect any claim for damages against the
         person who has subscribed for new shares.


ARTICLE 424 (RIGHT TO INJUNCTION)

         If a company is to issue shares in violation of Acts, subordinate
         statutes or the articles of incorporation or in a remarkably unfair
         manner and shareholders are likely to suffer disadvantages thereby,
         such shareholders may demand that the company stop such issuance.


ARTICLE 424-2 (LIABILITY OF SUBSCRIBER OF SHARES AT UNFAIR PRICE)


         (1) A person who has subscribed for shares at a remarkably unfair issue
         price in collusion with the directors shall be liable to pay to the
         company the amount equivalent to the difference between such issue
         price and the fair price.

         (2) Article 403 through 406 shall apply mutatis mutandis to an action
         for payment pursuant to paragraph (1).

         (3) Paragraphs (1) and (2) shall not affect the directors' liability to
         compensate for damage to the company or shareholders.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 425 (APPLICABLE PROVISIONS)


         (1) Article 302 (1) and (3), 303, 305 (2) and (3), 306, 318, and 319
         shall apply mutatis mutandis to the issuance of new shares.


<PAGE>

         (2) Article 305 (2) shall apply mutatis mutandis where certificates of
         preemptive rights are issued. (Newly Inserted by Act No. 3724, Apr. 10,
         1984)


ARTICLE 426 (REGISTRATION OF AMOUNT YET TO BE AMORTIZED)

         If shares were issued in accordance with Article 417, the registration
         of alteration thereby shall contain the amount yet to be amortized
         pursuant to Article 455.


ARTICLE 427 (RESTRICTIONS ON ASSERTION OF NULLIFICATION OR REVOCATION OF
SUBSCRIPTION)

         After one year has elapsed from the date of the registration of
         alteration due to the issuance of new shares, no person who subscribed
         for new shares may assert the nullity of his subscription by reason of
         defects in the requirements as to the subscription form for shares or
         certificates of preemptive rights or revoke his subscription on the
         ground of fraud, duress or mistake. The same shall apply where he has
         exercised his rights in respect to such shares. (Amended by Act No.
         1212, Dec. 12, 1962; Act No. 3724, Apr. 10, 1984)


ARTICLE 428 (DIRECTOR'S WARRANTY LIABILITY FOR SUBSCRIPTION)


         (1) In case that shares have not yet been subscribed or the
         subscription of shares has been revoked after the registration of
         alteration due to the issuance of new shares was effected, directors
         shall be deemed to have jointly subscribed for such shares.

         (2) Paragraph (1) shall not affect any claim for damages against
         directors.


ARTICLE 429 (ACTION FOR NULLIFICATION OF ISSUANCE OF NEW SHARE)


<PAGE>

         The nullity of the issuance of new shares may be asserted only by means
         of an action which shall be brought only by shareholders, directors or
         auditors within six months from the date of the issuance of such new
         shares. (Amended by Act No. 3724, Apr. 10, 1984)


ARTICLE 430 (APPLICABLE PROVISIONS)

         Articles 186 through 189, the main text of Article 190, Articles 191,
         192 and 377 shall apply mutatis mutandis to the action under Article
         429.
         [This Article Wholly Amended by Act No. 5053, Dec, 29, 1995]


ARTICLE 431 (EFFECT OF JUDGMENT NULLIFYING ISSUANCE OF NEW SHARES)


         (1) When a judgment nullifying the issuance of new shares becomes final
         and conclusive, such new shares shall be invalidated for the future.

         (2) In case of paragraph (1), the company shall without delay give
         public notice to that effect that the new share certificates shall be
         surrendered to the company within a fixed period and shall separately
         notify each shareholder and pledgee entered in the register of
         shareholders of the same: Provided, That such period shall be at least
         three months.


ARTICLE 432 (JUDGMENT OF NULLIFICATION AND REFUND TO SHAREHOLDERS)


         (1) When a judgment nullifying the issuance of new shares becomes final
         and conclusive, the company shall refund to each shareholder the amount
         paid by him for new shares.

         (2) If the amount mentioned in paragraph (1) is remarkably unreasonable
         in view of the status of the company's property as of the time when the
         judgment mentioned in Article 431 (1) becomes final and conclusive, the
         court may order

<PAGE>

         either the increase or decrease in such amount, upon the application of
         the company or of such shareholder mentioned in paragraph (1).

         (3) Articles 339 and 340 (1) and (2) shall apply mutatis mutandis in
         case of paragraph (1).


         SECTION 5 AMENDMENT OF THE ARTICLES OF INCORPORATION

ARTICLE 433 (METHOD OF AMENDMENT OF ARTICLES OF INCORPORATION)


         (1) The articles of incorporation shall be amended by a resolution of
         the general shareholders' meeting.

         (2) The summary of agenda relating to the amendment of the articles of
         incorporation shall be stated in the notice and public notice under
         Article 363.


ARTICLE 434 (SPECIAL RESOLUTION FOR AMENDMENT OF ARTICLES OF INCORPORATION)

         The resolution set forth in Article 433 (1) shall be adopted by the
         affirmative votes of no less than 2/3 of the voting rights of the
         shareholders present at the general meeting and of at least 1/3 of the
         total issued and outstanding shares.
         [This Article Wholly Amended by Act No. 5053, Dec. 29, 1995]


ARTICLE 435 (GENERAL MEETING OF SHAREHOLDERS OF CERTAIN CLASS OF SHARES)


         (1) If a company has issued two or more classes of shares and a certain
         class of shareholders is to be prejudiced by the amendment of the
         articles of incorporation, the resolution of a general meeting of such
         specific class of

<PAGE>

         shareholders shall be required for effecting such amendment in addition
         to that of a general shareholders meeting.

         (2) The resolution under paragraph (1) shall be adopted by the
         affirmative votes of no less than 2/3 of the voting rights of the
         shareholders present at the general meeting and of at least 1/3 of the
         total issued and outstanding shares of such class. (Amended by Act No.
         5053, Dec. 29, 1995)

         (3) The provisions relating to a general shareholders' meeting shall
         apply mutatis mutandis to the general meeting mentioned in paragraph
         (1), except for those provisions relating to non-voting shares.


ARTICLE 436 (IDEM-GENERAL MEETING OF SHAREHOLDERS OF CERTAIN CLASS OF SHARES)

         Article 435 shall apply mutatis mutandis where special provisions are
         to be made with regard to each class of shares in accordance with
         Article 344 (3) and where the shareholders of certain classes are to be
         prejudiced by the swap or transfer of shares or the merger of the
         company. (Amended by Act No. 6488, Jul. 24, 2001)


ARTICLE 437

         Deleted. (by Act No. 5053, Dec. 29, 1995)


         SECTION 6 REDUCTION OF CAPITAL

ARTICLE 438 (RESOLUTION FOR REDUCTION OF CAPITAL)


         (1) In order to reduce capital, the resolution in accordance with
         Article 434 shall be required.

         (2) The summary of agenda relating to the reduction of capital shall be
         stated in

<PAGE>

         notices and public notices under Article 363.


ARTICLE 439 (METHOD OF REDUCTION OF CAPITAL, ITS PROCEDURES)


         (1) In the resolution for reduction of capital, the method of effecting
         such reduction shall be determined.

         (2) Article 232 shall apply mutatis mutandis to the reduction of
         capital. (Amended by Act No. 3724, Apr. 10, 1984)

         (3) Any objection by bondholders may be raised according to the
         resolution of a meeting of bondholders. In this case, the court may,
         upon the application of any interested person, extend in favor of the
         bondholders the period within which such objection shall be raised.


ARTICLE 440 (PROCEDURES OF CONSOLIDATION OF SHARES)

         If shares are to be consolidated, the company shall determine a period
         of not less than one month and shall give public notice to the effect
         that shares shall be consolidated and that share certificates must be
         submitted to the company within such period and shall separately give
         notice to such effect to each of the shareholders and the pledgees who
         are entered in the register of shareholders. (Amended by Act No. 5053,
         Dec. 29, 1995)


ARTICLE 441 (IDEM-PROCEDURES OF CONSOLIDATION OF SHARES)

         The consolidation of shares shall take effect upon the expiration of
         the period mentioned in Article 440: Provided, That if the procedures
         set forth in Article 232 have not been completed, it shall take effect
         upon the completion of such procedures.



<PAGE>

ARTICLE 442 (DELIVERY OF NEW SHARE CERTIFICATES)


         (1) If, in case of the consolidation of share, there is any person who
         cannot submit his old share certificates, the company may, upon the
         application of such person, determine the period of not less than three
         months and give public notice to the effect that any interested person
         shall raise his objection, if any, on such certificates within such
         period, after the lapse of which the company may deliver new share
         certificates to such person.

         (2) Expenses of the public notice mentioned in paragraph (1) shall be
         borne by the applicant.


ARTICLE 443 (DISPOSITION OF FRACTIONAL SHARES)


         (1) If there are shares the number of which is unfit for the
         consolidation, the new share issued for that portion unfit for the
         consolidation shall be sold by means of auction and the proceeds from
         which shall be delivered to the former shareholders in proportion to
         the number of their shares: Provided, That the shares which are
         transacted on an exchange at the price quoted thereat may be sold
         through such exchange and shares without an exchange quotation may be
         sold in a manner other than auction with the permission of the court.
         (Amended by Act No. 3724, Apr. 10, 1984)

         (2) Article 442 shall apply mutatis mutandis to the case of paragraph
         (1).


ARTICLE 444 (IDEM-DISPOSITION OF FRACTIONAL SHARES)

         Article 443 shall apply mutatis mutandis to bearer share certificates
         which have not been submitted in accordance with Article 440.


ARTICLE 445 (ACTION FOR NULLIFYING REDUCTION OF CAPITAL)


<PAGE>

         The nullity of reduction of capital may be asserted only by means of an
         action which shall be brought only by a shareholder, director, auditor,
         liquidator, bankruptcy trustee or creditor disapproving such reduction
         of capital, within six months from the day on which the registration of
         alteration due to such reduction of capital has been effected. (Amended
         by Act No. Apr. 10, 1984)


ARTICLE 446 (APPLICABLE PROVISIONS)

         Articles 186 through 189, the main text of Article 190, Articles 191,
         192 and 377 shall apply mutatis mutandis to the action under Article
         445.
         [This Article Wholly Amended by Act No. 5053, Dec. 29, 1995]


         SECTION 7 ACCOUNTING OF COMPANY

ARTICLE 447 (PREPARATION OF FINANCIAL STATEMENTS)

         Directors shall prepare, at each period for the settlement of accounts,
         the following documents and supplementary schedules and obtain the
         approval of the board of directors:

         1.Balance sheet;

         2.Income statement; and

         3.Statements of appropriation of retained earnings or statements of
         disposition of deficit.

         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 447-2 (PREPARATION OF BUSINESS REPORT)



<PAGE>

         (1) Directors shall prepare, at each period for the settlement of
         accounts, a business report and shall obtain the approval of the board
         of directors.

         (2) The business report shall include important matters concerning the
         business as set forth in the Presidential Decree.

         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 447-3 (SUBMISSION OF FINANCIAL STATEMENT)

         Directors shall submits to auditors the documents set forth in Articles
         447 and 447-2 six weeks before the day of the ordinary general meeting.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 447-4 (AUDIT REPORT)

         (1) Auditors shall submit to directors an audit report within four
         weeks from the date on which he receives the documents under Article
         447-3.

         (2) The audit report under paragraph (1) shall include the followings:

         1.Outline of audit method;

         2.If the matters required to be entered in the account books are not
         recorded or are recorded falsely or the entry of the balance sheet or
         income statement does not coincide with that of the account books, a
         statement to such effect;

         3.If the balance sheet and the income statement show exactly the
         situation of the company's financial conditions and the company's
         profits and losses according to the Acts, subordinate statutes and the
         articles of incorporation, a statement to such effect;

         4.If the balance sheet or the income statement fails to show exactly
         the situation of the company's property holding and the company's
         profits and losses, in

<PAGE>

         contravention of according to the Acts, subordinate statutes and the
         articles of incorporation, a statement to such effect and the reasons
         thereof;

         5. Whether it is proper or not to change the accounting method relating
         to the preparation of the balance sheet or the income statement and, if
         so, the reasons thereof;

         6. Whether or not the business report shows exactly the situation of
         the company in accordance with the Acts, subordinate statutes or the
         articles of incorporation;

         7. Whether or not the statements of appropriation of retained earnings
         or the statements of disposition of deficit are prepared in conformity
         with the Acts, subordinate statutes and the articles of incorporation;

         8. If the statements of appropriation of retained earnings or the
         statements of disposition of deficit are obviously improper in the
         light of the company's financial conditions are and other
         circumstances, a statement to such effect;

         9. If the supplementary schedules mentioned in Article 447 does not
         include the matters required to be prescribed or includes incorrect
         record therein or includes what does not conform with the account
         books, the balance sheet, the income statement or the business report,
         a statement to such effect;

         10. If a dishonest act or an act of conduct which is in material
         contravention of Acts, subordinate statutes or the articles of
         incorporation is found with regard to the performance of a director's
         duties, a statement to such effect; and

         11. If an investigation necessary for the audit could not be carried
         out, a statement to such effect and the reasons thereof.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 448 (KEEPING AND PUBLIC INSPECTION OF FINANCIAL STATEMENTS, ETC.)



<PAGE>

         (1) Directors shall keep the documents set forth in Articles 447 and
         447-2 as well as the audit report at the principal office of the
         company for five years from one week prior to the day of the ordinary
         general meeting and shall keep copies thereof at the branch offices for
         three years. (Amended by Act No. 1212, Dec. 12, 1962; Act No. 3724,
         Apr. 10, 1984)

         (2) Any shareholder or creditor of the company may, at any time during
         business hours, inspect the documents set forth in paragraph (1) and
         may demand the copying of such documents or an abstract thereof, by
         paying such fees as fixed by the company.


ARTICLE 449 (APPROVAL AND PUBLIC NOTICE OF FINANCIAL STATEMENTS, ETC.)


         (1) Directors shall submit to the ordinary general meeting the
         documents under subparagraphs 1 through 3 of Article 447 and shall
         obtain the approval thereof. (Amended by Act No. 3724, Apr. 10, 1984)

         (2) Directors shall submit to the ordinary general meeting the
         documents set forth in Article 447-2 and shall report on the contents
         thereof. (Newly Inserted by Act No. 3724, Apr. 10, 1984)

         (3) If directors have obtained the approval of the general meeting in
         respect of documents set forth in paragraph (1), they shall give,
         without delay, public notice of the balance sheet.


ARTICLE 450 (RELEASE OF LIABILITY OF DIRECTORS AND AUDITORS)

         If a contrary resolution has not been adopted within two years after
         the ordinary general meeting at which the approval mentioned in Article
         449 (1) was given, the company shall be deemed to have released the
         directors and auditors from their liability: Provided, That it shall
         not be the case where any of the directors or auditors has committed
         some dishonest act.



<PAGE>

ARTICLE 451 (CAPITAL)

         Unless otherwise provided in this Act, the capital of a company shall
         be equal to the total sum of the par value of all the issued and
         outstanding shares.


ARTICLE 452 (METHOD FOR VALUATION OF ASSETS)

         Assets to be entered in the account books of a company shall be valued
         in the following manner, in addition to the application of subparagraph
         2 of Article 31: (Amended by Act No. 3724, Apr. 10, 1984)

         1.Current assets shall be valued by aquisition cost or on their
         manufacturing cost: Provided, That they shall be valued by the current
         price if the current price is remarkably lower than the acquisition
         price or the manufacturing cost;

         2.Deleted; (by Act No. 3724, Apr. 10, 1984)

         3.Pecuniary credits shall be valued by the amount of claim. If,
         however, the credits have been acquired by the price lower than the
         amount of claims or in any other similar case, a reasonable reduction
         may be effected. In case of credits the collection of which might be
         impossible, the estimated amount of uncollectable credits shall be
         reduced;

         4.Bonds having exchange quotations shall be valued by the average price
         during one month prior to the period for the settlement of accounts and
         bonds having no exchange quotations shall be valued by acquisition
         cost: Provided, That if the acquisition cost is different from the face
         amount of bonds, the reasonable increase or decrease may be effected.
         The latter part of subparagraph 3 shall apply mutatis mutandis to the
         bonds the collection of which might be impossible. This shall apply to
         any other things similar to bonds;

         5.Shares having exchange quotations shall be valued by the acquisition
         cost: Provided, That they shall be valued by the current price if the
         average price during one month prior to the period for the settlement
         of accounts is lower than

<PAGE>

         the acquisition cost. Shares which were acquired for the long-term
         holding because of transactional or other necessity shall be valued by
         acquisition cost, irrespective of whether or not they have exchange
         quotations: Provided, That the status of property of the issuing
         company has been remarkably deteriorated, the reasonable deduction of
         the amount shall be effected. The same shall apply to the valuation of
         contributions made into a limited liability company or any other
         entity; and

         6.In case of goodwill of business, the acquisition cost may be entered,
         only if it was acquired by succession for value. In this case, at least
         equal portion out of the above-mentioned cost shall be amortized at
         each period for the settlement of accounts within five years after the
         goodwill of business was acquired.


ARTICLE 453 (ACCOUNT OF ORGANIZATION COST)


         (1) The costs defrayed in accordance with subparagraphs 4 of Article
         290 and any amount of tax paid for the registration of incorporation
         may be accounted on the assets side of the balance sheet.

         (2) If it has been determined that interest shall be distributed after
         the incorporation of the company or before the commencement of the
         operation of a business, at least equally divided portion out of such
         accounted amount under paragraph (1) shall be amortized at each period
         for the settlement of accounts within five years after the company has
         completed the distributing of such interest.


ARTICLE 453-2 (ACCOUNT OF PRE-OPERATING COST)


         (1) Any cost disbursed for commencement of the operation of a business
         may be accounted on the assets side of the balance sheet.

         (2) At least equally divided portion out of such accounted amount under


<PAGE>

         paragraph (1) shall be amortized at each period for the settlement of
         accounts within three years after the commencement of the operation of
         business.

         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 454 (ACCOUNT OF NEW SHARE ISSUE COST)


         (1) If new shares are issued, the cost necessary for such issuance may
         be accounted on the assets side of the balance sheet.

         (2) At least equally divided portion out of such accounted amount under
         paragraph (1) shall be amortized at each period for the settlement of
         accounts within three years after the company has issued the new
         shares.


ARTICLE 455 (ACCOUNT OF DISCOUNT ON SHARE ISSUANCE)


         (1) If shares are issued in accordance with Article 417, the discount
         from the par value may be accounted on the assets side of the balance
         sheet.

         (2) At least equally divided portion out of such accounted amount under
         paragraph (1) shall be amortized at each period for the settlement of
         accounts within three years after the company has issued the shares.


ARTICLE 456 (ACCOUNT OF DISCOUNT ON BONDS)


         (1) If, in case of the offering of bonds, the total amount which is to
         be paid on redemption exceeds the actual amount received from such
         offering, the balance may be accounted on the assets side of the
         balance sheet.

         (2) At least equally divided portion out of such accounted amount under
         paragraph (1) shall be amortized at each period for the settlement of
         accounts

<PAGE>

         within the period set for the redemption of the bonds.

         (3) Article 454 shall apply mutatis mutandis to the case of new bonds
         issue cost.


ARTICLE 457 (ACCOUNT OF ACCRUED INTEREST DIVIDEND DURING CONSTRUCTION IN
PROGRESS)


         (1) Any amount distributed in accordance with Article 463 may be
         accounted on the assets side of the balance sheet.

         (2) If the dividend is made after the commencement of the operation of
         business at the rate higher than six percent per annum, at least a sum
         equivalent to the amount in excess of six percent shall be amortized
         out of such accounted amount under paragraph (1).


ARTICLE 457-2 (ACCOUNT OF RESEARCH AND DEVELOPMENT COST)


         (1) The cost incurred specially in connection with the research on or
         development of any new products or new technology may be accounted on
         the assets side of the balance sheet.

         (2) At least equally divided portion out of such accounted amount under
         paragraph (1) shall be amortized at each period for the settlement of
         accounts within five years after disbursement thereof.
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 458 (EARNED SURPLUS RESERVE)

         A company shall accumulate, as the earned surplus reserve, the amount
         of at least 1/10 of the cash dividend at each period for the settlement
         of accounts until reserve reaches half of the company's capital.
         (Amended by Act No. 3724, Apr. 10, 1984)



<PAGE>

ARTICLE 459 (CAPITAL SURPLUS RESERVE)


         (1) The company shall accumulate the following, as the capital surplus
         reserve: (Amended by Act No. 3724, Apr. 10, 1984; Act No. 5591, Dec.
         28, 1998; Act No. 6488, Jul. 24, 2001)

         1.If shares are issued at the price higher than the par value, such
         amount in excess;

         1-2.If, in case of an all-inclusive share swap, the limit of capital
         increase under Article 360-7 exceeds the increased equity capital of a
         complete parent company, such amount in excess;

         1-3.If, in case of an all-inclusive transfer of shares, the limit of
         capital under Article 360-18 exceeds the increased equity capital of
         the established complete parent company, such amount in excess;

         2.If, in case of reduction of capital, the reduced amount exceeds the
         amount used for the retirement of shares, for the refund of share
         prices and/or for recovery of deficit, such amount in excess;

         3.If, in case of a merger of companies, the value of property succeeded
         to from the company which ceased to exist exceeds the amount of the
         obligation succeeded to from such company, the amount refunded to the
         shareholders of such company and the amount of the increase in the
         capital of the surviving company or the amount of the capital of the
         newly incorporated company in consequence of the merger, as the case
         may be, such amount in excess;

         3-2.If the value of property which is invested in a company newly
         incorporated due to division or merger through division under Article
         530-2 or the surviving company thereof exceeds the amount of the
         obligation inherited from the investment company, the amount refunded
         to the shareholders of such company, and the amount of the capital of
         the newly incorporated company or the amount

<PAGE>

         of the increase in the capital of the surviving company, such amount in
         excess; and

         4.Any other surplus in the transaction of capital.

         (2) Out of the surplus under paragraph (1) 3 and 3-2, the earned
         surplus reserve and other legal reserves of the company which ceased to
         exist or was divided may be succeeded to the surviving company or the
         newly incorporated company formed due to a merger, division, or merger
         after division. (Amended by Act No. 5591, Dec. 28, 1998)


ARTICLE 460 (USE OF LEGAL RESERVE)


         (1) The legal reserve set forth in Articles 458 and 459 shall not be
         disposed of, except for recovery of deficit of the capital.

         (2) The capital surplus reserve shall not be used for recovery of
         deficit of the capital, unless the earned surplus reserve are fully
         used for recovery of deficit.


ARTICLE 461 (CAPITALIZATION OF RESERVES)


         (1) A company may capitalize the whole or a part of the reserve by a
         resolution of the board of directors: Provided, That it shall not be
         the case where the articles of incorporation provide that such shall be
         determined at a general shareholders' meeting.

         (2) In case of paragraph (1), the company shall issue the shares to the
         shareholders in proportion to the number of shares which they hold. In
         this case, Article 443 (1) shall apply mutatis mutandis to fractional
         shares.

         (3) When a resolution is made by the board of directors in accordance
         with paragraph (1), the company shall fix a date and give public notice
         two weeks

<PAGE>

         before such date to the effect that new shares under paragraph (2)
         shall be alloted to the shareholders entered on the register of
         shareholders on that date: Provided, That if the above date falls
         within the period under Article 354 (1), the public notice shall be
         given two weeks before the first day of such period.

         (4) In case of the proviso of paragraph (1), the shareholders shall
         become those of new shares under paragraph (2) on the date of the
         resolution of the general shareholders' meeting.

         (5) When the shareholders become those of new shares pursuant to
         paragraph (3) or (4), directors shall immediately notify the
         shareholders to whom such new shares are alloted and the pledgees
         entered on the register of shareholders of the class and number of such
         shares. If bearer share certificates have been issued, a public notice
         of the contents of resolution under paragraph (1) shall be given.

         (6) The latter part of Article 350 (3) shall apply mutatis mutandis to
         the case of paragraph (1). (Newly Inserted by Act No. 5053, Dec. 29,
         1995)

         (7) Article 339 shall apply mutatis mutandis to the issuance of shares
         pursuant to paragraph (2).

         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 462 (DIVIDENDS)


         (1) A company may pay dividends within the limit of the amount of net
         properties stated on the balance sheet after deducting the followings:
         (Amended by Act No. 6488, Jul. 24, 2001)

         1.Amount of the capital;

         2.Total amount of the capital surplus reserve and the earned surplus
         reserve which are accumulated till the pertinent period for the
         settlement of accounts of the company; and


<PAGE>

         3.Amount to be accumulated for the pertinent period for the settlement
         of accounts of the company.

         (2) If dividends have been paid in violation of paragraph (1), any
         creditors of the company may demand that such dividends be returned to
         the company.

         (3) Article 186 shall apply mutatis mutandis to an action relating to
         the demand under paragraph (2).


ARTICLE 462-2 (STOCK DIVIDENDS)


         (1) A company may pay dividends by means of issuing new shares, by a
         resolution of the general shareholders' meeting: Provided, That such
         stock dividends may not exceed the amount equivalent to a half of the
         total amount of dividends.

         (2) The dividends under paragraph (1) shall be made based on the par
         value of the shares and if the company have issued different classes of
         shares, it may be paid in the same classes of shares, respectively.
         (Amended by Act No. 5053, Dec. 29, 1995)

         (3) Article 443 (1) shall apply mutatis mutandis to the case where, out
         of profits to be distributed as stock dividends, there remains a
         fraction which is less than the par value of a share. (Amended by Act
         No. 5053, Dec. 29, 1995)

         (4) A shareholder who has received stock dividend shall become a
         shareholder of the new shares from the time of the closing of the
         general shareholders' meeting at which the resolution mentioned in
         paragraph (1) is made. In this case, the latter part of Article 350 (3)
         shall apply mutatis mutandis. (Amended by Act No. 5053, Dec. 29, 1995)

         (5) When the resolution under paragraph (1) has been made, directors
         shall notify, without delay, the shareholders entitled to receive the
         stock dividends

<PAGE>

         and the pledgees entered on the register of shareholders of the class
         and number of shares to be distributed to them. If bearer share
         certificates have been issued, a public notice of the contents of the
         resolution under paragraph (1) shall be given.

         (6) The right of a pledgee under Article 340 (1) shall extend to the
         shares to be distributed to a shareholder pursuant to paragraph (1). In
         this case, Article 340 (3) shall apply mutatis mutandis.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 462-3 (INTERIM DIVIDEND)


         (1) A company which has a settling term one time per year may determine
         in the articles of incorporation that the company may pay a dividend
         (hereinafter in this Article referred to as the "interim dividend") by
         means of money to the day's shareholder on a specified day set by a
         resolution of the board of directors only one time during the business
         year.

         (2) The interim dividend shall be made within the limit of the amount
         calculated by deducting the following amounts from the amount of net
         properties on the balance sheet in the immediately previous settling
         term: (Amended by Act No. 6488, Jul. 24, 2001)

         1.The amount of capital in the immediately previous settling term;

         2.The total amount of the capital surplus reserve and earned surplus
         reserve accumulated until the immediately previous settling term;

         3.The amount which is to be distributed as a profit or paid at the
         regular general meeting in the immediately previous settling term; and

         4.The earned surplus reserve which is to be accumulated in the relevant
         settling term for the interim dividend.


<PAGE>

         (3) If it is deemed that the amount of net properties on the balance
         sheet in the relevant settling term is unlikely to amount to the total
         sum of the amounts under subparagraphs of Article 462 (1), the company
         concerned shall not provide the interim dividend. (Amended by Act No.
         6488, Jul. 24, 2001)

         (4) Where, while the amount of net properties on the balance sheet in
         the relevant settling term fails to amount to the total sum of the
         amounts under subparagraphs of Article 462 (1), the interim dividend is
         provided, the directors shall be jointly and severally liable to
         compensate for the balance (where the dividend is less than the
         balance, the dividend) to the company: Provided, That the same shall
         not apply where it is proved that the directors did not neglect their
         care in rendering judgment under paragraph (3). (Amended by Act No.
         6488, Jul. 24, 2001)

         (5) With respect to the application of Articles 340 (1), 344 (1), 350
         (3) (including where this shall apply mutatis mutandis under Articles
         423 (1), 516 (2), and 516-9; hereinafter in this paragraph the same
         shall apply), 354 (1), 370 (1), 457 (2), 458, and 464 and subparagraph
         3 of Article 625, the interim dividend shall be deemed to be the
         dividend under Article 462 (1), and with respect to the application of
         Article 350 (3), a specified day under paragraph (1) shall be deemed to
         be the end of the business year.

         (6) The provisions of Articles 399 (2) and (3) and 400 shall apply
         mutatis mutandis with respect to the liability of directors under
         paragraph (4), and the provisions of Article 462 (2) and (3), with
         respect to the interim dividend made in breach of paragraph (3).
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 463 (ACCRUED INTEREST DIVIDEND DURING CONSTRUCTION IN PROGRESS)


         (1) If it is deemed impossible, in view of the nature of the
         undertaking which forms the company's purpose, to commence the whole of
         the business for more than two years after its incorporation, the
         company may provide in the articles of incorporation that a specified
         interest shall be distributed to the shareholders

<PAGE>

         of certain shares during a specified period prior to the commencement
         of the whole of business: Provided, That the rate of such interest
         shall not exceed five percent per annum.

         (2) The provisions of the articles of incorporation mentioned in
         paragraph (1) or amendment thereof shall require the authorization of
         the court.


ARTICLE 464 (STANDARD FOR DISTRIBUTION OF PROFITS, ETC.)

         The distribution of profits or interest shall be made in proportion to
         the number of shares owned by each shareholder: Provided, That this
         shall not apply to the case of Article 344, paragraph (1).


ARTICLE 464-2 (TIME FOR PAYMENT OF DIVIDENDS)


         (1) A company shall pay dividends under Article 464 no later than one
         month after the day of approval under Article 449 (1) or a resolution
         under Article 462-3 (1): Provided, That this shall not apply where the
         time for payment of dividend is fixed differently at the general
         meeting under Article 449 (1) or the board of directors under Article
         462-3 (1). (Amended by Act No. 5053, Dec. 29, 1995; Act No. 5591, Dec.
         28, 1998)

         (2) The claim for payment of dividends under paragraph (1) shall be
         extinguished by prescription, if it is not exercised for five years.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 465

         Deleted. (by Act No. 3724, Apr. 10, 1984)


ARTICLE 466 (SHAREHOLDER'S RIGHT TO INSPECT ACCOUNT BOOKS)



<PAGE>
         (1) Any shareholder who hold shares representing no less than 3/100 of
         the total issued and outstanding shares may demand, in writing with the
         reasons thereof specified, the inspection or copying of the account
         books and related documents.
         (Amended by Act No. 5591, Dec. 28, 1998)

         (2) A company shall not refuse the shareholder's demand mentioned in
         paragraph (1) unless it proves that such demand is improper. (Amended
         by Act No. 5591, Dec. 28, 1998)


ARTICLE 467 (INSPECTION ON AFFAIRS AND STATUS OF COMPANY'S PROPERTY)


         (1) If there is any reason to suspect of dishonest act or of material
         fact in contravention of any Acts, subordinate statutes or the articles
         of incorporation in connection with the management of affairs, any
         shareholder who holds shares representing no less than 3/100 of the
         total issued and outstanding shares may apply to the court for the
         appointment of an inspector to investigate the affairs of the company
         and the status of its property. (Amended by Act No. 5591, Dec. 28,
         1998)

         (2) The inspector shall report on the results of the investigation to
         the court.

         (3) If the court deems it necessary according to the report mentioned
         in paragraph (2), it may order the representative director to convene a
         general shareholders' meeting. In this case, Article 310 (2) shall
         apply mutatis mutandis. (Amended by Act No. 1212, Dec. 12, 1962; Act
         No. 5053, Dec. 29, 1995)

         (4) Directors and auditors shall examine without delay whether or not
         the report of the inspector mentioned in paragraph (3) is accurate and
         shall report on the results thereof to the general shareholders'
         meeting. (Newly Inserted by Act No. 5053, Dec. 29, 1995)


ARTICLE 467-2 (PROHIBITION AGAINST GRANTING PECUNIARY BENEFIT)



<PAGE>

         (1) A company may not grant to any person a pecuniary benefit in
         connection with the exercise of rights as a shareholder.

         (2) If a company has given gratuitously any pecuniary benefit to a
         specified shareholder, such pecuniary benefit shall be presumed to have
         given in connection with the exercise of a shareholder's rights. If a
         company has given for value any pecuniary benefit to a specified
         shareholder but if the benefits obtained by the company is remarkably
         less than the pecuniary benefit granted to the shareholder, the same
         shall be applicable.

         (3) If a company has granted any pecuniary benefit in contravention of
         paragraph (1), the person who has received such benefit shall return it
         to the company. In this case, if the person paid to the company
         anything in compensation for such benefit, the company may return it to
         him.

         (4) Articles 403 through 406 shall apply mutatis mutandis to an action
         for the return of benefit under paragraph (3).

         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 468 (RIGHT TO PREFERENTIAL PAYMENT OF EMPLOYEE)

         A person who has a claim to the return of money as a guarantee for
         fidelity of an employee or any other claim arising out of the relations
         of employment between a company and its employees shall be entitled to
         preferential payment from the company' whole property: Provided, That
         such right shall not satisfied prior to the pledge or mortgage.


         SECTION 8 BONDS

         SUB-SECTION 1 COMMON PROVISIONS


<PAGE>

ARTICLE 469 (OFFERING OF BONDS)

         A company may offer bonds for subscription by a resolution of the board
         of directors.


ARTICLE 470 (LIMITATION ON TOTAL AMOUNT)


         (1) The total amount of bonds shall not exceed four times the amount of
         net assets of the company as shown by the latest balance sheet.
         (Amended by Act No. 5053, Dec. 29, 1995)

         (2) Deleted. (by Act No. 5053, Dec. 29, 1995)

         (3) If the offering of bonds are made for the purpose of redeeming old
         bonds, the amount of the old bonds shall not be computed in the total
         amount of the bonds. In this case, the old bonds shall be redeemed
         within six months from the payment date of new bonds or from the first
         payment date if such payment is to be made in installments.


ARTICLE 471 (RESTRICTIONS ON OFFERING OF NEW BONDS)

         A company shall not offer new bonds for subscription until to be the
         amount of bonds previously subscribed has been fully paid.


ARTICLE 472 (FACE AMOUNT OF BOND)


         (1) The face amount of each bond shall not be less than ten thousand
         won. (Amended by Act No. 3724, Apr. 10, 1984)

         (2) The face amount of each bond shall, in respect of the same class of
         bonds, either be equal or be such as is an integral multiple of the
         minimum amount of the bond of the same class.

<PAGE>

ARTICLE 473 (RESTRICTIONS ON REDEMPTION IN EXCESS OF PAR VALUE)

         If a decision is made to repay to bondholders an amount in excess of
         the par value of the bond, such amount in excess shall be paid at an
         equal rate for each bond.


ARTICLE 474 (PUBLIC OFFERING, SUBSCRIPTION FORM FOR BONDS)


         (1) A person who intends to subscribe for bonds shall prepare two
         copies of subscription forms, stating the number of bonds for which he
         intends to subscribe and his address, and shall write his name and
         affix his seal or sign thereon. (Amended by Act No. 5053, Dec. 29,
         1995)

         (2) The subscription form for bonds shall be prepared by the directors
         and contain the following: (Amended by Act No. 3724, Apr. 10, 1984; Act
         No. 5053, Dec. 29, 1995)

         1.Trade name of the company;

         2.Total amount of the capital and the reserve;

         3.Amount of the net assets of the company as shown by the latest
         balance sheet;

         4.Total amount of the bonds;

         5.Face amount of each bond;

         6.Issue-price or minimum issue-price of each bond;


<PAGE>

         7.Rate of interest payable on each bond;

         8.Method and time of redemption of the bonds and of the payment of
         interest;

         9.Amount and time of each payment for the subscription price of bonds,
         if payments are to be made in installments;

         10.If a determination is made to restrict the bonds certificates either
         in bearer form or in registered form, such provisions;

         11.If bonds have been previously issued, the amount yet to be redeemed;

         12.If an offering of bonds for the purpose of redeeming old bonds are
         made in excess of the limits prescribed in Article 470 (1), a statement
         to that effect;

         13.If there is a company which has been commissioned to offer bonds for
         subscription, the trade name and address of such company;

         14.If the company mentioned in subparagraph 13 has undertaken to
         subscribe for any portion of the total amount of the bonds which has
         not been subscribed for through the public offering, a statement to
         that effect; and

         15.If a transfer agent is designated, his full name, address and
         business office.

         (3) In case where the minimum issue-price has been determined, the
         subscriber for bonds shall state in the subscription form the amount at
         which he intends to subscribe for.


ARTICLE 475 (SUBSCRIPTION FOR ALL BONDS)

         Article 474 shall not apply where all the bonds is subscribed for under
         a contract. The same shall apply to such part of the bonds as may be
         subscribed for by a company which has been commissioned to offer bonds
         for subscription.

<PAGE>

ARTICLE 476 (PAYMENT)


         (1) When the subscription for all the bonds has been completed, the
         directors shall, without delay, cause any person who has subscribed for
         bonds to make the full payment or the first instalment payment on each
         bond.

         (2) A company commissioned to offer bonds for subscription may in its
         own name perform the acts set forth in Article 474 (2) and 475 on
         behalf of the company.


ARTICLE 477

         Deleted. (by Act No. 3724, Apr. 10, 1984)


ARTICLE 478 (ISSUANCE OF BOND CERTIFICATES)


         (1) No certificate may be issued for a bond until its full amount has
         been paid up.

         (2) Each bond certificate shall contain the following particulars and
         the representative director shall write his name and affix his seal or
         shall sign thereon: (Amended by Act No. 1212, Dec. 12, 1962; Act No.
         5053, Dec. 29, 1995)

         1.Serial number of each bond; and

         2.Particulars set forth in Article 474 (2) 1, 4, 5, 7, 8, 10 and 13.


ARTICLE 479 (TRANSFER OF REGISTERED BONDS)


         (1) Transfer of registered bonds shall not be asserted against the
         company or a third person unless the name and address of the transferee
         have been entered in

<PAGE>

         the register of bonds and his full name is entered in the bond
         certificates.

         (2) Article 337 (2) shall apply mutatis mutandis to the transfer of
         registered bonds. (Newly Inserted by Act No. 3724, Apr. 10, 1984)


ARTICLE 480 (EXCHANGE BETWEEN REGISTERED CERTIFICATE AND BEARER CERTIFICATE)

         A bondholder may at any time request the company to change a registered
         bond certificate into a bearer certificate: Provided, That this shall
         not apply where the form of the bond certificate is restricted to
         either in registered or bearer form.


ARTICLE 481 (RESIGNATION OF COMMISSIONED COMPANY)

         A company which has been commissioned to offer bonds for subscription
         may resign with the consent of the issuing company and of a meeting of
         bondholders. It may do so with the permission of the court where there
         are unavoidable reasons therefor.


ARTICLE 482 (REMOVAL OF COMMISSIONED COMPANY)

         If a company which has been commissioned to offer bonds for
         subscription is unfit for dealing with the business or if there exists
         any other justifiable cause, the court may remove such company from
         office at the request of the issuing company or of a meeting of
         bondholders. (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 483 (SUCCESSOR TO BUSINESS OF COMMISSIONED COMPANY)


         (1) If, in case of Articles 481 and 482, the company which has been
         commissioned to offer bonds for subscription does not exist, a
         successor to its business may be appointed by agreement between the
         issuing company and a

<PAGE>

         meeting of bondholders.

         (2) If unavoidable reasons exist, any interested person may demand the
         court to appoint such successor to the business.


ARTICLE 484 (AUTHORITY OF COMMISSIONED COMPANY)


         (1) A company which has been commissioned to offer bonds for
         subscription shall have authority to do on behalf of the bondholders
         all judicial or extra-judicial acts which are necessary for the
         redemption of bonds.

         (2) When the company under paragraph (1) is requested to redeem the
         bonds, it shall without delay give public notice thereof and give a
         separate notice to notify each bondholder known to that company.

         (3) In case of paragraph (2), bondholders may demand payment of the
         redemption price in exchange for their bond certificates.


ARTICLE 485 (AUTHORITY AND DUTY IN CASE OF TWO OR MORE COMMISSIONED COMPANY)


         (1) If two or more companies have been commissioned to offer bonds for
         subscription, all acts within the scope of their authority shall be
         jointly performed.

         (2) In case of paragraph (1), each company shall be jointly and
         severally liable to the bondholders to pay redemption price.


ARTICLE 486 (LOST COUPON)


         (1) If, in case of redemption of bearer bonds to which coupons are
         attached, any

<PAGE>

         coupon is missing, a sum equal to the amount of the coupon shall be
         deducted from the redemption.

         (2) Any holder of the coupon mentioned in paragraph (1) may at any time
         demand payment of the amount deducted in exchange for such coupon.


ARTICLE 487 (EXTINCTIVE PRESCRIPTION FOR RIGHT TO DEMAND REDEMPTION)


         (1) The right to demand redemption of the bonds shall lapse by
         prescription if it is not exercised for ten years.

         (2) The same shall apply to the right set forth in Article 484 (3).

         (3) The right to demand payment of interest of the bonds and the rights
         mentioned in Article 486 (2) shall lapse by prescription, if it is not
         exercised for five years.


ARTICLE 488 (REGISTER OF BONDS)

         The register of bonds shall be prepared by the company and the
         following particulars shall be entered in such register:

         1.Name and address of each bondholder;

         2.Serial number of each bond certificate;

         3.Particulars set forth in Article 474 (2) 4, 5, 7 through 9 and 13;

         4.Amount paid in for each bond and date of each payment;

         5.Date of issuance of the bond certificates;

         6.Date of acquisition of each bond; and


<PAGE>

         7.In case of issuance of bearer bonds, the class, number, serial number
         and date of issuance


ARTICLE 489 (APPLICABLE PROVISIONS)


         (1) Article 353 shall apply mutatis mutandis to notices and peremptory
         notices to subscribers for bonds and to bondholders.

         (2) Article 333 shall apply mutatis mutandis where bonds belong to
         coownership of two or more persons.


         SUB-SECTION 2 MEETINGS OF BONDHOLDERS

ARTICLE 490 (MATTERS SUBJECT TO RESOLUTION)

         Unless otherwise provided in this Act, a meeting of bondholders may
         adopt resolutions, with the permission of the court, in respect of any
         matter which seriously affects the interests of bondholders.


ARTICLE 491 (PERSON AUTHORIZED TO CONVENE)


         (1) A meeting of bondholders shall be convened by the company which
         issued the bonds or by a company which has been commissioned to offer
         bonds for subscription.

         (2) Bondholders representing at least 1/10 of the total amount of the
         bonds may demand the convocation of a meeting of bondholders by
         submitting to either of the companies mentioned in paragraph (1) a
         written application containing the proposed subject-matters of the
         meeting and the reasons for convening such

<PAGE>

         meeting.

         (3) Article 366 (2) shall apply mutatis mutandis in case of paragraph
         (1).

         (4) The holder of bearer bond certificates may not exercise the right
         mentioned in paragraphs (1) and (2) unless he has deposited his bond
         certificates.


ARTICLE 492 (VOTES)


         (1) Each bondholder shall have one vote for each minimum face amount of
         the bonds.

         (2) The holder of bearer bond certificates may not exercise his voting
         rights unless he has deposited his bond certificates at least one week
         prior to the date set for the meeting.


ARTICLE 493 (ATTENDANCE OF REPRESENTATIVE OF ISSUING OR COMMISSIONED COMPANY)


         (1) The issuing company or the company which has been commissioned to
         offer bonds for subscription may have its representative attend a
         meeting of bondholders or may produce its opinion in writing.

         (2) The convocation of a meeting of bondholders shall be notified to
         the companies mentioned in paragraph (1).

         (3) Article 363 (1) and (2) shall apply mutatis mutandis to the
         notification under paragraph (2).


ARTICLE 494 (RIGHT TO DEMAND ISSUING COMPANY TO MAKE ITS REPRESENTATIVE ATTEND)

         A meeting of bondholders or the person who has convened such meeting
         may, if

<PAGE>

         deemed necessary, demand the issuing company to make its representative
         attend the meeting.


ARTICLE 495 (METHOD OF RESOLUTION)


         (1) Article 434 shall apply mutatis mutandis to the resolutions of a
         meeting of bondholders.

         (2) The consent or demand mentioned in Articles 481 through 483 and 494
         may, notwithstanding paragraph (1) above, be decided by a majority of
         the votes of the bondholders present.


ARTICLE 496 (APPLICATION FOR AUTHORIZATION OF RESOLUTION)

         Persons who have convened a meeting of bondholders shall apply to the
         court for the authorization of the resolutions within one week from the
         day on which such resolutions have been adopted.


ARTICLE 497 (REASONS FOR NON-AUTHORIZATION OF RESOLUTION)


         (1) The court shall not authorize the resolution of a meeting of
         bondholders in the following cases:

         1.If the procedures for convening the meeting of bondholders or the
         manner of adopting the resolution was in contravention of any Acts and
         subordinate statutes or of any statement contained in the prospectus
         for offering of bonds;

         2.If the resolution was adopted in an improper manner;

         3.If the resolution was remarkably unfair; and


<PAGE>

         4.If the resolution was contrary to the interests of the bondholders in
         general.

         (2) In case of paragraph (1) 1 and 2,the court may authorize such a
         resolution by taking into account the details of the resolution and all
         other circumstances.


ARTICLE 498 (EFFECT OF RESOLUTION)


         (1) A resolution of a meeting of bondholders shall take effect by
         obtaining the authorization of the court.

         (2) A resolution of a meeting of bondholders shall be effective against
         all the bondholders.


ARTICLE 499 (PUBLIC NOTICE OF AUTHORIZATION OR NON-AUTHORIZATION OF RESOLUTION)

         When a decision has been made either to authorize or not to authorize a
         resolution of a meeting of bondholders, the company which issued the
         bonds shall without delay give public notice thereof.


ARTICLE 500 (REPRESENTATIVES OF MEETING OF BONDHOLDERS)


         (1) A meeting of bondholders may elect one or more representatives from
         among the holders of bonds representing no less than 1/500 of the total
         amount of the bonds and may delegate him or them to decide matters
         which are to be dealt with by its resolution.

         (2) If there are two or more representatives, the decision under
         paragraph (1) shall be made by a majority of their votes.


ARTICLE 501 (EXECUTION OF RESOLUTION)


<PAGE>

         A resolution of a meeting of bondholders shall be executed either by a
         company commissioned to offer bonds for subscription or, in the absence
         of any such company, by the representatives mentioned in Article 500:
         Provided, That it shall not be the case where a person has been
         appointed to execute the resolution by the resolution of a meeting of
         bondholders.


ARTICLE 502 (TWO OR MORE REPRESENTATIVES OF MEETING OR EXECUTORS OF RESOLUTION)

         Article 485 (1) shall apply mutatis mutandis where there are two or
         more representatives of meeting or executors resolution.


ARTICLE 503 (EXECUTION OF RESOLUTION RELATING TO REDEMPTION)

         Articles 484, 485 (2) and 487 (2) shall apply mutatis mutandis where
         either the representatives of meeting or the executors of the
         resolution execute a resolution relating to the redemption of the
         bonds.


ARTICLE 504 (REMOVAL OF REPRESENTATIVE OF MEETING OR EXECUTOR OF RESOLUTION,
ETC.)

         The meeting of bondholders may adopt a resolution at any time to remove
         from office any representative of the meeting or executor of the
         resolution and may alter details of any matter delegated to such
         person.


ARTICLE 505 (ACCELERATION)


         (1) If a company has neglected to pay interest on the bonds or has
         neglected to redeem them where a part of the bonds are to be redeemed
         at fixed periods, the bondholders may by a resolution of a meeting of
         bondholders give notice to the company to the effect that payment
         thereof must be made within a fixed period of time and that if the
         company fails to make payment within such period, it shall

<PAGE>

         accelerate payment of the whole amount of the bonds: Provided, That
         such period shall not be shorter than two months.

         (2) The notice mentioned in paragraph (1) shall be given in writing.

         (3) If a company fails to pay within the period mentioned in paragraph
         (1), it shall accelerate the payment of the whole amount of the bonds.


ARTICLE 506 (PUBLIC NOTICE AND NOTICE OF ACCELERATION)

         When a company is subject to acceleration in accordance with Article,
         505, the person who executes of a resolution under Article 505 (1)
         shall without delay give public notice to that effect and give a
         separate notice to each bondholders known to the company thereof.


ARTICLE 507 (REMUNERATION AND EXPENSES FOR COMMISSIONED COMPANY)


         (1) Unless otherwise provided in the contract made with the issuing
         company, any remuneration payable to a company commissioned to offer
         bonds for subscription, representatives of a meeting or executors of a
         resolution or any expenses necessary for the execution of their duties
         may be borne by the company, with the permission of the court. (Amended
         by Act No. 1212, Dec. 12, 1962)

         (2) Any company commissioned to offer bonds for subscription and any
         representative of a meeting or executor of a resolution may receive
         remuneration and expenses mentioned in paragraph (1) out of the
         redemption amount, in preference to bondholders.


ARTICLE 508 (EXPENSES RELATING TO MEETINGS OF BONDHOLDERS)

<PAGE>


         (1) Any expenses relating to meetings of bondholders shall be borne by
         the issuing company.

         (2) Any expenses relating to the demand under Article 496 shall be
         borne by the company. The court may, however, upon the application of
         any interested person or ex officio, specially determine a person who
         shall bear such expenses in whole or in part.


ARTICLE 509 (MEETINGS OF CERTAIN CLASSES OF BONDHOLDERS)

         If two or more classes of bonds have been issued, a meeting of
         bondholders shall be convened for each class of bonds respectively.


ARTICLE 510 (APPLICABLE PROVISIONS)


         (1) Articles 363, 368 (3) and (4), 369 (2), and 371 through 373 shall
         apply mutatis mutandis to a meeting of bondholders.

         (2) The minutes of meetings of bondholders shall be kept by the issuing
         company at its principal office.

         (3) A company commissioned to offer bonds for subscription and any
         bondholder may, at any time during business hours, demand inspection of
         the minutes mentioned in paragraph (2).


ARTICLE 511 (ACTION FOR REVOCATION BY COMMISSIONED COMPANY)


         (1) If payment, settlement or any other act effected by a company to a
         certain bondholder is remarkably unfair, a company commissioned to
         offer bonds for subscription may demand the revocation thereof, only by
         means of action to court.


<PAGE>

         (2) The action mentioned in paragraph (1) shall be brought within six
         months from the day on which the company becomes aware of the forming
         the ground for revocation and within one year from the day when such
         act becomes effective.

         (3) Article 186 of this Act and the proviso of Article 406 (1) and
         Article 407 of the Civil Act shall apply mutatis mutandis to the action
         mentioned in paragraph (1).


ARTICLE 512 (ACTION FOR REVOCATION BY REPRESENTATIVE, ETC.)

         When a resolution has been adopted by a meeting of bondholders, any
         representative of a meeting or executor of a resolution may also bring
         the action mentioned in Article 511 (1): Provided, That such action
         shall be brought within one year from the day when such act becomes
         effective.


         SUB-SECTION 3 CONVERTIBLE BONDS

ARTICLE 513 (ISSUANCE OF CONVERTIBLE BONDS)


         (1) A company may issue convertible bonds.

         (2) In case of paragraph (1), any of the following matters not provided
         for in the articles of incorporation shall be determined by the board
         of directors, unless the articles of incorporation provides that it
         shall be determined by a general meeting of shareholders' meeting:

         1.Total amount of convertible bonds;

         2.Conditions of conversion;


<PAGE>

         3.Details on shares to be issued upon conversion;

         4.Period during which a claim for conversion may be demanded;

         5.Details on the preemptive rights of shareholders to subscribe for
         convertible bonds, and the amount of convertible bonds subject to such
         rights; and

         6.Details on issuance of convertible bonds to the persons other than
         shareholders, and the amount of such convertible bonds to be issued.

         (3) If, in case where convertible bonds are issued to those who are not
         shareholders of the company, the articles of incorporation do not
         include the amount of convertible bonds to be issued, conditions of
         conversion, contents of the shares to be issued upon conversion and the
         period during which the conversion may be demanded, such matters shall
         be determined by resolution under Article 434. In such case, the
         proviso of Article 418 (3) shall apply mutatis mutandis. (Amended by
         Act No. 6488, Jul. 24, 2001)

         (4) In case of resolution under paragraph (3), the summary of agenda
         relating to the issuance of convertible bonds shall be stated in the
         notice and public notice under Article 363.
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 513-2 (RIGHTS OF SHAREHOLDERS ENTITLED TO SUBSCRIBE FOR CONVERTIBLE
BONDS)


         (1) Any shareholder who has a right to subscribe for convertible bonds
         shall be entitled to be alloted bonds in proportion to the number of
         shares which he holds: Provided, That this shall not apply to an
         fractional bond the amount of which is less than the minimum face
         amount of each convertible bond.

         (2) Article 418 (2) shall apply mutatis mutandis where a shareholder
         has the right to subscribe for the convertible bonds.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]

<PAGE>

ARTICLE 513-3 (PEREMPTORY NOTICE TO SHAREHOLDERS HAVING RIGHT TO SUBSCRIBE FOR
CONVERTIBLE BONDS)


         (1) If shareholders have the preemptive right to subscribe for
         convertible bonds, the company shall notify each shareholder of the
         amount of convertible bonds which he is entitled to subscribe for,
         issue price, conditions of conversion, the details of the shares to be
         issued upon conversion, the period within which he may demand
         conversion and a statement to the effect that if he fails to subscribe
         for the convertible bonds on or before the specified date, he shall
         lose his right.

         (2) Article 419 (2) through (4) shall apply mutatis mutandis in case of
         paragraph (1).
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 514 (PROCEDURES FOR ISSUANCE OF CONVERTIBLE BONDS)


         (1) With regard to convertible bonds, the following particulars shall
         be stated in the subscription form for bonds, the bond certificates and
         the register of bonds: (Amended by Act No. 5053, Dec. 29, 1995)

         1.A statement to the effect that the bonds may be converted into
         shares;

         2.Conditions of conversion;

         3.Particulars as to shares to be issued upon conversion;

         4.Period during which conversion may be demanded; and

         5.Provision that the transfer of shares should be subject to the
         approval of the board of directors, if so determined.


<PAGE>

         (2) Deleted. (by Act No. 3724, Apr. 10, 1984)


ARTICLE 514-2 (REGISTRATION OF CONVERTIBLE BONDS)


         (1) When a company has issued convertible bonds, the company shall
         register them at the place of its principal office within two weeks
         from the date payment under Article 476 is completed. (Amended by Act
         No. 5053, Dec. 29, 1995)

         (2) The particulars to be registered under paragraph (1) shall be as
         follows:

         1.Total amount of convertible bonds;

         2.Face amount of each convertible bond;

         3.Amount paid for each convertible bond; and

         4.Matters set forth in subparagraphs 1 through 4 of Article 514.

         (3) Article 183 shall apply mutatis mutandis to the registration under
         paragraph (2).

         (4) If, in case where convertible bonds have been issued overseas, the
         matters to be registered take place in a foreign country, the period
         within which registration shall be made shall start to run from the
         date of arrival of notification thereof.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 515 (DEMAND FOR CONVERSION)


         (1) Any person who demands conversion shall submit to the company two
         copies of a written application form together with the bond
         certificates.


<PAGE>

         (2) The written application form mentioned in paragraph (1) shall state
         the bonds to be converted and the date of application and contain a
         name and a seal or signature by the person demanding conversion.
         (Amended by Act No. 5053, Dec. 29, 1995)


ARTICLE 516 (APPLICABLE PROVISIONS)


         (1) Articles 346 (2), 424 and 424-2 shall apply mutatis mutandis to the
         issuance of convertible bonds.

         (2) Articles 339, 348, 350 and 351 shall apply mutatis mutandis to the
         conversion of bonds. (Amended by Act No. 5053, Dec. 29, 1995)

         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


         SUB-SECTION 4 BONDS WITH WARRANTS

ARTICLE 516-2 (ISSUANCE OF BONDS WITH WARRANTS)


         (1) A company may issue bonds with warrants to subscribe for new
         shares.

         (2) In case of paragraph (1), any of the following matters which are
         not provided for in the articles of incorporation shall be determined
         by the board of directors, unless the articles of incorporation provide
         that it shall be determined by a general of shareholders' meeting:

         1.Total amount of bonds with warrants;

         2.Details of the warrants vested to such bonds;

         3.Period within which the warrants are to be exercised;


<PAGE>

         4.A statement on the transferability of only the warrants;

         5.A statement to the effect that upon request of the person who intends
         to exercise his warrant rights, the issue price of the bonds with
         warrants shall be deemed as payment under Article 516-8 (1), instead of
         the redemption of such bonds;

         6.Deleted; (by Act No. 5053, Dec. 29, 1995)

         7.Details on the preemptive rights to subscribe for bonds with warrants
         and the amount of bonds subject to such rights; and

         8.Details on issuance of bonds with warrants to persons other than
         shareholders and the amount of such bonds with warrants to be issued.

         (3) The total amount of issue price of the shares to be issued upon the
         exercise of warrant rights vested to each bonds shall not exceed the
         total amount of such bonds with warrant.

         (4) If, in case where the bonds with warrants are issued to those who
         are not shareholders, the articles of incorporation do not include the
         amount of such bonds, contents of the warrant rights and the period
         within which the warrant rights are to be exercised, these matters
         shall be determined by a resolution under Article 434. In such case,
         the proviso of Article 418 (3) shall apply mutatis mutandis. (Amended
         by Act No. 6488, Jul. 24, 2001)

         (5) Article 513 (4) shall apply mutatis mutandis to the case of
         paragraph (4).

         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 516-3 (PEREMPTORY NOTICE TO SHAREHOLDERS HAVING RIGHT TO SUBSCRIBE FOR
BONDS WITH WARRANTS)


         (1) If shareholders have the preemptive rights to subscribe for bonds
         with warrants, the company shall notify each shareholder of the amount
         of bonds with

<PAGE>

         warrants which he is entitled to subscribe for, the issue price, the
         particulars of warrant rights, the period within which he may exercise
         his warrant rights and a statement to the effect that if he fails to
         subscribe for the bonds with warrants on or before the specified date,
         he will lose his right. In this case, if the matters set forth in
         Article 516-2 (2) 4 or 5 have been determined, the details of such
         matters shall also be notified.

         (2) Article 419 (2) through (4) shall apply mutatis mutandis to the
         case of paragraph (1).

         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 516-4 (PARTICULARS TO BE ENTERED IN SUBSCRIPTION FORM FOR BONDS, BOND
CERTIFICATES AND REGISTER OF BONDS)

         The following matters shall be entered in the subscription form for
         bonds, the bond certificates and the register of bonds in case of bonds
         with warrants: Provided, That when the company issues the certificates
         of warrants set forth in Article 516-5 (1), it shall not be required to
         enter them in the bond certificates: (Amended by Act No. 5053, Dec. 29,
         1995)

         1.A statement to the effect that a bond with warrant;

         2.Particulars set forth in Article 516-2 (2) 2 through 5;

         3.The banks and other financial institutions that will be responsible
         to receive the payment under Article 516-8 and the places where such
         payments are to be made; and

         4.Provision that the transfer of shares should be subject to the
         approval of the board of directors, if so determined. [This Article
         Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 516-5 (ISSUANCE OF CERTIFICATES OF WARRANTS)

<PAGE>

         (1) If a company has determined the particulars set forth in Article
         516-2 (2) 4, it shall issue the certificates of warrants in addition to
         the bond certificates.

         (2) Certificates of warrants shall contain the following particulars in
         addition to the serial number and directors shall write their names and
         affix their seals or shall sign thereon : (Amended by Act No. 5053,
         Dec. 29, 1995)

         1.A statement to the effect that it is a certificate of warrant;

         2.Trade name of company;

         3.Matters set forth in Article 516-2 (2) 2, 3 and 5;

         4.Matters set forth in subparagraph 3 of Article 516-4; and

         5.Provision that the transfer of shares should be subject to the
         approval of the board of directors, if so determined.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 516-6 (TRANSFER OF WARRANT RIGHTS)


         (1) If certificates of warrants have been issued, transfer of the
         warrant rights shall be made only by the delivery of such certificates
         of warrants.

         (2) Articles 336 (2) and 360 of this Act and Article 21 of the Check
         Act shall apply mutatis mutandis to the certificates of warrants.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 516-7 (REGISTRATION OF BONDS WITH WARRANTS)


         (1) When a company has issued bonds with warrants, it shall register
         the

<PAGE>

         following:

         1.A statement to the effect that they are bonds with warrants;

         2.Total amount of issue price of the shares to be issued upon the
         exercise of warrant rights;

         3.Faceamount of each bond with warrants;

         4.Amount paid in for such bonds with warrants; and

         5.Matters set forth in Article 516-2 (2) 1 through 3.

         (2) Article 514-2 (1), (3) and (4) shall apply mutatis mutandis to the
         registration under paragraph (1).
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 516-8 (EXERCISE OF WARRANT RIGHTS)


         (1) Any person who intends to exercise his warrant right shall submit
         to the company two copies of a written application form therefor and
         shall pay the total amount of issue price of the new shares.

         (2) When written application forms are submitted pursuant to paragraph
         (1), the certificates of warrants, if they have been issued, shall be
         submitted together with the application form, but if such certificates
         have not been issued, the bond certificates shall instead be presented.

         (3) The payment under paragraph (1) shall be made to the banks or other
         financial institutions named in the bond certificates or in the
         certificates of warrants.

         (4) Article 302 (1) shall apply mutatis mutandis to the written
         application forms under paragraph (1) and Articles 306 and 318 shall
         apply mutatis mutandis to the

<PAGE>

         banks and other financial institutions responsible for receipt of
         payment under paragraph (3).1
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 516-9 (TIME OF BECOMING SHAREHOLDER)

         A person who has exercised his warrant rights pursuant to Article 516-8
         (1) shall become a shareholder at the time when he makes payment under
         that Article. In this case, Article 350 (2) and (3) shall apply mutatis
         mutandis. (Amended by Act No. 5053, Dec. 29, 1995)
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 516-10 (APPLICABLE PROVISIONS)

         Article 351 shall apply mutatis mutandis to the exercise of warrant
         rights and Articles 513-2 and 516 (1) shall apply mutatis mutandis to
         bonds with warrants. (Amended by Act No. 5053, Dec. 29, 1995)
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


         SECTION 9 DISSOLUTION

ARTICLE 517 (REASONS FOR DISSOLUTION)

         A stock company shall be dissolved for any of the following reasons:
         (Amended by Act No. 5591, Dec. 28, 1998)

         1.Reasons set forth in subparagraphs 1, 4 through 6 of Article 227;

         1-2.Division or merger through division of a company under Article
         530-2; and

         2.A resolution of a general shareholders' meeting.

<PAGE>

ARTICLE 518 (RESOLUTION FOR DISSOLUTION)

         The resolution for dissolution shall be adopted in accordance with
         Article 434.


ARTICLE 519 (CONTINUANCE OF COMPANY)

         Where a company has been dissolved by reason of the expiration of the
         duration or of the occurrence of any other events specified in the
         Article of incorporation as reason for dissolution or by the resolution
         of a general shareholders' meeting, the company may continue to exist
         by such resolution as provided for in Article 434.


ARTICLE 520 (JUDGMENT FOR DISSOLUTION)


         (1) If, in the cases mentioned below, there exist unavoidable reasons,
         any shareholder who holds shares representing no less than 10/100 of
         the total issued and outstanding shares may apply to the court for the
         dissolution of the company:

         1.When the company's business operation continues to be remarkably in
         deadlock and as a result irreparable injury to the company is suffered
         or threatened; and

         2.When the managing or disposing of the company's property is
         remarkably improper and the existence of the company is thereby in
         danger.

         (2) Articles 186 and 191 shall apply mutatis mutandis to the
         application under paragraph (1).


ARTICLE 520-2 (DISSOLUTION OF DORMANT COMPANY)

<PAGE>

         (1) If, in case where the administrator of the Office of Court
         Administration has given a public notice in the Gazette that any
         company whose last registration was made five years ago shall make a
         report to the effect that it has not yet closed its business to the
         court that has the jurisdiction over the place of its principal office,
         a company for which five years has already lapsed since its last
         registration as of the day of public notice fails to report within two
         months from the day of public notice in accordance with the
         Presidential Decree, the company shall be deemed to have been dissolved
         at the expiration of the period set for such a report: Provided, That
         it shall not be the case if the company has effected a registration
         during the period.

         (2)In case of a public notice under paragraph (1), the court shall also
         send to the company concerned a separate notice informing that such
         public notice has been given.

         (3) A company which is deemed to have been dissolved pursuant to
         paragraph (1) may continue to exist by a resolution under Article 434
         within three years thereafter.

         (4) If a company which is deemed to have been dissolved pursuant to
         paragraph (1) fails to continue to exist as a company in accordance
         with paragraph (3), it shall be deemed to have been liquidated when the
         period of the above three years has lapsed. [This Article Newly
         Inserted Act No. 3724, Apr. 10, 1984]


ARTICLE 521 (NOTICE AND PUBLIC NOTICE OF DISSOLUTION)

         Upon the dissolution of a company, except in the case of bankruptcy,
         the directors shall without delay dispatch notice thereof to the
         shareholders and, in cases where bearer share certificates have been
         issued, shall give public notice thereof.


ARTICLE 521-2 (PROVISIONS TO BE APPLIED MUTATIS MUTANDIS)


<PAGE>

         The provisions of Articles 228 and 229 (3) shall apply mutatis mutandis
         to the dissolution of a stock company.
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


         SECTION 10 MERGER

ARTICLE 522 (WRITTEN AGREEMENT OF MERGER AND RESOLUTION OF APPROVAL)


         (1) In order to effect a merger of companies, a written agreement for
         merger shall be prepared and be approved by a general shareholders'
         meeting. (Amended by Act No. 5053, Dec. 29, 1995; Act No. 5591, Dec.
         28, 1998)

         (2) The summary of the written agreement of a merger shall be stated in
         notices and public notices under Article 363.

         (3) The resolution of approval mentioned in paragraph (1) shall be
         adopted in accordance with Article 434. (Amended by Act No. 5591, Dec.
         28, 1998)


ARTICLE 522-2 (PUBLIC NOTICE OF WRITTEN AGREEMENT OF MERGER)


         (1) Directors of a company shall keep the following documents in its
         principal office from two weeks before the day on which the general
         shareholders' meeting is held under Article 522 (1) until six months
         after the merger is effected: (Amended by Act No. 5591, Dec. 28, 1998)

         1.A written agreement of such merger;

         2.A document specifying the reasons for the allotment of shares which
         are issued to the shareholders of a company which ceases to exist in
         consequence of a merger; and


<PAGE>

         3.The final balance sheet and statement of profit and loss of each
         company.

         (2) Any shareholder or creditor of the company may, at any time during
         business hours, request the inspection of a document under any
         subparagraph of paragraph (1) or request the delivery of the copies or
         abstracts of them with payment of the cost as determined by the
         company. (Amended by Act No. 5591, Dec. 28, 1998)
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 522-3 (APPRAISAL RIGHTS OF SHAREHOLDERS DISSENTING MERGER)


         (1) If, in case where the board of directors has made a resolution on
         the matters set forth in Article 522 (1), a shareholder dissenting from
         such resolution has notified in writing the company of his intention of
         dissenting before the general meeting is held, he may demand in writing
         that the company purchase his shares, with the class and number of such
         shares specified, within twenty days after the general meeting makes
         the resolution.

         (2) A shareholder who made a written notification of the intention of
         dissenting from a merger to the company within two weeks from the day
         on which a public notice or notification under Article 527-2 (2) was
         made may request that the company purchase his own shares in a written
         statement specifying the class and number of shares within 20 days
         after the period passed. (Newly Inserted by Act No. 5591, Dec. 28,
         1998)
         [This Article Newly Inserted by Act No. 5053, Dec. 29, 1995]


ARTICLE 523 (WRITTEN AGREEMENT OF MERGER)

         If one of the constituent companies of a merger survives after the
         merger, the written agreement of such merger shall contain the
         following particulars: (Amended by Act No. 5591, Dec. 28, 1998; Act No.
         6488, Jul. 24, 2001)

         1.If the surviving company which is to continue to exist increases, due
         to the

<PAGE>

         merger, the total number of shares authorized to be issued, the total
         number of shares authorized to be increased, the class and the number;

         2.Total amount of the capital and the reserve of the surviving company
         to be increased;

         3.Total number, class, number per class of shares to be issued at the
         time of the merger by the surviving company as well as any other
         particulars relating to the allotment of new shares to the shareholders
         of the company which is to cease to exist;

         4.The amount which is to be paid by the surviving company to the
         shareholders of the merged company, if so determined;

         5.Date set for the general members' meeting or general shareholders'
         meeting at which the resolution of the approval for the merger shall be
         adopted;

         6.Date on which the merger is to be effected;

         7.Matters on the change of the articles of incorporation which is to be
         effected by the surviving company in consequence of the merger, if so
         determined;

         8.The limit where each company makes a profit distribution due to the
         merger or the profit distribution in cash under Article 462-3 (1); and

         9.Where the directors, auditors or members of the audit committee who
         are to take offices in the company surviving after the merger are
         determined, their names and resident registration numbers.


ARTICLE 524 (WRITTEN AGREEMENT OF CONSOLIDATION)

         If a new company is to be formed by a merger, the written agreement of
         such merger shall contain the following particulars: (Amended by Act
         No. 6488, Jul. 24, 2001)


<PAGE>

         1.With regard to the company to be formed, the matters set forth in
         Article 289 (1), 1 through 4, the class and the number if different
         classes of shares are to be issued and the place of the principal
         office;

         2.Total number, class, number per class of shares which are to be
         issued by the company to be incorporated as well as any other
         particulars relating to the allotment of shares to the shareholders of
         each constituent company;

         3.Total amount of the capital and the reserve of the company to be
         formed;

         4.The amount payable to the shareholders of each constituent company,
         if so determined;

         5.Particulars set forth in subparagraphs 5 and 6 of Article 523; and

         6.Where the directors, auditors or members of the audit committee who
         are to take offices in the company formed by a merger are determined,
         their names and resident registration numbers.


ARTICLE 525 (WRITTEN AGREEMENT OF MERGER OF PARTNERSHIP COMPANY OR LIMITED
PARTNERSHIP COMPANY)


         (1) If, in case where one of the constituent companies, which survives
         after the merger, is a stock company or the company which is to be
         newly incorporated by the merger is a stock company, either or both of
         the constituent companies are a partnership company or limited
         partnership company, the written agreement of such merger shall be made
         with the consent of all the members.

         (2) Articles 523 and 524 shall apply mutatis mutandis to the written
         agreement of a merger under paragraph (1).


ARTICLE 526 (GENERAL MEETING FOR REPORTING IN CASE OF MERGER)



<PAGE>

         (1) If one of the constituent companies survives after the merger, its
         directors shall without delay convene a general shareholders' meeting
         at which they shall make a report on matters relating to the merger,
         after the procedures set forth in Article 527-5 has been completed, or
         after the consolidation of shares has taken effect if shares have been
         consolidated in consequence of the merger, or after disposal set forth
         in Article 443 has been effected by the surviving company if there are
         shares which are not fit for consolidation, or, in case of a
         small-scale merger, after the procedures under Article 527-3 (3) and
         (4) has been completed. (Amended by Act No. 5591, Dec. 28, 1998)

         (2) A person who has subscribed for the new shares issued at the time
         of merger shall have the same rights as the shareholder at the general
         shareholders' meeting under paragraph (1). (Amended by Act No. 5591,
         Dec. 28, 1998)

         (3) In case of paragraph (1), the board of directors may make a public
         notice in lieu of a report to the general shareholders' meeting. (Newly
         Inserted by Act No. 5053, Dec. 29, 1995)


ARTICLE 527 (INAUGURAL GENERAL MEETING IN CASE OF CONSOLIDATION)


         (1) If a new company is to be incorporated by a merger, members of the
         organizing committees shall without delay convene an inaugural general
         meeting after the procedures set forth in Article 527-5 have been
         completed, or after the consolidation of shares has taken effect if
         shares have been consolidated in consequence of the merger, or after
         the disposal mentioned in Article 443 has been effected if there are
         shares which are not fit for consolidation. (Amended by Act No. 5591,
         Dec. 28, 1998)

         (2) At the inaugural general meeting, a resolution for the amendment of
         the articles of incorporation may be adopted: Provided, That the
         resolution may not contradict the tenor of the agreement of such
         merger.


<PAGE>

         (3) Articles 308 (2), 309, 311, 312 and 316 (2) shall apply mutatis
         mutandis to the inaugural general meeting mentioned in paragraph (1).

         (4) In case of paragraph (1), the board of directors may make a public
         notice in lieu of a report to the general shareholders' meeting. (Newly
         Inserted by Act No. 5591, Dec. 28, 1998)


ARTICLE 527-2 (SIMPLIFIED MERGER)


         (1) Where one of the constituent companies of a merger survives, if
         there is the agreement of the total shareholders of a company to be
         extinguished due to the merger or 90/100 or more of the total issued
         and outstanding shares in such company are held by the surviving
         company, the approval of the general shareholders' meeting of the
         company to be extinguished may be replaced by the approval of the board
         of directors of such company.

         (2) In case of paragraph (1), a company to be extinguished due to a
         merger shall give public notice or make notification to the
         shareholders that the company shall be merged without approval by the
         general meeting of shareholders within two weeks after the written
         agreement of such merger was prepared: Provided, That the same shall
         not apply where the agreement of the total shareholders is obtained.
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 527-3 (SMALL-SCALE MERGER)


         (1) Where the total number of new shares issued by the surviving
         company of a merger does not exceed 5/100 of the total issued shares of
         the company, the approval of the general shareholders' meeting of the
         company may be replaced by the approval of the board of directors of
         such company: Provided, That where there is a fixed amount to be paid
         to shareholders of a company to be extinguished in consequence of the
         merger, if the amount exceeds 2/100 of the

<PAGE>

         amount of net assets existing on the final balance sheet of the
         surviving company, this shall not apply.

         (2) In case of paragraph (1), the written agreement of the merger of
         the surviving company shall include that the merger shall be effected
         without approval by the general meeting of shareholders.

         (3) In case of paragraph (1), the surviving company shall make a public
         notice or notification to the shareholders of the trade name and seat
         of the principal office of the company to be extinguished, the date of
         the merger, and that the merger shall be effected without approval by
         the general meeting of shareholders within two weeks after the written
         agreement of the merger was prepared.

         (4) Where shareholders who own no less than 20/100 of the total issued
         shares of a company which continues to exist after a merger notify the
         company of their intention of dissenting from the merger in writing
         under paragraph (1) within two weeks after they received a public
         notice or notification under paragraph (3), the merger shall not be
         effected under the main sentence of paragraph (1).

         (5) The provisions of Article 522-3 shall not apply to a case under the
         main sentence of paragraph (1).
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 527-4 (TERMS OF OFFICE OF DIRECTOR AND AUDITOR)


         (1) Where one of the constituent companies of a merger survives, a
         director or auditor of the surviving company who took office before the
         merger shall be retired when the regular general meeting, held in a
         settling term which comes first after the merger, is completed, except
         as otherwise prescribed by the written agreement of the merger.

         (2) Deleted. (by Act No. 6488, Jul. 24, 2001)
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]

<PAGE>

ARTICLE 527-5 (PROCEDURES FOR PROTECTION OF CREDITORS)


         (1) Within two weeks after a resolution of approval by the general
         meeting of shareholders is rendered under Article 522, a company shall
         give its creditors a public notice that an objection, if any, against
         the merger should be raised within a period of not less than one month
         and shall give a peremptory notice to the respective creditors known to
         the company.

         (2) In the application of the provisions of paragraph (1), a resolution
         of approval by the board of directors shall, in case of Articles 527-2
         and 527-3, be deemed to be that by the general meeting of shareholders.

         (3) The provisions of Article 232 (2) and (3) shall apply mutatis
         mutandis to a case under paragraphs (1) and (2).
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 527-6 (EX POST FACTO NOTICE OF DOCUMENTS ON MERGER)


         (1) A director shall keep in the principal office written documents
         specifying the progress of procedures under Article 527-5, the date of
         merger, the value of property and amount of debts succeeded to from a
         company which is extinguished due to the merger, and other matters
         concerning the merger, for six months from the date of the merger.

         (2) The provisions of Article 522-2 (2) shall apply mutatis mutandis to
         documents under paragraph (1).
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 528 (REGISTRATION OF MERGER)

<PAGE>

         (1) In case of a merger, the registration of alteration by the
         surviving company, the registration of the dissolution by the company
         which ceases to exist in consequence of the merger and the registration
         set forth in Article 317 by the company which is newly incorporated by
         consolidation shall be effected within two weeks at the place of the
         principal office and within three weeks at the place of each branch
         office from the date of the closing of the general shareholders'
         meeting or the date of a public notice in lieu of a report under
         Article 526, or from the date of the closing of the inaugural general
         meeting or the date of a public notice in lieu of a report under
         Article 527, as the case may be. (Amended by Act No. 5591, Dec. 28,
         1998)

         (2) If a surviving company or a company which is newly incorporated in
         consequence of a merger succeeds to convertible bonds or bonds with
         warrants, the registration of bonds shall be effected simultaneously
         with the registration under paragraph (1). (Amended by Act No. 3724,
         Apr. 10, 1984)


ARTICLE 529 (ACTION FOR NULLIFICATION OF MERGER)


         (1) The nullity of a merger may be asserted only through an action
         which shall be filed by each company's shareholder, director, auditor,
         liquidator or bankruptcy trustee or creditor who has opposed the
         merger. (Amended by Act No. 3724, Apr. 10, 1984)

         (2) The action under paragraph (1) shall be brought within six months
         from the day on which the registration under Article 528 has been
         effected.


ARTICLE 530 (APPLICABLE PROVISIONS)


         (1) Deleted. (by Act No. 5591, Dec. 28, 1998)

         (2) Articles 234, 235, 237 through 240, 329-2, 374 (2), 374-2 (2)
         through (5)

<PAGE>

         and 439 (3) shall apply mutatis mutandis to the merger of a stock
         company. (Amended by Act No. 5053, Dec. 29, 1995; Act No. 5591, Dec.
         28, 1998; Act No. 6488, Jul. 24, 2001)

         (3) Articles 440 through 444 shall apply mutatis mutandis to the
         consolidation or split of shares by reason of a merger of companies.
         (Amended by Act No. 5591, Dec. 28, 1998)

         (4) If shares are not consolidated, Articles 339 and 340 (3) shall
         apply mutatis mutandis to the pledges created over the shares of the
         company which ceases to exist in consequence of a merger.


         SECTION 11 DIVISION OF COMPANY

ARTICLE 530-2 (DIVISION AND MERGER THROUGH DIVISION OF COMPANY)


         (1) A company may be divided to form one or several new companies.

         (2) A company may merge with one or several existing companies through
         its division (hereinafter referred to as the "merger through
         division").

         (3) A company may be divided to form one or several new companies,
         which, in succession, may merge with other existing companies.

         (4) A company after dissolution may be divided or merged through
         division only when an existing company becomes the surviving company or
         a new company is to be incorporated by such division or merger through
         division.
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-3 (APPROVAL FOR DIVISION PLAN AND WRITTEN AGREEMENT OF MERGER
THROUGH DIVISION)



<PAGE>

         (1) A company which is to be divided or merged through division shall
         prepare a division plan or a written agreement of a merger through
         division, which shall be approved by the general meeting of
         shareholders.

         (2) A resolution of approval under paragraph (1) shall be made in
         accordance with Article 434.

         (3) With respect to a resolution under paragraph (2), a shareholder
         under Article 370 (1) shall also have a voting right.

         (4) A summary of a division plan or a written agreement of a merger
         through division shall be entered in a notice and public notice under
         Article 363.

         (5) Where a company which issued several classes of shares comes to
         inflict a loss to a class of shareholders due to division or a merger
         through division, the division or merger through division shall be
         subject to a resolution by the general meeting of such shareholders
         under Article 435.

         (6) Where the liability of shareholders of each constituent company of
         division or a merger through division is to be increased due to such
         division or merger through division, such division or merger through
         division shall be subject to an agreement from all of such shareholders
         in addition to a resolution under paragraphs (2) and (5).
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-4 (INCORPORATION OF COMPANY BY DIVISION)


         (1) The provisions of Section 1 of this Chapter concerning the
         incorporation of a company shall apply mutatis mutandis to the
         incorporation of a company under Article 530-2.

         (2) Notwithstanding paragraph (1), a company to be incorporated through
         division may be so incorporated even through investments made only by
         the

<PAGE>

         company to be divided. In this case, the provisions of Article 299
         shall not apply where the shares of the company to be incorporated are
         issued to the shareholders of the company to be divided in proportion
         to their shares.
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-5 (ENTRIES IN DIVISION PLAN)


         (1) Where a company is to be incorporated through division, the
         following matters shall be entered in the division plan:

         1.Trade name, objective, and seat of the principal office of the
         company to be incorporated, and the method of public notice;

         2.Total number of shares which are to be issued by the company to be
         incorporated, and the par value per share;

         3.Total number, classes, and number per class of shares which are to be
         issued by the company to be incorporated at the time of such division;

         4.Matters concerning the allotment of shares by the company to be
         incorporated to the shareholders of a company to be divided, and the
         merger or split of shares pursuant to such allotment, if so determined;

         5.Amount to be paid to the shareholders of a company to be divided, if
         so determined;

         6.Matters concerning the capital and reserve of the company to be
         incorporated;

         7.Property to be transferred to the company to be incorporated and the
         value thereof;

         8.Matters determined pursuant to Article 530-9 (2), if any;

         9.Name and resident registration number of the director and auditor of
         the

<PAGE>

         company to be incorporated, if so determined; and

         10.Other matters to be entered in the articles of incorporation of the
         company to be incorporated.

         (2) Where a company continues to exist after its division, the
         following matters shall be entered in the division plan with respect to
         the surviving company:

         1.Amount of the capital and reserve to be decreased;

         2.Method of the decrease of capital;

         3.Property to be transferred due to the division and the value thereof;

         4.Total number of shares issued after the division;

         5.If the total number of shares to be issued by the company is
         decreased, the total number, classes, and number per class of shares to
         be decreased; and

         6.Other matters which cause any changes in the articles of
         incorporation.
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-6 (ENTRIES IN WRITTEN AGREEMENT OF MERGER THROUGH DIVISION)


         (1) Where part of a company to be divided merges with another company
         and the other company (hereinafter referred to as the "other party to
         merger through division") survives, the following matters shall be
         entered in the written agreement of the merger through division:

         1.If the other party to merger through division increases the total
         number of shares to be issued due to the merger through division, the
         total number, classes, and number per class of such shares;

         2.The total number, classes, and number per class of new shares to be
         issued by

<PAGE>

         the other party to merger through division at the time of such merger;

         3.Matters concerning the allotment of shares by the other party to
         merger through division to the shareholders of the company to be
         divided, and the merger or split of shares pursuant to such allotment,
         if so determined;

         4.The amount to be paid by the other party to merger through division
         to the shareholders of the company to be divided, if so determined;

         5.Matters concerning the total amount of the capital and the reserve of
         the other party to merger through division to be increased;

         6.Property and the value thereof to be transferred by the company to be
         divided to the other party to merger through division;

         7.The matters determined pursuant to Article 530-9 (3), if so
         determined;

         8.The date of the general meeting of shareholders on which the
         companies concerned are to make a resolution under Article 530-3 (2);

         9.The date on which a merger through division is to be effected;

         10.Name and resident registration number of the director and auditor of
         the other party to merger through division, if so determined; and

         11.Other matters which cause the change of the articles of
         incorporation of the other party to merger through division.

         (2) Where part of a company to be divided merges with another company
         or its part through division to incorporate a company, the following
         matters shall be entered in the written agreement of the merger through
         division:

         1.Matters provided for in Article 530-5 (1) 1, 2, and 6 through 10;

         2.The total number, classes, and number per class of shares to be
         issued by the company to be incorporated at the time of the merger
         through division;


<PAGE>

         3.Matters concerning the allotment of shares by the companies concerned
         to their shareholders, and provisions concerning the merger or split of
         shares pursuant to such allotment, if so determined;

         4.Property and the value thereof to be transferred by the respective
         companies concerned to the company to be incorporated;

         5.The amount to be paid by the respective companies concerned to their
         shareholders, if so determined;

         6.The date of the general meeting of shareholders on which the
         respective companies concerned are to make a resolution under Article
         530-3 (2); and

         7.The date on which the merger through division is to be effected.

         (3) The provisions of Article 530-5 shall apply mutatis mutandis to an
         entry concerning any part for which the respective companies concerned
         fail to effect the merger through division in case of paragraphs (1)
         and (2).
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-7 (PUBLIC NOTICE OF DIVISION BALANCE SHEET)


         (1) The director of a company to be divided shall keep the following
         documents in the principal office from two weeks before the general
         meeting of shareholders is held under Article 530-3 (1), until six
         months after the registration of division or the merger through
         division is effected:

         1.A division plan or written agreement of a merger through division;

         2.A balance sheet concerning the part to be divided;

         3.In case of a merger through division, the balance sheet of the other
         party to merger through division; and


<PAGE>

         4.A document specifying reasons for the allotment of shares to be
         issued to the shareholders of a company to be divided.

         (2) The director of the other party to merger through division under
         Article 530-6 (1) shall keep the following documents in the principal
         office from two weeks before the opening day of the general meeting of
         shareholders which is to approval the merger through division, until
         six months after the registration of the merger through division is
         effected:

         1.A written agreement of the merger through division;

         2.A balance sheet concerning the divided part of a company to be
         divided; and

         3.A document specifying reasons for the allotment of shares to be
         issued to the shareholders of a company to be divided.

         (3) The provisions of Article 522-2 (2) shall apply mutatis mutandis to
         a document under paragraphs (1) and (2).

         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-8 (ACCOUNT CONCERNING DIVISION AND MERGER THROUGH DIVISION)

         Where a company which is incorporated due to a division or a merger
         through division or the other party to such merger through division
         acquires a right of business, the acquisition value may be counted in
         the assets side of the balance sheet. In this case, at least an equally
         divided portion out of such amount shall be amortized in each settling
         term within five years after the registration of incorporation or
         merger through division is effected.
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-9 (LIABILITY OF COMPANY AFTER DIVISION AND MERGER THROUGH DIVISION)

<PAGE>

         (1) Companies which are incorporated or continue to exist due to a
         division or a merger through division shall be jointly and severally
         liable to satisfy the debts of the company before the division or
         merger through division.

         (2) Notwithstanding paragraph (1), where a company to be divided
         incorporates another company by means of division upon a resolution
         under Article 530-3 (2), it may be determined that the incorporated
         company bears only the debts related to property invested thereby from
         among the debts of the company to be divided. In this case, if the
         company to be divided continues to exist after the division, the
         company shall bear only the debts which the company incorporated due to
         the division fails to repay.

         (3) In case of a merger through division, a company to be divided may,
         upon a resolution under Article 530-3 (2), determine that it bears only
         the debts, from among those of the company to be divided, related to
         property which an existing company financed due to the merger through
         division invests. In this case, the provisions of the latter part of
         paragraph (2) shall apply mutatis mutandis.

         (4) The provisions of Articles 439 (3) and 527-5 shall apply mutatis
         mutandis to a case under paragraph (2).

         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-10 (EFFECT OF DIVISION OR MERGER THROUGH DIVISION)

         A company which is incorporated or continues to exist due to a division
         or a merger through division shall succeed to the rights and duties of
         the company to be divided under the conditions prescribed by a division
         plan or written agreement of the merger through division.

         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-11 (PROVISIONS TO BE APPLIED MUTATIS MUTANDIS)


         (1) The provisions of Articles 234, 237 through 240, 329-2, 440 through
         444,

<PAGE>

         526, 527, 528, and 529 shall apply mutatis mutandis to division or a
         merger through division: Provided, That a member of the organizing
         committee under Article 527 shall be the representative director.

         (2) The provisions of Articles 374 (2), 439 (3), 522-3, 527-2, 527-3
         and 527-5 shall apply mutatis mutandis to a merger through division.
         (Amended by Act No. 6086, Dec. 31, 1999)
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


ARTICLE 530-12 (REAL DIVISION)

         The provisions of this Section shall apply mutatis mutandis where a
         company to be divided acquires the total number of shares of a company
         to be incorporated due to a division or a merger through division.
         [This Article Newly Inserted by Act No. 5591, Dec. 28, 1998]


         SECTION 12 LIQUIDATION

ARTICLE 531 (APPOINTMENT OF LIQUIDATORS)


         (1) Upon the dissolution of a company, except in the case of
         dissolution by a merger, division, merger through division, or
         bankruptcy, directors shall become the liquidators: Provided, That it
         shall not be the case if otherwise provided in the articles of
         incorporation or if other persons have been appointed at a general
         shareholders' meeting. (Amended by Act No. 5591, Dec. 28, 1998)

         (2) If there is no liquidator pursuant to paragraph (1), the court
         shall appoint a liquidator upon the application of any interested
         person.


ARTICLE 532 (LIQUIDATOR'S REPORT)


<PAGE>

         The liquidator shall make a report on the following matters to the
         court within two weeks from the date on which he has assumed office:
         (Amended by Act No. 5053, Dec. 29, 1995)

         1.Reasonand date of dissolution; and

         2.Name, residence registration number and address of the liquidator.


ARTICLE 533 (LIQUIDATOR'S DUTY TO INVESTIGATE COMPANY'S PROPERTY AND TO REPORT)


         (1) After the liquidator has assumed office, he shall without delay
         investigate the status of the company's property and shall prepare an
         inventory list and a balance sheet and submit them to a general
         shareholders' meeting for approval.

         (2) The liquidator shall without delay submit the inventory and balance
         sheet to the court after he has obtained the approval set forth in
         paragraph (1).


ARTICLE 534 (SUBMISSION, AUDIT, DISCLOSURE AND APPROVAL OF BALANCE SHEET,
BUSINESS REPORT AND SUPPLEMENTARY SCHEDULES)


         (1) The liquidator shall prepare a balance sheet, supplementary
         schedules and a business report four weeks before the day of the
         ordinary shareholders' general meeting and submit them to the auditor.

         (2) The auditor shall submit to the liquidator the audit report on the
         documents set forth in paragraph (1) one week before the day of the
         ordinary general shareholders' meeting.

         (3) The liquidator shall keep the documents set forth in paragraph (1)
         and the audit report set forth in paragraph (2) at the principal office
         of the company from a week before the day of the ordinary general
         shareholders' meeting.


<PAGE>

         (4) Article 448 (2) shall apply mutatis mutandis to the documents set
         forth in paragraph (3).

         (5) The liquidator shall submit the balance sheet and business report
         to the ordinary general shareholders' meeting for approval.
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 535 (PEREMPTORY NOTICE TO CREDITORS)


         (1) The liquidator shall give peremptory notice to creditors of the
         company, by means of a public notice, at least two times within two
         months after he has assumed office, to the effect that the creditors
         present their claims within a fixed period and that any creditor
         failing to do so will be excluded from the liquidation: Provided, That
         such period shall be no less than two months.

         (2) The liquidator shall give a peremptory notice demanding the
         presenting of claims individually to each creditor known to the
         company, and such creditor shall not be excluded from the liquidation,
         even if he has failed to present his claim.


ARTICLE 536 (DISCHARGE WITHIN PERIOD FOR PRESENTING CLAIMS)


         (1) The liquidator may not effect performance in favor of creditors
         during the period set for presenting their claims pursuant to Article
         535 (1): Provided, That the company shall not be relieved of any such
         liability for damages as may be caused by the delay of performance.

         (2) Notwithstanding paragraph (1), the liquidator may, with the
         permission of the court, effect performance in respect of small claims,
         secured claims or any claims the discharge of which is not likely to
         prejudice any other creditors.

<PAGE>

ARTICLE 537 (DISCHARGE TO EXCLUDED CREDITORS)


         (1) Creditors who have been excluded from the liquidation may demand
         performance only out of the surplus assets which have not yet been
         distributed.

         (2) If distribution has been made to a part of shareholders, property
         which is necessary for distribution to other shareholders in equal
         proportion thereto shall be deducted from the surplus assets mentioned
         in paragraph (1).


ARTICLE 538 (DISTRIBUTION OF SURPLUS ASSETS)

         The surplus assets shall be distributed among the shareholders in
         proportion to the number of shares held by each shareholder: Provided,
         That this shall not apply in case of Article 344 (1).


ARTICLE 539 (REMOVAL OF LIQUIDATOR)


         (1) A liquidator, except as appointed by the court, may be removed from
         office at any time by a resolution of a general shareholders' meeting.

         (2) If a liquidator is remarkably unfit for administrating the affairs
         of liquidation or has acted in contravention of his material duties,
         any shareholder who holds shares representing no less than 3/100 of the
         total issued and outstanding shares may apply to the court for removal
         of such liquidator from office. (Amended by Act No. 5591, Dec. 28,
         1998)

         (3) Article 186 shall apply mutatis mutandis to the action relating to
         the application under paragraph (2). (Amended by Act No. 5591, Dec. 28,
         1998)


ARTICLE 540 (COMPLETION OF LIQUIDATION)

<PAGE>

         (1) When the affairs of liquidation have been completed, the liquidator
         shall without delay prepare a statement of the settlement of accounts
         and submit it to a general shareholders' meeting for approval.

         (2) When the approval under paragraph (1) has been given, the company
         shall be deemed to have relieved the liquidator of his responsibility:
         Provided, That it shall not be the case where the liquidator have
         committed any dishonest act.


ARTICLE 541 (PRESERVATION OF DOCUMENTS)


         (1) The books of a company and all important documents relating to its
         business and liquidation shall be preserved for a period of ten years
         from the time when the registration of the completion of liquidation is
         effected at the place of the principal office: Provided, That the slips
         and similar documents shall be kept for five years. (Amended by Act No.
         5053, Dec. 29, 1995)

         (2) With regard to the preservation set forth in paragraph (1), the
         court shall appoint the custodian and shall determine the method of
         preservation, upon the application of the liquidator or any other
         interested person.


ARTICLE 542 (APPLICABLE PROVISIONS)


         (1) Articles 245, 252 through 255, 259, 260 and 264 shall apply mutatis
         mutandis to a stock company.

         (2) Articles 362, 363-2, 366, 367, 373, 376 and 377, 382 (2), 386, 388
         through 394, 396, 398 through 408, 411 through 413, 414 (3), 449 (3),
         450 and 466 shall apply mutatis mutandis to the liquidator. (Amended by
         Act No. 1212, Dec. 12, 1962; Act No. 3724, Apr. 10, 1984; Act No. 5591,
         Dec. 28, 1998)



<PAGE>

         CHAPTER V LIMITED LIABILITY COMPANY

         SECTION 1 INCORPORATION

ARTICLE 543 (PREPARATION OF ARTICLES OF INCORPORATION AND ABSOLUTE PARTICULARS
TO BE ENTERED THEREIN)


         (1) Members shall prepare the articles of incorporation for the
         incorporation of a limited liability company. (Amended by Act No. 6488,
         Jul. 24, 2001)

         (2) The articles of incorporation shall contain the following
         particulars and each member shall write his name and affix his seal or
         shall sign thereon: (Amended by Act No. 3724, Apr. 10, 1984; Act No.
         5053, Dec. 29, 1995; Act No. 6488, Jul. 24, 2001)

         1.Matters set forth in subparagraphs 1 through 3 of Article 179;

         2.Total amount of capital;

         3.Amount of each contribution unit;

         4.Number of contribution units by each member; and

         5.Place of the principal office.

         (3) Article 292 shall apply mutatis mutandis to a limited liability
         company.


ARTICLE 544 (PARTICULARS CONCERNING ABNORMAL INCORPORATION)

         The following particulars shall be effective upon being stated in the
         articles of incorporation:


<PAGE>

         1.Name of the persons who is to make a contribution in kind and the
         type, quantity and value of the subject-matter of the contribution and
         the number of contribution units to be given in consideration thereof;

         2.Type, quantity and value of the property which was agreed to be
         transferred to the company after its incorporation and name of the
         transferor; and

         3.Expenses of incorporation which are to be borne by the company.


ARTICLE 545 (LIMIT ACTION ON TOTAL NUMBER OF MEMBERS)


         (1) The total number of members of a company shall not exceed fifty:
         Provided, That it shall not be the case if the authorization of the
         court has been obtained where any special circumstances exist.

         (2) Paragraph (1) shall not apply where the number of members is
         altered by succession or testamentary gift.


ARTICLE 546 (LIMIT ACTION ON TOTAL AMOUNT OF CAPITAL AND AMOUNT OF EACH
CONTRIBUTION UNIT)


         (1) The total amount of capital of a company shall be at least ten
         million won. (Amended by Act No. 3724, Apr. 10, 1984)

         (2) The amount of each contribution unit shall be no less than five
         thousand won and shall be equal. (Amended by Act No. 3724, Apr. 10,
         1984)


ARTICLE 547 (APPOINTMENT OF FIRST DIRECTORS)


         (1) Where the directors have not been designated by the articles of


<PAGE>

         incorporation, a general members' meeting shall be convened before the
         incorporation of the company and such directors shall be elected at
         such meeting.

         (2) Each member may convene a general meeting mentioned in paragraph
         (1).


ARTICLE 548 (PAYMENT FOR CONTRIBUTION)


         (1) Directors shall have the members pay the full amount of
         contributions or furnish the whole of the property which is the
         subject-matter of the contributions in kind.

         (2) Article 295 (2) shall apply mutatis mutandis to the contributions
         in kind made by members.


ARTICLE 549 (REGISTRATION OF INCORPORATION)


         (1) The registration of incorporation of a limited liability company
         shall be effected within two weeks from the day on which payment for
         contribution or performance of the contribution in kind set forth in
         the Article 548 has been performed.
         (Amended by Act No. 5053, Dec. 29, 1995)

         (2) In connection with the registration under paragraph (1), the
         following particulars shall be registered: (Amended by Act No. 5053,
         Dec. 29, 1995)

         1.Particulars set forth in subparagraphs 1, 2 and 5 of Article 179 and
         the place of branch office, if any;

         2.Particulars set forth in Article 543 (2) 2 and 3;

         3.Name, residence registration number and address of each director:
         Provided, That if the director representing the company is appointed,
         addresses of other

<PAGE>

         directors shall be excluded;

         4.Name of the representative director, if any;

         5.Provisions pertaining to the joint representation of the company by
         two or more directors, if applicable;

         6.Duration or any other reason of dissolution of the company if any;
         and

         7.Name and residence registration number of auditors, if any.

         (3) In connection with the registration to be made at the place of the
         branch office or new branch office in the event that a limited
         liability company establishes or transfers a branch office, the matters
         as prescribed in paragraph (2) 1 and 3 through 6 shall be registered.
         (Newly Inserted by Act No. 5053, Dec. 29, 1995)

         (4) Articles 181 through 183 shall apply mutatis mutandis to the
         registration of a limited liability company. (Amended by Act No. 1212,
         Dec. 12, 1962)


ARTICLE 550 (LIABILITY OF MEMBERS AS OF INCORPORATION CONCERNING CONTRIBUTION IN
KIND)


         (1) If the actual value of the property mentioned in subparagraphs 1
         and 2 of Article 544 as at the time of the incorporation of a company
         is substantially short of the value stated by the articles of
         incorporation, members as of incorporation shall be jointly and
         severally liable to pay such shortage to the company.

         (2) The liability of members set forth in paragraph (1) may not be
         exempted. (Newly Inserted by Act No. 1212, Dec. 12, 1962)


ARTICLE 551 (LIABILITY OF MEMBERS AS OF INCORPORATION CONCERNING UNPAID AMOUNT
OF CONTRIBUTION)



<PAGE>

         (1) If it is found after the formation of the company that the payment
         of the amount of contributions and the performance of contributions in
         kind has not been completed, the members, directors and auditors as of
         incorporation shall be jointly and severally liable to pay the amount
         unpaid or the value of property which has not been contributed to the
         company. (Amended by Act No. 1212, Dec. 12, 1962)

         (2) The liability of members set forth in paragraph (1) may not be
         exempted. (Newly Inserted by Act No. 1212, Dec. 12, 1962)

         (3) The liability of directors and auditors set forth in paragraph (1)
         may not be exempted without the consent of all members. (Newly Inserted
         by Act No. 1212, Dec. 12, 1962)


ARTICLE 552 (ACTION FOR NULLIFICATION OR REVOCATION OF INCORPORATION)


         (1) The nullity of incorporation of a company may be asserted only by
         means of an action which shall be brought only by the members,
         directors or auditors and the revocation of incorporation of a company
         may be asserted only by means of an action which may be brought only by
         the persons having the right of revocation, within two years from the
         date on which the company has come into existence.

         (2) Articles 184 (2) and 185 through 193 shall apply mutatis mutandis
         to the action under paragraph (1).

         [This Article Wholly Amended by Act No. 1212, Dec. 12, 1962]


         SECTION 2 RIGHTS AND DUTIES OF MEMBERS

ARTICLE 553 (LIABILITY OF MEMBER)


<PAGE>

         Unless otherwise provided in this Act, the liability of a member shall
         be limited to the amount of his contribution to the company.


ARTICLE 554 (SHARE OF MEMBER)

         Each member shall have share in the company in proportion to the number
         of his contribution units.


ARTICLE 555 (INSTRUMENTS OF SHARE)

         A limited liability company may not issue instruments to order or
         bearer instruments with regard to the respective share of members.


ARTICLE 556 (TRANSFER OF SHARE)


         (1) A member may transfer the whole or a part of his share to any other
         person only if a resolution of a general members' meeting is made
         pursuant to Article 585: Provided, That the restriction on transfer may
         be aggravated by the articles of incorporation.

         (2) If the total number of members exceeds the limit mentioned in
         Article 545, such transfer shall not be effective except in case of
         testamentary gift.

         (3) Notwithstanding paragraph (1), the articles of incorporation may
         provide otherwise with regard to the transfer of share between members.
         (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 557 (REQUIREMENT FOR ASSERTING TRANSFER OF SHARE AGAINST COMPANY AND
THIRD PERSON)


<PAGE>

         The transfer of share shall not be set up against the company and third
         persons unless the full name and address of the transferee and the
         number of contribution units subject to the transfer have been entered
         in the register of members.


ARTICLE 558 (COMMON OWNERSHIP OF SHARE)

         Article 333 shall apply mutatis mutandis where share belongs to two or
         more persons in common.


ARTICLE 559 (PLEDGING OF SHARE)


         (1) Share may be pledged.

         (2) Articles 556 and 557 shall apply mutatis mutandis to the pledge of
         share.


ARTICLE 560 (PROVISIONS APPLICABLE MUTATIS MUTANDIS)


         (1) The provisions of Articles 339, 340 (1) and (2), 341, 341-3, 342
         and 343 (1) shall apply mutatis mutandis to the share of members.
         (Amended by Act No. 3724, Apr. 10, 1984; Act No. 6086, Dec. 31, 1999)

         (2) The provision of Article 353 shall apply mutatis mutandis to the
         notice or peremptory notice to members.


         SECTION 3 MANAGEMENT OF COMPANY

ARTICLE 561 (DIRECTORS)


<PAGE>

         A limited liability company shall have one or more directors.


ARTICLE 562 (REPRESENTATION OF COMPANY)


         (1) A director shall represent the company.

         (2) If there are two or more directors, the director who are to
         represent the company shall be elected at a general members' meeting
         unless otherwise provided in the articles of incorporation.

         (3) It may be determined by the articles of incorporation or a general
         members' meeting that two or more directors shall jointly represent the
         company.

         (4) Article 208 (2) shall apply mutatis mutandis to the cases under
         paragraph (3).


ARTICLE 563 (REPRESENTATIVE IN ACTION BETWEEN DIRECTOR AND COMPANY)

         If a company files an action against any of its directors or where a
         director files an action against the company, a person who shall
         represent the company with regard to such action shall be elected at a
         general members' meeting.


ARTICLE 564 (DETERMINATION ON MANAGEMENT OF BUSINESS, TRANSACTIONS BETWEEN
DIRECTOR AND COMPANY)


         (1) If there are several directors, management of the company's
         business, appointment or dismissal of a manager and establishment,
         transfer or closure of branch offices shall be determined by a majority
         vote of the directors, unless otherwise provided by the articles of
         incorporation. (Amended by Act No. 3724, Apr. 10, 1984)

         (2) Manager may be elected or removed at a general members' meeting,


<PAGE>

         notwithstanding paragraph (1). (Amended by Act No. 3724, Apr. 10, 1984)

         (3) A director may enter into transactions with the company for his
         account or for the account of a third person only if he has obtained
         approval from the auditor or from the general members' meeting in case
         of absence of the auditor. In this case, Article 124 of the Civil Act
         shall not apply. (Newly Inserted by Act No. 1212, Dec. 12, 1962)


ARTICLE 564-2 (RIGHT TO INJUNCTION)

         In case where a director acts in violation of Acts and subordinate
         statutes or the articles of incorporation and thereby an irreparable
         damage is likely to be caused to the company, the auditor or any member
         who holds contribution units representing not less than 3/100 of the
         total amount of capital may demand on behalf of the company that the
         director stop such an act.
         [This Article Newly Inserted by Act No. 6086, Dec. 31, 1999]


ARTICLE 565 (DERIVATE SUITS BY MEMBERS)


         (1) Any member who holds contribution units representing not less than
         3/100 of the total amount of the capital may demand that the company
         institute an action to enforce the liability of a director. (Amended by
         Act No. 6086, Dec. 31, 1999)

         (2) The provisions of Articles 403 (2) through (7) and 404 through 406
         shall apply mutatis mutandis to the case under paragraph (1). (Amended
         by Act No. 5591, Dec. 28, 1998)


ARTICLE 566 (KEEPING AND PERUSAL OF DOCUMENTS)


         (1) Directors shall keep at the principal office and at each branch
         office copies of the articles of incorporation and the minutes of the
         general members'

<PAGE>

         meetings and shall keep the register of members at the principal
         office.

         (2) The full name, address and number of contributions unit shall be
         entered in the register of members.

         (3) Any member or creditor of the company may demand, at any time
         during business hours, the perusal or copying of the documents set
         forth in paragraph (1).


ARTICLE 567 (PROVISIONS APPLICABLE MUTATIS MUTANDIS)

         The provisions of Articles 209, 210, 382, 385, 386, 388, 395, 397, 399
         through 401, 407 and 408 shall apply mutatis mutandis to directors of a
         limited liability company. In this case, the term "board of directors"
         in Article 397 shall be read as the "general members' meeting".
         (Amended by Act No. 1212, Dec. 12, 1962; Act No. 5591, Dec. 28, 1998;
         Act No. 6086, Dec. 31, 1999)


ARTICLE 568 (AUDITORS)


         (1) A limited liability company may have one or more auditors in
         accordance with the articles of incorporation.

         (2) Article 547 shall apply mutatis mutandis where the articles of
         incorporation provide that the company shall have auditors.


ARTICLE 569 (AUDITOR'S AUTHORITY)

         An auditors may at any time investigate the status of property and the
         affairs of the company and may request directors to report on the
         business operation.


ARTICLE 570 (PROVISIONS APPLICABLE MUTATIS MUTANDIS)


<PAGE>

         The provisions of Articles 382, 385 (1), 386, 388, 400, 407, 411, 413,
         414 and 565 shall apply mutatis mutandis to auditors.


ARTICLE 571 (CONVOCATION OF GENERAL MEMBERS' MEETING)


         (1) A general members' meeting shall be convened by directors unless
         otherwise provided in this Act: Provided, That a extraordinary general
         members' meeting may be convened by auditor. (Amended by Act No. 1212,
         Dec. 12, 1962)

         (2) In convening a general meeting, a notice in writing shall be
         dispatched to each member at least one week prior to the date set for
         such meeting: Provided, That this period may be shortened by the
         articles of incorporation.

         (3) Articles 363 (2) and 364 shall apply mutatis mutandis to the
         convocation of a general members' meeting.


ARTICLE 572 (DEMAND FOR CONVOCATION OF GENERAL MEETING BY MINORITY MEMBERS)


         (1) Any member who holds contribution units representing no less than
         3/100 of the total amount of the capital may demand the convocation of
         a general meeting by filing with directors a written application which
         states the proposed subject-matters of such meeting and the reasons for
         which it is to be convened. (Amended by Act No. 6086, Dec. 31, 1999)

         (2) Paragraph (1) may be provided otherwise by the articles of
         incorporation.

         (3) The provisions of Article 366 (2) and (3) shall apply mutatis
         mutandis in case of paragraph (1).

<PAGE>

ARTICLE 573 (OMISSION OF CONVOCATION PROCEDURES)

         A general meeting may be convened without the procedures set forth in
         Article 572, with the consent of all the members.


ARTICLE 574 (QUORUM OF GENERAL MEETING AND METHOD OF RESOLUTION)

         Unless otherwise provided by the articles of incorporation or this Act,
         all resolutions of a general members' meeting shall be adopted by the
         presence of members holding a majority of votes and by a majority of
         affirmative votes of the members present.


ARTICLE 575 (MEMBER'S RIGHT TO VOTE)

         Each member shall have one vote for each contribution unit: Provided,
         That the articles of incorporation may provide otherwise with regard to
         the number of votes.


ARTICLE 576 (TRANSFER OF BUSINESS AND EX POST FACTO INCORPORATION)


         (1) A resolution of a general meeting under Article 585 shall be
         required for a limited liability company to effect the matters set
         forth in subparagraphs 1 through 3 of Article 374.

         (2) Paragraph (1) shall apply mutatis mutandis where a limited
         liability company enters, within two years from its coming into
         existence, into an agreement to acquire, for value equivalent to not
         less than 1/20 of the capital, a property existing prior to its
         incorporation, which is purported to be continuously used for purposes
         of its business.


ARTICLE 577 (RESOLUTION IN WRITING)

<PAGE>

         (1) If a resolution of a general meeting is required, resolution in
         writing may be adopted, with the consent of all the members.

         (2) If all the members have consented in writing to the matters
         constituting the subject-matter of a resolution, such resolution shall
         be deemed to have been adopted in writing.

         (3) A resolution in writing shall have the same effect as a resolution
         of a general meeting.

         (4) The provisions regarding the general meeting shall apply mutatis
         mutandis to the resolutions in writing.


ARTICLE 578 (PROVISIONS APPLICABLE MUTATIS MUTANDIS)

         The provisions of Articles 365, 367, 368 (3) and (4), 369 (2), 371 (2),
         372, 373 and 376 through 381 shall apply mutatis mutandis to general
         members' meeting.


ARTICLE 579 (PREPARATION OF FINANCIAL STATEMENTS)


         (1) Directors shall, at each period for the settlement of accounts,
         prepare the following documents and annexed statements thereto:

         1.Balance sheet;

         2.Income statement; and

         3.Statement of appropriation of retained earnings of statements of
         disposition of deficit.

         (2) If there are auditors, directors shall submit to auditors the
         documents under

<PAGE>

         paragraph (1) four weeks before the day set for the ordinary general
         meeting.

         (3) Auditors shall submit a audit report to directors within three
         weeks from the day on which they receive the documents under paragraph
         (2).
         [This Article Wholly Amended by Act No. 3724, Apr. 10, 1984]


ARTICLE 579-2 (PREPARATION OF BUSINESS REPORT)


         (1) Directors shall prepare a business report at each period for the
         settlement of accounts.

         (2) Article 579 (2) and (3) shall apply mutatis mutandis to the
         business report under paragraph (1).
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 579-3 (KEEPING AND PUBLIC NOTICE OF FINANCIAL STATEMENTS)


         (1) Directors shall keep the documents under Articles 579 and 579-2 and
         the business report at the principal office of the company for five
         years from a week before the day set for the ordinary general meeting.

         (2) Article 448 (2) shall apply mutatis mutandis to the documents under
         paragraph (1).
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 580 (STANDARD FOR DIVIDEND)

         Unless otherwise provided in the articles of incorporation, a dividend
         shall be made in proportion to the number of contribution units of each
         member.

<PAGE>

ARTICLE 581 (MEMBER'S RIGHT TO PERUSE ACCOUNT BOOKS)


         (1) Any member who hold contribution units representing no less than
         3/100 of the total amount of the capital may demand the perusal or
         copying of the account books and related documents. (Amended by Act No.
         6086, Dec. 31, 1999)

         (2) A company may provide in the articles of incorporation that any
         member may make the demand under paragraph (1). In this case, the
         supplementary schedules need not be prepared, regardless of Article 579
         (1). (Amended by Act No. 3724, Apr. 10, 1984)


ARTICLE 582 (INSPECTION OF BUSINESS AFFAIRS AND STATUS OF PROPERTY)


         (1) If there is any dishonest act or any material fact in contravention
         of any Acts, subordinate statutes or the articles of incorporation in
         connection with the management of the company's affairs, any member who
         holds contribution units representing no less than 3/100 of the total
         amount of the capital may apply to the court for the appointment of an
         inspector to investigate the affairs of the company and the status of
         its property. (Amended by Act No. 6086, Dec. 31, 1999)

         (2) The inspector shall report in writing on the results of the
         investigation to the court.

         (3) The court may, if it deems it necessary after examining the report
         mentioned in paragraph (2), order auditors, or directors in the absence
         of auditors, to convene a general members' meeting. In this case,
         Article 310 (2) shall apply mutatis mutandis. (Amended by Act No. 1212,
         Dec. 12, 1962)


ARTICLE 583 (PROVISIONS APPLICABLE MUTATIS AND MUTANDIS)

<PAGE>

         (1) The provisions of Articles 449 (1) and (2), 450, 452, 453, 453-2,
         457-2, 458 through 460, 462, 462-3 and 466 shall apply mutatis mutandis
         to the accounting of a limited liability company. (Amended by Act No.
         3724, Apr. 10, 1984; Act No. 5053, Dec. 29, 1995; Act No. 6086, Dec.
         31, 1999)

         (2) The provision of Article 468 shall apply mutatis mutandis to the
         claims arising out of the relations of employment between a limited
         liability company and its employees. (Amended by Act No. 6086, Dec. 31,
         1999)


         SECTION 4 AMENDMENT OF ARTICLES OF INCORPORATION

ARTICLE 584 (METHOD OF AMENDMENT OF ARTICLES OF INCORPORATION)

         In order to amend the articles of incorporation, a resolution of a
         general members' meeting is required.


ARTICLE 585 (SPECIAL RESOLUTION FOR AMENDMENT OF ARTICLES OF INCORPORATION)


         (1) The resolution mentioned in Articles 584 shall be adopted by the
         affirmative votes of a majority of all the members and of 3/4 of the
         total votes.

         (2) In the application of paragraph (1), a member who is not allowed to
         exercise his vote shall not be added to the number of all the members
         and the vote which may not be exercised shall not be added to the
         number of the total votes.


ARTICLE 586 (RESOLUTION FOR CAPITAL INCREASE)

         Even where the articles of incorporation does not provide for, the
         following

<PAGE>

         matters, they may be determined by a resolution for capital increase:

         1.Name of the persons who is to make contribution type and the class,
         quantity and value of the subject-matter of such contribution in kind
         and the number of contribution units to be given in consideration
         thereof;

         2.Type, quantity and value of the property which was agreed to be
         transferred to the company after the capital increase is effected and
         the name of the transferor; and

         3.Name of the persons to whom the preemptive right to the capital
         contribution is granted and the substance of such right.


ARTICLE 587 (GRANTING OF PREEMPTIVE RIGHT IN CASE OF CAPITAL INCREASE)

         If a limited liability company promises to give a specified person the
         preemptive right to the capital contribution in case of the capital
         increase in the future, the resolution set forth in Article 585 shall
         be required.


ARTICLE 588 (MEMBER'S PREEMPTIVE RIGHT TO CAPITAL CONTRIBUTION)

         A member is entitled to subscribe for capital contribution with respect
         to the capital increase, in proportion to his share: Provided, That it
         shall not be the case where certain persons who shall subscribe for the
         capital contribution have been determined by the resolutions mentioned
         in Articles 586 and 587.


ARTICLE 589 (METHOD OF SUBSCRIPTION FOR CAPITAL CONTRIBUTION)


         (1) In case of the capital increase, any person who intends to
         subscribe for the capital contribution shall enter the number of
         contribution units to be subscribed for and his address on an
         instrument certifying such subscription and he shall write his name and
         affix his seal or shall sign. (Amended by Act No. 5053, Dec.

<PAGE>

         29, 1995)

         (2) A limited liability company shall not offer subscription for the
         capital contributions by means of advertisement or otherwise.


ARTICLE 590 (STATUS OF NEW SUBSCRIBER OF CONTRIBUTION)

         In case of the capital increase, the person who has subscribed for the
         capital contribution shall have the same rights as the existing member
         with regard to the dividend from the time of payment for the capital
         contribution and of the transfer of property which is the
         subject-matter of the contribution in kind.


ARTICLE 591 (REGISTRATION OF CAPITAL INCREASE)

         A limited liability company shall effect the registration of alteration
         due to the capital increase within two weeks at the place of the
         principal office, from the day on which the payment for the capital
         contribution or the performance of the contributions in kind in
         connection with such capital increase has been completed. (Amended by
         Act No. 5053, Dec. 29, 1995)


ARTICLE 592 (EFFECTUATION OF CAPITAL INCREASE)

         The increase in the capital shall take effect when the registration
         under Article 591 is effected at the place of the principal office.


ARTICLE 593 (MEMBER'S LIABILITY CONCERNING CONTRIBUTION IN KIND)


         (1) If the actual value of the property mentioned in subparagraphs 1
         and 2 of Article 586 as of the capital increase is substantially short
         of the value determined by the resolution for the capital increase, the
         members who have agreed to the resolution shall be jointly and
         severally liable to pay such deficit

<PAGE>

         to the company.

         (2) Articles 550 (2) and 551 (2) shall apply mutatis mutandis in case
         of paragraph (1). (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 594 (LIABILITY OF DIRECTORS, ETC. CONCERNING UNSUBSCRIBED CAPITAL
CONTRIBUTIONS, ETC.)


         (1) If there are contributions which have not yet been subscribed for
         after the capital increase, directors and auditors shall be deemed to
         have subscribed for such contributions jointly. (Amended by Act No.
         1212, Dec. 12, 1962)

         (2) If full payment of the capital contributions or the transfer of
         property which is the subject-matter of contribution in kind has not
         been completed after the capital increase, directors and auditors are
         jointly and severally liable to pay such incomplete payment or the
         value of property yet to be transferred. (Amended by Act No. 1212, Dec.
         12, 1962)

         (3) Article 551 (3) shall apply mutatis mutandis in case of paragraph
         (1). (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 595 (ACTION FOR NULLIFYING CAPITAL INCREASE)


         (1) The nullity of an capital increase may be asserted only by means of
         an action which shall be brought only by members, directors or auditors
         within six months from the day on which the registration under Article
         591 has been effected at the place of the principal office. (Amended by
         Act No. 1212, Dec. 12, 1962)

         (2) Articles 430 through 432 shall apply mutatis mutandis in case of
         paragraph (1).



<PAGE>

ARTICLE 596 (APPLICABLE PROVISIONS)

         Articles 334, 548, and 576 (2) shall apply mutatis mutandis to the
         increase in the capital. (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 597 (APPLICABLE PROVISIONS)

         Articles 439 (1) and (2), 443, 445 and 446 shall apply mutatis mutandis
         to the reduction of the capital.


         SECTION 5 MERGER AND CHANGE OF ORGANIZATION

ARTICLE 598 (METHOD OF MERGER)

         A resolution of the general members' meeting pursuant to Article 585
         shall be required for a merger involving a limited liability company.


ARTICLE 599 (APPOINTMENT OF MEMBERS OF ORGANIZING COMMITTEE)

         The members of the organizing committee pursuant to Article 175 shall
         be appointed by a resolution of a general members' meeting set forth in
         Article 585.


ARTICLE 600 (MERGER OF LIMITED LIABILITY COMPANY AND STOCK COMPANY)


         (1) A merger between a limited liability company and a stock company,
         as a result of which a stock company survives or is newly incorporated,
         shall not take effect unless it has obtained the authorization of the
         court.


<PAGE>

         (2) In case of a merger between a limited liability company and a stock
         company which has not completed the redemption of the bonds, the
         surviving company or the company which is to be newly incorporated
         shall not be a limited liability company.


ARTICLE 601 (SUBROGATION)


         (1) In case of a merger between a limited liability company and a stock
         company as a result of which a limited liability company survives or is
         newly incorporated, Article 339 shall apply mutatis mutandis to the
         pledge over the pre-existing shares of the stock company.

         (2) In case of paragraph (1), a pledge over share shall not be asserted
         against the company or any other third person unless the number of
         contribution units and the name and address of the pledgee have been
         entered in the register of members.


ARTICLE 602 (REGISTRATION OF MERGER)

         In case of a merger involving a limited liability company, the
         registration of alteration by the limited liability company surviving
         after the merger, the registration of dissolution by the limited
         liability company which ceases to exist in consequence of the merger
         and/or the registration under Article 549 (2) by the limited liability
         company which is newly incorporated by the merger shall be effected
         within two weeks at the place of the principal office and within three
         weeks at the place of each branch office, from the date of the closing
         of the general members' meeting held pursuant to Article 526 or 527,
         which are applied mutatis mutandis pursuant to Article 603.


ARTICLE 603 (APPLICABLE PROVISIONS)

         Articles 232, 234, 235, 237 through 240, 443, 522 (1) and (2), 522-2,
         523, 524,

<PAGE>

         526 (1) and (2), 527 (1) through (3), and 529 shall apply mutatis
         mutandis to the merger of a limited liability company. (Amended by Act
         No. 1212, Dec. 12, 1962; Act No. 3724, Apr. 10, 1984; Act No. 5591,
         Dec. 28, 1998)


ARTICLE 604 (CHANGE OF ORGANIZATION OF STOCK COMPANY TO LIMITED LIABILITY
COMPANY)


         (1) By a resolution adopted at a general meeting by the unanimous
         consent of all the shareholders, a stock company may change its
         organization into a limited liability company: Provided, That it shall
         not be the case where the redemption of the bonds has not been
         completed.

         (2) In case of the change of organization mentioned in paragraph (1),
         the total amount of capital shall not exceed the amount of net assets
         existing in the company.

         (3) The articles of incorporation and any other particulars necessary
         for the change of organization shall be determined by the resolution
         mentioned in paragraph (1).

         (4) Article 601 shall apply mutatis mutandis to the change of the
         organization under paragraph (1).


ARTICLE 605 (LIABILITY OF DIRECTORS AND SHAREHOLDERS FOR SHORTAGE IN AMOUNT OF
NET ASSETS)


         (1) If, in case of change of the organization under Article 604, the
         amount of net assets which exists in the company is short of the total
         amount of the capital, directors and shareholders at the time of the
         resolution mentioned in Article 604 (1) shall be liable to pay jointly
         and severally such amount of shortage to the company.

         (2) Articles 550 (2), and 551 (2) and (3) shall apply mutatis mutandis
         in case of

<PAGE>

         paragraph (1). (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 606 (REGISTRATION OF CHANGE OF ORGANIZATION)

         When a stock company has changed its organization in accordance with
         Article 604, the registration of the dissolution by the stock company
         and the registration under Article 549 (2) by the limited liability
         company shall be effected within two weeks at the place of the
         principal office and within three weeks at the place of each branch
         office.


ARTICLE 607 (CHANGE OF ORGANIZATION OF LIMITED LIABILITY COMPANY TO STOCK
COMPANY)


         (1) By a resolution adopted at a general meeting by the unanimous
         consent of all the members, a limited liability company may change its
         organization into a stock company.

         (2) In case of paragraph (1), the total amount of the issue price of
         shares which are to be issued at the time of change of the organization
         shall not exceed the amount of net assets existing in the company.

         (3) The change of organization under paragraph (1) shall not take
         effect unless it obtains the authorization of the court.

         (4) If, in the case of a change of organization mentioned in paragraph
         (1), the amount of net assets which exists in the company is short of
         the total amount of the issue-price of shares which are issued at the
         time of the change of organization, directors, auditors and members of
         the company at the time of the resolution under paragraph (1) shall be
         jointly and severally liable to pay such amount of shortage to the
         company. In this case, Article 550 (2), and 551 (2) and (3) shall apply
         mutatis mutandis. (Amended by Act No. 1212, Dec. 12, 1962)

         (5) Articles 340 (3), 601 (1), 604 (3) and 606 shall apply mutatis
         mutandis to the change of organization under paragraph (1).



<PAGE>

ARTICLE 608 (APPLICABLE PROVISIONS)

         Article 232 shall apply mutatis mutandis to the change of organization
         under Articles 604 and 607. (Amended by Act No. 3724, Apr. 10, 1984)


         SECTION 6 DISSOLUTION AND LIQUIDATION

ARTICLE 609 (REASONS FOR DISSOLUTION)


         (1) A limited liability company shall be dissolved for any of the
         following reasons: (Amended by Act No. 6488, Jul. 24, 2001)

         1.Reasons set forth in subparagraphs 1, and 4 through 6 of Article 227;
         and

         2.A resolution of a general members' meeting.

         (2) A resolution mentioned in paragraph (1) 2 shall be adopted
         according to Article 585.


ARTICLE 610 (CONTINUANCE OF COMPANY)


         (1) Where a company has been dissolved by any of the reasons mentioned
         in subparagraph 1 of Article 227 or Article 609 (1) 2, the company may
         continue to exist by such resolution of the general members' meeting as
         set forth in Article 585.

         (2) Deleted. (by Act No. 6488, Jul. 24, 2001)

<PAGE>

ARTICLE 611 (APPLICABLE PROVISIONS)

         Article 229 (3) shall apply mutatis mutandis to the continuance of
         existence of a company under Article 610.


ARTICLE 612 (DISTRIBUTION OF SURPLUS ASSETS)

         Unless otherwise provided in the articles of incorporation, the surplus
         assets shall be distributed among the members in proportion to the
         number of contribution units of each member.


ARTICLE 613 (APPLICABLE PROVISIONS)


         (1) Articles 228, 245, 252 through 255, 259, 260, 264, 520, 531 through
         537, 540 and 541 shall apply mutatis mutandis to a limited liability
         company. (Amended by Act No. 1212, Dec. 12, 1962)

         (2) Articles 209, 210, 366 (2) and (3), 367, 373 (2), 376, 377, 382
         (2), 386, 388, 399 through 402, 407, 408, 411 through 413, 414 (3),
         450, 466 (2), 539, 562 and 563, 564 (3), 565, 566, 571, 572 (1) and 581
         shall apply mutatis mutandis to the liquidator of a limited liability
         company. (Amended by Act No. 1212, Dec. 12, 1962; Act No. 3724, Apr.
         10, 1984)


         CHAPTER VI FOREIGN COMPANIES

ARTICLE 614 (APPOINTMENT OF REPRESENTATIVE, ESTABLISHMENT OF BUSINESS OFFICE AND
REGISTRATIONS THEREOF)


         (1) A foreign company intending to engage in business in the Republic
         of Korea shall appoint a representative in the Republic of Korea and
         shall establish a

<PAGE>

         business office.

         (2) In case of paragraph (1), such foreign company shall, in respect of
         the establishment of its business office, effect the same registration
         as that of a branch office of a company incorporated in the Republic of
         Korea either of the same kind or of the kind which it most closely
         resembles.

         (3) For the registration under paragraph (2), such foreign company
         shall register the governing law under which it was incorporated and
         the name and address of its representative in the Republic of Korea.

         (4) Articles 209 and 210 shall apply mutatis mutandis to such
         representative of a foreign company. (Amended by Act No. 1212, Dec. 12,
         1962)


ARTICLE 615 (STARTING POINT OF RECKONING OF REGISTRATION PERIOD)

         If the matters required to be registered in accordance with Article 614
         (2) and (3) took place in a foreign country, the period for
         registration shall be reckoned from the day on which a notice thereof
         arrived.


ARTICLE 616 (PROHIBITION OF CONDUCTING CONTINUOUS TRANSACTIONS BEFORE
REGISTRATION)


         (1) A foreign company shall not engage in continuous transactions at
         the place of its business office before it has effected the
         registration set forth in Article 614.

         (2) A person who has engaged in transactions in contravention of
         paragraph (1) shall be jointly and severally liable with the company
         for such transactions.


ARTICLE 617 (APPLICABLE LAWS)

         A company incorporated in a foreign country shall, if it has
         established its

<PAGE>

         principal office in the Republic of Korea or its main purpose is to
         engage in business in the Republic of Korea, be subject to the same
         provisions as a company incorporated in the Republic of Korea.


ARTICLE 618 (APPLICABLE PROVISIONS)


         (1) Articles 335 through 338, 340 (1), 355 through 357, 478 (1), 479
         and 480 shall apply mutatis mutandis to the issuance of share
         certificates or certificates of bonds and to the transfer or pledging
         of such shares or the transfer of bonds conducted in the Republic of
         Korea by a foreign company.

         (2) In case of paragraph (1), the first business office established in
         the Republic of Korea by a foreign company shall be deemed as its
         principal office.


ARTICLE 619 (ORDER TO CLOSE BUSINESS OFFICE)


         (1) In case where a foreign company has established its business
         office, the court may order such business office to be closed, on the
         application of any interested person or public prosecutor, for any of
         the following reasons:
         (Amended by Act No. 1212, Dec. 12, 1962)

         1.If the objective of establishment of such business office is illegal;

         2.If such business office has, without justifiable reasons, failed to
         commence business within one year after the registration of
         establishment thereof was effected, discontinued business for a period
         of not less than one year or suspended payment without justifiable
         reasons; or

         3.If the representative of such foreign company or any other person
         managing the affairs thereof has violated Acts and subordinate statutes
         or good morals and other social orders.


<PAGE>

         (2) Article 176 (2) through (4) shall apply mutatis mutandis in case of
         paragraph (1).


ARTICLE 620 (LIQUIDATION OF PROPERTIES EXISTING IN REPUBLIC OF KOREA)


         (1) If the court has ordered a business office of a foreign company to
         be closed in accordance with Article 619 (1), it may order the
         institution of proceedings for liquidation in respect of the whole of
         the company's property existing in the Republic of Korea, upon the
         application of any interested person or ex officio. In this case, the
         court shall appoint a liquidator.

         (2) Articles 535 through 537 and 542, except for those which are by
         nature inapplicable, shall apply mutatis mutandis to the liquidation
         under paragraph (1).

         (3) Paragraphs (1) and (2) shall apply mutatis mutandis where a foreign
         company has voluntarily closed its business office.


ARTICLE 621 (STATUS OF FOREIGN COMPANY)

         In connection with the application of other Acts, a foreign company
         shall be deemed to be a company incorporated in the Republic of Korea
         either of the same kind or of the kind which it most closely resembles,
         unless otherwise provided by Acts.


         CHAPTER VII PENAL PROVISIONS

ARTICLE 622 (CRIMES OF SPECIAL MISAPPROPRIATION BY PROMOTERS, DIRECTORS, AND
OTHER OFFICERS, ETC.)


         (1) If a promoter, managing member, director, member of audit
         committee,

<PAGE>

         auditor or acting director under Articles 386 (2), 407 (1), 415 or 567,
         manager or other employee commissioned to undertake a certain class of
         matters or specified matters related to the business affairs of the
         company has obtained, or made a third party obtain, any pecuniary
         benefit by acting in breach of his duty and has thereby inflicted loss
         on the company, he shall be punished by an imprisonment not exceeding
         ten years or to a fine not exceeding thirty million won. (Amended by
         Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29, 1995; Act No. 6086,
         Dec. 31, 1999; Act No. 6086, Dec. 31, 1999)

         (2) The same shall apply where a liquidator, acting liquidator under
         Article 542 (2) and incorporator under Article 175 have committed an
         act mentioned in paragraph (1).


ARTICLE 623 (CRIMES OF SPECIAL MISAPPROPRIATION BY REPRESENTATIVES OF MEETING OF
BONDHOLDERS, ETC.)

         If a representative of a meeting of bondholders or a person who was
         authorized to execute the resolutions thereof has obtained, or made
         another person obtain, any pecuniary benefit by acting in breach of his
         duty and has thereby inflicted loss on the bondholders, he shall be
         subject to an imprisonment not exceeding seven years or to a fine not
         exceeding twenty million won. (Amended by Act No. 3724, Apr. 10, 1984;
         Act No. 5053, Dec. 29, 1995)


ARTICLE 624 (ATTEMPTED CRIMES OF SPECIAL MISAPPROPRIATION)

         An attempt to commit any of the acts set forth in Articles 622 and 623
         shall be punishable.


ARTICLE 625 (CRIMES OF ENDANGERING COMPANY'S PROPERTY)

         If any person set forth in Article 622 (1), inspector, notary public
         mentioned in Article 298 (3), 299-2, 310 (3) or 313 (2) (including
         managing attorney of an incorporated law firm and of a joint law &
         notary office; the same shall apply

<PAGE>

         hereinafter in this Chapter) or appraiser mentioned in Article 299-2,
         310 (3), or 422 (1) has committed any of the following offenses, he
         shall be subject to an imprisonment not exceeding five years or to a
         fine not exceeding fifteen million won: (Amended by Act No. 3724, Apr.
         10, 1984; Act No. 5053, Dec. 29, 1995; Act No. 5591, Dec. 28, 1998)

         1.Making of a false report to, or concealing facts from, the court, the
         general meeting or promoters in respect of the subscription for shares
         or capital contribution, payment therefor, performance of contributions
         in kind, or any matter set forth in Article 290, subparagraph 4 of
         Article 416, or Article 544;

         2.Wrongful acquisition of the ownership of share or shares in the
         company or of the pledge right with respect thereto, for the account of
         the company, irrespective of the name they have used in doing so;

         3.Distribution of profits or interests in contravention of Acts,
         subordinate statutes or the articles of incorporation; and

         4.Disposal of the company's property for speculative transactions,
         outside the ordinary course of the company's business.


ARTICLE 625-2 (CRIMES OF VIOLATING SHARE ACQUISITION RESTRICTION, ETC.)

         If a person set forth in Article 635 (1) has violated Article 342-2 (1)
         or (2), he shall be subject to a fine not exceeding twenty million won.
         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 626 (CRIMES OF FALSE REPORTING)

         If a director, member of audit committee, auditor or acting director
         under Articles 386 (2), 407 (1), 415 or 567 has made a false reporting
         to, or has concealed facts from, the court or the general meeting with
         respect to the amount of net assets under Article 604 (2) or 607 (2) in
         case of a change of organization pursuant to Article 604 or 607, he
         shall be punished by an

<PAGE>

         imprisonment not exceeding five years or to a fine not exceeding
         fifteen million won. (Amended by Act No. 3724, Apr. 10, 1984; Act No.
         5053, Dec. 29, 1995; Act No. 6086, Dec. 31, 1999)


ARTICLE 627 (CRIMES OF USING DOCUMENTS CONTAINING MISSTATEMENTS)


         (1) If a person set forth in Article 622 (1), representative of a
         foreign company or person who is commissioned to offer shares or bonds
         has used the subscription forms for shares or bonds, prospectus,
         advertisements or any other documents relating to an offering of shares
         or bonds, which contained misstatements as to material facts in
         connection with such offering, he shall be punished by an imprisonment
         not exceeding five years or to a fine not exceeding fifteen million
         won.
         (Amended by Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29, 1995)

         (2) The same shall apply where a person who offers shares or bonds for
         sale has used documents related to such sale containing misstatements
         as to material facts pertaining to such sale.


ARTICLE 628 (CRIMES OF DISGUISED PAYMENT)


         (1) If a person set forth in Article 622 (1) has committed an act of
         disguising the payment for the subscription price or the fulfillment of
         the contribution in kind, he shall be subject to an imprisonment not
         exceeding five years or to a fine not exceeding fifteen million won.
         (Amended by Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29, 1995)

         (2) The same shall apply to a person who have consented to or has
         mediated an act mentioned in paragraph (1).


ARTICLE 629 (CRIMES OF EXCESSIVE ISSUANCE)


<PAGE>

         If promoters, directors or acting directors under Article 386 (2) or
         407 (1) have issued shares in excess of the total number of shares
         authorized to be issued by the company, they shall be subject to an
         imprisonment not exceeding five years or to a fine not exceeding
         fifteen million won. (Amended by Act No. 3724, Apr. 10, 1984; Act No.
         5053, Dec. 29, 1995)


ARTICLE 630 (CRIMES OF CORRUPTION IN OFFICE BY PROMOTERS, DIRECTORS OR OTHER
OFFICERS)


         (1) If a person set forth in Articles 622 and 623, inspector or notary
         public under Article 298 (3), 299-2, 310 (3) or 313 (2) or appraiser
         under Article 299-2, 310 (3), or 422 (1) has received, demanded or
         promised any pecuniary benefit, in response to unlawful solicitation in
         connection with their duties, he shall be subject to an imprisonment
         not exceeding five years or to a fine not exceeding fifteen million
         won. (Amended by Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29,
         1995; Act No. 5591, Dec. 28, 1998)

         (2) The same shall apply to a person who has promised, delivered or
         manifested an intention for delivery of pecuniary benefits mentioned in
         paragraph (1).


ARTICLE 631 (CRIMES OF BRIBERY IN RELATION TO DISTURBING EXERCISE OF RIGHTS,
ETC.)


         (1) If any person has received, demanded or promised pecuniary benefits
         in response to unlawful solicitations in connection with the following
         matters, he shall be subject to an imprisonment not exceeding one year
         or to a fine not exceeding three million won: (Amended by Act No. 1212,
         Dec. 12, 1962; Act No. 3724, Apr. 10, 1984; Act No. 5053, Dec. 29,
         1995; Act No. 5591, Dec. 28, 1998; Act No. 6086, Dec. 31, 1999)

         1.Making a statement or exercising voting rights at the inaugural
         general meeting, general members' meetings, general shareholders'
         meetings or meetings of bondholders;


<PAGE>

         2.Bringing an action set forth in Part 3 or exercising the rights of
         shareholders representing no less than 1/100 or 3/100 of the total
         issued and outstanding shares, the rights of bondholders representing
         no less than 10/100 of the total amount of the bonds or the rights of
         members having contribution units representing no less than 3/100 of
         the capital; and

         3.Exercising any right set forth in Article 402 or 424.

         (2) The same shall apply to a person who has promised, delivered or
         manifested an intention for delivery of pecuniary benefits mentioned in
         paragraph (1).


ARTICLE 632 (CONCURRENT IMPOSITION OF IMPRISONMENT AND FINE)

         Punishments of Imprisonment and fine set forth in Articles 622 through
         631 may be concurrently imposed.


ARTICLE 633 (CONFISCATION AND ADDITIONAL COLLECTION)

         In case of Article 630 (1) or 631 (1), the benefits received by the
         offender shall be confiscated. If it is wholly or partly impossible to
         confiscate such, the value thereof shall be collected from the
         offender.


ARTICLE 634 (CRIMES OF EVADING LIABILITY FOR PAYMENT ON SHARES)

         If a person who has subscribed for shares or contribution units by
         using another person's name or a fictitious name in order to evade the
         liability for payment of the subscription price, he shall be subject to
         an imprisonment not exceeding one year or to a fine not exceeding three
         million won. (Amended by Act No. 3724. Apr. 10, 1984; Act No. 5053,
         Dec. 29, 1995)


ARTICLE 634-2 (CRIMES OF GRANTING BENEFITS IN CONNECTION WITH EXERCISE OF


<PAGE>

SHAREHOLDER'S RIGHTS)


         (1) If a director, member of audit committee, auditor, acting director
         under Article 386 (2), 407 (1) or 415, manager or other employee has
         granted pecuniary benefits on the company's account in connection with
         the exercise of shareholder's rights, he shall be subject to an
         imprisonment not exceeding one year or to a fine not exceeding three
         million won. (Amended by Act No. 5053, Dec. 29, 1995; Act No. 6086,
         Dec. 31, 1999)

         (2) The same shall apply to a person who has received, or made another
         person deliver, the benefits under paragraph (1).

         [This Article Newly Inserted by Act No. 3724, Apr. 10, 1984]


ARTICLE 635 (OFFENCES SUBJECT TO FINE FOR NEGLIGENCE)


         (1) If a promoter, incorporator, managing member, director, auditor,
         member of audit committee, representative of a foreign company,
         inspector, notary public under Article 298 (3), 299-2, 310 (3) or 313
         (2), appraiser under Article 299-2, 310 (3), or 422 (1), manager,
         liquidator, transfer agent, company which was commissioned to offer
         bonds for subscription, its successor or acting director under Article
         386 (2), 407 (1), 415, 542 (2) or 567 has committed any of the
         following offenses, he shall be subject to a fine for negligence not
         exceeding five million: Provided, That this shall not apply where a
         criminal penalty is imposed against such an act: (Amended by Act No.
         1212, Dec. 12, 1962; Act No. 3724, Dec, 1984; Act No. 5053, Dec. 29,
         1995; Act No. 5591, Dec. 28, 1998; Act No. 6086, Dec. 31, 1999)

         1.Neglecting to effect any of the registrations set forth in this Part;

         2.Neglecting to give any public notices or any other notices prescribed
         in this Part or making a dishonest public or other notices;

         3.Disturbing any inspection or investigation pursuant to this Part;


<PAGE>

         4.Refusal to permit the inspection or copying of documents or to
         deliver a transcript or an abstract thereof in contravention of this
         Part, without justifiable reason;

         5.Making a false reporting to, or concealing facts from, the government
         authorities, general meetings or meetings of bondholders;

         6.Failure to state in share certificates, certificates of bonds or
         certificates for preemptive rights any of the required particulars or
         making a misstatement therein;

         7.Failure to effect entry of a change of holders in the register of
         shareholders, without justifiable reason;

         8.Neglecting to take procedure for the appointment of directors and
         auditors, if the remaining directors or auditors in office become fewer
         than the minimum number prescribed in the Acts or in the articles of
         incorporation;

         9.Failure to state any particulars required to be stated in the
         articles of incorporation, the register of shareholders or the part of
         a set thereof, the register of members, the register of bonds or the
         part of a set thereof, the minutes, the property list, the balance
         sheet, the business report, the operation report, the income
         statements, the statements of appropriation of retained earnings or the
         statements of disposition of deficits, the reports on the settlement of
         accounts, account books, the supplementary schedules mentioned in
         Articles 447, 534, 579 (1) or 613 (1) or the audit report or making mis
         statements therein;

         10.Neglecting or refusing to hand over the business undertaking to a
         liquidator appointed by the court;

         11.Fixing the unduly prolonged period set forth in Article 247 (3), 535
         (1) or 613 (1), for the purpose of delaying the completion of
         liquidation;

         12.Neglecting to apply for an adjudication of bankruptcy in
         contravention of

<PAGE>

         Article 254 (4), 542 (1) or 613 (1);

         13.Inviting public subscriptions for contribution in contravention of
         Article 589 (2);

         14.Merger, division, or merger through division of companies, change of
         organization, disposal of the company's property or reduction of its
         capital, in contravention of Article 232, 247 (3), 439 (2), 527-5, 530
         (2), 530-9 (4), 530-11 (2), 597, 603 or 608;

         15.Distribution of the properties of a company in contravention of
         Article 260, 542 (1) or 613 (1);

         16.Failure to prepare subscription forms for shares or bonds,
         certificates of preemptive rights or to state therein the required
         particulars or making misstatements therein, in contravention of
         Article 302 (2), 347, 420, 420-2, 474 (2) or 514 (1);

         17.Neglecting to take the procedures for cancellation of shares or
         contribution units or to effect the disposition of pledge rights over
         the shares or contribution units, in contravention of Article 342 or
         560 (1);

         18.Retirement of shares or contribution units in contravention of
         Article 343 (1) or 560 (1);

         19.Issuance of share certificates in contravention of Article 355 (1)
         and (2) or 618;

         19-2.Failure to enter in the register of shareholders, in contravention
         of Article 358-2 (2);

         19-3.Failure to make a subject-matter of the general meeting of
         shareholders the matters which shareholders propose, in contravention
         of Article 363-2 (1) or 542 (2);

         20.Failure to convene a general meeting in contravention of an order of
         the

<PAGE>

         court rendered in accordance with Article 365 (1) and (2), 578, 467 (3)
         or 582 (3) or convening a general meeting at a place other than that
         set forth in the articles of incorporation or convening such meeting in
         contravention of Article 363, 364 or 571 (2) and (3);

         20-2.Failure to give the notice or public notice on the contents and
         method of exercise of the appraisal right or giving a false notice or
         public notice, in contravention of Article 374 (2), 530 (2), or 530-11
         (2);

         21.Failure to keep books or documents in contravention of Article 396
         (1), 448 (1), 510 (2), 522-2 (1), 527-6 (1), 530-7, 534 (3), 542 (2),
         566 (1), 579 (3), 603 or 613;

         21-2.Refusal of the investigation of the auditor or the member of audit
         committee without any justifiable reason, in contravention of Article
         412-4 (3);

         22.Failure to set aside a reserve or misuse thereof, in contravention
         of Articles 458 through 460 or 583;

         22-2.Failure to pay the dividend within the period set forth in Article
         464-2 (1);

         23.Offeringbonds or failure to redeem old bonds, in contravention of
         Article 470;

         24.Issuance of bond certificates in contravention of Article 478 (1) or
         618;

         25.Discharge of any obligation in contravention of Article 536 or 613
         (1);

         26.Failure to comply with an order of the court rendered pursuant to
         Article 619 (1); and

         27.Issuance of instruments in bearer or non-bearer form with respect to
         contribution units, in contravention of Article 555.

         (2) The same shall apply where a promoter or director has transferred
         any right deriving from the subscription of shares.



<PAGE>

ARTICLE 636 (BUSINESS IN NAME OF COMPANY PRIOR TO ITS REGISTRATION, ETC.)


         (1) A person who has engaged in business in the name of a company
         before its incorporation shall be subject to a fine for negligence
         equivalent to two times the sum of the registration tax for the
         registration of incorporation of the company.

         (2) Paragraph (1) shall apply mutatis mutandis where a person has
         violated Article 616 (1).


ARTICLE 637 (APPLICATION OF PENAL PROVISIONS TO JURISTIC PERSON)

         If any person set forth in Article 622, 623, 625, 627, 628 or 630 (1)
         is a juristic person, the penal provisions under this Chapter shall
         apply to the directors or auditors who have committed such acts or
         other members or managers who has managed the affairs of the company.


         PART IV INSURANCE

         CHAPTER I COMMON PROVISIONS

ARTICLE 638 (DEFINITION)

         A contract of insurance shall take effect when the parties agree that
         one shall pay the premium as agreed, and that the other shall provide a
         certain sum of money or its equivalent in kind upon the occurrence of
         uncertain events against the property, life or body of the former.


ARTICLE 638-2 (EFFECTUATION OF INSURANCE CONTRACT)

<PAGE>

         (1) When an insurer receives from a policyholder a payment of the whole
         or a part of the amount equivalent to the premium, as well as an
         application for an insurance contract, it shall dispatch to him a
         notice on whether it accepts the application or not within thirty days
         unless otherwise stipulated. If the insured of a personal insurance
         contract is to undergo a physical examination, however, the period
         shall run from the day on which he does it.

         (2) If the insurer neglects to dispatch a notice on whether or not it
         accepts such an application within the period in the paragraph (1), it
         shall be considered to have accepted the application.

         (3) Where the insurer receives from a policyholder the whole or a part
         of the amount equivalent to the premium, as well as an application for
         an insurance contract, if any event specified in the insurance contract
         has taken place before it accepts the application, it shall assume
         contractual obligations unless it has any reason to refuse the
         application: Provided, That this shall not apply where the insured of a
         personal insurance contract is to undergo a physical examination, but
         fails to do so.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 638-3 (OBLIGATION TO DELIVER AND SPECIFY STANDARD INSURANCE TERMS)


         (1) When an insurer enters into an insurance contract, it shall deliver
         the standard insurance terms to the policyholder, and inform him of
         their important contents.

         (2) If the insurer violates the provisions of paragraph (1), the
         policyholder may cancel the contract within one month after the
         contract is made.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 639 (INSURANCE FOR BENEFIT OF THIRD PARTY)



<PAGE>

         (1) The policyholder may effect a contract of insurance for the benefit
         of a third party with or without a mandate of, specified or
         unspecified, the third party: Provided, That in the case of the
         non-life insurance contract, if there is no mandate of a third party,
         the policyholder shall inform the insurer thereof, and if he fails to
         do so, he may not stand against the insurer by the reason that the
         third party does not know the fact that the insurance contract was
         made. (Amended by Act No. 4470, Dec. 31, 1991)

         (2) In the case of paragraph (1), the third party shall be necessarily
         entitled to the benefits of the contract: Provided, That in case of the
         non-life insurance contract, if the policyholder has compensated the
         third party for the loss caused by the occurrence of the insured event,
         he may claim from the insurer the payment of the insured amount to the
         extent that it does not infringe upon the third party's right. (Newly
         Inserted by Act No. 4470, Dec. 31, 1991)

         (3) In the case of paragraph (1), the policyholder is liable for paying
         the premium to the insurer: Provided, That if the policyholder has been
         adjudged bankrupt or has delayed the payment of the premium, the third
         person is also liable for paying the premium in so far as the third
         party does not waive his rights. (Amended by Act No. 4470, Dec. 31,
         1991)


ARTICLE 640 (DELIVERY OF INSURANCE POLICY)


         (1) When the insurance contract is made the insurer shall prepare an
         insurance certificate and deliver it to the policyholder without delay,
         except in case where the policyholder fails to pay the whole premium or
         its first installment.
         (Amended by Act No. 4470, Dec. 31, 1991)

         (2) Where the existing insurance contract is extended or altered, the
         insurer may be exempt from the delivery of a insurance certificate by
         writing down the extension or alteration on the existing insurance
         certificate. (Newly Inserted by Act No.
         4470, Dec. 31, 1991)

<PAGE>

ARTICLE 641 (EFFECT OF OBJECTION AGREEMENT IN RESPECT OF INSURANCE CERTIFICATE)

         The parties to a contract of insurance may agree that they may raise
         any objection to the correctness of the contents of the insurance
         certificate within a certain period from the day of the delivery of the
         insurance certificate. The period shall not be less than one month.


ARTICLE 642 (DEMAND FOR REISSUANCE OF INSURANCE CERTIFICATE)

         If the policyholder has lost or has grossly damaged the insurance
         certificate, he may demand the insurer to reissue the insurance
         certificate. The expenses arising out of making the insurance
         certificate shall be borne by the policyholder.


ARTICLE 643 (RETROACTIVE INSURANCE)

         The parties to the insurance contract may agree that the commencement
         of cover shall be a certain time prior to the conclusion of the
         insurance contract.


ARTICLE 644 (EFFECT OF PREEXISTING INSURED EVENTS)

         If, at the time when a contract of insurance is made, the insured
         events has already occurred or will never occur, such a contract shall
         be null and void: Provided, That this shall not apply when both parties
         and the insured are not aware of it.


ARTICLE 645

         Deleted. (by Act No. 4470, Dec. 31, 1991)


ARTICLE 646 (EFFECT OF FACTS KNOWN TO AGENT)


<PAGE>

         If the contract of insurance was concluded through an agent, the
         principal is deemed as having been aware of the facts which the agent
         knew.


ARTICLE 647 (REQUEST FOR REDUCTION OF PREMIUM UPON CESSATION OF CERTAIN RISKS)

         Where the parties to a insurance contract agreed on the premium in
         consideration of certain risks, if such risks have ceased to exist
         during the period of insurance, the policyholder may demand that the
         premium be reduced for the future.


ARTICLE 648 (REQUEST FOR RETURN OF PREMIUM UPON NULLIFYING OF INSURANCE
CONTRACT)

         Where the whole or a part of a insurance contract is null and void, if
         the policyholder and the insured have acted in good faith and without
         gross negligence, the insurer may be demanded to return the whole or a
         part of the premium. The same shall apply where the policyholder and
         the beneficiary have acted in good faith and without gross negligence.


ARTICLE 649 (VOLUNTARY TERMINATION OF CONTRACT PRIOR TO OCCURRENCE OF INSURED
EVENTS)


         (1) The policyholder may in the future terminate the whole or a part of
         the contract at any time before the insured events occur: Provided,
         That in the case of an insurance contract as prescribed in Article 639,
         the policyholder shall not terminate the contract without obtaining the
         consent of the third party or carrying the insurance certificate.
         (Amended by Act No. 4470, Dec. 31, 1991)

         (2) In the case of an insurance policy by which the insured amount is
         not reduced despite the fact that the insurer has paid out insured
         event, the policyholder may terminate the insurance contract even after
         the occurrence of the insured event. (Newly Inserted by Act No. 4470,
         Dec. 31, 1991)


<PAGE>

         (3) In the case of paragraph (1), unless otherwise agreed by the
         parties, the policyholder may demand the return of any unearned
         premium. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 650 (EFFECT OF PAYMENT AND DELAY OF PREMIUM)


         (1) The policyholder shall pay the whole premium or its first
         installment without delay after the conclusion of the contract, and if
         the policyholder fails to pay it, the contract shall be considered to
         have been rescinded at the time of the lapse of two months after the
         contract is made, unless otherwise agreed.

         (2) If premium installments are not paid at an agreed time, the insurer
         may demand the policyholder to pay them within a reasonable period
         specified, and if he fails to do so, the insurer may rescinded the
         contract.

         (3) In the case of a policy effected on behalf of a specified third
         party, if the policyholder delays the payment of the premium, the
         insurer shall not rescind or terminate the contract without demanding
         also the third party to pay it within a reasonable time specified.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 650-2 (REINSTATEMENT OF INSURANCE CONTRACT)

         Where an insurance contract is terminated under Article 650 (2), and no
         refund for termination is paid, the policyholder may demand a
         reinstatement of the contract by paying to the insurer delayed premium
         together with the agreed interest within a specified period. The
         provisions of Article 638-2 shall be applicable mutatis mutandis to
         this case.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 651 (TERMINATION OF CONTRACT DUE TO BREACH OF DUTY OF DISCLOSURE)


<PAGE>

         If, at the time of making the insurance contract the policyholder or
         the insured, by fraud or gross negligence, fails to disclose or not to
         misrepresent material facts, the insurer may terminate the contract
         within one month after it knew the non-disclosure or misrepresentation
         or within three years after the contract was made: Provided, That this
         shall not apply where at the time of making the insurance contract the
         insurer knew the nondisclosure or misrepresentation or by gross
         negligence failed to do so. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 651-2 (EFFECT OF QUESTION IN WRITING)

         Any fact about which the insurer makes written questions shall be
         presumed to material.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 652 (NOTICE ON ALTERATION OR INCREASE OF RISKS AND TERMINATION OF
CONTRACT)


         (1) If, during the cover period, the policyholder or the insured
         becomes aware of the fact that the possibility of the occurrence of the
         insured events has been substantially altered or increased, he shall
         give notice thereof to the insurer without delay. If the policyholder
         or the insured has neglected to do so, the insurer may terminate the
         contract within one month after it becomes aware of the fact.

         (2) When the insurer is informed of an alteration or increase of the
         risks insured under paragraph (1), within one month it may demand an
         increase in the premium or rescind the contract. (Newly Inserted by Act
         No. 4470, Dec. 31, 1991)


ARTICLE 653 (INCREASES OF RISKS DUE TO INTENTION OR GROSS NEGLIGENCE OF
POLICYHOLDER, ETC. AND TERMINATION OF CONTRACT)

         If, during the cover period, the possibility of the occurrence of
         insured events

<PAGE>

         has been substantially altered or increased by intention or gross
         negligence of the policyholder, of the insured, or of the beneficiary,
         the insurer may request an increase in the premium or terminate the
         contract within one month after it becomes aware of the fact. (Amended
         by Act No. 4470, Dec. 31, 1991)


ARTICLE 654 (ADJUDICATION OF INSURER'S BANKRUPTCY AND PROSPECTIVE TERMINATION OF
CONTRACT)


         (1) If the insurer has been adjudged bankrupt, the policyholder may
         terminate the contract.

         (2) The contract of insurance which has not been terminated under the
         provisions of paragraph (1) shall lose its effect upon the lapse of
         three months after the adjudgment of bankruptcy. (Amended by Act No.
         4470, Dec. 31, 1991)


ARTICLE 655 (TERMINATION OF CONTRACT AND RIGHT TO DEMAND INSURED AMOUNT)

         Even after the insured events have occurred, if the insurer has
         terminated the contract under the provisions of Articles 650, 651, 652
         and 653, it is not liable for paying the insured amount and may demand
         the return of the insured amount which has been already paid: Provided,
         That this shall not apply when it was proved that the occurrence of the
         insured events was not affected by the non-disclosure or
         misrepresentation or by a substantial alteration or increase of the
         risks insured. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 656 (PAYMENT OF PREMIUM AND COMMENCEMENT OF LIABILITY OF INSURER)

         Unless otherwise agreed by the parties, the insurer's liability
         commences from the time when the initial premium has been paid.


ARTICLE 657 (DUTY TO NOTIFY OCCURRENCE OF INSURED EVENTS)

<PAGE>

         (1) When the policyholder, the insured or the beneficiary becomes aware
         of the occurrence of insured events, he shall without delay dispatch
         the notice thereof to the insurer.

         (2) If the loss is insured by the policyholder, the insured or the
         beneficiary's neglects of the duty to notify as referred to in
         paragraph (1), the insurer shall not be liable for indemnification of
         the increased loss. (Newly Inserted by Act No. 4470, Dec. 31, 1991)


ARTICLE 658 (PAYMENT OF INSURED AMOUNT)

         The insurer shall pay the insured amount to the insured or the
         beneficiary, if there is an agreed period for such a payment, within
         the agreed period, or if not, within ten days after determining the
         insured amount payable without delay on receiving the notification
         under Article 657 (1).
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 659 (REASONS FOR EXEMPTION OF LIABILITY)


         (1) If the insured events have occurred due to intention or gross
         negligence of the policyholder, of the insured, or of the beneficiary,
         the insurer is not liable for paying the insured amount.

         (2) Deleted. (by Act No. 4470, Dec. 31, 1991)


ARTICLE 660 (EXEMPTION OF LIABILITY FOR LOSS CAUSED BY WAR, ETC.)

         If the insured events have been caused by war or other public
         disturbances, the insurer is not liable for paying the insured amount,
         unless otherwise agreed by the parties.



<PAGE>

ARTICLE 661 (REINSURANCE)

         The insurer may make a contract of reinsurance with another insurer in
         regard to the liability which the former shall bear by the occurrence
         of the insured events. The contract of reinsurance shall not affect the
         validity of the original contract of insurance.


ARTICLE 662 (EXTINCTIVE PRESCRIPTION)

         Two years' absence of the exercise of the rights to demand the payment
         of the insured amount or the return of the premium or the reserve, or
         one year's absence of the exercise of the right to demand the payment
         of the premium, shall make those rights extinguished.


ARTICLE 663 (PROHIBITION OF ENTERING SPECIAL AGREEMENT WHICH IS DISADVANTAGEOUS
TO POLICYHOLDER, ETC.)

         The provisions of this Part shall not be changed as being
         disadvantageous to the policyholder, the insured or the beneficiary
         through an agreement by the parties: Provided, That this shall not
         apply in the case of reinsurance, marine insurance and other similar
         types of insurance. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 664 (APPLICABLE PROVISIONS)

         The provisions of this Part shall apply mutatis mutandis to mutual
         insurance to the extent that its nature is compatible with those
         provisions. (Amended by Act No. 4470, Dec. 31, 1991)

<PAGE>

         CHAPTER II NON-LIFE INSURANCE

         SECTION 1 COMMON PROVISIONS

ARTICLE 665 (LIABILITY OF INSURER OF NON-LIFE INSURANCE)

         The insurer of a contract of non-life insurance is liable for
         indemnifying the insured for the loss against his property caused by
         the occurrence of the insured events.


ARTICLE 666 (NON-LIFE INSURANCE CERTIFICATE)

         The non-life insurance certificate shall contain the following
         particulars and the insurer shall write it's name and affix his seal or
         shall sign thereon: (Amended by Act No. 4470, Dec. 31, 1991)

         1.The subject-matter insured;

         2.The nature of the insured events;

         3.The insured amount;

         4.The amount of the premium and the method of its payment;

         5.The time of commencement and termination of the cover period if there
         is an agreement thereupon;

         6.The reasons for nullity of the contract and forfeiture of the right;

         7.The domicile and full name or trade name of the policyholder;

         8.The date of the contract of insurance; and


<PAGE>
         9.The place in, and the date on, which the insurance certificate was
         made.


ARTICLE 667 (NON-INCLUSION OF LOST PROFITS, ETC.)

         The profit or remuneration which was expected by the insurer but lost
         by reason of the occurrence of the insured events shall not be included
         in the amount of loss for which the insurer should indemnify, unless
         otherwise agreed by the parties.


ARTICLE 668 (SUBJECT-MATTERS OF INSURANCE CONTRACT)

         Only such interests as can be estimated in a monetary sum may be a
         subject-matter insured contract.


ARTICLE 669 (OVER-INSURANCE)


         (1) If the insured amount substantially exceeds the value of the
         subject-matter of a insurance contract, the insurer or the policyholder
         may demand a reduction of the premium and of the insured amount:
         Provided, That the reduction of the premium shall be effective for the
         future.

         (2) The value mentioned in paragraph (1) shall be determined by
         reference to the value when a contract is made. (Amended by Act No.
         4470, Dec. 31, 1991)

         (3) The provisions of paragraph (1) shall apply where the insurable
         value has substantially decreased during the cover period.

         (4) In the case of paragraph (1), if the conclusion of the contract was
         due to a fraud of the policyholder, such a contract shall be null and
         void: Provided, That the insurer may demand the premium due until it
         becomes aware of that fact.

<PAGE>

ARTICLE 670 (AGREED UPON VALUED POLICY)

         If the insurable value has been determined by the parties, it shall be
         presumed to have been determined as the value of the insured property
         at the time of the occurrence of the insured events: Provided, That if
         the insurable value determined substantially exceeds the value of the
         insured property at the time of the occurrence of the insured events,
         the latter shall be the insurable value.


ARTICLE 671 (UNVALUED POLICY)

         If the insurable value has not been determined by the parties, the
         value of the insured property at the time of the occurrence of the
         insured events shall be the insurable value.


ARTICLE 672 (DOUBLE INSURANCE)


         (1) Where several insurance contracts have been made simultaneously or
         successively with regard to the same subject-matter insured contract
         and the same events, if the total of the insured amounts exceeds the
         insurable value, the individual insurer has a joint and several
         liability up to the amount insured by each one. In this case, each
         insurer's liability for indemnification is subject to the ratio that
         the amount insured by each one has to the total insured amounts.
         (Amended by Act No. 4470, Dec. 31, 1991)

         (2) Where several insurance contracts are made with regard to the same
         subject-matter insured contract and the same events, the policyholder
         shall notify each insurer of the contents of each insurance contract.
         (Amended by Act No. 4470, Dec. 31, 1991)

         (3) The provision of Article 669 (4) shall apply mutatis mutandis to
         the contract of insurance under paragraph (1).

<PAGE>

ARTICLE 673 (DOUBLE INSURANCE AND WAIVER OF RIGHT AGAINST ONE OF DOUBLE
INSURERS)

         If several contracts of insurance have been made in accordance with
         Article 672, the waiver of the rights against one insurer shall not
         affect the rights and duties of the other insurers. (Amended by Act No.
         4470, Dec. 31, 1991)


ARTICLE 674 (PARTIAL INSURANCE)

         If only a part of the insurable value has been insured, the insurer
         shall be liable for indemnification in proportion to the ratio of the
         insured amount to the insurable value: Provided, That if the parties
         agreed otherwise, the insurer shall be liable for indemnifying for such
         loss within the limit of the insured amount. (Amended by Act No. 4470,
         Dec. 31, 1991)


ARTICLE 675 (LIABILITY FOR INDEMNIFICATION IN CASE OF DESTRUCTION OF
SUBJECT-MATTER AFTER OCCURRENCE OF INSURED EVENTS)

         Where a loss to be borne by the insurer occurred against the
         subject-matter insured, the insurer shall not be relieved of its
         liability to indemnify for the loss already occurred, even though the
         subject-matter may have been subsequently destroyed by the occurrence
         of a event which was not insured by the insurer. (Amended by Act No.
         1212, Dec. 12, 1962)


ARTICLE 676 (BASIS FOR DETERMINATION OF AMOUNT OF LOSS)


         (1) The amount of a loss for which an insurer is to indemnify shall be
         determined according to the value when and where the loss occurred:
         Provided, That if there is an agreement as otherwise determined by
         parties, the amount of a loss may be calculated on the basis of the
         value of a new Article of the subject-matter of insurance. (Amended by
         Act No. 4470, Dec. 31, 1991)

         (2) The expenses required for determining the amount of loss as
         referred to in

<PAGE>

         paragraph (1) shall be borne by the insurer. (Amended by Act No. 4470,
         Dec. 31, 1991)


ARTICLE 677 (DEDUCTION OF UNPAID PREMIUM FROM INDEMNITY)

         If there is premium still to be paid, the insurer which is to indemnify
         for the loss may deduct the unpaid premium from the indemnity amount
         even if the date of the payment has not arrived.


ARTICLE 678 (EXEMPTION OF LIABILITY FOR INDEMNIFICATION)

         The insurer is not subject to indemnify for any loss caused by the
         nature, defects or natural wear of the subject-matter of insurance.


ARTICLE 679 (ASSIGNMENT OF SUBJECT-MATTER OF INSURANCE)


         (1) When the insured has assigned the subject-matter of insurance, the
         assignee shall be presumed to have succeeded to the right and
         obligation under the contract of insurance. (Amended by Act No. 4470,
         Dec. 31, 1991)

         (2) In the case as referred to in paragraph (1), the assignor or
         assignee of the subject-matter of insurance shall without delay notify
         the insurer of that fact. (Newly Inserted by Act No. 4470, Dec. 31,
         1991)


ARTICLE 680 (DUTY TO PREVENT LOSS)


         (1) The policyholder and the insured shall endeavor to prevent and
         reduce loss: Provided, That the insurer shall be liable for paying the
         necessary or beneficial expenses incurred for that purpose and the
         amount of indemnity even though they exceed the insured amount.
         (Amended by Act No. 4470, Dec. 31, 1991)


<PAGE>

         (2) Deleted. (by Act No. 4470, Dec. 31, 1991)


ARTICLE 681 (SUBROGATION BY INSURER CONCERNING SUBJECT-MATTER OF INSURANCE)

         If the subject-matter of insurance has been totally destroyed, the
         insurer which has paid the whole insured amount shall acquire the
         rights of the insured to the subject-matter: Provided, That in case
         where only a part of the insurable value has been insured, the rights
         which are to be acquired by the insurer shall be determined according
         to the ratio of the insured amount to the insurable value.


ARTICLE 682 (SUBROGATION BY INSURER REGARDING THIRD PERSON)

         If the loss has been caused by the act of a third person, the insurer
         which has paid the insured amount shall acquire, to the extent of the
         amount paid, the rights of the policyholder or the insured against the
         third person: Provided, That if the insurer has provided a part of the
         insured amount payable, it may exercise such rights in so far as the
         rights of the insured are not prejudiced.


         SECTION 2 FIRE INSURANCE

ARTICLE 683 (LIABILITY OF INSURER OF FIRE INSURANCE)

         The insurer of a contract of fire insurance shall be bound to indemnify
         for any loss arising from fire.


ARTICLE 684 (INDEMNIFICATION FOR LOSS CAUSED BY MEASURES SUCH AS FIRE
EXTINGUISHING, ETC.)

         The insurer shall be bound to indemnify for any loss caused by the
         measures necessary for extinguishing fire or for decreasing loss.



<PAGE>

ARTICLE 685 (FIRE INSURANCE CERTIFICATE)

         A fire insurance certificate shall, in addition to the particulars
         mentioned in Article 666, contain the following ones:

         1.If a building is the subject-matter of insurance, the location,
         structure and purpose of the building;

         2.If movables are the subject-matter of insurance, the condition and
         purpose of the place where they exist; and

         3.If the insurable value, if determined.


ARTICLE 686 (SUBJECT-MATTER OF AGGREGATE GOODS INSURANCE)

         Where aggregate goods are collectively the subject-matter insured,
         goods of the insured's family and employees shall be also included in
         the subject-matter insured. In this case, the insurance is deemed as
         concluded also for the benefit of the insured's family and employee.


ARTICLE 687 (IDEM)

         Where aggregate goods are collectively the subject-matter insured, even
         if they are frequently replaced during the cover period, the goods
         existing at the time of the occurrence of the insured events shall be
         included in the subject-matter insured.


         SECTION 3 TRANSPORT INSURANCE

ARTICLE 688 (LIABILITY OF INSURER OF TRANSPORT INSURANCE)


<PAGE>

         Unless otherwise agreed, the insurer of a contract of transport
         insurance shall be bound to indemnify for any loss which may arise
         between when the carrier receives the goods and when he delivers them
         to the consignee.


ARTICLE 689 (INSURABLE VALUE OF TRANSPORT INSURANCE)


         (1) In the insurance of the goods carried, the value of the goods when
         and where they were dispatched, the freight up to their destination,
         and other expenses involved shall constitute the insurable value.

         (2) Profits to be expected through the arrival of the goods carried may
         be included in the insurable value only if there is an agreement to
         that effect.


ARTICLE 690 (TRANSPORT INSURANCE CERTIFICATE)

         A transport insurance certificate shall, besides the particulars
         mentioned in Article 666, contain the following ones:

         1.The route and method of the carriage;

         2.The domicile and the name or trade name of the carrier;

         3.The place where the goods are to be received and delivered;

         4.The period allowed for the carriage, if determined; and

         5.The insurable value, if determined.


ARTICLE 691 (INTERRUPTION OR ALTERATION OF CARRIAGE AND EFFECT OF CONTRACT)

         Unless otherwise agreed a contract of transport insurance shall not
         lose its

<PAGE>

         effect, even though the carriage has been temporarily interrupted, or
         the route or method of the carriage has been altered, for the purpose
         of the carriage.


ARTICLE 692 (INTENTION OR GROSS NEGLIGENCE OF CARRIAGE ASSISTANT AND EXEMPTION
OF INSURER'S LIABILITY)

         If the insured events have occurred by intention or gross negligence of
         the consignor or the consignee, the insurer shall not be bound to
         indemnify for the loss caused by such events.


         SECTION 4 MARINE INSURANCE

ARTICLE 693 (LIABILITY OF INSURER OF MARINE INSURANCE)

         The insurer of a contract of marine insurance shall be bound to
         indemnify for loss which may be caused by the events connected with sea
         business. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 694 (INDEMNIFICATION OF GENERAL AVERAGE CONTRIBUTION)

         The insurer shall be liable to compensate the insured for the amount to
         be contributed by the latter to the general average: Provided, That if
         the amount of the general average contribution relating to the
         subject-matter of insurance, exceeds the insurable value, the amount of
         the surplus contribution shall not be indemnified for. (Amended by Act
         No. 4470, Dec. 31, 1991)


ARTICLE 694-2 (INDEMNIFICATION FOR SALVAGE)

         The insurer shall be bound to indemnify for salvage charges incurred by
         the insured in preventing any loss caused by the insured events:
         Provided, That if the salvage contribution of the object of the
         insurance exceeds the insurable

<PAGE>

         value, the amount of the surplus contribution shall not be compensated.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 694-3 (INDEMNIFICATION FOR SPECIAL EXPENSES)

         The insurer shall be bound to indemnify for extraordinary expenses
         incurred for the safety or preservation of the subject-matter of
         insurance within the limit of the insured amount.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 695 (MARINE INSURANCE CERTIFICATE)

         A marine insurance certificate shall, besides the particulars mentioned
         in Article 666, contain the following ones: (Amended by Act No. 4470,
         Dec. 31, 1991)

         1.In case where a ship is insured, the name, nationality, type of the
         ship, and the scope of navigation;

         2.In case where a cargo is insured, the name, nationality and type of
         the ship, ports of loading and unloading, and the places of sending and
         arrival if determined; and

         3.The insurable value, if determined.


ARTICLE 696 (INSURABLE VALUE AND SUBJECT-MATTER OF SHIP INSURANCE)


         (1) In the insurance of a ship, the insurable value shall be the value
         of the ship at the time when the liability of the insurer commences.

         (2) In the case mentioned in paragraph (1), a ship's appurtenances,
         fuel, food, and all other things necessary for the navigation of a ship
         shall be deemed as included in the subject-matter insured. (Amended by
         Act No. 4470, Dec. 31,

<PAGE>

         1991)


ARTICLE 697 (INSURABLE VALUE OF CARGO INSURANCE)

         In the insurance of a cargo, the insurable value shall be the value of
         the cargo at the time and place of loading together with the expenses
         incurred for loading and insurance. (Amended by Act No. 1212, Dec. 12,
         1962)


ARTICLE 698 (INSURABLE VALUE OF PROSPECTIVE PROFIT INSURANCE)

         In the insurance of prospective profit or remuneration to be earned
         upon the arrival of the cargo, if the insurable value has not been
         determined by the contract, the insured amount shall be presumed to be
         the insurable value.


ARTICLE 699 (COMMENCEMENT OF COVER PERIOD OF MARINE INSURANCE)


         (1) If a ship is insured for each voyage, the cover period shall
         commence at the time the shipment of goods or ballast starts.

         (2) If the cargo is insured, the cover period shall commence at the
         time the loading of goods starts: Provided, That if the place of
         sending the cargo is determined, the cover period commences at the time
         the transport starts therefrom.

         (3) If the insurance contract is concluded under paragraph (1) or (2)
         after the loading of goods or ballast starts, the cover period shall
         commence at the time of the conclusion of the contract.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 700 (TERMINATION OF COVER PERIOD OF MARINE INSURANCE)

<PAGE>

         In the case of paragraph (1) of Article 699, the cover period shall
         terminate at the time of the unloading of the goods and ballast at the
         port of arrival, and in case of paragraph (2) of the said Article, it
         shall terminate upon the delivery of the goods at the port of unloading
         or the place of arrival: Provided, That where unloading has been
         delayed by a cause other than an act of god, the cover period shall
         terminate when such an unloading is generally completed. (Amended by
         Act No. 4470, Dec. 31, 1991)


ARTICLE 701 (EFFECT OF CHANGE OF VOYAGE)


         (1) If a ship starts on a voyage from a port other than the port of
         departure as determined in the insurance contract, the insurer shall be
         discharged from its liability.

         (2) If a ship starts on a voyage for a port other than the port of
         arrival as determined in the insurance contract, the provisions of
         paragraph (1) shall be also applicable.

         (3) If the port of arrival as determined in the insurance contract is
         changed after the liability of the insurer commenced, the insurer shall
         be discharged from its liability when the change is determined.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 701-2 (DEVIATION FROM COURSE)

         If a ship deviates from the sea route as determined in the insurance
         contract without any justifiable reason, the insurer shall be
         discharged from its liability from the time of deviation. This
         provision shall also apply where the ship has regained her route before
         the occurrence of loss.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 702 (EFFECT OF DELAY IN DEPARTURE OR VOYAGE)

<PAGE>

         If the insured delays departure or voyage without any justifiable
         reason, the insurer shall be discharged from its liability for any
         insured events from the time of delay.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 703 (EFFECT OF CHANGE OF SHIP)

         In the case of a cargo insurance, if the ship has been changed due to
         any cause attributable either to the policyholder or to the insured,
         the insurer shall be discharged from liability for any insured events
         from the time of change. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 703-2 (EFFECT OF TRANSFER, ETC. OF SHIP)

         In case where a ship is insured, if any of the following causes exists,
         the insurance contract shall be terminated: Provided, That this shall
         not apply if otherwise agreed:

         1.Where the ship is transferred;

         2.Where the class of ship is changed; and

         3.Where the ship is undertaken by new management.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 704 (FLOATING CARGO INSURANCE OF UNDETERMINED SHIP)


         (1) If the ship in which the cargo is to be loaded has not been
         determined at the time of making the contract of insurance, the
         policyholder or the insured shall, when he becomes aware of the loading
         of the cargo, without delay dispatch a notice to the insurer of the
         name and nationality of the ship, and type, quantity



<PAGE>

         and value of the cargo. (Amended by Act No. 4470, Dec. 31, 1991)

         (2) If the notice as referred to in paragraph (1) has been neglected,
         the insurer may terminate the contract within one month after it
         becomes aware of that fact. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 705

         Deleted. (by Act No. 4470, Dec. 31, 1991)


ARTICLE 706 (EXEMPTION OF MARINE INSURER'S LIABILITY)

         The insurer shall not be bound to indemnify for the following losses
         and expenses: (Amended by Act No. 4470, Dec. 31, 1991)

         1.If the ship or the freight has been insured, any loss arising from
         the failure, at the time of departure, to make preparations necessary
         for safe voyage or to have necessary documents on board;

         2.If the cargo has been insured, any loss arising from fraud or gross
         negligence of the charterer, consignor, or consignee; and

         3.Pilotage dues, port charges, light dues, quarantine fees, and other
         ordinary expenses incurred for the ship or cargo in the course of the
         voyage.


ARTICLE 707

         Deleted. (by Act No. 4470, Dec. 31, 1991)


ARTICLE 707-2 (INDEMNIFICATION FOR PARTIAL LOSS OF SHIP)


         (1) If a part of a ship which is damaged, is entirely repaired, the
         insurer shall be bound to indemnify for the expenses incurred for the
         repair up to the insured



<PAGE>

         amount in respect of any one casualty.

         (2) If a part of a ship which is damaged is only partially repaired,
         the insurer shall be bound to indemnify for the expenses incurred for
         the repair and the depreciation amount arising from the unrepaid
         damage.

         (3) If a part of a ship which is damaged is not repaired, the insurer
         shall be bound to indemnify for the depreciation amount arising from
         the unrepaired damage.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 708 (INDEMNIFICATION FOR PARTIAL DAMAGE OF CARGO)

         Where the cargo insured has arrived at the port of unloading in a
         damaged condition, the insurer shall be bound to indemnify for the lost
         part of the insurable value in proportion to the insurable value in a
         damaged condition as compared with one in a sound condition.


ARTICLE 709 (INDEMNIFICATION FOR DAMAGE DUE TO SALE OF CARGO)


         (1) If the cargo insured has been sold in the course of the voyage by
         reason of an act of god, the insurer shall be bound to indemnify for
         the difference between the sale price deducted by the freight and other
         necessary expenses, and the insurable value.

         (2) If, in the case of paragraph (1), the buyer does not pay the
         purchase price, the insurer shall make its payment thereof. When he has
         made such payment, he shall acquire the rights of the insured against
         the buyer. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 710 (CAUSES FOR ABANDONMENT)


<PAGE>

         In the following cases, the insured may abandon the subject-matter of
         insurance to the insurer and claim the whole insured amount: (Amended
         by Act No. 4470, Dec. 31, 1991)

         1.Where, as the insured loses the possession of his own ship or cargo
         due to an insured event, it is unrecoverable, or the expenses of its
         recovery are expected to exceed its value at the time it is recovered;

         2.Where, as the ship is substantially damaged due to an insured events,
         the expenses of its repair are expected to exceed its value at the time
         it is repaired; and

         3.Where, as the cargo is substantially damaged due to an insured event,
         the total sum of the expenses incurred for its repair and its
         transportation to the destination are expected to exceed its value at
         the time it arrives at the destination.


ARTICLE 711 (MISSING SHIP)


         (1) A ship shall be deemed as missing, when it is uncertain for two
         months whether she exists or not. (Amended by Act No. 4470, Dec. 31,
         1991)

         (2) In the case as referred to in paragraph (1), a total loss shall be
         presumed. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 712 (CONTINUED CARRIAGE OF CARGO BY ANOTHER SHIP AND EXTINCTION OF RIGHT
OF ABANDONMENT)

         If, in the case of subparagraph 2 of Article 710, the master has,
         without delay, continued the carriage of the cargo by another ship, the
         insured shall not be allowed to abandon the cargo. (Amended by Act No.
         4470, Dec. 31, 1991)



<PAGE>

ARTICLE 713 (NOTICE OF ABANDONMENT)


         (1) If the insured elects to effect an abandonment, he shall dispatch a
         notice thereof to the insurer within a reasonable period. (Amended by
         Act No. 4470, Dec. 31, 1991)

         (2) Deleted. (by Act No. 4470, Dec. 31, 1991)


ARTICLE 714 (REQUISITES FOR EXERCISE OF RIGHT OF ABANDONMENT)


         (1) An abandonment shall be unconditional.

         (2) An abandonment shall be effected in respect of the whole
         subject-matter of insurance: Provided, That if the cause of abandonment
         has arisen only in respect of its part, only that part may be
         abandoned.

         (3) In case where a part of the insurable value has been insured, an
         abandonment may be effected only according to the proportion which the
         insured amount bears to the insurable value.


ARTICLE 715 (NOTICE OF OTHER INSURANCE CONTRACT, ETC.)


         (1) The insured shall, when effecting an abandonment, notify the
         insurer of the existence either of any other contract of insurance
         covering the subject-matter insured or of any obligation with which it
         is charged with, and if any, its type and contents.

         (2) The insurer may refuse to pay the insured amount until it has
         received the notice mentioned in paragraph (1). (Amended by Act No.
         4470, Dec. 31, 1991)

         (3) If the period for the payment of the insured amount has been agreed
         upon,


<PAGE>

         the period shall be computed from the day on which the notice of
         paragraph (1) has been received.


ARTICLE 716 (APPROVAL OF ABANDONMENT)

         After the insurer has accepted abandonment, it shall not raise any
         objection thereto.


ARTICLE 717 (REFUSAL OF ABANDONMENT)

         In case where the insurer has not accepted the abandonment, the insured
         shall not claim payment of the insured amount unless he proves the
         cause of abandonment.


ARTICLE 718 (EFFECT OF ABANDONMENT)


         (1) The insurer shall, by virtue of the abandonment, acquire all the
         rights of the insured subject-matter insured.

         (2) When the insured has effected an abandonment, he shall deliver all
         the documents relating to the subject-matter insured to the insurer.


         SECTION 5 LIABILITY INSURANCE

ARTICLE 719 (LIABILITY OF INSURER OF LIABILITY INSURANCE)

         If the insured is liable for the loss of a third person caused by an
         insured event during the cover period, the insurer of a contract of
         liability insurance shall be bound to indemnify therefor.



<PAGE>

ARTICLE 720 (BEARING EXPENSES DEFRAYED BY INSURED TO DEFEND HIMSELF)


         (1) Necessary expenses, judicial or extra-judicial, incurred by the
         insured to defend himself against the claims of a third person shall be
         deemed to have been included in the subject-matter of insurance. The
         insured may demand from the insurer an advance payment of such
         expenses.

         (2) If the insured can be relieved of the execution of judgment by
         furnishing a security or a deposit, he may demand the insurer to
         furnish a security or a deposit within the limit of the insured amount.

         (3) Where the act of paragraph (1) or (2) has been effected by the
         instruction of the insurer, even if the amount of security or deposit
         plus the amount of loss exceeds the insured amount, the insurer shall
         be liable for them. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 721 (SUBJECT-MATTER OF BUSINESS LIABILITY INSURANCE)

         If the liability in respect of the business which the insured manages
         is the subject-matter of insurance, the liability of the insured's
         agent or business supervisor against a third person shall be deemed as
         included in the subject-matter of insurance.


ARTICLE 722 (DUTY OF THE INSURED TO NOTIFY RISK)

         When a third person has demanded the insured to redress damage, he
         shall, without delay, give notice thereof to the insurer.


ARTICLE 723 (NOTICE OF PAYMENT, ETC. BY INSURED AND PAYMENT OF INSURED AMOUNT)



<PAGE>

         (1) When the insured has made a payment to a third person, approval or
         compromise with a third person and the insured's obligation has been
         settled by a judgment, the insured shall, without delay, dispatch
         notice thereof to the insurer.

         (2) Unless otherwise agreed as regards the period, the insurer shall
         pay the insured amount within ten days from the day on which he has
         received the notice of paragraph (1).

         (3) Even though there is an agreement by which the insurer is relieved
         of its liability when the insured has without the consent of the
         insurer made payment to a third person, approval or compromise with
         him, the insurer shall not be relieved of its liability to indemnify
         unless such an act is grossly unreasonable.


ARTICLE 724 (RELATIONS BETWEEN INSURER AND THIRD PERSON)


         (1) The insurer shall not pay the whole or a part of the insured amount
         to the insured before a third person has been indemnified for any loss
         caused by accidents attributable to the insured.

         (2) A third person may directed demand the insurer to indemnify for any
         loss caused by accidents attributable to the insured, within the limit
         of the insured amount: Provided, That the insurer may stand against the
         third person with a defense which the insured has in connection with
         the accidents. (Amended by Act No. 4470, Dec. 31, 1991)

         (3) The insurer shall, upon receiving a request under paragraph (2),
         without delay notify the insured of it. (Newly Inserted by Act No.
         4470, Dec. 31, 1991)

         (4) In the case of paragraph (2), the insured shall, upon a request
         from the insurer, cooperate in presenting necessary documents and
         evidence, making testimony, or calling a witness. (Newly Inserted by
         Act No. 4470, Dec. 31, 1991)



<PAGE>

ARTICLE 725 (LIABILITY INSURANCE OF CUSTODIAN)

         If a lessee, or any person who holds in his custody anything belonging
         to another person, has insured it against damages which he may have to
         pay, its owner may directly demand the insurer to indemnify for the
         loss.


ARTICLE 725-2 (SEVERAL LIABILITY INSURANCE)

         where several liability insurance contracts have been simultaneously or
         successively concluded which are to indemnify for the loss sustained by
         the insured, who should pay damages to a third person for the same
         accident, if the total insured amount exceeds the amount of damages
         paid by the insured to the third person, the provisions of Articles 672
         and 673 shall apply mutatis mutandis.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 726 (APPLICATION TO REINSURANCE)

         The provisions of this Section shall apply mutatis mutandis to a
         contract of reinsurance. (Amended by Act No. 4470, Dec. 31, 1991)


         SECTION 6 AUTOMOBILE INSURANCE

ARTICLE 726-2 (LIABILITY OF INSURER OF AUTOMOBILE INSURANCE)

         The insurer of the automobile insurance contract shall be bound to
         indemnify for any loss caused by accidents which have occurred while
         the insured owns, uses or manages an automobile.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]




ARTICLE 726-3 (AUTOMOBILE INSURANCE CERTIFICATE)
<PAGE>

         The automobile insurance certificate shall, besides the particulars
         mentioned in Article 666, contain the following ones:

         1.Names, birth dates or trade names of the owner and other possessors
         of the automobile;

         2.Registration number, chassis number, type in year and mechanism of
         the insured automobile; and

         3.Value of the automobile, if determined.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 726-4 (TRANSFER OF AUTOMOBILE)


         (1) If the insured transfers the automobile during the cover period,
         the transferee shall succeed to the rights and obligations under the
         insurance contract only in case where the transferee obtains the
         approval from the insurer.

         (2) When the insurer is notified of the fact of transfer by the
         transferee, the insurer shall notify without delay whether it accepts
         or not, and if it fails to do so within ten days after the notification
         thereof, it shall be considered to have accepted.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


         CHAPTER III PERSONAL INSURANCE

         SECTION 1 COMMON PROVISIONS

ARTICLE 727 (LIABILITY OF INSURER OF PERSONAL INSURANCE)


<PAGE>

         The insurer of a contract of personal insurance shall be liable for the
         payment of the insured amount and other benefits according as the
         contract of insurance provides, in case the insured events may arise in
         respect to life or body.


ARTICLE 728 (PERSONAL INSURANCE CERTIFICATE)

         A personal insurance certificate shall, besides the particulars
         mentioned in Article 666, contain the following ones: (Amended by Act
         No. 4470, Dec. 31, 1991)

         1.The kind of contract of insurance;

         2.The domicile, full name and birth date of the insured; and

         3.The address, full name and birth date of the beneficiary of
         insurance, if such a beneficiary has been determined.


ARTICLE 729 (PROHIBITION OF SUBROGATION BY INSURER AGAINST THIRD PERSONS)

         The insurer shall not subrogate and exercise the rights of the
         policyholder and of the beneficiary arisen through the insurance risks
         against the third persons: Provided, That in case of accident insurance
         contract, if there is a special stipulation between parties, the
         insurer may be subrogated in the position of the insured to exercise of
         any right of the insured, to the extent that it is unprejudicial to
         such right. (Amended by Act No. 4470, Dec. 31, 1991)


         SECTION 2 LIFE INSURANCE

ARTICLE 730 (LIABILITY OF INSURER IN LIFE INSURANCE)

         The insurer of a contract of life insurance shall be bound to pay the
         insured amount agreed upon if the insured events occur in respect of
         the life of the


<PAGE>

         insured.


ARTICLE 731 (LIFE INSURANCE CONTRACT FOR THIRD PERSON)


         (1) A contract of insurance which cover the death of a third person as
         an insured event shall require the written consent of the third person
         at the time the insurance contract is concluded.
         (Amended by Act No. 4470, Dec. 31, 1991)

         (2) The provisions of paragraph (1) shall apply if the rights arising
         from the contract of insurance have been transferred to the person
         other than the insured. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 732 (PROHIBITION OF INSURANCE CONTRACT FOR THOSE UNDER 15 YEARS OF AGE,
ETC.)

         A contract of insurance which designates the death of a person under 15
         years of age, of an insane person or of a mentally incompetent person
         as an insured event shall be null and void. (Amended by Act No. 1212,
         Dec. 1212, 1962; Act No. 4470, Dec. 31, 1991)


ARTICLE 732-2 (INSURANCE RISKS CAUSED BY GROSS NEGLIGENCE)

         In the case of an insurance contract covering death as an insured
         event, the insurer shall not be discharged from its liability, even
         though the insured event happens by reason of gross negligence of the
         policyholder, insured or beneficiary.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 733 (RIGHT TO DESIGNATE OR CHANGE BENEFICIARY)


         (1) The policyholder is entitled to designate or change the
         beneficiary.


<PAGE>

         (2) If the policyholder has died without exercising the right of
         designation mentioned in paragraph (1), the insured shall be the
         beneficiary, and in case where the policyholder has died without
         exercising the right of change mentioned in paragraph (1), the right of
         the beneficiary shall be settled: Provided, That this shall not apply
         where there is an agreement by which the policyholder's successor may
         exercise the right mentioned in paragraph (1) in the case of the
         policyholder's death. (Amended by Act No. 4470, Dec. 31, 1991)

         (3) If the beneficiary has died during the cover period. the
         policyholder may re-designate any other beneficiary. In such a case, if
         the policyholder has died without exercising the right of designation,
         the inheritor of the beneficiary shall be a beneficiary.

         (4) If the insured event occurs before the policyholder exercises the
         right of designation as referred to in paragraphs (2) and (3), the
         inheritor of the insured or beneficiary shall be a beneficiary. (Newly
         Inserted by Act No. 4470, Dec. 31, 1991)


ARTICLE 734 (NOTIFICATION OF RIGHT TO DESIGNATE BENEFICIARY OF INSURANCE, ETC.)


         (1) If, after entering into a contract, the policyholder designates or
         changes the beneficiary, such a designation or change shall not be
         asserted against the insurer, unless the insurer has been given a
         notice thereof.

         (2) The provisions mentioned in Article 731 (1) shall apply mutatis
         mutandis to the designation or change mentioned in paragraph (1).
         (Amended by Act No. 1212, Dec. 12, 1962; Act No. 4470, Dec. 31, 1991)


ARTICLE 735 (ENDOWMENT INSURANCE)

         In the contract of insurance by which the death of the insured has been
         covered as an insured event, it may be agreed that the insured amount
         shall be paid at


<PAGE>

         the time of the termination of the cover period even if the insured
         event has not occurred.


ARTICLE 735-2 (ANNUITY INSURANCE)

         The insurer of a life insurance contract may, upon the occurrence of an
         insured event on the life of the insured, pay the insured amount in
         installments as an annuity, as the contract provides.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 735-3 (GROUP INSURANCE)


         (1) In case where, according to a covenant, an organization effects a
         life insurance contract in which the whole or part of its members are
         the insured, the provisions of Article 731 shall not be applicable.

         (2) When the insurance contract as referred to in paragraph (1) is
         effected, the insurer shall deliver the insurance certificate only to
         the policyholder.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 736 (DUTY TO RETURN ACCUMULATION FOR INSURANCE, ETC.)


         (1) When a contract of insurance has been terminated in accordance with
         the provisions of Articles 649, 650, 651 and 652 through 655, and when
         the liability for paying the insured amount has been relieved in
         accordance with the provisions of Articles 659 and 660, the insurer
         shall pay to the policyholder the amount accumulated for the
         beneficiary: Provided, That unless the contract provides otherwise, the
         same shall not apply where the insured event mentioned in Article 659
         (1) has occurred due to the policyholder. (Amended by Act No. 4470,
         Dec. 31, 1991)


<PAGE>

         (2) Deleted. (by Act No. 4470, Dec. 31, 1991)


         SECTION 3 ACCIDENT INSURANCE

ARTICLE 737 (LIABILITY OF INSURER OF ACCIDENT INSURANCE)

         The insurer of a contract of accident insurance shall be liable for the
         payment of the insured amount and other benefits if the insured event
         causing the injury of the body occurs.


ARTICLE 738 (ACCIDENT INSURANCE CERTIFICATE)

         When, in the case of an accident insurance, the insured and the
         policyholder are not the same person, only the official function or
         position of the insured may be written down on the insurance
         certificate instead of the particulars mentioned in subparagraph 2 of
         Article 728.


ARTICLE 739 (APPLICABLE PROVISIONS)

         The provisions concerning life insurance except Article 732 shall apply
         mutatis mutandis to accident insurance.


         PART V MARITIME COMMERCE

         CHAPTER I SHIPS

ARTICLE 740 (DEFINITION OF SHIP)

         A ship mentioned in this Act is one which is used for navigation for
         the purpose


<PAGE>

         of commercial activities or any other profit-making transactions.
         (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 741 (BOATS AND VESSEL PROPELLED BY OARS)

         The provisions of this Part shall not apply to small boats or to any
         vessel propelled mainly by oars. (Amended by Act No. 4470, Dec. 31,
         1991)


ARTICLE 742 (ACCESSORY TO SHIP)

         Any Article entered in the ship's inventory of equipments shall be
         presumed to be an accessory to the ship.


ARTICLE 743 (TRANSFER OF RIGHT RELATING TO SHIP)

         The transfer of the right relating to a ship shall take effect only by
         an agreement between the parties: Provided, That such transfer shall
         not be asserted against to a third person unless it has been registered
         and an entry thereof has been made in the certificate of the ship's
         nationality.


ARTICLE 744 (ARREST OR PROVISIONAL ARREST OF SHIP)

         No arrest or provisional arrest can be levied on a ship which has
         completed preparations for commencing a voyage, or on her equipments:
         Provided, That this shall not apply to such obligations which have been
         incurred for the purpose of making preparations for commencing a
         voyage.


ARTICLE 745 (SMALL SHIPS)

         The provisions of Articles 743 and 744 shall not apply to any ship of a
         gross tonnage of less than twenty tons. (Amended by Act No. 4470, Dec.
         31, 1991)

<PAGE>

         CHAPTER II SHIPOWNER

ARTICLE 746 (SHIPOWNER'S LIMITATION OF LIABILITY)

         The shipowner may limit his liability for the claims falling under any
         of the following subparagraphs to the amounts as prescribed in Article
         747, whatever the basis of liability may be: Provided, That the
         shipowner shall not be entitled to limit his liability if the loss
         resulted from his personal act or ommission, committed with the intent
         to cause such loss, or recklessly and with knowledge that such loss
         would probably result:

         1.Claims in respect of loss of life or personal injury or loss of or
         damage to property other than the ship, occurring on board or in direct
         connection with the operation of the ship;

         2.Claims in respect of loss resulting from delay in the carriage by sea
         of cargos, passengers or their luggages;

         3.Claims in respect of other loss resulting from infringement of
         another person's rights other than contractual rights, occurring in
         direct connection with the operation of the ship other than claims
         referred to in subparagraphs 1 and 2; and

         4.Claims of a person in respect of measures taken in order to avert or
         minimize loss for which the person liable may limit in accordance with
         subparagraphs 1 through 3, and further loss caused by such measures.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 747 (LIMITS OF LIABILITY)


         (1) The limits of the liability for claims against the shipowner shall
         be calculated as follows:


<PAGE>

         1.The limits of liability in respect of claims for loss of life or
         personal injury of passengers shall be an amount of 46,666 Units of
         Account multiplied by the number of passengers which the ship is
         authorized to carry according to the ship's certificate, but not
         exceeding 25 million Units of Account.

         2.The limits of liability in respect of claims for loss of life or
         personal injury of a person other than passengers shall be calculated
         on the basis of the ship as follows: Provided, That the limits of
         liability shall be 167,000 Units of Account for a ship with a tonnage
         of less than 300 tons:

         (a) 333,000 Units of Account for a ship not exceeding 500 tons; and

         (b) For a ship with a tonnage in excess 500 tons, the following amount
         in addition to that mentioned in (a):

         (i)For each ton from 501 to 3,000 tons, 500 Units of Account;

         (ii)For each ton from 3,001 to 30,000 tons, 333 Units of Account;

         (iii)For each ton from 30,001 to 70,000 tons, 250 Units of Account; and

         (iv)for each ton in excess of 70,000 tons, 167 Units of Account.

         3.The limits of liability in respect of any other claims shall be
         calculated on the basis of the tonnage of the ship as follows:
         Provided, That the limits of liability shall be 83,000 Units of Account
         for a ship with a tonnage of less than 300 tons:

         (a) 167,000 Units of Account for a ship not exceeding 500 tons; and

         (b) for a ship with a tonnage in excess 500 tons, the following amount
         in addition to that mentioned in (a):

         (i)For each ton from 501 to 30,000 tons, 167 Units of Account;

         (ii)For each ton from 30,001 to 70,000 tons, 125 Units of Account; and


<PAGE>

         (iii)For each ton in excess of 70,000 tons, 83 Units of Account.

         (2) The limits of liability as referred to in subparagraphs of
         paragraph (1) shall cover all claims against the shipowner, arising on
         any distinct occasion.

         (3) The claims for which the shipowner may limit his liability in
         accordance with Article 746 shall rank rateably with the claims
         mentioned in each subparagraph.

         (4) If the limits of liability calculated in accordance with paragraph
         (1) 2 is insufficient to pay the claims mentioned therein in full, the
         limits of liability calculated in accordance with paragraph (1) 3 shall
         be available for payment of the unpaid balance of claims under
         subparagraph 2, and such unpaid balance shall rank rateably with the
         claims mentioned under subparagraph 3 when the claims mentioned under
         subparagraph 2 and 3 arose from the same accident.

         (5) The Unit of Account referred to paragraph (1) is the Special
         Drawing Right as defined by the International Monetary Fund.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 748 (CLAIMS EXCEPTED FROM LIMITATION)

         The shipowner shall not limit his liability for the following claims:
         (Amended by Act No. 5809, Feb. 5, 1999)

         1.Claims by the master, seaman or other employees whose duties are
         connected with the operations of the ship, including claims of their
         inheritors, dependents or other person entitled to make such claims
         against the shipowner;

         2.Claims for rescue from marine accidents or contribution in general
         average;

         3.Claims for oil pollution damage within the meaning of the
         International Convention on Civil Liability for Oil Pollution Damage,
         dated November 29th 1969 or of any amendment or Protocol thereto which
         is in force;


<PAGE>

         4.Claims in respect of the raise, removal, destruction or the rendering
         harmless of a ship which is sunk, wrecked, stranded or abandoned,
         including anything that is or has been on board such ship; and

         5.Claims for nuclear damages.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 749 (COUNTERCLAIMS)

         Where the shipowner has a claim against the claimant arising out of the
         same occurrence, their respective claims shall be set off against each
         other and the limitation of liability shall only apply to the balance,
         if any.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 750 (PERSONS ENTITLED TO LIMIT LIABILITY)


         (1) The following persons may limit their liability to the same extent
         as the shipowner in accordance with the provisions of this Chapter:

         1.Charterer, manager and operator of a ship;

         2.Corporate shipowner and a member with unlimited liability of the
         persons mentioned in subparagraph 1; and

         3.Master, seaman, pilot, or employee or agent of the shipowner or the
         persons as referred to in subparagraph 1, who has incurred through his
         own act the claims as prescribed in subparagraphs of Article 746 for
         the shipowner or the person as enumerated in subparagraph 1.

         (2) The total amount of the limits of liability of the shipowner and
         the persons enumerated in paragraph (1) for all of the claims arising
         from the same accident shall not exceed the limits of liability as
         prescribed in Article 747 for each ship.


<PAGE>

         (3) If a shipowner or one of those as referred to in subparagraphs of
         paragraph (1) is subject to a decision to commence the procedures on
         the limitation of liability, other persons who are entitled to limit
         their liability, may take advantage of such decision.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 751 (TONNAGE OF SHIP FOR LIMITATION ON LIABILITY)

         For the purpose of Article 747 (1), the tonnage of the ship engaged in
         international navigation shall be the international gross tonnage as
         set forth in the Vessels Act, and the tonnage of other ships shall be
         the gross tonnage as prescribed by the said Act.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 752 (PROCEDURES OF LIMITATION OF LIABILITY)


         (1) Any person who desires to limit his liability pursuant to the
         provisions of this Chapter, shall apply for a commencement of the
         procedures of limitation of liability to the court within one year
         after he receives from the creditor a request in writing of an amount
         exceeding the limit of liability.

         (2) The application for commencement of the procedure of limitation of
         liability, formation of the limitation fund, public notice,
         participation in the procedures, distribution of the fund, and other
         necessary matters shall be set forth by another Act.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 752-2 (LIMITED LIABILITY OF SALVORS)


         (1) The provisions of Articles 746 through 752 shall be applicable
         mutatis mutandis to limitation of liability for any claim arising in
         direct connection with



<PAGE>

         salvage operations of salvors. (Amended by Act No. 5809, Feb. 5, 1999)

         (2) Any salvor who has not performed the salvage operation from on
         board a ship, or has performed only on the ship which has been rescued,
         shall be considered to be a ship of 1,500 tons with respect to the
         limits of liability as prescribed in Article 747.

         (3) The limit of liability of a salvor shall be extended to each rescue
         ship, and in the case as referred to in paragraph (2), to all claims
         arising from the same accident for each salvor.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 753 (CO-OWNERSHIP OF SHIP: MATTERS RELATING TO USE)


         (1) The matters relating to the use of the ship owned by the co-owners
         shall be determined by the majority of the share of the co-owner in
         proportion to the value of the share of the co-owner.

         (2) The matters which alter the contract relating to the co-ownership
         of a ship shall be determined by the unanimous consent of the
         co-owners.


ARTICLE 754 (CO-OWNERSHIP OF SHIP: BURDEN OF EXPENSES)

         The co-owner of a ship shall bear the expenses relating to the use of
         the ship and the obligations which have arisen in respect of such use
         in proportion to the value of his share.


ARTICLE 755 (APPORTIONMENT OF PROFIT AND LOSS)

         The apportionment of loss and profit shall be performed in proportion
         to the value of the share of the co-owner of a ship after each voyage
         has been completed.



<PAGE>

ARTICLE 756 (ASSIGNMENT OF SHARE)

         Even if there is a partnership between the co-owners of a ship, each
         co-owner may transfer his share to another person without obtaining the
         consent of other co-owners: Provided, That the same shall not apply in
         the case of a manager of the ship.


ARTICLE 757 (CO-OWNERSHIP OF SHIP: LOSS OF NATIONALITY AND PURCHASE OF QUOTA OR
APPLICATION FOR AUCTION)


         (1) When a ship loses the nationality of the Republic of Korea by
         transfer of the portion of the co-owner of a ship or by losing his
         nationality, other co-owners may purchase such share at a reasonable
         price or may apply the court for the auction of such share.

         (2) When a ship which belongs to the ownership of a company loses the
         nationality of the Republic of Korea through the transfer of any share
         of the members, in case of "partnership company" the other member, and
         in case of "limited partnership company", the member with unlimited
         liability, may purchase such share at a reasonable price.


ARTICLE 758 (RIGHT TO DEMAND PURCHASE OF SHARES BELONGING TO PERSONS WHO OBJECT
TO RESOLUTION)


         (1) When the co-owners of a ship have resolved to commence a new voyage
         or to repair the ship extensively, any co-owner who has an objection
         thereto may demand of another co-owner for purchase of his share at a
         reasonable price.

         (2) Any person who intends to effect the demand mentioned in paragraph
         (1) shall dispatch the notice thereof to another co-owner or to a ship
         manager


<PAGE>

         within three days from the date of resolution, and in case where the
         person did not participate in the resolution, from the day on which he
         has received the notice of the resolution. (Amended by Act No. 4470,
         Dec. 31, 1991)


ARTICLE 759 (TRANSFER OF SHIP DURING VOYAGE, ETC.)

         If a ship in the course of a voyage, or the share on the ship has been
         transferred, the transferee shall acquire the profit and bear the loss
         arising from the voyage, unless otherwise agreed upon between the
         parties.


ARTICLE 760 (APPOINTMENT AND REGISTRATION OF SHIP MANAGER)


         (1) The co-owners of a ship shall appoint a ship manager. The consent
         of all the co-owners shall be required for the appointment of a ship
         manager who is not a co-owner. (Amended by Act No. 4470, Dec. 31, 1991)

         (2) The appointment of a ship manager and the termination of his proxy
right shall be registered.


ARTICLE 761 (AUTHORITIES OF SHIP MANAGER)


         (1) The ship manager shall have the authority to do all judicial and
         extra-judicial acts relating to the use of the ship.

         (2) No restriction upon such proxy right of a ship manager shall be
         asserted against a third person acting in good faith.


ARTICLE 762 (RESTRICTION ON AUTHORITIES OF SHIP MANAGER)

         The ship manager shall not do the following acts unless he has been
         authorized


<PAGE>

         to so in writing by co-owners of the ship:

         1.The assigning and chartering, or offering as security of the ship;

         2.The commencing of a new voyage;

         3.The obtaining of an insurance coverage on the ship;

         4.The extensive repair of the ship; and

         5.The borrowing of money.


ARTICLE 763 (ENTRY AND KEEPING OF RECORD)

         The ship manager shall keep a record relating to the administration of
         his duties. All matters relating to the use of the ship shall be
         entered therein.


ARTICLE 764 (REPORT OF SHIP MANAGER AND APPROVAL THEREOF)

         After the termination of each voyage, the ship manager shall, without
         delay, prepare the documents relating to the progresses of such voyage
         and the account, report them to the co-owners of the ship, and obtain
         their approval.


ARTICLE 765 (RIGHT TO REQUEST REGISTRATION OF LESSEE AND EFFECT OF REGISTRATION)


         (1) The lessee of a ship may request the shipowner to cooperate in
         effecting the registration of the lease.

         (2) The lease of a ship, if registered, shall be effective against
         third persons from the time registration has been effected.



<PAGE>

ARTICLE 766 (LEASE OF SHIP AND LEGAL RELATION AGAINST THIRD PERSON)


         (1) If the lessee of a ship makes the ship available in navigation for
         the purpose of engaging in commercial activities and of acquiring
         profits, the lessee shall, in relation to third persons, have the same
         rights and duties as the shipowner in connection with matters relating
         to the use of the ship.

         (2) In the case mentioned in paragraph (1), any preferential right
         which has arisen in connection with the use of the ship shall be
         effective even against the shipowner. This shall not, however, apply in
         cases where the holder of the preferential right was aware that the use
         was not in conformity with the contract of such use. (Amended by Act
         No. 4470, Dec. 31, 1991)


         CHAPTER III MASTER

ARTICLE 767 (APPOINTMENT AND DISMISSAL OF MASTER)

         The shipowner may appoint or dismiss the master.


ARTICLE 768 (CLAIM FOR COMPENSATION OF DAMAGE AGAINST UNREASONABLE DISMISSAL OF
MASTER)


         (1) If the master is dismissed without reasonable cause by the
         shipowner, the master may demand the shipowner to compensate for any
         damage arising therefrom.

         (2) If a master who is also a co-owner of a ship is dismissed against
         his intention, he may demand of the other co-owners that they purchase
         his share at a reasonable price.

         (3) If a master intends to make the demand mentioned in paragraph (2),
         he shall


<PAGE>

         dispatch without delay the notice thereof to the other co-owner or to
         the ship manager. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 769 (MASTER'S LIABILITY OF CONTINUE PERFORMANCE OF HIS DUTIES)

         If a master is dismissed or his term expires during the voyage, he
         shall be liable to perform his duties until another master is able to
         perform such duties or the ship arrives at the port of registry.


ARTICLES 770 AND 771

         Deleted. (by Act No. 4470, Dec. 31, 1991)


ARTICLE 772 (RESPONSIBILITY FOR APPOINTING ANOTHER MASTER IN HIS PLACE)

         If the master is unable to perform his duties by reason of force
         majeure, he may appoint another master by his own responsibility and
         require the latter to perform his duties, except as otherwise provided
         by Acts, subordinate statutes.


ARTICLE 773 (SCOPE OF PROXY RIGHT)


         (1) While away from the port of registry, the master shall have
         authority to perform all judicial and extra-judicial acts which are
         necessary for voyage.

         (2) While at the port of registry, the master has authority only to
         hire and dismiss seamen, except in cases where he has been vested with
         special authority.


ARTICLE 774 (AUTHORITY IN RESPECT OF SPECIAL ACTS)



<PAGE>

         (1) The master shall not do any of the following acts except in order
         to reimburse expenses for repair of the ship, salvage remuneration, or
         any other expenses necessary for the continuance of the voyage:
         (Amended by Act No. 5809, Feb. 5, 1999)

         1.Offering ship or her equipment as security;

         2.Borrowing of money; and

         3.Disposing of the whole or a part of the cargo.

         (2) The amount of damages, if the master disposes of the cargo, shall
         be determined by the value of such cargo at the port of unloading at
         the time when it should have arrived there: Provided, That any expenses
         which are not required to be paid shall be deducted from such value.


ARTICLE 775 (RESTRICTION UPON PROXY RIGHT)

         No restriction upon the proxy right of the master shall be asserted
         against a third person acting in good faith.


ARTICLE 776 (DISPOSITION OF CARGO FOR BENEFIT OF PERSONS INTERESTED)


         (1) If the master disposes of the cargo during the voyage, disposition
         of the cargo shall be done in such a manner for the best interest of
         the persons interested.

         (2) In the case mentioned in paragraph (1), the person interested shall
         be liable against the person who became the creditor on account of such
         a disposition within the limit of the value of the cargo: Provided,
         That this shall not apply where such a person has been guilty of
         negligence. (Amended by Act No. 4470, Dec. 31, 1991)



<PAGE>

ARTICLE 777 (AUCTION OF SHIP)

         If the ship has become unrepairable while away from the port of
         registry, the master may sell the ship by auction with the
         authorization of the marine authority. (Amended by Act No. 1212, Dec.
         12, 1962)


ARTICLE 778 (UNREPAIRABLE CASES)


         (1) A ship shall be deemed to be unrepairable in the following cases:

         1.If the ship cannot be repaired at the place where she lies and cannot
         proceed to a place where repairs can be effected; and

         2.If the expenses for repair will exceed three-quarters of the value of
         the ship.

         (2) If the ship has been damaged in the course of a voyage, the value
         mentioned in paragraph (1) 2, shall be the value at the time of
         commencement of such voyage; and in other cases, it shall be the value
         of the ship before she sustained such damage. (Amended by Act No. 4470,
         Dec. 31, 1991)


ARTICLE 779 (DUTY TO REPORT AND MAKE UP ACCOUNTS)


         (1) The master shall, without delay, report to the shipowner on all
         important matters relating to the voyage.

         (2) At the end of each voyage, the master shall, without delay, present
         the statement of the accounts to the shipowner and obtain the
         shipowner's approval thereof.

         (3) Whenever required by the shipowner, the master shall report on
         matters relating to the voyage and on the accounts.



<PAGE>

         CHAPTER IV CARRIAGE

         SECTION 1 CARRIAGE OF GOODS

         SUB-SECTION 1 COMMON PROVISIONS

ARTICLE 780 (TYPES OF CONTRACT OF CARRIAGE)

         The contracts of carriage of goods shall be divided into the following
         two categories:

         1.A charter party, the object of which is providing the whole or a part
         of a ship for the carriage of goods; and

         2.A contract the object of which is carrying separate goods.


ARTICLE 781 (CHARTER PARTY AND WRITTEN CONTRACT OF CARRIAGE)

         A party to a charter party shall, upon demand by the other party,
         provide a written contract of carriage.


ARTICLE 782 (CHARTER PARTY AND NOTICE OF READINESS FOR LOADING GOODS, PERIOD FOR
LOADING GOODS)


         (1) If a charter party has been entered into, the carrier shall, as
         soon as the preparations necessary for loading the goods have been
         completed, dispatch notice thereof to the charterer without delay.
         (Amended by Act No. 4470, Dec. 31, 1991)


<PAGE>

         (2) If the period for loading goods is stipulated, such period shall
         commence from one o'clock p.m. on the day, when the notification as
         referred to in paragraph (1) is made before noon, and from six o'clock
         a.m. of the following day, when it is made in the afternoon. This
         period shall not include the day on which the loading is impossible by
         force majeure, and the day on which no loading work is done due to
         custom in the port. (Amended by Act No. 4470, Dec. 31, 1991)

         (3) If any goods have been loaded after the passage of such period as
         referred to in paragraph (2), the carrier may demand reasonable
         remuneration. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 783 (NOTICE AND LOADING WHERE THIRD PERSON IS SHIPPER)

         In cases where a third person other than the charterer loads the goods,
         if it is impossible for the master to ascertain such person or if such
         person fails to load the goods, the master shall, without delay,
         dispatch a notice thereof to the charterer. In such cases, the
         charterer may load the goods only within the period allowed for
         loading.


ARTICLE 784 (RIGHT TO REQUEST COMMENCEMENT OF VOYAGE OF CHARTERER AND POWER TO
COMMENCE VOYAGE OF MASTER)


         (1) The charterer may require the master to commence the voyage even
         when all the goods have not been loaded.

         (2) The master may, with the lapse of the period allowed for loading,
         immediately commence the voyage, even though the charterer has not
         loaded all the goods.

         (3) In cases mentioned in paragraphs (1) and (2), the charterer shall
         pay the full amount of the freight and any expenses arising from his
         failure in loading all the



<PAGE>

         goods, and shall, if required by the carrier, provide adequate
         security. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 785 (TRANSPORT OF SEPARATE ARTICLE AND PROVIDING GOODS)


         (1) If a separate Article is the object of a carriage contract, the
         shipper shall hand over the goods to the carrier at such time and place
         as agreed upon between parties or as determined in accordance with the
         custom of the loading port.

         (2) If the shipper fails to hand over goods to the carrier at such time
         and place as referred to in paragraph (1), the contract shall be
         considered to have been rescinded. In this case, the master may
         immediately commence the voyage, and the shipper shall pay freight in
         full.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 786 (FURNISHING DOCUMENTS NECESSARY FOR CARRIAGE)

         The charterer or the shipper shall, within the period allowed for
         loading, furnish the master with the documents necessary for the
         carriage.


ARTICLE 787 (DUTY TO EXERCISE DUE DILIGENCE AS TO SEAWORTHINESS)

         The carrier shall be liable for damages for any loss of, damages to, or
         delay of the goods, unless he proves that neither he, nor the crew, nor
         any of his employees has failed to exercise due diligence in connection
         with the following particulars at the commencement of the voyage:
         (Amended by Act No. 4470, Dec. 31, 1991)

         1.Make the ship seaworthy;

         2.Properly man, equip and supply the ship; and


<PAGE>

         3.Make the holds, refrigerating and cool chambers, and all other parts
         of the ship in which goods are carried, fit and safe for their
         reception, carriage and preservation.


ARTICLE 788 (DUTY OF CARE AND DILIGENCE TO GOODS)


         (1) If a carrier fails to prove that he or the crew or other employee
         of a ship exercised his duty of care in reception, loading, stowage,
         carriage, keeping, discharging and delivering of the goods, he shall be
         liable to compensate for damages caused by loss, damage or delay of the
         goods.

         (2) The carrier shall not be responsible for damage of the goods
         arising or resulting from act of the master, mariner or pilot, or the
         employees of the carrier in the navigation or in the management of the
         ship, or fire. This shall not apply where the fire was caused by actual
         fault or privity of the carrier.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 789 (CAUSES FOR EXEMPTION FROM LIABILITY)


         (1) Deleted. (by Act No. 4470, Dec. 31, 1991)

         (2) The carrier shall be relieved of the liability for compensation, if
         he has proved that any fact of the following subparagraphs existed and
         that any damage of the goods might usually be caused by such fact:
         Provided, That the same shall not apply if it was proved that he has
         failed to exercise due diligence notwithstanding the fact that he could
         have avoided such damage if he had exercised the due diligence
         mentioned in Articles 787 and 788 (1): (Amended by Act No. 4470, Dec.
         31, 1991)

         1.Perils or accidents of the sea and other navigable waters;


<PAGE>

         2.Act of God;

         3.War, riots, or civil commotions;

         4.Piracy and other similar acts;

         5.Judicial seizure, quarantine restrictions and other restrictions by
         public authorities;

         6.Act of the shipper or the owner of the goods or his employees;

         7.Strikes, restraint of labor or lockouts;

         8.Saving life or property at sea or any deviation in saving life or
         property at sea or any reasonable deviation;

         9.Insufficiency of packing of the goods or insufficiency or inadequacy
         of marks;

         10.Particular nature or latent defects of the goods; and

         11.Latent defects of the ship.


ARTICLE 789-2 (LIMITATION OF LIABILITY)


         (1) The carrier shall not in any case be or become liable for any loss
         or damage to or in connection with the goods in accordance with
         Articles 787 through 789 in an amount exceeding the equivalent of 500
         Units of Account per package or unit: Provided, That the carrier shall
         not limit his liability if it is proved that the damage resulted from
         an act or omission of the carrier done with intent to cause damage, or
         recklessly and with knowledge that damage would probably result.

         (2) In applying paragraph (1), the number of the package or unit shall
         be determined as follows:


<PAGE>

         1.Where a container or similar article of transport is used to
         consolidate the goods, the number of packages or units enumerated in
         the bill of lading or other documents evidencing the contract of
         carriage as packed in such article of transport shall be deemed the
         number of packages or units. Except as aforesaid, such article of
         transport shall be considered the package or unit; and

         2.Where the article of transport itself supplied by a person other than
         the carrier is lost or damaged, such article of transport shall be
         deemed a separate package or unit.

         (3) The provisions of paragraphs (1) and (2) shall not apply if, at the
         time of delivery of the goods to the carrier by the shipper, the nature
         and value of the goods have been declared by the shipper and inserted
         in the bill of lading or other documents evidencing the contract of
         carriage. The carrier shall not be responsible in any event for loss or
         damage to the goods if the nature or value thereof has been knowingly
         significantly misstated unless the carrier or his employees were aware
         of this.

         (4) The provisions of paragraphs (1) through (3) shall not affect the
         application of Articles 746 through 752.

         (5) The Unit of Account as referred to in paragraph (1) shall have the
         same meaning as that prescribed in Article 747 (5).
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 789-3 (APPLICATION TO NON-CONTRACTUAL CLAIM)


         (1) The provisions of this Chapter concerning the liability of carrier
         shall also apply to the carrier's liability in tort.

         (2) If any action against a employee or agent of the carrier in respect
         of loss or damage of the goods and if such loss or damage occurred
         during performance of his duties, such employee or agent shall be
         entitled to avail himself of the defences and limits of liability which
         the carrier is entitled to invoke.


<PAGE>

         Nevertheless, a employee or agent of the carrier shall not be entitled
         to avail himself of the provisions of this Article, if it is proved
         that the damage resulted from an act or omission of the employee or
         agent done with intent to cause damage or recklessly and with knowledge
         that damage would probably result.

         (3) In the case as referred to in the text of paragraph (2), the
         aggregate of the amounts recoverable from the carrier, such employees
         and agents shall in no case exceed the limit as prescribed in Article
         789-2 (1).

         (4) The provisions of paragraphs (1) through (3) shall also apply even
         in case where the claim for damages in respect of the goods is made
         against the actual carrier other than the carrier or his employees or
         agents.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 790 (PROHIBITION OF REDUCTION OF CARRIER'S LIABILITY)


         (1) No special agreement between the parties that reduces or exempts
         any obligation or liability of the carrier in contrary to the
         provisions of Articles 787 through 789-3, shall be valid. This
         provision shall also apply to a stipulation transferring the benefit of
         insurance in respect of the goods to the carrier, or to any
         stipulations to this effect.

         (2) The provisions of paragraph (1) shall not be applicable to any
         transport of live animals and transport of the goods on deck after
         inserting such intention on the bill of lading or the surface of other
         documents evidencing the contract of carriage.

         (3) Except in case where it is contrary to the provisions of Article
         787, the provisions of paragraph (1) shall not be applicable to a
         charter party: Provided, That in case where a bill of lading is issued
         pursuant to the charter party, the provisions of paragraph (1) shall be
         applicable to any obligation or liability of the carrier to any holder
         of the bill of lading other than the charterer.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]



<PAGE>

ARTICLE 791 (DISPOSAL OF UNLAWFUL GOODS LOADED)


         (1) The goods which have been loaded in contravention of any Acts,
         subordinate statutes or a contract, may, at any time, be unloaded by
         the master, and if there is any danger that such goods will imperil the
         ship or other goods, they may be abandoned.

         (2) If the master carries the goods mentioned in paragraph (1), he may
         demand the maximum freight prevailing for the same types of goods at
         the time and place of the loading. (Amended by Act No. 4470, Dec. 31,
         1991)

         (3) The provisions of paragraphs (1) and (2) shall not affect any claim
         for damages by the carrier or any other interested person. (Amended by
         Act No. 4470, Dec. 31, 1991)


ARTICLE 791-2 (DISPOSAL OF DANGEROUS GOODS)


         (1) Goods of an inflammable, explosive or dangerous nature whereof the
         carrier had knowledge of their nature and character may, if such goods
         shall become a danger to the ship or other goods, may at any time
         before discharge be landed, or destroyed or rendered innocuous by the
         master.

         (2) The carrier shall be exempted from the liability to compensate for
         any loss inflicted on the goods by such disposal as referred to in
         paragraph (1) except its liability to general average contribution.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 792 (RESCISSION OF CONTRACT OF WHOLE CHARTER PRIOR TO COMMENCEMENT OF
VOYAGE, ETC.)



<PAGE>

         (1) Prior to the commencement of the voyage, the whole charterer may
         rescind the contract upon payment of one-half of the freight.

         (2) If, in case of the charter party for a rounder-trip voyage, the
         whole charterer terminates the charter party prior to the homeward
         voyage, he shall pay two-thirds of the freight.

         (3) The provision of paragraph (2) shall apply, if, in case where the
         voyage is to be made from another port to the port of loading, the
         whole charterer has terminated the charter party before the ship leaves
         the port of loading. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 793 (SPACE CHARTER AND RESCISSION OF CONTRACT PRIOR TO COMMENCEMENT OF
VOYAGE, ETC.)


         (1) The charterer who has chartered a part of a ship, or a shipper, may
         rescind or terminate the charter party in accordance with Article 792
         only when the rescission or the termination is done jointly by other
         charterers and all shippers together. (Amended by Act No. 4470, Dec.
         31, 1991)

         (2) Even if, except in cases mentioned in paragraph (1), the space
         charterer, or a shipper, has rescinded or terminated the charter party
         before the commencement of a voyage, he shall pay the full amount of
         the freight. (Amended by Act No. 4470, Dec. 31, 1991)

         (3) Even before the commencement of a voyage, if the space charterer or
         a shipper has loaded the whole or a part of the goods, he may not
         rescind or terminate the charter party without obtaining the consent of
         the other charterers and shippers.


ARTICLE 794 (DUTY TO PAY INCIDENTAL EXPENSES AND SUBSTITUTED DONATION FOR
ANOTHER PERSON)



<PAGE>

         (1) Even if a charterer or shipper has rescinded or terminated the
         charter party in accordance with the provisions of Articles 792 and 793
         (1), he shall not be relieved of the liability to pay any incidental
         expenses and substituted donation for another person related thereto.

         (2) In the case mentioned in Article 792 (2) and (3), the charterer or
         the shipper shall pay, in addition to the amount mentioned in paragraph
         (1), the amount of his contribution to general average or rescue from
         marine accidents in proportion to the value of the goods. (Amended by
         Act No. 4470, Dec. 31, 1991; Act No. 5809, Feb. 5, 1999)


ARTICLE 795 (EXPENSES OF LOADING AND UNLOADING)

         If, in the cases mentioned in Articles 793 and 794, the whole or a part
         of the goods have been loaded, the charterer or the shipper shall bear
         the expenses of such loading and unloading.
         (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 796 (EFFECT OF FAILURE TO LOAD WITHIN PERIOD ALLOWED FOR LOADING)

         The charterer shall be deemed to have rescinded or terminated the
         charter party if he has failed to load the goods within the period
         allowed for loading. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 797 (TERMINATION OF CHARTER PARTY AFTER COMMENCEMENT OF VOYAGE)

         After the commencement of a voyage, the charterer or the shipper may
         not terminate the charter party unless he pays the full amount of the
         freight, advances, the moorage charges, the amount of his contribution
         to general average or rescue from marine accidents, and pays
         compensation for any damages arising from the unloading or provides
         adequate security therefor. (Amended by Act No. 5809, Feb. 5, 1999)



<PAGE>

ARTICLE 798 (CHARTER PARTY AND UNLOADING GOODS)


         (1) If, in case where a charter party has been made, preparations
         necessary for unloading the goods have been completed, the master shall
         without delay dispatch notice thereof to the consignee.

         (2) The provisions of Article 782 (2) shall be applicable mutatis
         mutandis to the calculation of allowed time for unloading the goods.
         (Amended by Act No. 4470, Dec. 31, 1991)

         (3) If any goods have been unloaded after the passage of such period as
         referred to in paragraph (2), the carrier may demand reasonable
         remuneration. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 799 (CARRIAGE OF SEPARATE ARTICLE AND RECEIPT OF GOODS)

         If carriage of a separate Article is the purpose of the contract, the
         consignee who is notified of the arrival of the goods, shall receive
         goods without delay at such time and place as agreed between the
         parties or determined pursuant to the custom of the unloading port.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 800 (LIABILITY OF CONSIGNEE, MASTER'S RIGHT OF RETENTION)


         (1) When the consignee has received the goods, he shall be liable to
         pay the freight, the incidental expenses, substituted donation for
         another person and the moorage charges, the amount of his contribution
         to general average and rescue from marine accidents in proportion to
         the value of the goods, in accordance with the purport of the contract
         of carriage or of the bill of lading.
         (Amended by Act No. 5809, Feb. 5, 1999)


<PAGE>

         (2) The master shall not be responsible to deliver the goods except
         upon payment of the amount in accordance with the provisions mentioned
         in paragraph (1). (Amended by Act No. 4470, Dec. 31, 1991)



ARTICLE 800-2 (NOTICE OF PARTIAL LOSS OF OR DAMAGE OF GOODS)


         (1) If the consignee finds a partial loss of or damage to the goods, he
         shall send the carrier a written notice providing a summary thereof
         without delay after he discovers it: Provided, That if it is impossible
         to detect such loss or damage immediately, he shall send such notice
         within three days after discovery thereof.

         (2) If there is no notice as referred to in paragraph (1), the goods
         shall be presumed to have been delivered to the consignee without any
         loss or damage.

         (3) The provisions of paragraphs (1) and (2) shall not be applicable in
         case where the carrier or his employee was aware of such loss or
         damage.

         (4) If any loss of or damage to the goods has taken place, or there is
         suspicion, the carrier and consignee shall provide necessary
         conveniences for the other part's inspection of such goods.

         (5) The special agreement between the parties unfavorable to the
         consignee in violation of the provisions of paragraphs (1) through (4)
         shall not be valid.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 801 (FREIGHT)

         If the freight has been fixed on the basis of the weight or volume of
         the goods, the amount of the freight shall be determined by the weight
         or volume of such goods at the time of delivery.


ARTICLE 802 (IDEM)


<PAGE>

         (1) If the freight has been fixed on the basis of period, the amount of
         the freight shall be determined by the period from the day on which
         loading of goods was commenced to the day on which the unloading was
         completed.

         (2) The period mentioned in paragraph (1) shall not include the period
         during which by reason of an act of god the ship has anchored at the
         port of loading or in the course of the voyage, or it has been repaired
         in the course of the voyage. Such period shall not include the number
         of days on which the goods have been loaded or unloaded after passage
         of the period of loading or unloading of the goods, as in the case of
         Article 782 (2) or 798 (2). (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 803 (DEPOSIT, ETC. OF GOODS)


         (1) If the consignee neglects to receive the goods, the master may
         deposit them, or deliver them to the custom house or other place
         permitted by the authorities as prescribed by the relevant Acts and
         subordinate statutes. In this case, the master shall dispatch the
         notice thereof without delay to the consignee.

         (2) If the consignee cannot be identified, or he refuses to receive the
         goods, the master shall deposit them, or deliver them to the custom
         house, or other place permitted by the authorities, and dispatch notice
         thereof without delay to the charterer or shipper and the consignee, if
         known

         (3) If the goods are deposited, or delivered to the custom house or
         other place permitted by the authorities under paragraphs (1) and (2),
         the goods shall be considered to have been delivered to the holder of
         the bill of lading or the consignee.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 804 (SHIPOWNER'S RIGHT TO SELL GOODS BY AUCTION)


<PAGE>

         (1) In order to obtain payment of the amounts specified in Article 800
         (1), the carrier may, with the permission of the court, sell the goods
         by auction, and is entitled to receive payment in preference to others.
         (Amended by Act No. 4470, Dec. 31, 1991)

         (2) A carrier may exercise his right as referred to in paragraph (1)
         over the goods even after the master has delivered them to the
         consignee: Provided, That this shall not apply when thirty days have
         elapsed from the date of delivery or if a third person has acquired
         possession of such goods.
         (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 805

         Deleted. (by Act No. 4470, Dec. 31, 1991)


ARTICLE 806 (RECONTRACT OF CARRIAGE AND LIABILITY OF SHIPOWNER)

         If a charterer has entered into a contract of carriage with a third
         person under his own name, the shipowner shall assume the liability as
         prescribed in Articles 787 and 788 to the third person to the extent
         that the fulfillment of the contract belongs to the duties of the
         master.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 807 (REASONS FOR TERMINATION OF CONTRACT OF CARRIAGE)


         (1) A contract of carriage shall be terminated by any of the following
         reasons:

         1.If the ship has sunk or has been lost;

         2.If the ship has become unrepairable;


<PAGE>

         3.If the ship has been captured; and

         4.If the goods have been lost by reason of an act of god.

         (2) If any of the events mentioned in subparagraphs 1 through 3 of
         paragraph (1) has occurred during the voyage, the charterer or the
         shipper shall pay freight to the extent of the value of the goods in
         proportion to the carriage performed. (Amended by Act No. 4470, Dec.
         31, 1991)


ARTICLE 808 (RESCISSION OF CONTRACT FOR REASONS STIPULATED IN ACT)


         (1) If the voyage or carriage has become illegal, or if by reason of an
         act of god fulfilling the purpose of the contract was made has become
         impossible, either party may rescind the contract.

         (2) If, in case where either of the reasons mentioned in paragraph (1)
         has occurred in the course of the voyage, the contract has been
         terminated, the charterer or the shipper shall pay freight in
         proportion to the carriage performed. (Amended by Act No. 4470, Dec.
         31, 1991)


ARTICLE 809 (ACT OF GOD IN RESPECT OF PART OF GOODS)


         (1) If either of the reasons mentioned in Articles 807 (1) 4 and
         Article 808 (1) has occurred in respect to a part of the goods, the
         charterer or the shipper may load other goods in so far as the
         liability of the carrier does not increase thereby. (Amended by Act No.
         4470, Dec. 31, 1991)

         (2) If the charterer or the shipper desires to exercise the right
         mentioned in paragraph (1), he shall unload or load the goods without
         delay. If he has neglected such unloading or loading, he shall pay the
         full amount of the freight. (Amended by Act No. 4470, Dec. 31, 1991)



<PAGE>

ARTICLE 810 (DISPOSAL OF CARGO BY MASTER AND FREIGHT)

         A carrier may demand the full payment of the freight in any of the
         following cases: (Amended by Act No. 4470, Dec. 31, 1991)

         1.If the master has disposed of the cargo in accordance with the
         provision of Article 774 (1); and

         2.If the master has disposed of the cargo in accordance with the
         provision of Article 832.


ARTICLE 811 (TIME-BAR OF CLAIMS AND OBLIGATIONS OF CARRIER)

         Any claims and obligations of the carrier to the shipper, consignor or
         consignee shall, regardless of the cause of the claims, be extinguished
         if no legal action is filed within one year after the carrier delivers
         or should have delivered the goods to the consignee: Provided, That
         this period may be extended by agreement between the parties.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 812 (APPLICABLE PROVISIONS)

         The provisions of Articles 134, 136 through 140 shall apply mutatis
         mutandis to the carrier. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 812-2 (DEFINITION OF TIME CHARTER)

         A time charter party shall take effect only after an owner or lessee of
         a ship stipulates to have a charterer use for a navigation a ship
         manned by crew and provided with navigational equipments for a
         specified period, and the charterer stipulates to pay the hire
         calculated by the period.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]



<PAGE>

ARTICLE 812-3 (RIGHT OF TIME CHARTERER TO COMMAND MASTER)


         (1) At any time the charterer shall be entitled to command the master
         for the use of a ship within the stipulated extent.

         (2) If the master, seaman or other employees of a ship inflicts any
         loss on the time charterer in contravention of the latter's reasonable
         orders, the shipowner shall be liable to compensate for it.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 812-4 (LIEN AND AUCTION RIGHT OF SHIPOWNER ON GOODS)


         (1) The provisions of Articles 800 (2) and 804 shall be applicable
         mutatis mutandis in case where the time charterer fails to pay the
         shipowner for the hire or advances, or to perform any similar
         obligations under the time charter party: Provided, That the shipowner
         shall not oppose to a third person who has acquired in good faith the
         bill of lading issued by the time charterer.

         (2) The right of the shipowner as referred to in paragraph (1) to the
         goods shall not be exercised beyond the limit of the hire or freight
         stipulated by the time charterer on the goods.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 812-5 (ARREARS OF HIRE, TERMINATION OF CONTRACT, ETC.)


         (1) If the time charterer fails to pay the hire by the due date, the
         shipowner may rescind or terminate the charter party.

         (2) If the shipowner rescinds or terminates the charter party under
         paragraph


<PAGE>

         (1) during navigation of the ship after the time charterer enters into
         a contract of carriage with a third person and makes a shipment of
         goods, the shipowner shall have the same liability to carry as the time
         charterer as to the person interested in the goods.

         (3) If the shipowner notifies in writing those interested in the goods
         of his intention of rescission or termination of the charter party or
         continuous transport under paragraph (2), he shall be considered to
         have established the right of pledge for the purpose of a claim for the
         hire or freight, which the time charterer holds to those interested in
         the goods, for securing the hire advances and other similar claims
         arising from the time charter.

         (4) The provisions of paragraphs (1) to (3) shall not affect the claim
         for damages by the shipowner or those interested in the goods to the
         time charterer. [This Article Newly Inserted by Act No. 4470, Dec. 31,
         1991]


ARTICLE 812-6 (TIME-BAR OF CLAIM UNDER TIME CHARTER)

         Any claims between the parties arising from the time charter shall be
         extinguished if no local action is filed within one year after the ship
         is returned to its owner: Provided, That in this case, the proviso of
         Article 811 shall be applicable mutatis mutandis.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


         SUB-SECTION 2 BILL OF LADING

ARTICLE 813 (ISSUANCE OF BILL OF LADING)


         (1) The carrier shall, upon demand by the charterer or the shipper,
         provide him with a bill of lading in one or more copies after receipt
         of the goods. (Amended by Act No. 4470, Dec. 31, 1991)


<PAGE>

         (2) The carrier shall, upon demand by the charterer or the shipper,
         provide him with the on board bill of lading in one or more copies
         after loading of the goods, or shall indicate such loading on the bill
         of lading mentioned in paragraph (1). (Amended by Act No. 4470, Dec.
         31, 1991)

         (3) The carrier may authorize a master or any other agent to provide
         the on board bills of lading or to indicate such loading on the bills
         of lading mentioned in paragraph (2). (Amended by Act No. 4470, Dec.
         31, 1991)


ARTICLE 814 (MATTERS TO BE ENTERED IN BILL OF LADING)


         (1) The bill of lading shall include the following matters, and the
         carrier shall write his name and affix his seal or sign on the bill of
         lading:

         1.Name, nationality and tonnage of the ship;

         2.Type, weight or volume of the goods, type, number and marks of
         packing, which have been notified in writing by the shipper;

         3.External appearances of the goods;

         4.Name or trade name of the charterer or the shipper;

         5.Name or trade name of the consignee or the notify party;

         6.Loading port;

         7.Unloading port;

         8.Freight;

         9.Issuing date and place; and

         10.If several bills of lading are issued, the number thereof.


<PAGE>

         (2) If there is any considerable reason to doubt that the weight,
         volume, number or marks of the goods as referred to in paragraph (1) 2
         fail to exactly indicate the goods which the carrier actually received,
         or if there is no adequate way to confirm it, such entry may be
         omitted.

         (3) The shipper shall be considered to have warranted the carrier that
         the information as referred to in paragraph (1) 2 is correct.

         (4) If the carrier has made notification of the goods to the notify
         party specified in the bill of lading, he shall be considered to have
         made the notification to the charterer or the shipper, the holder of
         the bill of lading and other consignee.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


ARTICLE 814-2 (EFFECT OF ENTRY IN BILL OF LADING)

         If the bill of lading is issued in accordance with the provisions of
         Article 814 (1), the carrier shall be presumed to have received or
         shipped goods as it is entered in the bill of lading: Provided, That
         the carrier may not oppose a third person who has acquired in good
         faith the bill of lading.
         [This Article Newly Inserted by Act No. 4470, Dec. 31, 1991]


ARTICLE 815 (DELIVERY OF COPY)

         The charterer or the shipper who has been provided with a bill of
         lading shall, upon demand by the issuer, write his name and affix his
         seal or sign on the copy of the bill of lading and deliver it to the
         issuer. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 816 (MULTIPLE COPIES OF BILL OF LADING AND DELIVERY OF GOODS AT PORT OF
UNLOADING)



<PAGE>

         (1) At the port of unloading, the master shall not refuse to deliver
         the goods, even though the holder of only one of multiple copies of the
         bill of lading demands such delivery.

         (2) If the holder of only one of multiple copies of the bill of lading
         has taken delivery of the goods in accordance with the provisions of
         paragraph (1), other copies of bill of lading shall become invalid.
         (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 817 (MULTIPLE COPIES OF BILL OF LADING AND DELIVERY OF GOODS AT PLACES
OTHER THAN PORT OF UNLOADING)

         At places other than the port of unloading, the master shall not
         deliver the goods except upon receipt of all the copies of the bill of
         lading.


ARTICLE 818 (DEMAND TO DELIVER GOODS BY NUMEROUS HOLDERS AND DEPOSIT)


         (1) If two or more holders of the bill of lading have demanded delivery
         of the goods, the master shall without delay deposit the goods with the
         competent authority and dispatch notice thereof to each person who has
         demanded such delivery.

         (2) If, after the master has delivered a part of the goods in
         accordance with the provision of Article 816 (1), another holder has
         demanded delivery of the goods, the provision of paragraph (1) shall
         apply in respect of the goods remaining. (Amended by Act No. 4470, Dec.
         31, 1991)


ARTICLE 819 (RANKS OF NUMEROUS HOLDERS OF BILL OF LADING)


         (1) As to the goods that have been deposited with the competent
         authority pursuant to the provisions of Article 818, the holder of the
         bill of lading who has



<PAGE>

         received the bill of lading from the former holder, whose priority is
         common to several holders of the bill of lading, shall be prior to
         other holders of the bill of lading. (Amended by Act No. 4470, Dec. 31,
         1991)

         (2) In regards to the bill of lading dispatched to an absentee, the
         time when a bill of lading has been dispatched shall be deemed to be
         the time it is delivered.


ARTICLE 820 (APPLICABLE PROVISIONS)

         The provisions of Articles 129, 130, 132 and 133 shall apply mutatis
         mutandis to the bills of lading. (Amended by Act No. 4470, Dec. 31,
         1991)


         SECTION 2 CARRIAGE OF PASSENGERS

ARTICLE 821 (TICKET IN NAME OF PARTICULAR PASSENGER)

         A ticket in the name of a particular passenger shall not be assigned to
         another person.


ARTICLE 822 (DUTY OF PROVIDING MEALS)

         Unless otherwise agreed, meals of a passenger during the voyage shall
         be provided by the carrier. (Amended by Act No. 4470, Dec. 31, 1991)

ARTICLE 823 (DUTY OF PROVIDING LODGING AND MEALS FOR PASSENGERS DURING SHIP
REPAIR)


         (1) If a ship has to be repaired in the course of a voyage, the carrier
         shall provide adequate lodging and meals for passengers during the
         period of repair: Provided, That this shall not apply in cases where he
         has provided them with the convenience of a passage to the ports of
         disembarkation without prejudicing



<PAGE>

         their right thereby. (Amended by Act No. 4470, Dec. 31, 1991)

         (2) In the case mentioned in paragraph (1), a passenger may terminate
         the contract after paying freight in proportion to the voyage
         performed. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 824 (DUTY OF FREE CARRIAGE FOR LUGGAGE)

         In the absence of any agreement to the contrary, the carrier shall not
         demand freight for luggage which a passenger is entitled to accompany
         pursuant to the contract. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 825 (DELAY OF BOARDING SHIP AND MASTER'S RIGHT TO COMMENCE VOYAGE)


         (1) If a passenger does not get on board at the time fixed for
         embarkation, the master may commence the voyage immediately. The same
         shall apply at the port of call during the course of the voyage.
         (Amended by Act No. 4470, Dec. 31, 1991)

         (2) In the case of paragraph (1), the passenger shall pay the full
         amount of the freight. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 826 (RESCISSION OF CONTRACT BY PASSENGER AND FREIGHT)

         If, prior to the commencement of the voyage, a passenger rescinds the
         contract, he shall pay one-half of the freight, and if he rescinds the
         contract after the commencement of the voyage, he shall pay the full
         amount of the freight.


ARTICLE 827 (RESCISSION OF CONTRACT FOR REASONS SPECIFICALLY STIPULATED)

         If, prior to the commencement of the voyage, a passenger has become
         incapable


<PAGE>

         of making the voyage because of death, illness, or any other act of
         god, the carrier may demand three-tenths of the freight, and if any of
         such reasons have occurred after the commencement of the voyage, the
         carrier may, at his option, demand either three-tenths of the freight
         or freight in proportion to the carriage performed. (Amended by Act No.
         4470, Dec. 31, 1991)


ARTICLE 828 (PASSENGER'S DEATH AND DISPOSAL OF HIS LUGGAGE)

         If a passenger dies, the master shall dispose of luggage brought by the
         deceased in such manner as will be to the best interest of his
         successors.


ARTICLE 829 (LEGAL REASONS FOR TERMINATION OF CONTRACT)

         A contract of carriage shall be terminated by any of the reasons
         mentioned in Article 807 (1) 1 through 3. If any of such reasons have
         occurred during the voyage, the passenger shall pay the freight in
         proportion to the carriage performed.


ARTICLE 830 (APPLICABLE PROVISIONS)


         (1) The provisions of Articles 148, 787, 790 (1) and 806 shall be
         applicable mutatis mutandis to the carriage of passengers by sea.

         (2) The provisions of Articles 134, 136, 149 (2), 787 through 791-2,
         800, 800-2, 806, 808 and 811 shall be applicable mutatis mutandis to
         the carriage of the luggages of the passengers that have been entrusted
         to the carrier.

         (3) The provisions of Articles 150, 789-2 (1) and (4), 789-3, 790 (1),
         806 and 811 shall be applicable mutatis mutandis to the luggage of the
         passengers that have not been entrusted to the carrier.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]



<PAGE>

ARTICLE 831 (IDEM)

         If a charter party is entered into for carrying passengers, the
         provisions of Articles 781, 782 (1), 783, 784, 786, 787, 790 (1), 791,
         792 through 797, 802, 807, 808 and 811 shall be applicable mutatis
         mutandis to the relation between the carrier and the charterer.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


         CHAPTER V GENERAL AVERAGE

ARTICLE 832 (REQUIREMENTS OF GENERAL AVERAGE)

         Damage and expenditure which have arisen from any disposition of the
         ship or the cargo by the master in order to preserve the ship and the
         cargo from a common peril shall constitute a general average.


ARTICLE 833 (PERSONS WHO BEAR GENERAL AVERAGE)

         General average shall be borne respectively by the different
         contributing interests in proportion to the ratio that the value of the
         ship and the cargo preserved from a common peril, one-half of the
         freight, and the amount of the damages constituting general average
         bear to one another.


ARTICLE 834 (COMPUTATION OF AMOUNTS TO BE CONTRIBUTED TO GENERAL AVERAGE)

         With regard to the determination of the amount to be contributed to
         general average the value of the ship shall be its value at the time
         and place of arrival, and the value of the cargo shall be its value at
         the time and place of unloading: Provided, That in regard to the cargo,
         the freight and any other expenses which have been exempted from
         payment due to the loss of such cargo shall be deducted.



<PAGE>

ARTICLE 835 (LIMITED LIABILITY TO GENERAL AVERAGE)

         The persons who are to contribute to general average in accordance with
         the provisions of Articles 833 and 834 shall be liable only to the
         extent of the values which exist at the time when the ship has arrived
         or the cargo has been delivered. (Amended by Act No. 4470, Dec. 31,
         1991)


ARTICLE 836 (COMPUTATION OF DAMAGES CONSTITUTING GENERAL AVERAGE)

         With regard to the determination of the amount of general average, the
         value of the ship shall be its value at the time and place of arrival,
         and the value of the cargo shall be its value at the time and place of
         unloading: Provided, That in regard to the cargo, all the expenses
         which have been exempted from payment thereof due to the loss of such
         cargo shall be deducted.


ARTICLE 837 (RIGHT OF SUBROGATION AGAINST PERSON LIABLE)

         If a common peril of the ship and cargo has arisen from any defect of
         the ship or cargo or from any negligent act, a contributor to the
         general average may exercise the right of subrogation against the
         person liable for such peril.


ARTICLE 838 (EXCLUSION FROM CALCULATING CONTRIBUTIONS TO GENERAL AVERAGE)

         The value of the arms installed on board a ship, the wages of the
         crews, and the food and clothing of the crews and passengers, even if
         they are preserved, shall not be included in calculating contributions
         to the general average, and such value shall be included in calculating
         the value of the general average if they have been lost.


ARTICLE 839 (EXCLUSION FROM DEMAND FOR CONTRIBUTION TO GENERAL AVERAGE)



<PAGE>

         (1) The value of any appurtenances not included in the inventory of
         appurtenances, the goods loaded without a bill of lading or any other
         document by which the value of the cargo may be determined, or money or
         the negotiable instruments and any other valuable goods of which the
         particulars and value are not expressed, if they are preserved, shall
         be included in calculating contributions to the general average,
         whereas such value shall not be included in calculating the amount of
         general average if they are lost.

         (2) The provision of paragraph (1) shall also apply to the goods loaded
         on deck: Provided, That this shall not apply in cases of coastwise
         navigation. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 840 (FALSE STATEMENT OF VALUE OF CARGO AND GENERAL AVERAGE)


         (1) If, in the bill of lading or any other document available as a
         basis for the valuation of the cargo, the value of the cargo has been
         stated higher than its actual value, in cases where the cargo is
         preserved, the amount of contributions to the general average shall be
         determined upon the basis of the value so stated, and in cases where
         such value has been stated lower than its actual value, the value so
         stated shall be the amount of general average if the cargo has been
         lost.

         (2) The provisions of paragraph (1) shall apply mutatis mutandis in
         cases where a false entry has been made regarding any matters that may
         affect the value of the cargo. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 841 (RECOVERY OF DAMAGE WHICH IS GENERAL AVERAGE)

         If, after the shipowner, charterer, shipper, or any other person
         interested has contributed to the amount of general average, the whole
         or a part of the ship, its appurtenances or the cargo has been restored
         to the owner thereof, he shall return the amount of money he has
         received as general average remuneration


<PAGE>

         after deducting therefrom any salvage remuneration and the amount of
         damage which has arisen from a partial loss or damage.


ARTICLE 842 (TIME-BAR OF GENERAL AVERAGE CLAIM)

         Any claim created by a general average or claim for the subrogation as
         prescribed in Article 837 shall be extinguished if no legal action is
         filed within one year after the calculation thereof is completed. In
         this case, however, the provisions of the proviso of Article 811 shall
         be applicable mutatis mutandis.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


         CHAPTER VI COLLISION OF VESSELS

ARTICLE 843 (PROVISIONS APPLICABLE TO COLLISION OF VESSELS)

         Where a collision occurs between seagoing vessels or between a seagoing
         vessels and vessels of inland navigation, the compensation due for
         damages caused to the vessels, or to any things or persons on board
         therof, shall be settled in accordance with the provisions in this
         chapter, in whatever waters the collision takes place. (Amended by Act
         No. 4470, Dec. 31, 1991)


ARTICLE 844 (COLLISION DUE TO ACT OF GOD)

         If the collision is due to an act of god, or if the causes of the
         collision are in doubt, the damages shall be borne by those who have
         suffered them.


ARTICLE 845 (COLLISION CAUSED BY FAULT OF ONE PARTY)

         If the collision is caused by the fault of a crew of one of the
         vessels, the owner of the vessel in fault shall be liable for
         compensation due for the damages arising therefrom.



<PAGE>

ARTICLE 846 (COLLISION CAUSED BY FAULT OF BOTH PARTIES)


         (1) When the collision is due to the fault of crews of both vessels,
         the owner of each vessel shall be liable for damages in proportion to
         the degree of the faults respectively committed, the liability shall be
         apportioned equally.

         (2) In the cases mentioned in paragraph (1), in respect of damage
         caused by death or personal injury of third parties, the owners of both
         vessels shall be jointly and severally liable toward such third
         parties. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 847 (COLLISION CAUSED BY FAULT OF PILOT)

         Even in case where the collision is caused by the fault of the pilot of
         a vessel, the owner of such vessel shall be liable for damages in
         accordance with the provisions of Articles 845 and 846.
         (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 848 (TIME-BAR OF COLLISION CLAIM)

         Action claim for the recovery of damages caused by collision shall be
         barred if no action is instituted within two years from the date of the
         collision. In this case, however, the proviso of Article 811 shall be
         applicable mutatis mutandis.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


         CHAPTER VII RESCUE FROM MARINE ACCIDENTS

ARTICLE 849 (REQUIREMENTS OF RESCUE FROM MARINE ACCIDENTS)


<PAGE>

         A person who, without any duty to do so, has salvaged a ship in
         distress, or its cargo or any other goods on any water surface, may
         claim reasonable remuneration for the result obtained from such
         efforts. The same shall apply to a rescue from marine accidents between
         seagoing ships and ships of inland navigation. (Amended by Act No.
         5809, Feb. 5, 1999)


ARTICLE 850 (DETERMINATION OF SALVAGE REMUNERATION)

         In case where there is no special stipulation as to salvage
         remuneration, and any agreement as to the amount thereof between the
         parties has not been made, the court shall, upon the application of the
         parties, determine the amount, taking into consideration the degree of
         the risk, the labor of salvage, expenses, result of the salvage,
         efforts to prevent environmental loss and all other circumstances.
         (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 851 (ALTERATION OF STIPULATED SALVAGE REMUNERATION)

         In case where special stipulation has been made as to the amount of the
         salvage remuneration at the time of marine accidents and such amount is
         grossly unreasonable, the court may increase or reduce such amount,
         taking into consideration the circumstances mentioned in Article 850.
         (Amended by Act No. 4470, Dec. 31, 1991; Act No. 5809, Feb. 5, 1999)


ARTICLE 852 (LIMITATION ON AMOUNT OF SALVAGE REMUNERATION)


         (1) Unless agreed otherwise, the amount of salvage remuneration shall
         not exceed the value of the thing salvaged.

         (2) If there is in existence a preferential right of higher priority,
         the amount of the salvage remuneration shall not exceed the amount that
         remains after deducting the amount of the claim of the person having
         such preferential right.



<PAGE>

         (Amended by Act No. 1212, Dec. 12, 1962)


ARTICLE 853 (DISTRIBUTION OF SALVAGE REMUNERATION AMONG JOINT SALVORS)


         (1) If two or more persons have together engaged in the salvage, the
         provision of Article 850 shall apply mutatis mutandis in regard to the
         proportions of the distribution of the salvage remuneration.

         (2) A person who has engaged in salvaging human life may also share in
         the distribution of the salvage remuneration in accordance with the
         provisions of paragraph (1). (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 854 (DISTRIBUTION OF SALVAGE REMUNERATION FOR SALVAGE INSIDE SHIP)


         (1) If a ship has engaged in the salvage and has received remuneration
         therefor, the amount of damage caused to such ship and the expenses
         required for the salvage shall be paid to the shipowner, and the
         balance shall be paid in equal portions to the master and to the
         seamen.

         (2) As to the distribution of remuneration to be paid to the seamen in
         accordance with the provisions of paragraph (1), the master shall,
         prior to the termination of the voyage, draw up a schedule of
         distribution, taking into consideration the labor of each seaman, the
         results thereof and the circumstances, and shall notify the seamen
         thereof. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 855 (CASE OF SALVAGE BY TUGBOAT)

         In regard to the salvage for the tow or the cargo on board the tow by a
         tugboat, the salvage remuneration shall not be demanded unless any
         special labor, which shall not be deemed to be the performance of a
         contract of towage, has been provided.



<PAGE>

ARTICLE 856 (REMUNERATION BETWEEN SHIPS BELONGING TO SAME OWNER)

         Even between ships which belong to the same owner, any person who has
         been engaged in salvage may demand a reasonable remuneration therefor.


ARTICLE 857 (PERSONS WHO SHALL NOT DEMAND SALVAGE REMUNERATION)

         Any of the following persons shall not demand salvage remuneration:
         (Amended by Act No. 5809, Feb. 5, 1999)

         1.The person who worked on board the salvaged ship;

         2.The person who has caused the marine accidents, either intentionally
         or by negligence;

         3.The person who has forcibly effected salvage, notwithstanding that it
         was declined for justifiable reasons; and

         4.The person who has concealed or disposed of any goods salvaged
         without justifiable reasons.


ARTICLE 858 (SALVOR'S PREFERENTIAL RIGHT)


         (1) The claims for remuneration of the person who has been engaged in
         the salvage shall have a preferential right over the cargo salvaged:
         Provided, That such right shall not be exercised against such cargo
         after the debtor has delivered it to a third person.

         (2) The provisions relating to the preferential rights of a ship's
         creditor shall apply mutatis mutandis to the preferential rights
         mentioned in paragraph (1). (Amended by Act No. 4470, Dec. 31, 1991)



<PAGE>

ARTICLE 859 (MASTER'S AUTHORITY CONCERNING PAYMENT OF SALVAGE REMUNERATION)


         (1) The master has authority to do, on behalf of the salvage debtors,
         all judicial and extra-judicial acts relating to the payment of the
         salvage remuneration.

         (2) The master may himself become a party to an action relating to
         salvage remuneration and a final judgment in such action shall be
         valid as to the debtors of the salvage remuneration. (Amended by Act
         No. 1212, Dec. 12, 1962)


ARTICLE 860 (TIME-BAR OF SALVAGE CLAIMS)

         Any claim for remuneration of salvage shall be time-barred if no action
         is instituted within two years from the date when the salvage is
         finished. In this case, however, the provisions of the proviso of
         Article 811 shall be applicable mutatis mutandis.
         [This Article Wholly Amended by Act No. 4470, Dec. 31, 1991]


                         CHAPTER VIII CLAIMS ON VESSEL

ARTICLE 861 (CLAIM GIVING RISE TO MARITIME LIEN)


         (1) A person who has any of the following claims holds maritime lien on
         a vessel and the appurtenances of the vessel, on the freight for the
         voyage during which the claim giving rise to the lien arises, and on
         the accessories of the vessel and freight: (Amended by Act No. 4470,
         Dec. 31, 1991)

         1.Law costs incurred in the common interest of the creditors, expenses
         incurred with respect to public auction of the vessel and the
         appurtenances, public taxes imposed on the vessel regarding the voyage,
         pilotage dues and towage dues, and



<PAGE>

         the cost of preservation and watching from the time of the entry of the
         vessel into the last port;

         2.Claims arising out of the contract of engagement of the master and
         other persons hired on board;

         3.Remuneration for salvage, and the contribution of the vessel in
         general average; and

         4.Indemnities for collision or other accidents of navigation, as also
         for damage caused to works forming part of harbors, docks, and
         navigable ways, and indemnities for personal injury to passengers or
         crew.

         (2) A creditor of the vessel who has maritime lien mentioned in
         paragraph (1) shall have the right to receive priority performance of
         his claims to the other creditors in respect of the property mentioned
         in paragraph (1) in accordance with this Act or other Acts. In such
         case, the provisions relating to the mortgage of the Civil Act shall
         apply mutatis mutandis in so far as the nature of such right is not
         incompatible. (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 862 (ACCESSARIES OF VESSEL AND FREIGHT)

         The accessories of the vessel and the freight mentioned in Article 861
         mean: (Amended by Act No. 4470, Dec. 31, 1991; Act No. 5809, Feb. 5,
         1999)

         1.Compensation due to the shipowner for material damage sustained by
         the vessel or for loss of freight;

         2.General average contributions due to the shipowner in respect of
         material damage sustained by the vessel, or in respect of loss of
         freight; and

         3.Remuneration due to the shipowner for the rescue from marine
         accidents.


ARTICLE 863 (MARITIME LIEN ON FREIGHT)


<PAGE>

         The maritime lien on freight may be exercised only against the freight
         unpaid and the amount of money that has been paid and possessed by the
         shipowner or his agent.


ARTICLE 864 (EXCLUSION OF INSURANCE AMOUNT, ETC.)

         The provisions of Article 862 shall not apply to payments due to the
         shipowner on policies of insurance and any other bounties or national
         subsidies.


ARTICLE 865 (CLAIMS ARISING FROM CONTRACT OF ENGAGEMENT OF EMPLOYEE OF SHIP)

         The claims mentioned in the provisions of Article 861 (1) 2 shall have
         preferential rights on the total amount of freight due for all voyage
         made during the subsistence of the contract of engagement.


ARTICLE 866 (PRIORITY OF MARITIME LIENS)


         (1) Claims secured by a lien and relating to the same voyage rank in
         the order in which they are set out in subparagraphs of Article 861(1).

         (2) The claims mentioned in Article 861 (1) 3 rank in the inverse order
         of the dates on which they came into existence. The claims arising from
         the same accident shall be deemed to have arisen at the same time.
         (Amended by Act No. 4470, Dec. 31, 1991)


ARTICLE 867 (IDEM)


         (1) In case of concurrence of the claims secured by a lien which have
         arisen in regard to two or more voyages, a claim arising in respect of
         a later voyage shall



<PAGE>

         rank prior to a claim arising in respect of an earlier voyage.

         (2) The claims mentioned in Article 865 shall rank equally with claims
         attaching to the last voyage.


ARTICLE 868 (CLAIMS SAME RANK)

         In case of concurrence of the claims of the same rank in accordance
         with Articles 865 through 867, they shall be paid concurrently and
         rateably in proportion to the amount of the claims. (Amended by Act No.
         4470, Dec. 31, 1991)


ARTICLE 869 (OVERTAKING NATURE OF MARITIME LIENS)

         The maritime lien of the ship's creditors shall not be affected by the
         transfer of ownership of the ship.


ARTICLE 870 (TIME-BAR OF MARITIME LIEN)


         (1) The maritime lien of a ship's creditor shall be time-barred if it
         has not been exercised within one year from the date on which it has
         arisen. (Amended by Act No. 4470, Dec. 31, 1991)

         (2) Deleted. (by Act No. 4470, Dec. 31 191)


ARTICLE 871 (SHIP MORTGAGE)


         (1) A registered ship may be the object of a ship mortgage.

         (2) A mortgage on a ship shall extend to its appurtenances.


<PAGE>

         (3) The provisions relating to the mortgage mentioned in the Civil Act
         shall apply mutatis mutandis to the ship mortgage.


ARTICLE 872 (CONCURRENCE OF SHIP MORTGAGE, ETC. AND MARITIME LIEN)

         The maritime lien of a ship's creditor shall take precedence over a
         pledge and mortgage.


ARTICLE 873 (PROHIBITION OF PUTTING REGISTERED SHIP IN PLEDGE)

         Any registered ship shall not be the subject of a pledge.


ARTICLE 874 (APPLICABLE PROVISIONS TO SHIP UNDER CONSTRUCTION)

         The provisions of this Chapter shall apply mutatis mutandis to ships
         under construction. (Amended by Act No. 4470, Dec. 31, 1991)


         ADDENDA


ARTICLE 1 (MANDATORY PROVISIONS)

         The scope of petty merchants shall be determined by a Cabinet Order.


ARTICLE 2 (IDEM)

         The lakes, rivers, ports and bays under Article 125 shall be determined
         by a Cabinet Order.



<PAGE>

ARTICLE 3 (DEFERMENT OF GIVING PUBLIC NOTICE ON COMMERCIAL REGISTRATION)


         (1) The provisions relating to the public notices mentioned in Article
         36 shall no longer apply after a reasonable period. Such period shall
         be determined by the Supreme Court Regulations.

         (2) If, in the case of the preceding paragraph, the registration has
         been effected in the period mentioned in the preceding paragraph,
         public notice shall be deemed to have been made.


ARTICLE 4 (PROHIBITION ON ISSUANCE OF SHARE CERTIFICATE IN BEARER FORM COMPANY
TO BE ORGANIZED ONLY BY NATIONALS OF REPUBLIC OF KOREA)

         The stock company which should be organized by only nationals of the
         Republic of Korea in accordance with the Acts and subordinate statutes,
         and a stock company having special rights. on the condition that it is
         to be organized by only nationals of the Republic of Korea, shall not
         issue share certificates in bearer from. If the above mentioned
         provisions have been contravened, such share certificates shall be null
         and void and the last non-bearer shareholder shall be a shareholder.


ARTICLE 5

         Deleted. (by Act No. 3724, Apr. 10, 1984)


ARTICLE 6 (QUALIFICATION OF COMPANY COMMISSIONED TO OFFER BONDS FOR
SUBSCRIPTION)

         No person other than a bank, trust or securities company shall be
         commissioned to offer bonds for subscription or become a successor of
         the business under Article 483. (Amended by Act No. 3724, Apr. 10,
         1984)



<PAGE>

ARTICLE 7 (METHOD TO DEPOSIT BEARER BOND CERTIFICATE BY HOLDER THEREOF)

         If the holder of bearer bond certificates has not deposited his bond
         certificates with the public official who is in charge of deposit in
         accordance with the provisions of Articles 491 (4) and 492 (2) or
         provisions to be applied mutatis mutandis, he shall deposit such bond
         certificates in the bank or trust company which is to be designated by
         the Chief Justice of the Supreme Court. (Amended by Act No. 1212,
         Dec. 12, 1962)


ARTICLE 8 (MANNER OF PUBLIC NOTICE RELATING TO MEETINGS OF BONDHOLDERS)

         The public notice with regard to convocation of meeting of bondholders,
         payment of redemption amount or execution of resolution of meeting of
         bondholders relating to payment of redemption amount shall be given of
         public notice determined by Articles of incorporation of issuing
         company according to the manner.


ARTICLE 9 (MANDATORY PROVISIONS)

         The Form of the inventory of equipments mentioned in Article 742 shall
         be determined by a Cabinet Order.


ARTICLE 10 (IDEM)

         The scope of coastal navigations mentioned in the proviso of Article
         839 (2) shall be determined by a Cabinet Order.


ARTICLE 11 (IDEM)

         The matters concerning the enforcement of this Act shall be determined
         by separate Act.



<PAGE>

ARTICLE 12 (ENFORCEMENT DATE AND EFFECT OF OLD ACT)


         (1) This Act shall enter into force on Jan. 1, 1963.

         (2) The Commercial Act, Limited Liability Company Act, Act on
         Implemention Commercial Act, Act for Enforcement of Amendment of the
         Commercial Act applied in accordance with Article 1 of the Chosun Civil
         Affairs Ordinance shall be effective until the date of enforcement of
         this Act.


         ADDENDUM (Act No. 1212, Dec. 12, 1962)

         This Act shall enter into force on January 1, 1963.


         ADDENDA (Act No. 3724, Apr. 10, 1984)


         ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on September 1, 1984.


         ARTICLE 2 (PRINCIPLES OF TRANSITIONAL MEASURES)

         Except as otherwise provided, this Act shall be applicable to the
         matters which have taken place before the enforcement of this Act:
         Provided, That any effect given by the previous provisions shall not be
         affected.


         ARTICLE 3 (TRANSITIONAL MEASURES AS TO TRADE BOOKS, ETC.)

         The previous provisions shall apply with respect to trade books and

<PAGE>

         supplementary schedules, which a person who is a merchant when this Act
         enters into force should prepare before the fixed time under the
         revised provisions of Article 30 (2) (for the company, this date means
         the period for settlement of accounts; hereinafter referred to as the
         same in this Article), to the accounts to be made before and at the
         fixed time.


ARTICLE 4 (TRANSITIONAL MEASURES AS TO MINIMUM AMOUNT OF CAPITAL OF STOCK
COMPANY)


         (1) A company which has been formed as a stock company before the
         enforcement of this Act, and the capital of which is less than fifty
         million won at the enforcement date of this Act, shall increase its
         capital to fifty million won or more, or alter its organization into a
         limited liability company within three years from the enforcement date
         of this Act.

         (2) If the company fails to take such a procedure in the period as
         prescribed in paragraph (1), it shall be regarded as being dissolved.

         (3) The companies which are as considered to have been dissolved under
         paragraph (2) but the liquidation of which is not closed, may continue
         their operation by a special resolution as prescribed in Article 434,
         according to the procedure in paragraph (1) within one year from the
         enforcement date of this Act. (Newly Inserted by Act No. 4372, May. 31,
         1991)


ARTICLE 5 (TRANSITIONAL MEASURES AS TO PAR VALUE OF SHARES)


         (1) With respect to the par value of shares of stock company issued
         formed before the enforcement of this Act, the previous provisions
         shall be applicable for three years from the enforcement date of this
         Act regardless of the revised provisions of Article 329 (4).

         (2) A stock company formed before the enforcement of this Act shall
         consolidate the shares by a resolution under Article 434, in order to
         make the shares the par


<PAGE>

         value of which is less than five thousand won into those above five
         thousand won, within three years from the enforcement date of this Act.
         In this case, the provisions of Articles 440 through 444 shall be
         applicable mutatis mutandis.


ARTICLE 6 (TRANSITIONAL MEASURES AS TO TRANSFER OF SHARES BEFORE ISSUING SHARE
CERTIFICATES)

         The revised provisions of the proviso of Article 335 (2) shall also be
         applicable to a transfer of shares which has been made without issuing
         the share certificates before the enforcement of this Act.


ARTICLE 7 (TRANSITIONAL MEASURES AS TO TRANSFER OF SHARES BY DELIVERY OF SHARE
CERTIFICATES)


         (1) With respect to a transfer or acquisition of shares before the
         enforcement of this Act, the previous provisions of Articles 336 and
         359 shall be applicable even after the enforcement of this Act:
         Provided, That with regard to a possession of share certificates after
         the enforcement of this Act, the revised provisions of Article 336 (2)
         shall be applicable.

         (2) Even though a person who has, after the enforcement of this Act
         acquired share certificates issued before the enforcement of this Act,
         has not investigated as to the uninterrupted series of endorsements or
         the propriety of instrument for conveyance, the failure of such
         investigation shall not be considered as an act of bad faith or gross
         negligence, for the purpose of application of the revised provisions of
         Article 359.


ARTICLE 8 (TRANSITIONAL MEASURES AS TO TRANSFER AGENT)


         (1) A transfer agent who was appointed before the enforcement of this
         Act, under Article 11-6 of the Capital Market Promotion Act, shall be
         regarded to



<PAGE>

         have been appointed under the revised provisions of Article 337 (2) of
         this Act.

         (2) The qualification of the transfer agent under this Act shall be
         determined by a Presidential Decree.


ARTICLE 9 (TRANSITIONAL MEASURES AS TO ACQUIREMENT OF SHARES OF PARENT COMPANY
BY SUBSIDIARY COMPANY)


         (1) If a subsidiary company which is subject to Article 342-2, has the
         shares of a parent company which is subject to the said Article, at the
         time this Act enters into force, the former shall dispose of such
         shares within three years from the enforcement date of this Act.

         (2) The provisions of Article 625-2 shall be applicable mutatis
         mutandis to the case of non-disposition of shares in contravention of
         the provisions of paragraph (1).


ARTICLE 10 (TRANSITIONAL MEASURES AS TO NON-BEARING OF SHARE CERTIFICATES)

         A measure pertaining to the non-issue of share certificates, which was
         taken before the enforcement of this Act, under the provisions of
         Article 11-7 of the Capital Market Promotion Act, shall be considered
         to have been taken under the revised provisions of Article 358-2 of
         this Act.


ARTICLE 11 (TRANSITIONAL MEASURES AS TO PERIOD OF CLOSURE OF REGISTER OF
SHAREHOLDERS AND RECORD DATE)

         If a day within two weeks from the day of enforcement of this Act is
         determined as the period of closure of shareholders' register or the
         record date, the previous provisions shall be applicable.



<PAGE>

ARTICLE 12 (TRANSITIONAL MEASURES AS TO EXERCISE VOTE IN DISUNITY)

         The revised provisions of Article 368-2 (including the cases to which
         this Article is applied mutatis mutandis by Articles 308 (2) and 527
         (3)) shall not be applicable to the exercise of a vote at a general
         shareholders' meeting or inaugural general meeting which is held on a
         day within two weeks from the enforcement date of this Act.


ARTICLE 13 (TRANSITIONAL MEASURES AS TO ACTION FOR AFFIRMING NON-EXISTENCE OF
RESOLUTION OF GENERAL MEETING)

         The revised provisions of Article 380 (including the cases to which
         this Article is applied mutatis mutandis by Articles 308 (2) and 578)
         shall also be applicable to the cases pending to the court at the time
         when this Act enters into force: Provided, That the effect of an action
         brought before the enforcement of this Act shall not be affected.

ARTICLE 14 (TRANSITIONAL MEASURES AS TO TERM OF OFFICE OF DIRECTORS AND
AUDITORS)

         With respect to the term of office of directors and auditors of a stock
         company who are in office at the time this Act enters into force, the
         previous provisions shall be applicable, regardless of the revised
         provisions of Articles 383 (2) and 410.


ARTICLE 15 (TRANSITIONAL MEASURES AS TO DUTY AND POWER OF AUDITORS)

         With respect to the duty and power of an auditor of a stock company
         appointed before the enforcement of this Act, and is in office before
         closing of a ordinary general meeting relating to the period for the
         settlement of accounts which arrives first after the enforcement of
         this Act, the previous provisions shall be applicable.



<PAGE>

ARTICLE 16 (TRANSITIONAL MEASURES AS TO REPRESENTATIVE OF COMPANY FOR ACTION
BETWEEN COMPANY AND Directors)

         With respect to the person who is to represent a company in an action
         brought by a stock company against a director (including a liquidator,
         and hereinafter referred to the same in this Article) and vice versa,
         the previous provisions shall be applicable until the ordinary general
         meeting relating to the period for the settlement of accounts which
         arrives first after the enforcement of this Act, is closed.


ARTICLE 17 (TRANSITIONAL MEASURES AS TO ALLOTMENT OF NEW SHARES)

         When a resolution to issue new shares is adopted before the enforcement
         of this Act, the revised provisions of Article 418 (2) shall not be
         applicable.


ARTICLE 18 (TRANSITIONAL MEASURES AS TO TIME OF EFFECTING NEW SHARES)

         When a resolution to issue new shares is made before the enforcement of
         this Act, the time when a person becomes a shareholder shall be
         determined according to the previous provisions, regardless of the
         revised provisions of Article 423.


ARTICLE 19 (TRANSITIONAL MEASURES AS TO REDUCTION OF CAPITAL)

         When a resolution concerning the reduction of capital is made before
         the enforcement of this Act, the fractional shares shall be disposed of
         according to the previous provisions, regardless of the revised
         provisions of Article 443 (1).


ARTICLE 20 (TRANSITIONAL MEASURES AS TO TIME TO PAY DIVIDEND)

         The revised provisions of Article 464-2 shall not be applicable to the
         dividend which has been decided to be paid by a resolution under
         Article 449 (1) before


<PAGE>

         the enforcement of this Act.


ARTICLE 21 (TRANSITIONAL MEASURES AS TO ISSUANCE OF CONVERTIBLE BONDS)

         When a resolution to issue convertible bonds has been made before the
         enforcement of this Act, such bonds shall be issued according to the
         previous provisions.


ARTICLE 22 (TRANSITIONAL MEASURES AS TO PROHIBITION AGAINST GRANTING BENEFITS)

         The revised provisions of Article 467-2 shall not be applicable to an
         act performed before the enforcement of this Act.


ARTICLE 23 (TRANSITIONAL MEASURES AS TO DISCLOSURE OF BALANCE SHEET FOR MERGER)

         The revised provisions of Article 522-2 (including the cases to which
         this Article is applied mutatis mutandis by Article 603) shall not be
         applicable to a case where the general shareholders' meeting under
         paragraph (1) of the said Article is to be held on a day within two
         weeks after the enforcement of this Act.


ARTICLE 24 (TRANSITIONAL MEASURES AS TO TOTAL AMOUNT OF CAPITAL OF LIMITED
LIABILITY COMPANIES)


         (1) A company which was a limited liability company before the
         enforcement of this Act, and whose total amount of capital and amount
         of one contribution unit at the time of enforcement of this Act are
         less than the amount as prescribed in the revised provisions of Article
         546, shall raise the amount, in the case of the total amount of
         capital, to ten million won or more, and, in the case of the amount of
         contribution unit, to five thousand won or more, within three years
         from the enforcement date of this Act.


<PAGE>

         (2) The company which fails to raise its total amount of capital within
         the period as prescribed in paragraph (1) shall be deemed to have been
         dissolved.

         (3) The companies which as considered to have been dissolved under
         paragraph (2), but the liquidation of which is not completed, may
         continue their operation by a special resolution as prescribed in
         Article 585, according to the procedure as referred to in paragraph (1)
         within one year from the enforcement date of this Act. (Newly Inserted
         by Act No. 4372, May. 31, 1991)


ARTICLE 25 (REVISION OF RELEVANT ACTS AND RELATIONS WITH OTHER ACTS)


         (1) through (7) Omitted.

         (8) In the cases where the previous provisions of the Commercial Act
         are cited in the Acts other than those prescribed in paragraphs (1)
         through (7), at the time this Act enters into force, if the provisions
         corresponding to them are included in this Act, such corresponding
         provisions of this Act shall be considered to have been cited in lieu
         of the previous provisions.


         ADDENDUM (Act No. 4372, May. 31, 1991)

         This Act shall enter into force on the date of its promulgation.


         ADDENDA (Act No. 4470, Dec. 31, 1991)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on January 1, 1993.



<PAGE>

ARTICLE 2 (TRANSITIONAL MEASURES)


         (1) The provisions of Part IV of this Act shall also be applicable to
         any insurance contract concluded before this Act enters into force:
         Provided, That the effect given by the previous provisions shall not be
         affected.

         (2) The provisions of Part V of this Act shall not be applicable to any
         obligation on damages caused by any accident taken place before this
         Act enters into force, but the previous provisions shall be applicable.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING APPLICATION OF LIMITATION TONNAGE)

         In application of Article 751, the gross tonnage shall be applicable in
         lieu of the international gross tonnage to a ship which is engaged in
         an international navigation, and fails to be delivered an international
         tonnage certificate or written international tonnage confirmation by
         the Administrator of the Korea Maritime and Port Administration under
         Article 13 of the Vessels Act.


ARTICLE 4 (RELATION WITH OTHER ACTS)

         In case where other Acts cite the previous provisions of the Commercial
         Act at the time this Act enters into force, if the provisions
         corresponding to them are included in this Act, such corresponding
         provisions of this Act shall be considered to have been cited in lieu
         of the previous provisions.


         ADDENDA (Act No. 4796, Dec. 22, 1994)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on January 1, 1995.



<PAGE>

ARTICLES 2 THROUGH 4

         Omitted.


         ADDENDA (Act No. 5053, Dec. 29, 1995)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on October 1, 1995.


ARTICLE 2 (PRINCIPLES OF TRANSITIONAL MEASURES)

         Except as provided otherwise by this Act, this Act shall also apply to
         the matters taken place before this Act enters into force: Provided,
         That it shall not affect any effect taken pursuant to the previous
         provisions.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING TRADE BOOKS, ETC.)

         The previous provisions shall apply with respect to trade books and
         supplementary schedules, which a person who is a merchant at the time
         this Act enters into force should prepare before the fixed time under
         the revised provision of Article 30 (2) (for the company, this date
         means the period for settlement of accounts; hereinafter referred to as
         the same in this Article) which arrives for the first time after the
         enforcement of this Act, and to the accounts to be made before and at
         the fixed time.


ARTICLE 4 (TRANSITIONAL MEASURES CONCERNING CLASS OF SHARES HAVING PREFERENTIAL
          RIGHTS)

         Any class of shares having preferential rights, issued before this Act
         enters into


<PAGE>

         force, shall be subject to the previous provisions.


ARTICLE 5 (TRANSITIONAL MEASURES CONCERNING TERM OF OFFICE OF AUDITOR)

         The term of any auditor of a stock company, who is in office at the
         time this Act enters into force, shall be subject to the previous
         provisions.


ARTICLE 6 (RELATION WITH OTHER ACTS)

         In case where other Acts cite the provisions of the previous Commercial
         Act at the time this Act enters into force, if the provisions
         corresponding to them are included in this Act, such corresponding
         provisions of this Act shall be considered to have been cited in lieu
         of the previous provisions.


         ADDENDA (Act No. 5591, Dec. 28, 1998)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on the date of its promulgation:
         Provided, That the amended provisions of Article 382-2 shall enter into
         force six months after its promulgation.


ARTICLE 2 (PRINCIPLES OF TRANSITIONAL MEASURES)

         Except as otherwise prescribed by this Act, this Act shall also apply
         to matters which took place before this Act enters into force:
         Provided, That it shall not affect any effect taken pursuant to the
         previous provisions.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING MERGER)


<PAGE>

         With respect to a merger effected pursuant to a merger contract
         concluded prior to the enforcement of this Act, the previous provisions
         shall continue to apply even after this Act enters into force:
         Provided, That the period of institution of an objection by creditors
         under Articles 232 and 527-5 shall apply to that publicly notified on
         or after the enforcement date of this Act.


ARTICLE 4 (TRANSITIONAL MEASURES CONCERNING APPLICATION OF PENAL PROVISIONS)

         The application of penal provisions to an act conducted prior to the
         enforcement of this Act, and to acts conducted after the enforcement of
         this Act which are subject to the previous provisions under Article 3,
         shall follow the previous provisions.


ARTICLE 5

         Omitted.


         ADDENDA (Act No. 5809, Feb. 5, 1999)


ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force six months after its promulgation.
         (Proviso Omitted.)


ARTICLES 2 THROUGH 6 Omitted.


          ADDENDA (Act No. 6086, Dec. 31, 1999)



<PAGE>

ARTICLE 1 (ENFORCEMENT DATE)

         This Act shall enter into force on the date of its promulgation.


ARTICLE 2 (PRINCIPLES OF TRANSITIONAL MEASURES)

         Except as otherwise provided, this Act shall also apply to the matters
         which occurred before the enforcement of this Act: Provided, That this
         shall be without prejudice to any effect given by the previous
         provisions.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING DIVISION)

         The previous provisions shall continue to govern even after the
         enforcement of this Act with respect to the division of a corporation
         effected under a division agreement that was concluded before this Act
         enters into force.


ARTICLE 4

         Omitted.


         ADDENDA (Act No. 6488, Jul. 24, 2001)

         (1) (Enforcement Date) This Act shall enter into force on the date of
         its promulgation.

         (2) (Application Examples for Request for Action Cost by Shareholders
         Instituting Action Who Won the Case) The amended provisions of Article
         405 (1) shall apply also to the pending case at the court at the time
         of enforcement of this Act.


<PAGE>

         (3) (General Transitional Measures) This Act shall apply also to the
         case occurred prior to the enforcement of this Act unless otherwise
         prescribed by this Act: Provided, That this shall not affect the
         validity accrued by the previous provisions.


         ADDENDUM (Act No. 6545, Dec. 29, 2001)

         This Act shall enter into force on July 1, 2002.








</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.5
<SEQUENCE>15
<FILENAME>u98617exv12w5.txt
<DESCRIPTION>EX-12.5 KOREAN SECURITIES AND EXCHANGE ACT
<TEXT>
<PAGE>

                                                                  Exhibit 12.5



SECURITIES AND EXCHANGE ACT

- --------------------------------------------------------------------------------

    Wholly amended By            1976.12.22                 Act No. 2920
    Amended By                   1982.3.29                  Act No. 3541
    Amended By                   1987.11.28                 Act No. 3945
    Amended By                   1991.12.31                 Act No. 4469
    Amended By                   1994.1.5                   Act No. 4701
    Amended By                   1995.12.29                 Act No. 5041
    Amended By                   1997.1.13                  Act No. 5254
    Amended By                   1997.12.13                 Act No. 5423
    Amended By                   1998.1.8                   Act No. 5498
    Amended By                   1998.2.24                  Act No. 5521
    Amended By                   1998.5.25                  Act No. 5539
    Amended By                   1998.9.16                  Act No. 5559
    Amended By                   1998.12.28                 Act No. 5591
    Amended By                   1999.2.1                   Act No. 5736
    Amended By                   1999.5.24                  Act No. 5982
    Amended By                   2000.1.21                  Act No. 6176
    Amended By                   2001.3.28                  Act No. 6423
    Amended By                   2002.1.26                  Act No. 6623
    Amended By                   2002.4.27                  Act No. 6695


                          CHAPTER I GENERAL PROVISIONS

ARTICLE 1 (PURPOSE)

         The purpose of this Act is to contribute to the development of national
         economy by

<PAGE>


         attaining wide and orderly circulation of securities, and by protecting
         investors through fair issuance, purchase, sale or other transactions
         of securities.


ARTICLE 2 (DEFINITIONS)


         (1) The term "securities" in this Act shall mean any of the following
         subparagraphs: (Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254,
         Jan. 13, 1997)

         1.Government bonds;

         2.Municipal bonds;

         3.Bonds issued by a corporation which is established under a special
         Act;

         4.Corporate bonds;

         5.Certificates of contribution issued by a corporation which is
         established under a special Act;

         6.Stock certificates, or instruments which represent preemptive right;

         7.Certificates or instruments issued by a foreign corporation, etc.,
         which have the same nature as those referred to in subparagraphs 1
         through 6 of this paragraph;

         8.Securities depository receipts which a person designated by the
         Presidential Decree issues based on underlying certificates or
         instruments issued by a foreign corporation, etc.; and

         9.Other certificates or instruments designated by the Presidential
         Decree, which are similar or related to those referred to in
         subparagraphs 1 through 8 of this paragraph.

<PAGE>

         (2) Such right as shall be represented by the securities referred to in
         each subparagraph of paragraph (1) shall be regarded as such
         securities, even before certificates of such securities have been
         issued with respect to such rights.

         (3) The term "public offering of new securities" in this Act shall mean
         a solicitation of an offer to acquire securities which are issued newly
         under the Presidential Decree. (Amended by Act No. 4469, Dec. 31, 1991;
         Act No. 5254, Jan. 13, 1997)

         (4) The term "public offering of outstanding securities" in this Act
         shall mean an offer to sell outstanding securities or a solicitation of
         an offer to buy those under the Presidential Decree. (Amended by Act
         No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997)

         (5) The term "issuer" in this Act shall mean a person who has issued or
         intends to issue any securities: Provided, That in issuing securities
         prescribed in paragraph (1) 8, the term "issuer" shall mean a person
         who has issued or intends to issue certificates or instruments which
         are the basis of such issuance. (Amended by Act No. 5254, Jan. 13,
         1997)

         (6) The term "underwriting" in this Act shall mean an act which falls
         under any of the following subparagraphs:

         1.To acquire from an issuer all or a part of securities with a view to
         distributing, in connection with issuance of the securities;

         2.To make a contract to acquire the unsold portion of securities with
         an issuer in connection with issuance of the securities, in a case
         where there is no one else to acquire it; and

         3.To make arrangements on behalf of an issuer for a public offering of
         new or outstanding securities, or to participate directly or indirectly
         in a public offering of new or outstanding securities in part, for the
         purpose of a commission or reward.


<PAGE>

         (7) The term "underwriter" in this Act shall mean any person who
         conducts one of the activities referred to in subparagraphs of
         paragraph (6). (Amended by Act No. 5423, Dec. 13, 1997)

         (8) The term "securities business" in this Act shall mean any business
         which falls under any of the following subparagraphs: (Amended by Act
         No. 5254, Jan. 13, 1997; Act No. 6423, Mar. 28, 2001)

         1.To buy and sell securities;

         2.To buy and sell securities on consignment;

         3.To act as an intermediary or an agent with respect to purchase and
         sale of securities (excluding what falls under subparagraph 8);

         4.To act as an intermediary or agent with respect to an entrustment of
         sale and purchase transactions to be executed on a securities market,
         Association brokerage market, or market in foreign country similar to
         those;

         5.To underwrite securities;

         6.To make a public offering of outstanding securities;

         7.To arrange for a public offering of new or outstanding securities;
         and

         8.To act as an intermediary or an agent with respect to the sale and
         purchase of securities and make other sale and purchase of securities
         necessary for the relevant intermediary business according to
         quotations falling under each of the following items for listed stocks
         or other stocks registered with the Korea Securities Dealers
         Association (hereinafter referred to as the "Association") established
         under Article 162, making use of information communications networks
         and electronic data-processing equipment, on behalf of many persons at
         the same

<PAGE>

         time:

         (a) Final quotations of the relevant stocks published by the securities
         market or Association brokerage market; and

         (b) The single price determined in such manner as prescribed by the
         Ordinance of the Ministry of Finance and Economy.

         (9) The term "securities company" in this Act means a company which
         conducts securities business in accordance with this Act.

         (10) The term "investment advisory business" and the term
         "discretionary investment business" in this Act mean the business
         falling under each of the following subparagraphs: (Amended by Act No.
         6176, Jan. 21, 2000)

         1.The investment advisory business: The business of offering advice
         orally or in writing, or in other manner with respect to the judgment
         of value of securities or investment in securities (referring to the
         judgment on kinds, items, quantity, and price of securities subject to
         investment, and the classification, methods and time of trading such
         securities; hereinafter the same shall apply): Provided, That any
         advice that is made through publications, etc. issued for many and
         unspecified persons and is prescribed by the Presidential Decree shall
         be excluded; and

         2.The discretionary investment business: The business of making
         investments for customers after being entrusted by such customers with
         the whole or part of the investment judgment that is made based on the
         analysis of the value of securities, etc.

         (11) The term "investment advisory company" in this Act shall mean a
         company which conducts the investment advisory business or investment
         discretionary business under this Act. (Amended by Act No. 3945, Nov.
         28, 1987; Act No. 5736, Feb. 1, 1999)

<PAGE>

         (12) The term "securities market" in this Act shall mean a market which
         is established by the Korea Stock Exchange (hereinafter referred to as
         the "Stock Exchange") under the provisions of Article 71 for sale and
         purchase transaction of securities.

         (13) The terms "listed corporation", "unlisted corporation",
         "stock-listed corporation" and "stock-unlisted corporation" in this Act
         shall mean: (Amended by Act No. 5736, Feb. 1, 1999)

         1.Listed corporation: issuer of securities listed on the securities
         market;

         2.Unlisted corporation: issuer of securities not listed on the
         securities market;

         3.Stock-listed corporation: corporation which has issued stocks listed
         on the securities market; and

         4.Stock-unlisted corporation: corporation which has issued stocks not
         listed on the securities market.

         (14) The term "Association brokerage market" in this Act shall mean a
         market operated by the Association for the purpose of brokering sale
         and purchase transactions of securities prescribed by the Presidential
         Decree. (Newly Inserted by Act No. 5254, Jan. 13, 1997; Act No. 6423,
         Mar. 28, 2001)

         (15) The term "Association-registered corporation" in this Act shall
         mean a corporation which is registered with the Association pursuant to
         Article 172-2. (Newly Inserted by Act No. 5254, Jan. 13, 1997)

         (16) The term "foreign corporation" in this Act shall mean a foreign
         government, foreign local government, foreign public institution,
         foreign enterprise established under foreign Acts and subordinate
         statutes, international finance organization established under a
         treaty, or person who is designated by the Ordinance of the Ministry of
         Finance and Economy. (Newly Inserted by Act No. 5254, Jan. 13, 1997;
         Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998)


<PAGE>


         (17) The term "securities-related institution" in this Act shall mean:
         (Amended by Act No. 5736, Feb. 1, 1999)

         1.An institution which has been established, licensed to do operations
         or business, or registered under this Act;

         2.A management company or trustee company under the Securities
         Investment Trust Business Act; and

         3.An asset management company or a custodian under the Mutual Funds
         Act.

         (18) The term "employee stock ownership association" in this Act shall
         mean an organization created after satisfying requirements prescribed
         by the Presidential Decree for the purpose of promoting the welfare of
         employees and enhancing their economic status through the management of
         stocks acquired by such employees of any stock-listed corporation, any
         Association-registered corporation, or any corporation, registered
         under Article 3, which intends to list newly its stock certificates.
         (Newly Inserted by Act No. 5254, Jan. 13, 1997; Act No. 6176, Jan. 21,
         2000; Act No. 6423, Mar. 28, 2001)

         (19) The term "outside director" in this Act shall mean a director who
         does not engage in the regular business of the relevant company and is
         selected and appointed under Article 54-5 or 191-16. (Newly Inserted by
         Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001)


ARTICLE 2-2 (FICTION OF SECURITIES INDEX AS SECURITIES)


         (1) Stockprice index or other securities index which indicate
         comprehensively the price levels of many types of stock certificates or
         other securities according to


<PAGE>

         their classification and which is designated by the Stock Exchange
         (hereinafter referred to as "securities index") shall be deemed
         securities.

         (2) Any transactions which make an agreement of receiving and giving
         money calculated by the margin between the value of securities index in
         advance determined by parties according to the standards and procedures
         as determined by the Stock Exchange and the value of securities index
         which actually arises at a given time in the future in respect of
         securities index (hereinafter referred to as "futures transaction of
         securities index") shall be deemed sales transaction of securities.

         (3) In applying this Act to futures transactions of securities index,
         the value of securities index shall be securities prices.
         [This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]


                 CHAPTER II REGISTRATION OF ISSUER OF SECURITIES

ARTICLE 3 (REGISTRATION OF ISSUER OF SECURITIES)

         Any issuer who falls under any of the following subparagraphs shall be
         registered with the Financial Supervisory Commission so as to provide
         for a fair issuance of securities and public disclosure of information
         as to a business corporation: Provided, That the same shall not apply
         to issuers of securities as prescribed in Article 2 (1) 1 through 3, 4
         (limited to corporate bonds as prescribed by the Presidential Decree),
         and 5, and of such other securities as determined by the Presidential
         Decree: (Amended by Act No. 3541, Mar. 29, 1982; Act No. 3945, Nov. 28,
         1987; Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No.
         5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1,
         1999; Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001; Act No.
         6623, Jan. 26, 2002)

<PAGE>

         1.Deleted; (by Act No. 6623, Jan. 26, 2002)

         2.A corporation that is neither Association-registered corporation nor
         listed corporation, which intends to make a public offering of new or
         outstanding securities;

         3.A corporation that is neither Association-registered corporation nor
         listed corporation, which intends to merge with a stock-listed
         corporation or an Association-registered corporation;

         4.Deleted; (by Act No. 6623, Jan. 26, 2002)

         5.A corporation under incorporation which intends to make a public
         offering of new securities; and

         6.A corporation which intends to grant the stock option pursuant to
         Article 189-4.


ARTICLE 4 (DOCUMENTS FOR REGISTRATION)

         An issuer of securities who applies for the registration pursuant to
         the provisions of Article 3 shall file documents as determined by the
         Financial Supervisory Commission such as general situations and
         property conditions of the company, with the Financial Supervisory
         Commission. In case where any significant matters stated in the filed
         documents are modified, such information shall also be filed with the
         Financial Supervisory Commission. (Amended by Act No. 4469, Dec. 31,
         1991; Act No. 5498, Jan. 8, 1998)


ARTICLE 5 (DISCLOSURE OF DOCUMENTS FILED FOR REGISTRATION)

         The Financial Supervisory Commission may offer the documents filed
         pursuant to

<PAGE>

         Article 4 for public inspection. (Amended by Act No. 5498, Jan. 8,
         1998)


ARTICLE 6 (ADMINISTRATION OF REGISTERED CORPORATION)

         With respect to a corporation which has been registered with the
         Financial Supervisory Commission pursuant to the provisions of Article
         3 (hereinafter referred to as a "registered corporation"), the
         Financial Supervisory Commission may prescribe the criteria for sound
         management of the registered corporation such as financing the
         corporate and improving financial structure, and make necessary
         recommendations. (Amended by Act No. 5498, Jan. 8, 1998) [This Article
         Wholly Amended by Act No. 3541, Mar. 29, 1982]


                       CHAPTER III REGISTRATION STATEMENT

ARTICLE 7 (SCOPE OF APPLICATION)

         No provisions of this Chapter shall apply to the securities referred to
         in Article 2 (1) 1 through 3 (including bonds that are deemed bonds of
         subparagraph 3 in other Acts and subordinate statutes, but excluding
         bonds prescribed by the Presidential Decree) and 5 and to such other
         securities as determined by the Presidential Decree. (Amended by Act
         No. 4469, Dec. 31, 1991; Act No. 6423, Mar. 28, 2001)


ARTICLE 8 (REGISTRATION OF PUBLIC OFFERING)


         (1) Where the total value of a public offering of new or outstanding
         securities, which is calculated as prescribed by the Ordinance of the
         Ministry of Finance and Economy, is not less than the amount prescribed
         by the Ordinance of the Ministry of Finance and Economy, the public
         offering of such securities may not be made


<PAGE>

         unless the issuer files a registration statement on such securities
         with the Financial Supervisory Commission and the registration
         statement is accepted by the Financial Supervisory Commission:
         Provided, That if the issuer determines a period in which he is to
         issue securities pursuant to the Ordinance of the Ministry of Finance
         and Economy, and files en bloc a registration statement of securities
         to be offered publicly during the period (hereinafter referred to as
         "shelf registration statement") with the Financial Supervisory
         Commission, and the shelf registration statement is accepted by the
         Financial Supervisory Commission, he shall not be required to file
         separately the registration statement on securities to be offered
         publicly in such period. (Amended by Act No. 4469, Dec. 31, 1991; Act
         No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May
         25, 1998; Act No. 6423, Mar. 28, 2001)

         (2) Matters on the predictions or prospects for the issuer's future
         financial status or results of operation which fall under any of the
         following subparagraphs (hereinafter referred to as "predicted
         information") may be entered or indicated in a registration statement
         under paragraph (1). In this case, the entry or indication of predicted
         information shall be made through the methods as prescribed in Article
         14 (2) 1, 2 and 4: (Newly Inserted by Act No. 5736, Feb. 1, 1999)

         1.Matters on the issuer's results of operation such as size in sales
         and revenues, or other predictions or prospects for results of
         operation;

         2.Matters on the predictions or prospects for the issuer's financial
         status such as the size in capital stock and funds flows;

         3.Matters on the issuer's results of operation or changes in financial
         status, and targeted levels at a certain point due to the occurrence of
         a particular event or the establishment of a particular plan; and

         4.Other matters on the predictions or prospects for the issuer's future
         as determined by the Presidential Decree.

         (3) In filing a registration under paragraph (1), where the matters to
         be entered in

<PAGE>

         such registration or accompanying documents are the same as those which
         have already been filed, the Commission may allow the issuer to
         substitute the documents referring to the same information which has
         already been filed for the above documents. (Amended by Act No. 5423,
         Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000)

         (4) Matters necessary for the matters to be stated in the registration
         statement or accompanying documents referred to in paragraphs (1)
         through (3) shall be determined by the Presidential Decree. (Newly
         Inserted by Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998;
         Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000)


ARTICLE 9 (EFFECTIVE DATE OF REGISTRATION STATEMENT, ETC.)


         (1) A statement pursuant to the provisions of Article 8 (1)
         (hereinafter referred to as a "registration statement") shall come into
         force on such date as the time period prescribed by the Ordinance of
         the Ministry of Finance and Economy elapses after the receipt thereof
         by the Financial Supervisory Commission. (Amended by Act No. 5254, Jan.
         13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998)

         (2) The effect taken pursuant to the provisions of paragraph (1) shall
         not be construed as assuring that the truth or the accuracy of such
         matters stated in the registration statement has been recognized on its
         face value or that the Government has guaranteed or approved the value
         of the securities specified in the registration statement. (Amended by
         Act No. 5498, Jan. 8, 1998)

         (3) In case where an issuer of securities intends to withdraw a
         registration statement of securities, he shall file a registration
         statement on withdrawal with the Financial Supervisory Commission
         before such registration statement takes effect. (Newly Inserted by Act
         No. 4469, Dec. 31, 1991; Act No. 5423, Dec. 13, 1997; Act No. 5498,
         Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000)

<PAGE>

         [This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]


ARTICLE 10 (RESTRICTIONS ON TRANSACTIONS)


         (1) In case where there is an offer to acquire or purchase securities,
         unless a registration statement has taken effect pursuant to the
         provisions of Article 9, no issuer or seller of securities specified
         therein nor his agent shall accept such offer. (Amended by Act No.
         3541, Mar. 29, 1982)

         (2) No issuer who filed a shelf registration statement pursuant to the
         proviso of Article 8 (1), shall accept any offer for acquisition or
         purchase of securities, unless he files additional documents of shelf
         registration statement determined by the Presidential Decree at each
         time he makes a public offering of new or outstanding securities.
         (Newly Inserted by Act No. 4469, Dec. 31, 1991; Act No. 5423, Dec. 13,
         1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000)


ARTICLE 11 (AMENDMENT STATEMENT)


         (1) If it appears to the Financial Supervisory Commission that a
         registration statement is incomplete in its form or inadequate in any
         material information required to be stated therein, the Financial
         Supervisory Commission may, with presenting the reasons thereof, issue
         an order to file an amendment statement. (Amended by Act No. 5498, Jan.
         8, 1998)

         (2) In case where an order is issued pursuant to the provisions of
         paragraph (1), the registration statement concerned shall be construed
         not to be received by the Commission after the date on which the order
         is issued.

         (3) A person who has filed a registration statement may file an
         amendment

<PAGE>

         statement, if there occurs any modification in matters entered in the
         registration statement before the day of subscription as determined by
         the statement commences. In this case, if important matters as
         determined by the Ordinance of the Ministry of Finance and Economy are
         modified, the amendment statement thereof shall be filed without fail.
         (Amended by Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991;
         Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998)

         (4) A person who filed a shelf registration statement as prescribed in
         the proviso of Article 8 (1), notwithstanding the provisions of
         paragraph (3), may file an amendment statement before the predetermined
         issue period is terminated. In this case, the predetermined issue
         amount and period may not be revised. (Newly Inserted by Act No. 4469,
         Dec. 31, 1991)

         (5) If an amendment statement is filed pursuant to the provisions of
         paragraph (1), (3) or (4), a registration statement on securities shall
         be regarded as filed and received on the day of receipt of the
         amendment statement. (Amended by Act No. 4469, Dec. 31, 1991)


ARTICLE 12 (PREPARATION AND DISCLOSURE OF PROSPECTUS)


         (1) When an issuer of securities makes a public offering of new or
         outstanding securities pursuant to Article 8, such issuer shall prepare
         a prospectus under the conditions as determined by the Presidential
         Decree, and make it available for public inspection at a place
         determined by the Ordinance of the Ministry of Finance and Economy.
         (Amended by Act No. 3541, Mar. 29, 1982; Act No. 3945, Nov. 28, 1987;
         Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5423,
         Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000)

         (2) In the prospectus as prescribed in paragraph (1), particulars
         different from the contents mentioned in the registration statement
         (including additional documents of

<PAGE>

         shelf registration statement as prescribed in Article 10 (2); hereafter
         the same shall apply in this Chapter) shall not be mentioned, or
         matters to be entered in the registration statement shall not be
         omitted: Provided, That the same shall not apply to the matters as
         prescribed by the Presidential Decree from among matters which are not
         appropriate for being offered for public inspection, considering
         balance between interests of keeping secret in management of business
         and protection of investors. (Amended by Act No. 4469, Dec. 31, 1991;
         Act No. 5254, Jan. 13, 1997)


ARTICLE 13 (JUSTIFIABLE USE OF PROSPECTUS)


         (1) No one shall be permitted to allow any other person to acquire
         securities the registration of which has taken effect or shall sell
         such securities to such other person before a prospectus prepared in
         accordance with the provisions of Article 12 is, upon a request by the
         other person, given to him. In this case, when the prospectus is given
         in the form of digitally recorded document in accordance with the
         provisions of Article 194-2, such prospectus shall be deemed to be
         given when requirements falling under each of the following
         subparagraphs are satisfied:

         1.It is required that a person to receive or be transmitted with a
         digitally recorded document (hereinafter referred to as the "recipient
         of digitally recorded document") agree to the receipt or the
         transmission of a prospectus in the form of the digitally recorded
         document;

         2.It is required that the recipient of digitally recorded document
         designate the kind of an electronically transferable media through and
         a place at which he receives or is transmitted with the digitally
         recorded document;

         3.It is required to confirm that the recipient of digitally recorded
         document has received or has been transmitted with a digitally recorded
         document; and

         4.The digitally recorded document is required to be identical in
         content with the

<PAGE>

         prospectus paper.

         (2) Where any person intends to induce subscriptions for new or
         outstanding securities subject to the registration under the provisions
         of Article 8 for the purpose of executing a public offering or other
         transactions thereof, he shall induce such subscriptions in a manner
         falling under any of the following subparagraphs:

         1.A manner in which the prospectus under the provisions of Article 12
         is used after the registration of securities comes into force under the
         provisions of Article 9 (1);

         2.A manner in which an issuer uses a preliminary prospectus (referring
         to the prospectus additionally indicating the fact that the
         registration has yet to come into force) prepared on the conditions as
         prescribed by the Presidential Decree before the registration of
         securities comes into force after such registration has been accepted
         under the provisions of Article 9 (1); and

         3.A manner in which an issuer uses a simple prospectus (referring to a
         document, a digitally recorded document and other devices or
         indications similar to them that omit part of matters or include
         extracted matters from among the matters to be entered in the
         prospectus statement) prepared on the conditions as prescribed by the
         Presidential Decree through ads making use of newspapers, broadcasts
         and magazines, etc., handbooks, publicity leaflets, or electronically
         transferable media after his registration of securities is accepted
         under the provisons of Article 9 (1).
         [This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]


ARTICLE 14 (LIABILITIES FOR COMPENSATION DUE TO FALSE STATEMENTS)


         (1) If a purchaser of securities sustains damage because a registration
         statement or a prospectus (including a preliminary prospectus and a
         simple prospectus; hereafter in this Article the same shall apply) of
         securities as prescribed in Article 12 includes false statements or
         indications or fails to state or indicate important

<PAGE>

         matters, the following persons shall be liable to compensate for the
         damage: Provided, That the same shall not apply where a person who may
         be liable for compensation proves that he could not know such false
         facts or omissions of that prospectus in spite of his exercise of due
         diligence, or where the purchaser of such securities has known the fact
         at the time of his offering to acquire them: (Amended by Act No. 6176,
         Jan. 21, 2000)

         1.A registrant under the registration statement concerned and directors
         of the corporation concerned at the time of registration (if the
         registration statement is filed before the corporation is incorporated,
         its promoter);

         2.Certified public accountants, appraisers or persons specialized in
         credit ratings who certified or signed that matters stated in the
         registration statement or documents attached thereto are true or
         correct;

         3.A person who has made a contract to underwrite the securities with
         the issuer;

         4.A person who has prepared or delivered the prospectus; and

         5.A holder of outstanding securities offered for sale at the time of
         registration for public offering of outstanding securities.

         (2) Where predicted information is entered or indicated through the
         following methods, any person falling under any subparagraph of
         paragraph (1), notwithstanding the provisions of paragraph (1), shall
         not be liable to compensate for the damage concerned: Provided, That
         this shall not apply where the purchaser of securities does not know
         the fact that there are false entries or indications in predicted
         information or that material matters are not entered or indicated at
         the time of his offering to acquire them, and where he proves that any
         person falling under any subparagraph of paragraph (1) was by intention
         or by gross negligence responsible for the entry or indication:

         1.The entry or indication concerned shall specify that it is predicted
         information;

<PAGE>

         2.The basis for the assumption or judgement for predictions or
         prospects shall be specified;

         3.The entry or indication concerned shall be faithfully made on the
         basis of rational foundations or assumptions; and

         4.A warning phrase that predicted values may differ from actual results
         shall be specified in the entry or indication concerned.

         (3) The provisions of paragraph (2) shall not apply where a corporation
         other than stock-listed corporations and Association-registered
         corporations submits a registration statement of securities for the
         first time for the public offering of new or outstanding securities.
         [This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]


ARTICLE 15 (AMOUNT OF LIABILITY TO BE COMPENSATED)


         (1) The amount to be compensated for damage pursuant to the provisions
         of Article 14 shall be the difference between the amount actually paid
         by the claimant for the acquisition of securities and the amount which
         falls under any of the following subparagraphs:

         1.The market price of securities at the time of the closing of oral
         proceedings, if a lawsuit is entered against the securities concerned
         (in case where no market price is available, an estimated price at
         which the securities would be disposed of); and

         2.The price at which the securities were disposed of, in case where
         such disposition of securities has been made prior to the time of the
         closing of oral proceedings referred to in subparagraph 1 of this
         paragraph.


<PAGE>

         (2) Notwithstanding the provisions of paragraph (1), where a person
         liable for compensation for damage pursuant to the provisions of
         Article 14 proves that a claimant has sustained all or part of the
         damage without regard to any false statement or indication or any
         omission of the entry or indication of material matters, he is not
         bound to compensate for damage of such part. (Newly Inserted by Act No.
         5254, Jan. 13, 1997)


ARTICLE 16 (EXTINCTION OF CLAIMS)

         The compensation liabilities for damage pursuant to the provisions of
         Article 14 shall be extinguished, unless the claimant exercises such
         right within one year from the date on which he discovers the fact or
         within three years from the time when a registration statement has
         taken effect.


ARTICLE 17 (AFTER-REPORT)

         An issuer of securities specified in a registration statement then in
         effect shall file with the Financial Supervisory Commission a report on
         results of public offering of new or outstanding securities under the
         conditions as determined by the Financial Supervisory Commission.
         (Amended by Act No. 3541, Mar. 29, 1982; Act No. 5423, Dec. 13, 1997;
         Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 6176,
         Jan. 21, 2000)


ARTICLE 18 (DISCLOSURE OF REGISTRATION STATEMENT AND AFTER-REPORT)

         A registration statement of securities and an after-report pursuant to
         Article 17 (hereinafter referred to as an "after-report") shall be kept
         in the Financial Supervisory Commission and made available for public
         inspection under the conditions as prescribed by the Presidential
         Decree: Provided, That the same shall not apply to the matters as
         prescribed by the Presidential Decree from among

<PAGE>

         matters which are not appropriate for being offered for public
         inspection, considering balance between interests of keeping secret in
         management of business and protection of investors. (Amended by Act No.
         5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998)


ARTICLE 18-2 (PUBLIC OFFERING WITHOUT FILING REGISTRATION STATEMENT)

         Any issuer who makes a public offering of new or outstanding securities
         without filing a registration statement in accordance with the
         provisions of Article 9 (1) shall disclose matters concerning his
         financial standing and take measures prescribed by the Presidential
         Decree to protect investors.
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]


ARTICLE 19 (REPORT AND INVESTIGATION)


         (1) The Financial Supervisory Commission, if necessary in the public
         interest or for protection of investors, may order a registrant under
         the registration statement, an issuer of securities, an underwriter
         thereof, and any other related persons to file a report or materials
         for reference, or may have the Governor of the Financial Supervisory
         Service established under the Act on the Establishment, etc. of
         Financial Supervisory Organization (hereinafter referred to as the
         "Financial Supervisory Service") investigate account books, documents
         and any other related materials of such registrant, issuer, underwriter
         and other related persons. (Amended by Act No. 5254, Jan. 13, 1997; Act
         No. 5498, Jan. 8, 1998)

         (2) A person who investigates pursuant to the provisions of paragraph
         (1) shall carry along a certificate which proves his authority to
         investigate and shall present such certificate to persons concerned.
         (Amended by Act No. 5254, Jan. 13, 1997)

<PAGE>

ARTICLE 20 (DISPOSITION RIGHT OF FINANCIAL SUPERVISORY COMMISSION)

         In the case falling under any of the following subparagraphs, the
         Financial Supervisory Commission, after showing reason therefor and
         making a public notice of such fact, order the issuer of securities
         concerned to make an amendment, and if necessary, the Financial
         Supervisory Commission may suspend or prohibit the issuance of such
         securities, public offering of new or outstanding securities or other
         transactions with respect thereto or may take measures as prescribed by
         the Presidential Decree. In this case, the Financial Supervisory
         Commission may determine procedures and criteria necessary for taking
         measures against the issuer of securities: (Amended by Act No. 5254,
         Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 6176, Jan. 21, 2000;
         Act No. 6423, Mar. 28, 2001)

         1.In case that a registration statement or an after-report is not
         submitted or such statement or such report contains false statements or
         omits important matters;

         2.In case that a prospectus does not comply with the provisions of
         Article 12 or 13;

         3.In case that a violation of the provisions of Article 13 (2) is
         committed with respect to the public offering of new or outstanding
         securities and other transactions of securities through a preliminary
         prospectus or a simple prospectus; and

         4.In case that a violation of the provisions of Article 18-2 is
         committed.


                     CHAPTER IV TENDER OFFER FOR SECURITIES

ARTICLE 21 (APPLICABLE OBJECT OF TENDER OFFER)

<PAGE>


         (1) A person who intends to acquire voting stocks or any other
         securities as prescribed by the Presidential Decree (hereinafter
         referred to as "stocks, etc.") through purchase, exchange, bid or any
         other acquisition by transfer (hereafter referred to as "purchase,
         etc." in this Chapter) from persons of not less than the number as
         prescribed by the Presidential Decree outside the securities market or
         Association brokerage market during the period as prescribed by the
         Presidential Decree shall acquire the stocks, etc. through tender
         offer, in case where the total number of the stocks, etc. held
         (including the cases prescribed by the Presidential Decree as owning or
         its equivalent; hereafter the same shall apply in this Chapter and
         Article 200-2) by the person himself and specially related persons
         (this means the specially related person as prescribed by the
         Presidential Decree; hereinafter the same shall apply) after the
         purchase, etc. is 5/100 or more of the total number of the stocks, etc.
         (including the case where the person himself and specially related
         persons who have acquired 5/100 or more of the total number of the
         stocks, etc. make purchase, etc. of the stocks, etc.): Provided, That
         the same shall not apply with respect to purchase, etc. as prescribed
         by the Presidential Decree, considering the type thereof and other
         circumstances.

         (2) Deleted. (by Act No. 5521, Feb. 24, 1998)

         (3) In this Chapter, the term "tender offer" means making an offer to
         buy stocks, etc. (including exchange with other securities; hereafter
         the same shall apply in this Chapter) or a solicitation of an offer to
         sell stocks, etc. (including exchange with other securities; hereafter
         the same shall apply in this Chapter) against many and unspecified
         persons, and buying them outside the securities market and Association
         brokerage market.

         (4) Number of stocks, etc. and total number of stocks, etc. pursuant to
         the provisions of paragraph (1) shall be the number calculated by the
         method as prescribed by the Ordinance of the Ministry of Finance and
         Economy. (Amended by Act No. 5521, Feb. 24, 1998; Act No. 5539, May 25,
         1998)


<PAGE>

         (5) The term "person handling tender offer affairs" means a person in
         charge of keeping in custody stocks, etc. to be purchased, paying funds
         necessary for making tender offer or offering securities subject to a
         swap and handling administrative affairs related to tender offer on
         behalf of any person who intends to make tender offer. In this case,
         any person qualified to act as such agent shall be limited to a
         securities company. (Newly Inserted by Act No. 6423, Mar. 28, 2001)
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLE 21-2 (PUBLICATION OF TENDER OFFER AND SUBMISSION OF TENDER OFFER
STATEMENT)


         (1) Any person who intends to make tender offer shall publish matters
         falling under each of the following subparagraphs (hereinafter referred
         to as "publication of tender offer") under the conditions as prescribed
         by the Presidential Decree:

         1.A person who intends to make tender offer;

         2.A person who issues stocks, etc. subject to tender offer;

         3.The objective of tender offer;

         4.Kinds and numbers of stocks, etc. subject to tender offer;

         5.The period of tender offer and tender offer conditions such as
         prices, settlement date, etc.; and

         6.Details of purchase funds and other matters prescribed by the
         Presidential Decree.

         (2) Any person who has published his tender offer (hereinafter referred
         to as "tender offerer" shall file a statement containing matters
         falling under each of the following subparagraphs with the Financial
         Supervisory Commission (hereinafter referred to as a "tender offer
         statement") on the date on which his tender offer is


<PAGE>

         published (hereinafter referred to as the "publication date of tender
         offer") under the conditions as prescribed by the Presidential Decree:
         Provided, That in the event that the publication date of tender offer
         falls under any holiday or any other day prescribed by the Financial
         Supervisory Commission, the tender offer statement may be submitted on
         the day next thereto:

         1.Matters concerning tender offerer and specially related persons;

         2.Issuers of stocks, etc. subject to tender offer;

         3.Objective of tender offer;

         4.Kinds and numbers of stocks, etc. subject to tender offer;

         5.Period of tender offer and tender offer conditions such as prices and
         settlement date, etc.;

         6.In the event a contract exists that aims for the purchase of stocks,
         etc. without depending on tender offer after the publication date of
         tender offer, details of such contract; and

         7.Details of purchase funds and other matters prescribed by the
         Presidential decree.

         (3) The period of tender offer referred to in paragraphs (1) and (2)
         shall be set within the scope of the period prescribed by the
         Presidential Decree.

         (4) The provisions of Article 8 (2) shall apply mutatis mutandis to the
         tender offer statement.
         [This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]


ARTICLE 21-3 (RESTRICTIONS ON VOTING RIGHTS, ETC.)


<PAGE>

         In case where a person has made purchase, etc. of stocks, etc. in
         violation of the provisions of Article 21 (1) or 21-2 (1) and (2), he
         may not exercise the voting rights on the stocks concerned (including
         stocks which are acquired through exercise of rights related to the
         stocks, etc. concerned) during the period as prescribed by the
         Presidential Decree, and the Financial Supervisory Commission may order
         to dispose of the stocks, etc. concerned (including stocks which are
         acquired through exercise of rights related to the stocks, etc.
         concerned). (Amended by Act No. 5498, Jan. 8, 1988; Act No. 5521, Feb.
         24, 1998; Act No. 6423, Mar. 28, 2001) [This Article Newly Inserted by
         Act No. 5254, Jan. 13, 1997]


ARTICLE 22 (SUBMISSION OF COPY OF TENDER OFFER STATEMENT)

         Any tender offerer shall, when he files a tender offer statement,
         promptly send a copy thereof to each of issuers of stocks, etc. subject
         to his tender offer (referring to persons prescribed by the
         Presidential Decree in case of stocks, etc. prescribed by the
         Presidential Decree; hereafter in this Chapter the same shall apply)
         and also submit such copy to the Stock Exchange or the Association.
         [This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]


ARTICLE 23 (RESTRICTIONS ON PURCHASES BY TENDER OFFERER)


         (1) Any tender offerer (including any person handling tender offer
         affairs; hereafter in this Article and Article 24 the same shall apply)
         shall be prohibited from making any tender offer prior to the lapse of
         three days (excluding any holiday and any other day prescribed by the
         Financial Supervisory Commission in calculating the period) from the
         publication date of tender offer (referring to the next date in case of
         the date falling under the proviso of Article 21-2 (2)). (Amended by
         Act No. 6423, Mar. 28, 2001)


<PAGE>

         (2) Except for the case as prescribed by the Presidential Decree, no
         tender offerer (including a specially related person) shall, during the
         period from the date on which tender offer is permitted pursuant to
         paragraph (1) to the date on which period of tender offer expires, make
         any purchase of securities specified in the said statement by other
         means than a tender offer.

         (3) Except for the case as prescribed by the Presidential Decree, no
         person who has ever purchased stocks, etc. concerned through tender
         offer for 6 months of the past from the publication date of tender
         offer (including specially related persons) shall purchase the stocks,
         etc. concerned through tender offer. (Amended by Act No. 6423, Mar. 28,
         2001)

         (4) An issuer of stocks, etc. subject to tender offer shall not, during
         the period as referred to in paragraph (2), commit an act as prescribed
         by the Presidential Decree among the acts which may change the number
         of voting stocks.
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLE 23-2 (AMENDMENT STATEMENT AND PUBLICATION, ETC.)


         (1) Any tender offerer, in case where he intends to modify the terms
         for purchase, shall file an amendment statement by the date on which
         period of tender offer expires: Provided, That reduction of purchase
         price, decrease of number of stocks, etc. which are intended to be
         purchased, extension of payment period of purchase amount and other
         purchase conditions as prescribed by the Presidential Decree shall not
         be modified. (Amended by Act No. 5423, Dec. 13, 1997; Act No. 5539, May
         25, 1998; Act No. 6176, Jan. 21, 2000)

         (2) Any tender offerer shall, when he files an amendment statement
         under paragraph (1), promptly publish the fact and details of what is
         amended (limited to matters contained in the publication of tender
         offer). In this case, the method of making such publication shall be
         governed by the provisions of Article 21-2 (1).

<PAGE>

         (Newly Inserted by Act No. 6423, Mar. 28, 2001)

         (3) The provisions of Articles 11 (1), (2) and (5), 22, and 23 (1)
         shall apply mutatis mutandis to any tender offer statement and any
         amendment statement. (Amended by Act No. 6423, Mar. 28, 2001)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 24 (PREPARATION AND USE OF PROSPECTUS FOR TENDER OFFER)


         (1) A tender offerer, when he intends to purchase securities through
         tender offer, shall prepare a prospectus for such tender offer
         (hereinafter referred to as "prospectus for tender offer") under the
         conditions as prescribed by the Ordinance of the Ministry of Finance
         and Economy, and shall keep it at the place as prescribed by the
         Ordinance of the Ministry of Finance and Economy in order to make it
         available for public inspection. (Amended by Act No.
         5254, Jan. 13, 1997; Act No. 5539, May 25, 1998)

         (2) The provisions of Article 13 shall apply mutatis mutandis to the
         use of a prospectus for tender offer.


ARTICLE 24-2 (WITHDRAWAL OF TENDER OFFER)


         (1) A tender offerer may not withdraw a tender offer after it has been
         possible to make a tender offer pursuant to Article 23 (1): Provided,
         That in such case as prescribed by the Presidential Decree, he may
         withdraw a tender offer by the last day of the tender offer period.

         (2) In case where a tender offerer intends to withdraw a tender offer
         pursuant to paragraph (1), a withdrawal statement shall be filed with
         the Financial Supervisory


<PAGE>

         Commission and the Stock Exchange or the Association, and the contents
         thereof shall be announced publicly. (Amended by Act No. 5423, Dec. 13,
         1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No.
         6176, Jan. 21, 2000)

         (3) A person who accepts an offer to buy stocks, etc. subject to tender
         offer or gives his offer (hereinafter referred to as "tender") to sell
         them (hereinafter referred to as a "tendering stockholder"), may cancel
         such tender at any time during tender offer period. In this case, a
         tender offerer may claim damages or penalty due to cancellation of
         tender by a tendering stockholder.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 25 (PRESENTATION OF OPINION ON TENDER OFFER)

         An issuer of stocks, etc. for which a tender offer statement has been
         filed, may present his opinion on the tender offer concerned under the
         conditions as prescribed by the Presidential Decree. In this case, the
         issuer shall file a written statement describing the contents of such
         opinion without delay with the Financial Supervisory Commission and,
         the Stock Exchange or the Association, as the case may be. (Amended by
         Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998)


ARTICLE 25-2 (CONDITIONS AND MANNERS OF TENDER OFFER)


         (1) A tender offerer shall purchase without delay all the stocks, etc.
         tendered according to the purchase conditions and manners stated in the
         tender offer statement on and after the day following the expiration
         date of tender offer period: Provided, That in case where the
         Presidential Decree prescribes, the same shall not apply.

         (2) Price of tender offer shall be uniform. (Amended by Act No. 5521,
         Feb. 24, 1998)

<PAGE>
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]



ARTICLE 25-3 (LIABILITY FOR DAMAGES OF TENDER OFFERER)


         (1) The provisions of Article 14 (1) shall apply mutatis mutandis to
         damages which a person falling under any of the following subparagraphs
         causes to tendering stockholder in connection with a tender offer
         statement and public notice thereof, an amendment statement and public
         notice thereof pursuant to Article 23-2, and a prospectus for tender
         offer:
         (Amended by Act No. 5736, Feb. 1, 1999)

         1.A registrant stated in a tender offer statement and an amendment
         statement thereof (including specially related persons of the
         registrant, and in case where the registrant is a juristic person,
         including directors of the juristic person) and his agent; and

         2.A person who prepares a prospectus for tender offer and his agent.

         (2) The provisions of Article 16 shall apply mutatis mutandis to
         liability for damages pursuant to the provisions of paragraph (1).
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 26 (PUBLIC NOTICE OF STATEMENTS, ETC.)

         The Financial Supervisory Commission, the Stock Exchange, and the
         Association shall keep the tender offer statement, amendment statement
         pursuant to Article 23-2, withdrawal statement pursuant to Article 242
         (2), and written statement pursuant to Article 25 for 3 years from the
         date on which such statements have been received and shall make them
         available for public inspection. (Amended by Act No. 5498, Jan. 8,
         1998; Act No. 6423, Mar. 28, 2001)
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]

<PAGE>

ARTICLE 27 (REQUEST FOR MATERIALS TO TENDER OFFERER)

         The Financial Supervisory Commission, if necessary in the public
         interest or for the protection of investors, may order any tender
         offerer, any person related to the tender offerer, and any issuer of
         the securities concerned to file a report or material for reference.
         (Amended by Act No. 5498, Jan. 8, 1998)


ARTICLE 27-2 (PROVISIONS TO BE APPLIED MUTATIS MUTANDIS)

         The provisions of Articles 17, 19 and 20 shall apply mutatis mutandis
         to the tender offer. In this case, the "Financial Supervisory
         Commission" as referred to in Article 17 shall be deemed to be the
         "Financial Supervisory Commission and Stock Exchange or Association".
         (Amended by Act No. 5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


                          CHAPTER V SECURITIES BUSINESS

                                SECTION 1 LICENSE

ARTICLE 28 (LICENSE)


         (1) A person who may be engaged in the securities business shall be a
         stock company which has obtained a license from the Financial
         Supervisory Commission by the type of business. (Amended by Act No.
         5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5982, May 24,
         1999)


<PAGE>

         (2) The type of business referred to in paragraph (1) shall be as
         follows: (Amended by Act No. 6423, Mar. 28, 2001)

         1.The business referred to in Article 2 (8) 1;

         2.The business referred to in Article 2 (8) 2 through 4;

         3.The business referred to in Article 2 (8) 5 through 7; and

         4. The business referred to in Article 2 (8) 8.

         (3) The capital of a securities company shall not be less than one
         billion won and an amount prescribed by the Presidential Decree
         according to the scope of its business. (Amended by Act No. 6176, Jan.
         21, 2000)

         (4) Deleted. (by Act No. 5254, Jan. 13, 1997)

         (5) The Financial Supervisory Commission may set conditions to a
         license referred to in paragraph (1). (Newly Inserted by Act No. 5736,
         Feb. 1, 1999; Act No. 5982, May 24, 1999)

         (6) Deleted. (by Act No. 5254, Jan. 13, 1997)

         (7) Deleted. (by Act No. 5736, Feb. 1, 1999)


ARTICLE 28-2 (SECURITIES BUSINESS BY FOREIGN SECURITIES COMPANY)


         (1) If a foreign securities company (this refers to a person engaged in
         securities business in a foreign country pursuant to the relevant Acts
         and subordinate statutes of such country; hereinafter the same shall
         apply) intends to establish a branch office or any other business
         office in order to operate the securities business in the

<PAGE>

         Republic of Korea, it shall obtain a license from the Financial
         Supervisory Commission by the type of business in accordance with the
         provisions of each subparagraph of Article 28 (2). (Amended by Act No.
         5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5982, May 24,
         1999; Act No. 6176, Jan. 21, 2000)

         (2) The business fund for any branch office or any other business
         office under the provisions of paragraph (1) shall not be less than one
         billion won and an amount prescribed by the Presidential Decree
         according to the scope of its business. (Newly Inserted by Act No.
         6176, Jan. 21, 2000)

         (3) A foreign securities company which has not obtained the license for
         establishment of branch office, etc. pursuant to paragraph (1) shall
         not conduct the securities business with domestic residents. (Newly
         Inserted by Act No. 5254, Jan. 13, 1997)

         (4) The branch office or any other business office licensed pursuant to
         paragraph (1) shall be regarded as a securities company organized under
         this Act, except for the provisions of Article 28 (3). (Amended by Act
         No. 5254, Jan. 13, 1997)

         (5) If a domestic branch office or other business office of a foreign
         securities company goes into liquidation or becomes bankrupt, its
         domestic holding assets shall be appropriated preferentially for a
         performance of obligation to a person who is the other party of
         securities transaction and has a domicile or residence in Korea at the
         time of the transaction. In this case, the scope of its domestic
         holding assets shall be determined by the Presidential Decree. (Newly
         Inserted by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan.
         13, 1997)

         (6) If it is deemed difficult to conduct the securities business
         because a domestic branch office or other business office of a foreign
         securities company has violated this Act, an order or disposition made
         under this Act, or foreign Acts and subordinate statutes, the Financial
         Supervisory Commission may revoke the business license, suspend
         business, or take other necessary measures for the purpose of
         protecting the public interest or investors. The same shall apply in
         case


<PAGE>

         where it is deemed difficult to conduct securities business of a
         domestic branch office or other business office of the foreign
         securities company by reason that the foreign securities company has
         violated foreign Acts and subordinate statutes, etc. (Newly Inserted by
         Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No. 5498,
         Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999)

         (7) The Financial Supervisory Commission may set conditions to the
         license referred to in paragraph (1). (Newly Inserted by Act No. 5736,
         Feb. 1, 1999; Act No. 5982, May 24, 1999)

         (8) Necessary matters relating to the operation of the securities
         company by a foreign securities company shall be prescribed by the
         Presidential Decree.
         [This Article Newly Inserted by Act No. 3541, Mar. 29, 1982]


ARTICLE 29 (PROVISIONS APPLICABLE TO PERSONS WHO OPERATE SECURITIES BUSINESS AS
SIDE BUSINESS)


         (1) Deleted. (by Act No. 5736, Feb. 1, 1999)

         (2) This Chapter shall apply within the scope of licensed business to a
         person who, upon license of securities business pursuant to this
         Chapter, operates securities business as a side business: Provided,
         That the provisions of Articles 28 (3), 33, 47, and 62 shall not apply.
         (Amended by Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997;
         Act No. 5736, Feb. 1, 1999)


ARTICLE 30 (APPLICATION FOR LICENSE)


         (1) Any person who intends to obtain a license pursuant to the
         provisions of Articles 28 (1) and 28-2 (1) shall file an application
         with the Financial Supervisory

<PAGE>

         Commission under the conditions as prescribed by the Presidential
         Decree.

         (2) The Financial Supervisory Commission may, where such application it
         receives under the provisions of paragraph (1) is found to be
         insufficient, ask the applicant to supplement such application. In this
         case, the period required to supplement such application shall not be
         added to the period under the provisions of Article 31 (1).
         [This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]


ARTICLE 31 (PROCEDURE OF LICENSE)


         (1) When the Financial Supervisory Commission has received the written
         application pursuant to the provisions of Article 30, it shall make a
         decision either granting or denying a license and shall notify the
         applicant of the decision in writing without delay. (Amended by Act No.
         5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5982, May 24,
         1999)

         (2) Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 32 (REQUIREMENTS FOR LICENSE)


         (1) Any person who intends to obtain a license for his securities
         business in accordance with the provisions of Article 28 (1) shall
         satisfy requirements falling under each of the following subparagraphs:

         1.He is required to satisfy requirements under the provisions of
         Article 28 (3);

         2.He is required to be able to protect investors and have manpower,
         computer installations and other physical facilities enough to carry
         out securities business he intends to run;

<PAGE>

         3.He is required to have a proper and sound business plan; and

         4.Any such major investor as prescribed by the Presidential Decree (in
         case that an investor is a corporation, this includes any person who
         virtually exercises his influence over important matters concerning the
         management of such corporation and is prescribed by the Presidential
         Decree shall be included) is required to have a sufficient investment
         capability, a sound financial standing and social credit.

         (2) Any foreign stockbroker who intends to obtain a license for the
         establishment of his branch office or other business office pursuant to
         the provisions of Article 28-2 (1) shall meet requirements falling
         under each of the following subparagraphs:

         1.He has to satisfy requirements under the provisions of Article 28-2
         (2);

         2.He has to have property, financial standing, and business capability
         enough to carry out securities business in the country and has to have
         a full and high international credit rating; and

         3.He has to meet requirements under paragraph (1) 2 and 3.

         (3) Necessary matters concerning detailed requirements for a license
         under paragraphs (1) and (2) shall be prescribed by the Presidential
         Decree.
         [This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]


ARTICLE 32-2 (PUBLIC NOTICE OF LICENSE)

         The Financial Supervisory Commission shall, when it grants a license in
         accordance with the provisions of Articles 28 (1) and 28-2 (1),
         promptly publish the grant of such license in the Official Gazette and
         make the grant of such license known to the public through computer
         communications, etc.
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

<PAGE>

                  SECTION 2 MAINTENANCE OF SOUND BUSINESS ORDER

ARTICLE 33 (ELIGIBILITY OF OFFICERS)


         (1) Deleted. (by Act No. 5736, Feb. 1, 1999)

         (2) Any person who falls under any of the following subparagraphs shall
         not be an officer of a securities company, and any officer of a
         securities company who falls under any of the following subparagraphs
         shall lose his office: (Amended by Act No. 5254, Jan. 13, 1997; Act No.
         5423, Dec. 13, 1997; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21,
         2000)

         1.A minor, an incompetent, or a quasi-incompetent;

         2.A bankrupt who has not been reinstated yet;

         3.A person who has been sentenced to imprisonment without prison labor
         or a heavier punishment or to a fine or a heavier punishment under this
         Act, foreign Acts and subordinate statutes corresponding to this Act
         (hereinafter referred to as "foreign securities Acts and subordinate
         statutes") and other Acts and subordinate statutes which are related to
         finance as prescribed by the Presidential Decree, and for whom 5 years
         have not elapsed since the execution of such punishment was terminated
         (including the cases where the execution is deemed to have been
         terminated) or exempted;

         3-2.A person who has been sentenced to the suspension of execution of
         imprisonment without prison labor or a heavier punishment and is still
         in the


<PAGE>

         suspended period of execution;

         4.Any person who was an officer or an employee of a corporation or a
         company whose business license or authorization, etc. was cancelled
         pursuant to this Act, foreign securities Acts and subordinate statutes,
         or finance-related Acts and subordinate statutes prescribed by the
         Presidential Decree (limited to any person who is directly or
         correspondingly responsible for the occurrence of the cause of
         cancellation and prescribed by the Presidential Decree), and for whom 5
         years have yet to elapse from the date on which such license or
         authorization was canceled against the corporation or the company; and

         5.A person who was discharged or dismissed from a securities company
         under this Act, foreign securities Acts and subordinate statutes, or
         other Acts and subordinate statutes which are related to finance as
         prescribed by the Presidential Decree, and for whom 5 years have not
         elapsed since the date of such discharge or dismissal.
         [This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]


ARTICLES 33-2 AND 34
         Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 35 (MATTERS TO BE AUTHORIZED)


         (1) When a securities company intends to merge with another company,
         transfer its whole business, or take over the whole business of another
         company (including equivalent cases), such securities company shall
         obtain authorization from the Financial Supervisory Commission with
         respect thereto. In this case, the provisions of Article 32 shall apply
         mutatis mutandis. (Amended by Act No. 5254, Jan. 13, 1997; Act No.
         5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24,
         1999)

<PAGE>

         (2) The Financial Supervisory Commission shall, in determining whether
         to grant such authorization under the provisions of paragraph (1), take
         into account matters prescribed by the Presidential Decree. (Newly
         Inserted by Act No. 6176, Jan. 21, 2000)


ARTICLE 36 (MATTERS TO BE REPORTED)

         In case where a securities company falls under any of the following
         subparagraphs, it shall promptly report the fact to the Financial
         Supervisory Commission: (Amended by Act No. 5254, Jan. 13, 1997; Act
         No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan.
         21, 2000)

         1.When a securities company appoints or discharges its officer;

         2.When a securities company establishes newly a branch office or other
         business office, or when it changes the location of its principal
         office, branch office or other business office, or when it suspends,
         resumes or discontinues the business of its principal office, branch
         office or other business office;

         3.When a person and such relatives of him and other specially related
         persons of him as designated by the Presidential Decree (hereinafter
         referred to as the "specially related persons"), who possess the
         largest number of stocks of a securities company, are changed;

         4.When a trade name of a securities company is changed;

         4-2.When a cause to dissolve a securities company occurs; and

         5.Cases as prescribed by the Presidential Decree, other than those
         under subparagraphs 1 through 4-2.



<PAGE>

ARTICLE 37 (PUBLIC NOTICE OF DISCONTINUANCE OF SECURITIES BUSINESS)

         When a securities company intends to discontinue its securities
         business or the business of its branch office or any other business
         office, the securities company shall print a public notice to that
         effect in 2 or more daily newspapers 3 or more times not later than 30
         days before the date of discontinuance, and shall notify directly the
         creditors who are known to the securities company at the same time.
         (Amended by Act No. 3541, Mar. 29, 1982)


ARTICLE 38
         Deleted. (by Act No. 4469, Dec. 31, 1991)


ARTICLE 39
         Deleted. (by Act No. 5423, Dec. 13, 1997)


ARTICLE 40
         Deleted. (by Act No. 6623, Jan. 26, 2002)


ARTICLE 41 (LIABILITIES FOR BRANCH OFFICE OR OTHER BUSINESS OFFICE)

         If a branch office or other business office of any securities company
         causes any damage to other persons in connection with the purchase and
         sale of securities or other securities transaction, such securities
         company shall be liable to compensate the damage to the person who
         suffers the damage.


ARTICLE 42 (RESTRICTIONS ON OFFICERS' SECURITIES TRANSACTION)

         No officer or employee of any securities company shall make or entrust
         sale and


<PAGE>

         purchase transactions of securities for his own account in whatsoever
         name except for securities savings through payroll deduction plans and
         for other cases as prescribed by the Presidential Decree.


ARTICLE 43 (MANIFESTATION OF TYPE OF TRANSACTION)

         When any securities company receives an order from any customer for a
         securities transaction, such securities company shall make clear in
         advance to such customer as to whether it will act as the other party,
         or as an intermediary, an agent, or a factor in effectuating such
         transaction.


ARTICLE 44 (PROHIBITION OF REPRESENTATION OF OTHER PARTY)

         No securities company may act as a principal and concurrently as a
         factor, an intermediary or an agent for other party with respect to the
         same securities transaction.


ARTICLE 44-2
         Deleted. (by Act No. 6423, Mar. 28, 2001)


ARTICLE 44-3 (SEPARATE DEPOSIT OF CUSTOMER DEPOSIT MONEY)


         (1) Any securities company shall deposit (including trust; hereinafter
         the same shall apply) any money deposited by customers (referring to
         the money deposited by customers in connection with sale and purchase
         and any other transactions of securities; hereinafter the same shall
         apply) separately from his property at a securities finance company
         (hereinafter referred to as a "depository institution") under Article
         145. (Amended by Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26,

<PAGE>

         2002)

         (2) Where a securities company deposits customer deposit money in a
         depository institution pursuant to paragraph (1), it shall specify that
         the money is the customers' property.

         (3) A securities company which has received customer deposit money
         (hereinafter referred to as a "depositing securities company") pursuant
         to paragraph (1) shall not transfer or offer as security customer
         deposit money deposited in a depository institution except as otherwise
         determined by the Presidential Decree, and no person shall set off or
         seize it (including provisional seizure).

         (4) A depositing securities company shall, where it falls under any of
         the following subparagraphs, withdraw customer deposit money deposited
         in a depository institution and preferentially pay it to customers. In
         this case, the securities company concerned shall publicly announce
         payment time and place of customer deposit money and other matters
         relating to the payment of customer deposit money in two daily
         newspapers or more within the period as determined by the Presidential
         Decree:

         1.Where it resolves to discontinue its business;

         2.Where it receives an order for suspension of business;

         3.Where it has its license revoked;

         4.Where it resolves to dissolve itself;

         5.Where it has been declared bankrupt; and

         6.Where any cause equivalent to those listed in subparagraphs 1 through
         5 occurs.

         (5) A depository institution, where it falls under any subparagraph of
         paragraph (4),


<PAGE>

         shall preferentially pay customer deposit money deposited to the
         depositing securities company.

         (6) A depository institution shall manage customer deposit money by the
         following methods:

         1.Purchase of Government bonds and municipal bonds;

         2.Purchase of bonds whose payment is guaranteed by the Government,
         local governments or financial institutions; and

         3.Other methods recognized as being capable of safely managing customer
         deposit money, as determined by the Presidential Decree.

         (7) The scope of customer deposit money to be deposited by a securities
         company in a depository institution pursuant to paragraph (1), the
         ratio to be deposited, matters relating to withdrawal of customer
         deposit money, matters on the management of customer deposit money by a
         depository institution or other matters necessary for the depositing of
         customer deposit money shall be determined by the Presidential decree.
         In this case, the ratio to be deposited may be otherwise determined by
         securities company taking into account the securities company's
         financial status, etc.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 44-4 (DEPOSITING OF SECURITIES, ETC. DEPOSITED BY CUSTOMERS)


         (1) A securities company shall promptly deposit securities which come
         to be held by customers due to buying and selling consignment or other
         transactions and bonds or deeds as determined by the Presidential
         Decree in the Korea Securities Depository established under Article 173
         (hereafter in this Article, referred to as the "Korea Securities
         Depository").


<PAGE>

         (2) A securities company shall promptly deposit securities, bonds, and
         deeds to be held by managing assets on hand as determined by the
         Presidential Decree in the Korea Securities Depository.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 45
         Deleted. (by Act No. 5736, Feb. 1, 1999)


ARTICLE 46 (NOTIFICATION OF SALE AND PURCHASE TRANSACTIONS, ETC.)

         A securities company shall notify the customer concerned of the
         purchase and sale by a customer's order and other contents of
         transactions, etc. under the conditions as prescribed by the
         Presidential Decree.
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLE 46-2 (EXCEPTIONAL ACQUISITION OF TREASURY STOCKS)

         A securities company may, in case where the securities company has been
         entrusted by a customer, acquire treasury stocks less than the minimum
         trading unit of the securities market or Association brokerage market
         outside those markets. In this case, the acquired treasury stocks shall
         be disposed of within the period as prescribed by the Presidential
         Decree.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 47 (BUSINESS REPORT)


         (1) Any securities company shall compile each business report stating
         its business


<PAGE>

         achievements, financial standing, and other matters prescribed by the
         Presidential Decree for 3 months, 6 months, 9 months and 12 months,
         respectively, from the date of the commencement of every business year
         and file such business report with the Financial Supervisory Commission
         within forty-five days from the date of the elapse of such months.
         (Amended by Act No. 6623, Jan. 26, 2002)

         (2) Any securities company shall keep the business report referred to
         in paragraph (1) or its computerized materials at its head office,
         branch office, or other business office and make them accessible to the
         public for one year from the date on which the business report is filed
         with the Financial Supervisory Commission. (Amended by Act No. 6623,
         Jan. 26, 2002)

         (3) Detailed matters concerning the compilation of the business report
         under the provisions of paragraph (1) and other necessary matters shall
         be determined by the Financial Supervisory Commission.
         [This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]


ARTICLE 48 (OFFICERS' ENGAGING IN OTHER BUSINESS)

         Where the Presidential Decree determines that the interests of a
         full-time officer of a securities company are in conflict with those of
         customers or threaten to impair the sound management of the securities
         company, the officer shall not be engaged in the regular business of
         another corporation or in other businesses. (Amended by Act No. 6176,
         Jan. 21, 2000; Act No. 6423, Mar. 28, 2001)
         [This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]


ARTICLE 49 (CREDIT EXTENSION)


         (1) Any securities company may extend credit in connection with
         securities as lending money or securities to a customer.


<PAGE>

         (2) The method and contents of the credit extension referred to in
         paragraph (1) shall be prescribed by the Presidential Decree. (Amended
         by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No.
         6176, Jan. 21, 2000)

         (3) The Financial Supervisory Commission shall provide for regulations
         on the maximum amount of credit, the ratio of security and method of
         receiving security, etc. (Amended by Act No. 3541, Mar. 29, 1982; Act
         No. 5498, Jan. 8, 1998)

         (4) In case where a securities company sells such securities as
         underwritten thereby, the securities company shall not lend funds or
         extend any other credit with respect to the purchase of such
         securities, until 3 months have elapsed from the date of underwriting
         such securities.


ARTICLE 50 (BUSINESS OF SECURITIES SAVINGS)


         (1) A securities company may be engaged in the business of securities
         savings according to the regulations as prescribed by the Financial
         Supervisory Commission. (Amended by Act No. 3541, Mar. 29, 1982; Act
         No. 5498, Jan. 8, 1998)

         (2) The method and the contents of the securities savings business
         referred to in paragraph (1) shall be prescribed by the Presidential
         Decree. (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25,
         1998; Act No. 6176, Jan. 21, 2000)


ARTICLE 51 (RESTRICTIONS ON ENGAGING CONCURRENTLY IN OTHER BUSINESS)


         (1) Any securities company shall be prohibited from engaging in any
         other business than the securities business falling under each of the
         following subparagraphs:


<PAGE>

         1.The financial business (referring to the business prescribed by this
         Act or finance-related Acts and subordinate statutes; hereafter the
         same in this Article shall apply) that is prescribed by relevant Acts
         and subordinate statutes as the business for securities companies to
         run;

         2.The financial business prescribed by the Presidential Decree, which
         is authorized by the Financial Supervisory Commission as the business
         for securities company to run; and

         3.The business falling under any of the following items, which is
         prescribed by the Presidential Decree as a collateral business:

         (a) The business related to the securities business;

         (b) The business of utilizing manpower, assets, or facilities and
         equipment, etc. owned by a securities company; and

         (c) The business that does not require any license, authorization,
         approval or registration, etc. under other Acts and subordinate
         statutes.

         (2) Any financial business under the provisions of paragraph (1) 2 for
         which a securities company has obtained a license or authorization from
         the Financial Supervisory Commission or filed a registration with the
         Financial Supervisory Commission in accordance with this Act or other
         Acts and subordinate statutes shall be deemed to have been granted
         authorization by the Financial Supervisory Commission in accordance
         with the provisions of paragraph (1) 2.
         [This Article Wholly Amended by Act No. 6176, Jan. 21, 2000]


ARTICLE 52 (PROHIBITION OF UNFAIR SOLICITATION, ETC.)

         A securities company, or officers and employees thereof shall not
         commit such acts as described in the following subparagraphs: (Amended
         by Act No. 3541, Mar. 29,


<PAGE>

         1982; Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No.
         6176, Jan. 21, 2000)

         1.To solicit sale and purchase transaction of securities by promising a
         customer to assume all or a part of the loss incurred as a result of
         the transaction concerned;

         2.To provide, directly or indirectly, any benefit which has a property
         value with a customer in relation to the underwriting business of
         securities for the purpose of excluding competitors and inducing the
         customers, or to restrict business activities of customers by making
         improper use of its superior position in transactions; and

         3.To do such acts relating to issuance, purchase and sale or other
         transaction of securities other than those referred to in subparagraphs
         1 and 2 as prescribed by the Presidential Decree as those detrimental
         to the protection of investors or the fair transactions, or undermining
         the credibility of the securities industry.


ARTICLE 52-2 (BUSINESS METHOD OF SECURITIES COMPANY MAKING USE OF ELECTRONIC
DATA-PROCESSING EQUIPMENT, ETC., AND RESTRICTIONS THEREON)


         (1) Any securities company that runs the securities business prescribed
         in Article 2 (8) 8 shall make business matters falling under each of
         the following subparagraphs conform to the standards prescribed by the
         Presidential Decree:

         1.Matters concerning securities subject to the brokering of sale and
         purchase transactions;

         2.Matters concerning the suspension of sale and purchase of securities
         subject to the brokering of sale and purchase transactions and the
         removal of such suspension;

         3.Matters concerning the conclusion of a sale and purchase transaction
         contract and


<PAGE>

         other matters concerning settlement method and settlement
         responsibility, etc.;

         4.Matters concerning sale and purchase transactions of securities on
         consignment, including the consignment guarantee money, etc. of a
         securities company participating in such transactions;

         5.Matters concerning the publication of issuers of securities subject
         to the brokering of sale and purchase transactions;

         6.Matters concerning the publication and report of the results of sale
         and purchase transactions;

         7.Matters concerning the opening, closing, suspension, or interruption
         of the brokering of sale and purchase transactions; and

         8.Other necessary matters in connection with the brokering of sale and
         purchase transactions.

         (2) Any securities company that only runs the securities business as
         prescribed n Article 2 (8) 8 shall be prohibited from running the
         business prescribed in Articles 49 and 50 and any subparagraph of 51
         (1).

         (3) Any securities company that runs the securities business as
         prescribed in Article 2 (8) 8 shall, if such securities subject to the
         brokering of sale and purchase transactions are listed stocks or stocks
         registered with the Association, be a member of either the Stock
         Exchange or the Association.

         (4) The provisions of Article 117 shall apply mutatis mutandis to any
         securities company that runs the securities business as prescribed in
         Article 2 (8) 8.

         (5) The provisions of Articles 43, 44, and 46 shall not apply to a case
         where any securities company runs the securities business as prescribed
         in Article 2 (8) 8. (Amended by Act No. 6623, Jan. 26, 2002)

<PAGE>

         [This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]

ARTICLE 52-3 (PROHIBITION OF ARBITRARY PURCHASE AND SALE)

         Officers and employees of a securities company shall not, unless they
         have received entrustment with respect to purchase and sale
         transactions of securities from a customer or his agent, make purchase
         and sale transactions of securities with property deposited by
         customers.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 52-4 (PROHIBITION OF UNFAIR DEMAND TO SECURITIES COMPANY, ETC.)

         No person shall unfairly receive money, service and other financial
         interests from a securities company or officers and employees thereof
         in return for the payment of a commission relating to the business
         which a securities company operates, or may request a securities
         company or officers and employees thereof to furnish the person himself
         or third party with money, service and other financial interests.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 53 (INSPECTION)


         (1) A securities company shall be subject to inspection by the Governor
         of the Financial Supervisory Service (hereinafter referred to as the
         "FSS Governor") with respect to its business condition and property.
         (Amended by Act No. 5498, Jan. 8, 1998)

         (2) The FSS Governor may, if necessary for the inspection, request any
         securities company to report on its business conditions or property, to
         file data, to make witness available, or to present any evidence or
         opinion thereon. (Amended by Act


<PAGE>

         No. 5498, Jan. 8, 1998)

         (3) Any person who conducts inspection pursuant to the provisions of
         paragraph (1) shall show the persons concerned a certificate which
         represents his authority to inspect.

         (4) The FSS Governor shall, after the inspection referred to in
         paragraph (1), file a report on the results of the inspection with the
         Financial Supervisory Commission. In this case, if the FSS Governor
         finds that any securities company has violated the provisions of this
         Act, other Acts and subordinate statutes relating to securities, any
         disposition taken under this Act, or the regulations of the Financial
         Supervisory Commission, the Securities Futures Commission under the Act
         on the Establishment, etc. of Financial Supervisory Organization
         (hereinafter referred to as the "Securities Futures Commission"), and
         the Stock Exchange, the FSS Governor shall add the written opinion as
         to how to take actions against such violations. (Amended by Act No.
         5498, Jan. 8, 1998)

         (5) The Financial Supervisory Commission shall, reviewing the reports
         and the written opinion referred to in paragraph (4), take such
         measures as prescribed in the following subparagraphs: (Amended by Act
         No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan.
         8, 1998; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999; Act
         No. 6176, Jan. 21, 2000)

         1.Where any securities company falls under any subparagraph of Article
         55 (1), the cancellation of the securities business license of the
         securities company concerned; and

         2.Where any securities company has, in the course of its business,
         committed unlawful or unfair acts other than those referred to in
         subparagraph 1, the order to suspend the business in whole or in part,
         request for the discharge of officers concerned, or other measures as
         prescribed by the Presidential Decree.

         (6) The FSS Governor may, if necessary, entrust part of the inspection
         authority as

<PAGE>

         referred to in paragraph (1) to the Association under the conditions as
         prescribed by the Presidential Decree. (Newly Inserted by Act No. 6623,
         Jan. 26, 2002)

         (7) The Financial Supervisory Commission may determine the method and
         procedure of inspection, the criteria for measures against results of
         inspection, and other necessary matters relating to inspection. (Newly
         Inserted by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998)


ARTICLE 54 (AUTHORITY OF FINANCIAL SUPERVISORY COMMISSION TO ISSUE ORDER)

         The Financial Supervisory Commission may issue such orders necessary
         for preventing excessively speculative securities transactions or for
         the protection of public interest or investors to a securities company
         under the conditions as prescribed by the Presidential Decree. (Amended
         by Act No. 5498, Jan. 8, 1998)


ARTICLE 54-2 (MAINTENANCE OF EQUITY CAPITAL REGULATION RATE)


         (1) Any securities company shall maintain the rate (hereinafter
         referred to as the "equity capital regulation rate") higher than the
         rate prescribed by the Presidential Decree, which derives from the
         division of the amount calculated by deducting the amount of the
         following subparagraph 3 from the added amount of the following
         subparagraphs 1 and 2 by total risk amount (referring to the amount
         added up with the risks calculated in terms of money, which is involved
         in the business or is immanent in assets and debts of such securities
         company):

         1.The amount obtained by deducting total amount of debts from total
         value of assets;

         2.The allowance account for bad debts established in the floating
         asset, the posterity borrowings, and the amount prescribed by the
         Presidential Decree; and

<PAGE>

         3.The appraised value of fixed assets, the amount of prepayment, and
         the amount prescribed by the Presidential Decree.

         (2) Any securities company shall calculate its equity capital
         regulation rate as of the last day of every quarter (hereafter in this
         Article referred to as the "base day") and file a report thereof with
         the Financial Supervisory Commission within forty-five days from the
         base day and keep such report or its computerized materials at its head
         office, branch office and other business office to make it accessible
         to the public for three months from the date forty-five days have
         passed since the base day. (Amended by Act No. 6623, Jan. 26, 2002)

         (3) Specific standards for calculating the equity capital regulation
         rate shall be determined by the Financial Supervisory Commission.
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]


ARTICLE 54-3 (SOUNDNESS OF ASSET OPERATION)


         (1) Any securities company shall be prohibited from performing the act
         falling under each of the following subparagraphs except as otherwise
         provided for by the Presidential Decree: (Amended by Act No. 6423, Mar.
         28, 2001)

         1.The act of owning securities issued by the biggest stockholder
         (referring to the biggest stockholder under the provisions of Article
         54-5 (4) 2; hereafter in this paragraph the same shall apply) or the
         major stockholder (referring to the major stockholder under the
         provisions of Article 188 (1); hereafter in this paragraph the same
         shall apply) of a relevant securities company;

         2.The act of loaning money or extending credit to the person falling
         under each of the following items:

<PAGE>

         (a) The biggest stockholder of the relevant company (including persons
         prescribed by the Presidential Decree from persons specially related to
         him; hereafter in this paragraph the same shall apply);

         (b) The major stockholder of the relevant company; and

         (c) The officers of the relevant company and specially related persons
         who are prescribed by the Presidential Decree;

         3.The act of directly or indirectly guaranteeing the repayment of debts
         for other persons;

         4.The act of owning stocks, bonds or commercial papers (referring to
         bills issued by the business for the purpose of raising funds) issued
         by the largest shareholder or the major shareholder of a relevant
         securities company; and

         5.Any act that may harm the sound management of assets of a securities
         company as prescribed by the Presidential Decree other than acts in
         subparagraphs 1 through 4.

         (2) The Financial Supervisory Commission may set detailed standards
         necessary to execute the matters under paragraph (1).
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]


ARTICLE 54-4 (INTERNAL CONTROL STANDARDS)


         (1) Any securities company shall make basic procedures and standards
         (hereafter in this Article referred to as the "internal control
         standards") to be followed by its officers and employees when they
         perform their duties in order to observe Acts and subordinate statutes,
         operate its assets in a sound manner and protect customers.


<PAGE>

         (2) Any securities company shall have not less than one person assigned
         to check whether the internal control standards are observed and to
         inspect any violation of the internal control standards and report the
         results to the auditor or the inspection committee (hereinafter
         referred to as the "compliance officer").

         (3) Any securities company shall, if it intends to appoint or dismiss a
         compliance officer, go through a resolution thereon of the board of
         directors: Provided, That the same shall not apply to any branch office
         of a foreign securities business operator. (Newly Inserted by Act No.
         6423, Mar. 28, 2001)

         (4) Any compliance officer shall satisfy requirements falling under
         each of the following subparagraphs: (Newly Inserted by Act No. 6423,
         Mar. 28, 2001)

         1.He is required to be the person with the experience falling under any
         of the following items:

         (a) A person who has served not less than 10 years in the Bank of Korea
         or an institution subject to inspection (including any foreign
         financial institution corresponding thereto) under Article 38 of the
         Act on the Establishment, etc. of Financial Supervisory Organizations;

         (b) A person with a master's degree or higher in the finance-related
         area who has served not less than 5 years in a university as a
         full-time lecturer or higher or in a research institute as a researcher
         or higher;

         (c) A person with the qualification of an attorney-at-law or a
         certified public accountant who has served not less than 5 years in the
         service area related to such qualification; and

         (d) A person who has served not less than 5 years in the Ministry of
         Finance and Economy, the Financial Supervisory Commission, the
         Securities Futures Commission, or the Financial Supervisory Service and
         for whom 5 years have yet to elapse from the date on which he resigned
         or retired from each of such institutions;


<PAGE>

         2.He is required not to fall under each subparagraph of Article 33 (2);
         and

         3.He is required not to have been subject to measures such as demand
         for caution or warning, etc. for violating finance-related Acts and
         subordinate statutes from the Financial Supervisory Commission or the
         Governor of the Financial Supervisory Service in the past 5 years.

         (5) Necessary matters concerning the internal control standards and
         compliance officers shall be prescribed by the Presidential Decree.
         (Amended by Act No. 6423, Mar. 28, 2001)
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]


ARTICLE 54-5 (APPOINTMENTS OF OUTSIDE DIRECTORS)


         (1) Any securities company (limited to any securities company
         prescribed by the Presidential Decree in the light of the size of its
         asset, etc.) shall have the board of directors in which the number of
         outside directors is not less than half of total number of directors of
         the company. In this case, not less than three outside directors shall
         be seated in the board of directors.

         (2) Any securities company under the provisions of paragraph (1) shall
         establish a committee in accordance with the provisons of Article
         393-2 of the Commercial Act to recommend candidates for outside
         directors (hereafter in this Article referred to as the "outside
         director candidate recommendation committee"). In this case, outside
         directors shall make up not less than half of the total members of the
         outside director candidate recommendation committee.

         (3) In case of the securities company under the provisons of paragraph
         (1), a general meeting of stockholders of the securities company, when
         it intends to appoint its outside directors, shall appoint them from
         among candidates


<PAGE>

         recommended by the outside director candidate recommendation committee.
         In this case, when the outside director candidate recommendation
         committee of a securities company, which is a stock-listed corporation
         or an Association-registered corporation, recommends candidates for
         outside directors, it shall include therein candidates for outside
         directors recommended by the stockholders who satisfy the requirements
         for exercising rights under Article 191-14. (Amended by Act No. 6423,
         Mar. 28, 2001)

         (4) Any person falling under any of the following subparagraphs shall
         be prohibited from becoming an outside director of a securities company
         under the provisions of paragraph (1) and shall be dismissed from the
         office of an outside director when he is found to fall under any of the
         following subparagraphs after appointed as the outside director:

         1.A person who falls under Article 191-12 (3) 1 through 4;

         2.In case that a person who is a stockholder of a relevant securities
         company and another person in a special relationship with him hold the
         largest number of stocks on the basis of total number of issued voting
         stocks of the company, the former (hereinafter referred to as the
         "biggest stockholder");

         3.A person in a special relationship with the biggest stockholder;

         4.The major stockholder of a relevant securities company (referring to
         the major stockholder under the provisions of Article 188 (1)) and his
         spouse and lineal ascendants and descendants;

         5.A person who is an officer or employee (referring to a person who is
         engaged in a regular business; hereafter the same in this paragraph
         shall apply) of a relevant securities company or its affiliate
         (referring to the affiliate under the Monopoly Regulation and Fair
         Trade Act) or worked as an officer or employee for such relevant
         securities company or its affiliate within the preceding two years;

<PAGE>

         6.The spouse or lineal ascendants or descendants of an officer of a
         relevant securities company;

         7.The officer or employee of a corporation that is in an important
         business relationship prescribed by the Presidential Decree with a
         relevant securities company, a competitive relationship or a
         cooperative relationship with such securities company or the person who
         worked as the officer or employee for such corporation within the
         preceding two years;

         8.The officer or employee of a company in which the officer or employee
         of a relevant securities company works as a non-standing director; and

         9.A person who has difficulty in faithfully performing his duties as an
         outside director or may affect adversely the management of his company
         and is prescribed by the Presidential Decree.

         (5) The securities company under the provisions of paragraph (1), when
         the number of its outside directors does not meet the requirements for
         the composition of the board of directors under paragraph (1) owing to
         any resignation or death, etc. of the outside directors, shall make
         sure that it satisfies the requirements of paragraph (1) at a general
         meeting of stockholder called for the first time after the occurrence
         of such cause.
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]


ARTICLE 54-6 (INSPECTION COMMITTEE)


         (1) Any securities company (limited to the securities company
         prescribed by the Presidential Decree taking into account the size of
         its asset) shall establish an inspection committee (hereinafter
         referred to the "inspection committee") pursuant to the provisions of
         Article 415-2 of the Commercial Act.

<PAGE>
         (2) Not less than two thirds of the total members of the inspection
         committee referred to in paragraph (1) shall come from outside
         directors. In this case, the chairman of the inspection committee of
         any securities company that is either a stock-listed corporation or an
         Association-registered corporation shall be an outside director.
         (Amended by Act No. 6423, Mar. 28, 2001)

         (3) Any members of the inspection committee who are not outside
         directors shall not fall under any subparagraph of Article 191-12 (3):
         Provided, That any person who holds office not as a full-time auditor
         or an outside director of the inspection committee under the provisions
         of Article 191-12 (3) but as a member of the inspection committee may
         become a non-outside-director member of the inspection committee
         notwithstanding the provisions of Article 191-12 (3) 6.

         (4) Where the securities company referred to in paragraph (1) is unable
         to fill the fixed number of outside directors of the inspection
         committee under paragraph (2) due to such causes as the resignation and
         death, etc. of outside directors, a general meeting of stockholders
         called for the first time after the occurrence of such causes shall
         have the requirement of paragraph (2) satisfied.

         (5) The proviso of Article 415-2 (2) of the Commercial Act shall not
         apply to the composition of the inspection committee under the
         provisions of paragraph (1).

         (6) The provisions of Article 409 (2) and (3) of the Commercial Act
         shall apply mutatis mutandis to the selection and appointment of any
         outside director who becomes a member of the inspection committee.
         (Newly Inserted by Act No. 6423, Mar. 28, 2001)
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]


ARTICLE 55 (CANCELLATION OF LICENSE)


         (1) In case that any securities company falls under any of the
         following


<PAGE>

         subparagraphs, the Financial Supervisory Commission may show reason
         therefor and cancel the license of such securities company: (Amended by
         Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736,
         Feb. 1, 1999; Act No. 5982, May 24, 1999; Act No. 6176, Jan. 21, 2000)

         1.Where a securities company obtains the license of securities business
         by fraud or unfair means;

         2.Where a securities company commits a violation of licensed contents
         or licensed terms or fails to commence the business within 6 months
         from the date on which a license was granted;

         3.Where a securities company has received money or securities from
         other person in connection with its business by unfair means, or when
         it has acquired money or securities which shall be delivered to other
         persons;

         4.Where a securities company having received the order to suspend its
         business pursuant to the provisions of Article 57 has not corrected the
         reason therefor within 1 month (where a period to correct exceeding one
         month is determined in ordering to suspend its business, within the
         period) from the date on which such securities company has received
         such order;

         5.Where a securities company violates any contract in connection with
         purchase and sale or other transactions effected on the securities
         market or Association brokerage market, or when it does not conduct
         delivery with respect to such purchase and sale or other transactions;

         6.Where a securities company commits a violation of the provisions of
         Articles 35 (1), 54-2 (1), 54-3, 54-5, 54-6 or 63;

         7.Where a securities company violates the order issued pursuant to the
         provisions of Article 54; and


<PAGE>

         8.Where a securities company violates this Act, order or disposition
         given under this Act other than subparagraphs 1 through 7, and
         therefore it is deemed difficult for it to do business as a securities
         company.

         (2) Any securities company shall, when its securities business license
         is canceled, dissolve itself. (Newly Inserted by Act No. 6176, Jan. 21,
         2000)

         (3) The provisions of Article 32-2 shall apply mutatis mutandis to the
         cancellation of license under the provisions of paragraph (1). (Newly
         Inserted by Act No. 6176, Jan. 21, 2000)


ARTICLE 56 (CONSUMMATION OF UNSETTLED BUSINESS)

         When a securities company is cancelled its license (including the
         cancellation of a license under Article 14 of the Act on the Structural
         Improvement of the Financial Industry) pursuant to Article 55 or closes
         its business by itself, it shall consummate the purchase and sale of
         securities and other transactions which it has left unsettled. In this
         case, the securities company or the successor of such securities
         company shall be regarded as a securities company to the extent
         consistent with the purpose of consummating such unsettled purchase and
         sale of securities or other transactions. (Amended by Act No. 5736,
         Feb. 1, 1999)


ARTICLE 57 (SUSPENSION OF BUSINESS)


         (1) In case where any securities company falls under any of the
         following subparagraphs, the Financial Supervisory Commission may order
         the suspension of the whole or part of the business: (Amended by Act
         No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan.
         21, 2000; Act No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26, 2002)

<PAGE>

         1.Where it violates the provisions of Article 42, 44, 44-3, 44-4, 47,
         49 through 52, 52-2, or 54-4;

         2.Where it violates an order under Article 54;

         3.Where it fails to comply with a request to discharge an officer
         referred to in paragraph (3) or Article 53 (5) 2 without any
         justifiable cause; and

         4.Where it resolves to discontinue its business or dissolve itself in
         order to protect public interests and investors.

         (2) The provisions of Article 56 shall apply mutatis mutandis to the
         suspension of business referred to in paragraph (1).

         (3) In case where any securities company violates the provisions of
         Article 36, 43, 44, 46 or 48, or any of officers violates the
         provisions of Article 52, the Financial Supervisory Commission may
         request such securities company to discharge the officer concerned
         after showing the reason therefor to such officer. (Amended by Act No.
         3541, Mar. 29, 1982; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1,
         1999)


ARTICLE 58 (LIABILITIES OF OFFICERS)


         (1) In case where any director or auditor (referring to the members of
         the inspection committee if such committee is established; hereafter
         the same in this Article shall apply) of a securities company neglects
         to perform his duties on purpose or by negligence, or causes any damage
         to third person in the course of performing his duties for such
         securities company, such director or auditor and the biggest
         stockholder shall be jointly and severally made liable to compensate
         for the damage: Provided, That the same shall not apply to the biggest
         stockholder who proves that the act causing such damage to third person
         is not committed upon his

<PAGE>

         request or with his consent. (Amended by Act No. 3541, Mar. 29, 1982;
         Act No. 6176, Jan. 21, 2000)

         (2) The provisions of paragraph (1) shall not affect the liabilities of
         the securities company concerned.

         (3) In case of paragraph (1), the provisions of Articles 399 (2) and
         (3) and 414 (3) of the Commercial Act shall apply mutatis mutandis.


ARTICLE 59 (PROHIBITION OF OFFER OR DIVULGENCE OF INFORMATION)


         (1) Unless any officer or employee of a securities company receives a
         written request or a written consent from the customer who makes or
         intends to make purchase and sale of securities through the securities
         company (including any person who participates in the securities
         savings referred to in Article 50; hereinafter the same shall apply),
         the officer or the employee of such securities company shall not offer
         or divulge the information with respect to the customer, such as
         purchase and sale of securities and other securities transaction, and
         the money or securities deposited by such customer, to another person:
         Provided, That the same shall not apply to case where the securities
         company is inspected by a supervisory institution with respect to its
         duties or where it is requested pursuant to the provisions of Article
         60.

         (2) Any person who acquires the information in the ordinary course of
         inspection by a supervisory institution shall not offer or divulge such
         information to any other person, or make use of the information for any
         other purpose other than that of the inspection.


ARTICLE 60 (PROHIBITION OF REQUEST FOR INFORMATION)

<PAGE>


         (1) No person shall request any officer or employee of a securities
         company to offer the information referred to in Article 59 (1), except
         when a court issues an order to submit such information or a judge of a
         court issues a warrant therefor, or other cases as prescribed by the
         Presidential Decree.

         (2) Even when the offer of such information is requested pursuant to
         the provisions of paragraph (1), the inquiry or investigation shall be
         limited within the necessary scope of the purpose.


ARTICLE 61 (REFUSAL OF ILLEGAL INVESTIGATION)

         Any officer or employee of a securities company shall, by and after
         showing the reason therefor, refuse the request, inquiry or
         investigation which is in contravention of the provisions of Article
         60.


ARTICLE 62 (TRADE NAME)


         (1) Any securities company shall use the letters of securities,
         securities brokerage, or bonds brokerage in its trade name under the
         conditions as prescribed by the Presidential Decree.
         (Amended by Act No. 6423, Mar. 28, 2001)

         (2) No person who is not a securities company shall include any word
         which represents a securities business in its trade name.


ARTICLE 63 (PROHIBITION OF LENDING TRADE NAME)

         No securities company shall allow other persons to operate the
         securities business by lending its trade name.

<PAGE>

ARTICLE 64 (EXERCISE OF MINORITY STOCKHOLDER'S RIGHT, ETC. OF SECURITIES
COMPANY)


         (1) The provisons of Article 191-13 (1) through (6) shall apply mutatis
         mutandis to the requirements, etc. for the exercise of the minority
         stockholder's right of a securities company (limited to any securities
         company prescribed by the Presidential Decree taking into account the
         size, etc. of its asset; hereafter the same in this Article shall
         apply). In this case, "1/10,000 or more" in Article 191-13 (1) shall be
         deemed "5/100,000 or more"; "50/100,000 or more (25/100,000 or more in
         case of a corporation prescribed by the Presidential Decree)" in
         paragraph (2) of the same Article, "250/100,000 or more (125/1,000,000
         or more in case of a corporation prescribed by the Presidential
         Decree)"; "10/10,000 or more (5/10,000 or more in case of a corporation
         prescribed by the Presidential Decree)" in paragraph (3) of the same
         Article, "50/100,000 or more (25/100,000 or more in case of a
         corporation prescribed by the Presidential Decree)"; "50/10,000 or more
         (25/10,000 or more in case of a corporation prescribed by the
         Presidential Decree)" in paragraph (4) of the same Article,
         "250/100,000 or more (125/100,000 or more in case of a corporation
         prescribed by the Presidential Decree)"; and "30/1,000 or more
         (15/1,000 or more in case of a corporation prescribed by the
         Presidential Decree)" in paragraph (5) of the same Article, "150/10,000
         or more (75/10,000 or more in case of a corporation prescribed by the
         Presidential Decree)", respectively. (Amended by Act No. 6423, Mar. 28,
         2001)

         (2) The provisions of Article 191-14 (1) and (2) shall apply mutatis
         mutandis to the requirement, etc. for the exercise of the right by
         stockholders of a securities company to make proposals. In this case,
         "10/1,000 or more (5/1,000 or more in case of a corporation prescribed
         by the Presidential Decree)" in Article 191-14 (1) shall be deemed
         "50/10,000 or more (25/10,000 or more in case of a corporation
         prescribed by the Presidential Decree)".
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]

<PAGE>

ARTICLES 65 THROUGH 69
         Deleted. (by Act No. 5736, Feb. 1, 1999)


              SECTION 3 DELETED.

ARTICLES 69-2 THROUGH 70
         Deleted. (by Act No. 5736, Feb. 1, 1999)


            CHAPTER V-2 INVESTMENT ADVISORY BUSINESS, ETC.

ARTICLE 70-2 (REGISTRATION, ETC.)


         (1) Any person who intends to operate the investment advisory business
         shall register his business with the Financial Supervisory Commission.
         (Amended by Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999)

         (2) Any person who intends to do the discretionary investment business
         shall be a company registered with the Financial Supervisory
         Commission. (Amended by Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan.
         21, 2000)


         (3) Deleted. (by Act No. 5736, Feb. 1, 1999)

         (4) Requirements and procedures for the registration referred to in
         paragraphs (1) and (2) and other necessary matters shall be determined
         by the Presidential Decree. (Amended by Act No. 6176, Jan. 21, 2000)


<PAGE>

         (5) No person may operate the discretionary investment business except
         for such cases as prescribed in this Act or other Acts.
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLE 70-3 (RESTRICTION ON ENGAGING CONCURRENTLY IN OTHER BUSINESS)

         No investment advisory company shall be engaged in any business other
         than registered business: Provided, That the same shall not apply with
         respect to the business approved by the Financial Supervisory
         Commission from among the businesses related directly to the registered
         business. (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May
         25, 1998; Act No. 5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 70-4 (DEPOSITION OF BUSINESS GUARANTY MONEY)


         (1) The investment advisory company shall deposit the business guaranty
         money with a financial institution under the conditions as prescribed
         by the Presidential Decree. In this case, such investment advisory
         company shall be prohibited from transferring the business guaranty
         money or offering it as security, except as otherwise prescribed by the
         Presidential Decree. (Amended by Act No. 5254, Jan. 13, 1997; Act No.
         5498, Jan. 8, 1998; Act No. 6176, Jan. 21, 2000)

         (2) Any person who has concluded an investment advisory contract
         (including a discretionary investment contract; hereinafter the same
         shall apply) with an investment advisory company, shall be entitled to
         get payment out of the investment business guaranty money as referred
         to in paragraph (1) in preference to other creditors with respect to
         obligation originated in connection with the contract. (Amended by Act
         No. 5254, Jan. 13, 1997)
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]

<PAGE>

ARTICLE 70-5 (MAINTENANCE OF SOUND BUSINESS ORDER)

         Investment advisory contract of an investment advisory company, method
         of discretionary investment, notification of investment result for
         customers, fees, disclosure of contents of business, advertisement for
         business, and other criteria necessary for maintenance of sound
         business order shall be prescribed by the Presidential Decree.
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLE 70-6 (PROHIBITION OF SECURITIES TRANSACTION, ETC.)

         An investment advisory company or its officers and employees shall not
         conduct any act falling under any of the following subparagraphs in
         connection with its business: (Amended by Act No. 5254, Jan. 13, 1997)

         1.Acts as referred to in any subparagraph of Article 2 (8);

         2.Receiving a custody or deposition of money or securities from
         customers;

         3.Lending money or securities to customers, or intermediating,
         arranging or acting as an agent for lending money or securities of
         third person to customers;

         4.Making a promise to guarantee certain profits or division of profits,
         or to bear the whole or part of loss with customers with respect to an
         investment in securities;

         5.Giving advice without any justifiable ground for the purpose of
         obtaining any profit for himself or third person other than customers,
         taking advantage of the fluctuation in price of securities through
         purchase and sale of the customers who obtain advice about the
         specified securities;


<PAGE>

         6.Circulating any false information and other rumor without any
         grounds; and

         7.Acts, other than those under subparagraphs 1 through 6, which may
         harm the fair transaction order and mislead an investment decision of
         investors and are designated by the Presidential Decree.
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 70-7 (OFFICERS, SUPERVISION, ETC.)

         The provisions of Articles 33 (2), 35, 37, 42, 47, and 48,
         subparagraphs 2 and 3 of Article 52, and Articles 53, 54, 56 through
         61, and 63 shall apply mutatis mutandis to the investment advisory
         company. (Amended by Act No. 5982, May 24, 1999)
         [This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]


ARTICLE 70-8 (REPORT ON BUSINESS SIMILAR TO INVESTMENT ADVISORY BUSINESS)


         (1) A person who intends to operate a business which gives advice
         through publications, etc. oriented to many and unspecified persons
         under the provisions of the proviso of Article 2 (10) 1 and is
         prescribed by the Presidential Decree, shall report to the Financial
         Supervisory Commission in due form as prescribed by the Financial
         Supervisory Commission. (Amended by Act No. 5539, May 25, 1998; Act No.
         5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000)

         (2) The Financial Supervisory Commission may entrust the business of
         report pursuant to paragraph (1) to the FSS Governor. (Amended by Act
         No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5736, Feb.
         1, 1999)

         (3) The provisions of Article 70-6 shall apply mutatis mutandis to a
         person who is liable to report pursuant to the provisions of paragraph
         (1), officers and personnel thereof, or other employees.

<PAGE>

         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]



ARTICLE 70-9 (BUSINESS OF FOREIGN INVESTMENT ADVISORY BUSINESSMAN)


         (1) A foreign investment advisory businessman (referring to a person
         who operates the investment advisory business in a foreign country
         pursuant to foreign Acts and subordinate statutes; hereinafter the same
         shall apply) shall, where he intends to operate the investment advisory
         business or discretionary investment business directly or by
         establishing a branch office and other business place (hereinafter
         referred to as a "branch office of a foreign investment advisory
         businessman") in Korea, register with the Financial Supervisory
         Commission. (Amended by Act No. 5539, May 25, 1998; Act No. 5736, Feb.
         1, 1999)

         (2) Matters necessary for the registration pursuant to the provisions
         of paragraph (1) shall be prescribed by the Presidential Decree.
         (Amended by Act No. 5736, Feb. 1, 1999)

         (3) A branch office of a foreign investment advisory businessman, etc.
         which has registered pursuant to the provisions of paragraph (1) shall
         be considered as an investment advisory company pursuant to this Act.
         (Amended by Act No. 5736, Feb. 1, 1999)

         (4) The provisions of Article 28-2 (5) through (7) shall apply mutatis
         mutandis to a branch office, etc. of a foreign investment advisory
         businessman. (Amended by Act No. 6176, Jan. 21, 2000)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 70-10 (TRADE NAME)

<PAGE>

         (1) An investment advisory company (excluding a company which operates
         investment advisory business or discretionary investment business as a
         side business) shall include the word "investment advisory" in its
         trade name.

         (2) Those other than investment advisory companies shall not include
         the word "investment advisory" or "discretionary investment" in their
         trade names.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 70-11 (CANCELLATION OF REGISTRATION)

         Where an investment advisory company falls under any of the following
         subparagraphs, the Financial Supervisory Commission may cancel the
         registration of its investment advisory business or its discretionary
         investment business giving the reasons thereof: (Amended by Act No.
         6176, Jan. 21, 2000)

         1.Where it registers an investment advisory business or discretionary
         investment business by fraud or other illegal means;

         1-2.Where it is impossible to keep the registration requirements
         satisfied after registering the investment advisory business or the
         discretionary investment business;

         2.Where it operates a discretionary investment business without
         registration;

         3.Where it receives money or securities from other persons or acquires
         money or securities to be granted to other persons in connection with
         its business by illegal means;

         4.Where it violates a contract for sale and purchase or other
         transactions on the securities market or Association brokerage market
         or fails to transfer securities;

         4-2.Where it violates the provisions of Article 70-4 (1);


<PAGE>

         5.Where it has been under order to suspend its business pursuant to
         Article 57 applied mutatis mutandis under Article 70-7 and fails to
         correct the conditions within one month (where a period to correct
         exceeding one month is determined at the same time as an order to
         suspend its business, within the said period) from the date on which it
         has received such order;

         6.Where it violates the provisions of Article 35 (1) or 63 applied
         mutatis mutandis under Article 70-7;

         7.Where it violates an order under Article 54 applied mutatis mutandis
         under Article 70-7; and

         8.Where it is deemed difficult to conduct its business operations for a
         violation of this Act or an order or disposition under this Act other
         than subparagraphs 1 through 7.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


                         CHAPTER VI KOREA STOCK EXCHANGE

                    SECTION 1 ESTABLISHMENT AND ORGANIZATION

ARTICLE 71 (ESTABLISHMENT)


         (1) There shall be established a Stock Exchange for the purpose of
         providing a fair and stable market price of securities, and the wide
         and orderly circulation thereof.

         (2) The Stock Exchange shall be a juristic person as an organization of
         members. (Amended by Act No. 3945, Nov. 28, 1987)



<PAGE>

         (3) The Stock Exchange shall place its principal office in the Seoul
         Special Metropolitan City, and may establish its branch offices in such
         places as deemed necessary. (Amended by Act No. 3541, Mar. 29, 1982)

         (4) The Stock Exchange shall come into existence by the registration of
         its incorporation at the location of its principal office.

         (5) The registration referred to in paragraph (4) shall contain the
         matters prescribed in the following subparagraphs: (Amended by Act No.
         3945, Nov. 28, 1987)

         1.Objectives;

         2.Name;

         3.Locations of the principal office and branch offices;

         4.Names and addresses of members;

         5.Names and addresses of officers;

         6.Method of public notice; and

         7.Matters as prescribed by the Presidential Decree other than those
         referred to in subparagraphs 1 through 6 of this paragraph.

         (6) Deleted. (by Act No. 3945, Nov. 28, 1987)

         (7) Matters necessary for the registration of the incorporation of the
         Stock Exchange other than those referred to in paragraphs (4) and (5)
         shall be prescribed by the Presidential Decree.
         (Amended by Act No. 3945, Nov. 28, 1987)

<PAGE>

ARTICLE 72
         Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 73 (BUSINESS)


         (1) The Stock Exchange shall conduct such business as prescribed in the
         following subparagraphs in order to attain its objectives: (Amended by
         Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997; Act No. 5498,
         Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001;
         Act No. 6623, Jan. 26, 2002)

         1.Establishment of the securities market (including futures markets);

         2.Business relating to the purchase and sale transaction of securities;

         3.Business relating to the listing of securities;

         4.Business relating to the disclosure of a listed corporation;

         5.Business relating to the review of abnormal trade of securities, such
         as any trade causing the unusual and abnormal fluctuations in the price
         or volume of trading of securities, as prescribed by the Presidential
         Decree (hereinafter referred to as the "abnormal trade") and to the
         supervision and control of members;

         6.Business relating to the auction of securities;

         7.Business relating to self-regulatory mediation of any dispute over
         purchase and sale transactions on the securities market;

         8.Business incidental to the establishment of the securities market;
         and


<PAGE>

         9.Business as determined in the articles of association other than
         those as prescribed in subparagraphs 1 through 7.

         (2) Deleted. (by Act No. 5736, Feb. 1, 1999)


ARTICLE 73-2 (REVIEW OF ABNORMAL TRADE AND SUPERVISION OF MEMBERS)


         (1) Where the Stock Exchange deems it necessary to ascertain the
         trading situation of the item of securities suspected of abnormal trade
         in the securities market (including the case of brokering the sale and
         purchase transaction of securities under Article 52-2; hereafter in
         this Article the same shall apply) or check whether a securities
         company complies with the trading regulations of the Stock Exchange, it
         may request the securities company concerned to submit related
         materials with the reasons specified in writing.

         (2) Where the Stock Exchange deems it necessary to ascertain the
         trading situation of the item of securities suspected of abnormal trade
         in the securities market or check whether a member complies with the
         trading regulations of the Stock Exchange, it may supervise over the
         business, financial standing, books, documents, and other things of the
         member with respect to the trading in question.

         (3) Where the Stock Exchange deems it necessary to conduct the review
         or supervision under paragraphs (1) and (2), it may request its members
         to file a report, submit materials, or have the persons concerned
         present themselves to make a statement with respect to the abnormal
         trade, etc. under the conditions as determined by the articles of
         association.
         [This Article Newly Inserted by Act No. 6623, Jan. 26, 2002]


ARTICLE 74 (MATTERS TO BE PROVIDED FOR IN ARTICLES OF ASSOCIATION)

<PAGE>

         (1) The articles of association of the Stock Exchange shall contain the
         following matters: (Amended by Act No. 3945, Nov. 28, 1987; Act No.
         6423, Mar. 28, 2001)

         1.Objectives;

         2.Name;

         3.Locations of the principal office, the branch offices and the
         securities market;

         4.Matters relating to contributions;

         4-2.Matters relating to members;

         4-3.Matters relating to members' guarantee fund;

         4-4.Matters relating to the transfer and return of shares of members;

         5.Matters relating to officers and executive officers;

         6.Matters relating to the general meeting of members and the board of
         directors;

         7.Matters relating to the execution of business;

         8.Matters relating to the accounting and apportionment of expenses; and

         9.Method of public notice.

         (2) When the Stock Exchange intends to amend any provisions of its
         articles of association referred to in paragraph (1), it shall obtain
         the authorization of the Minister of Finance and Economy. (Amended by
         Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997; Act No. 5539,
         May 25, 1998)

<PAGE>


ARTICLE 75 (PROVISIONS OF CIVIL ACT APPLIED MUTATIS MUTANDIS)

         The provisions of the Civil Act relating to an incorporated association
         (excluding Article 39 of the Civil Act) shall apply mutatis mutandis to
         the Stock Exchange unless as otherwise provided for in this Act or any
         order pursuant to this Act. In such a case, members, a general meeting
         of members, and officers of the Stock Exchange shall be considered
         respectively as members, a general meeting of members, and directors or
         auditors of an incorporated association. (Amended by Act No.
         3945, Nov. 28, 1987)


ARTICLE 76 (PROHIBITION OF ESTABLISHMENT OF SIMILAR FACILITIES)

         No person other than the Stock Exchange may establish a securities
         market or facilities similar thereto, or may conduct purchase and sale
         transactions of securities through similar facilities: Provided, That
         the same shall not apply to any person who runs the securities business
         under Article 2 (8) 8 and Association brokerage market. (Amended by Act
         No. 6423, Mar. 28, 2001) [This Article Wholly Amended by Act No. 5254,
         Jan. 13, 1997]


ARTICLE 76-2 (QUALIFICATION FOR MEMBER)

         Members of the Stock Exchange shall be the securities companies
         satisfying such requirements as prescribed by the articles of
         association.
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 76-3 (CONTRIBUTION AND LIABILITY)


         (1) Members shall be liable for contribution under the conditions as
         prescribed by


<PAGE>

         the articles of association.

         (2) Liability of members to the Stock Exchange shall be limited to
         their contribution except as otherwise prescribed by this Act and the
         articles of association.
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 76-4 (WITHDRAWAL OF MEMBER)


         (1) Any member may withdraw with the approval of the Stock Exchange
         under the conditions as prescribed by the articles of association.

         (2) If any of the following causes occurs, the member shall withdraw:

         1.Disqualification;

         2.Dissolution; and

         3.Expulsion.
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 76-5 (TRANSFER AND RETURN OF SHARE)


         (1) A share of a member may be transferred after obtaining the approval
         of the Stock Exchange only when the member intends to withdraw, under
         the conditions as prescribed by the articles of association.

         (2) If a member withdraws from the Stock Exchange, the Stock Exchange
         shall return the entire shares under the conditions as prescribed by
         the articles of association.


<PAGE>

         (3) If it is deemed necessary to adjust the ratio of a member's share,
         the Stock Exchange may return a part of a share to a member under the
         conditions as prescribed by the articles of association.
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 77 (GENERAL MEETING OF MEMBERS)


         (1) The general meeting of members shall resolve only the matters as
         provided for in this Act or the articles of association of the Stock
         Exchange. (Amended by Act No. 3945, Nov. 28, 1987)

         (2) Deleted. (by Act No. 5254, Jan. 13, 1997)

         (3) The matters which have been resolved in the general meeting of
         members shall be reported to the Minister of Finance and Economy.
         (Amended by Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997;
         Act No. 5539, May 25, 1998)


ARTICLE 78 (OFFICERS)


         (1) The following officers shall be assigned to the Stock Exchange:
         (Amended by Act No. 6423, Mar. 28, 2001)

         1.A chief director;

         2.A vice chief director;

         3.Not more than 5 directors (these directors shall be non-standing and
         not more than 3 of them shall represent the public interest while not
         more than 2 of them


<PAGE>

         shall represent the members); and

         4.Two auditors (one of them shall be non-standing).

         (2) The chief director shall be elected by the general meeting of
         members from among those who have rich experience and learning in
         securities matters and have a moral influence, and approved by the
         Minister of Finance and Economy. (Amended by Act No. 5254, Jan. 13,
         1997; Act No. 5539, May 25, 1998)

         (3) The vice chief director shall be appointed by the chief director
         with the consent of a general meeting of the members. (Amended by Act
         No. 6423, Mar. 28, 2001)

         (4) Directors representing the public interest shall be appointed by
         the chief director from among the persons recommended by the director
         candidate recommendation committee. In this case, the director
         candidate recommendation committee shall consist of the vice chief
         director, directors representing the public interest and directors
         representing the members, and the directors representing the public
         interest shall not be less than 50% of the total members of such
         committee. The chairman of the committee shall be selected and
         appointed from among the directors representing the public interest as
         prescribed by the articles of association. (Amended by Act No.
         6423, Mar. 28, 2001)

         (5) Directors representing the members shall be elected at the general
         meeting of the members. (Amended by Act No. 6423, Mar. 28, 2001)

         (6) Auditors shall be elected at the general meeting of the members.
         (Amended by Act No. 5736, Feb. 1, 1999)

         (7) The terms of office for the chief director, the vice chief
         director, directors, and auditors shall be three years, respectively.
         (Amended by Act No. 5254, Jan. 13, 1997; Act No. 6423, Mar. 28, 2001)

         (8) Deleted. (by Act No. 5736, Feb. 1, 1999)


<PAGE>

         (9) Deleted. (by Act No. 5254, Jan. 13, 1997)
         [This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]


ARTICLE 79 (DUTIES OF OFFICERS)


         (1) The chief director shall represent the Stock Exchange, take charge
         of its general affairs and preside over the general meeting of members
         and the board of directors. (Amended by Act No. 3945, Nov. 28, 1987)

         (2) The vice chief director shall assist the chief director, and if the
         chief director is absent by accident, he shall act for the chief
         director. (Amended by Act No. 6423, Mar. 28, 2001)

         (3) Deleted. (by Act No. 6423, Mar. 28, 2001)

         (4) The auditors shall inspect affairs and accounting of the Stock
         Exchange, and deliver their opinion to the general meeting of members.
         (Amended by Act No. 3945, Nov. 28, 1987)


ARTICLE 80 (INELIGIBILITY OF OFFICERS)

         A person falling under any of the following subparagraphs shall not be
         an officer of the Stock Exchange, and any officer who falls under any
         of the following subparagraphs shall lose his office: (Amended by Act
         No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997)

         1.Any person who is not a national of the Republic of Korea, any
         officer who belongs to a corporation of the Republic of Korea of which
         fifty percent or more of the amount of stated capital or fifty percent
         or more of the total combined voting


<PAGE>

         rights is owned by foreign individuals and/or foreign corporations,
         etc., or any officer of a foreign corporation;

         2.A minor, an incompetent or a quasi-incompetent;

         3.A bankrupt who has not been reinstated yet;

         4.A person who has been sentenced to imprisonment without prison labor
         or a heavier punishment or to a fine or a heavier punishment pursuant
         to this Act, foreign securities Acts and subordinate statutes, or other
         Acts and subordinate statutes relating to finance as prescribed by the
         Presidential Decree, and for whom five years have not elapsed since the
         execution of such punishment was terminated (including the cases where
         the execution is deemed to have been terminated) or exempted;

         4-2.A person who has been sentenced to the suspension of execution of
         imprisonment without prison labor or a heavier punishment and is still
         in the suspended period of execution; or

         5.A person who was dismissed or discharged from office pursuant to this
         Act, foreign securities Acts and subordinate statutes, or other Acts
         and subordinate statutes relating to finance as prescribed by the
         Presidential Decree, and for whom five years have not elapsed since
         such discharge or dismissal.


ARTICLE 81 (REQUEST FOR DISMISSAL OF OFFICER)

         If an officer of the Stock Exchange violates the provisions of Acts and
         subordinate statutes or the disposition made by an administrative
         agency pursuant to Acts and subordinate statutes, the Financial
         Supervisory Commission may suspend the execution of his duties or
         request his dismissal. (Amended by Act No. 5254, Jan. 13, 1997; Act No.
         5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1,
         1999; Act No. 5982, May 24, 1999)

<PAGE>

         [This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]


ARTICLE 82
         Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 83 (LIABILITIES OF OFFICERS, ETC.)


         (1) Any person who is or had been an officer or employee of the Stock
         Exchange shall not divulge or make surreptitious use of secrets which
         he may have acquired in the course of performing his duties.

         (2) The provisions of Article 42 shall apply mutatis mutandis to
         officers and employees of the Stock Exchange.

         (3) An officer and employee of the Stock Exchange shall not have a
         special interest relationship with the securities institutions by
         offering funds or participating in the sharing of profit and loss or
         other business.


ARTICLE 83-2 (DISPUTE MEDIATION COMMITTEE)


         (1) The Stock Exchange shall set up a Dispute Mediation Committee
         (hereinafter referred to as the "Mediation Committee") mandated to
         deliberate and resolve on matters concerning dispute mediation under
         Article 73 (1) 7.

         (2) The Stock Exchange may, when it is deemed necessary to mediate any
         dispute, ask the parties concerned to confirm facts or furnish
         materials, etc.

         (3) The Mediation Committee may, when it is deemed necessary to hear
         opinions of

<PAGE>

         the parties concerned and other interested persons, ask them to be
         present at the meeting to state their opinions.

         (4) Necessary matters concerning the composition and operation of the
         Mediation Committee and procedures for mediating disputes, etc. shall
         be prescribed by the operating rules under Article 94.
         [This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]


          SECTION 2 SALE AND PURCHASE TRANSACTIONS ON SECURITIES MARKET

ARTICLE 84
         Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 85 (RESTRICTIONS ON TRADERS ON SECURITIES MARKETS)


         (1) No person other than members of the Stock Exchange shall perform
         sale and purchase transactions on the securities market: Provided, That
         where the articles of association of the Stock Exchange determine that
         such person may sell and buy specific securities, he may do so.

         (2) A person who has been able to perform sale and purchase
         transactions on the securities market under the proviso of paragraph
         (1) shall be deemed a member of the Stock Exchange in applying the
         provisions of Articles 73 (1) 5, 73-2, 74 (1) 4-2 and 4-3, 76-3 (2),
         76-4, 87, 94 (2) 5, 95 through 97, 99, 100, and 206-3 (6). (Amended by
         Act No. 6623, Jan. 26, 2002)
         [This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]

<PAGE>

ARTICLE 86
         Deleted. (by Act No. 5736, Feb. 1, 1999)


ARTICLE 87 (COMPLETION OF TRANSACTIONS)


         (1) When a member is suspended from transactions or loses his
         qualification, the Stock Exchange shall have the member or any other
         member complete the sale and purchase transactions which have been
         initiated on the securities market by the member. In this case, the
         member who loses his qualification shall be regarded as having the
         qualification of a member within the objective of completion of those
         transactions. (Amended by Act No. 3945, Nov. 28, 1987)

         (2) In case where the Stock Exchange has any other member complete the
         sale and purchase transactions pursuant to paragraph (1), it shall be
         regarded that a trust contract is in existence between the member
         concerned and such other member. (Amended by Act No. 3945, Nov. 28,
         1987)


ARTICLE 88 (LISTING REGULATIONS)


         (1) Deleted. (by Act No. 5254, Jan. 13, 1997)

         (2) The Stock Exchange shall adopt the Securities Listing Regulations
         (hereinafter referred to as the "Listing Regulations") in order to
         examine securities which are to be listed on the securities market or
         administer the securities which have been listed on the securities
         market (hereinafter referred to as "listed securities"). (Amended by
         Act No. 5736, Feb. 1, 1999)

         (3) The Listing Regulations referred to in paragraph (2) shall provide
         for the

<PAGE>

         following matters: (Amended by Act No. 5736, Feb. 1, 1999)

         1.Matters relating to the listing standards for, listing examination of
         and delisting of securities;

         2.Matters relating to suspension from and release of suspension from
         the sale and purchase transactions of securities; and

         3.Matters necessary for the administration of listed securities other
         than those prescribed in subparagraphs 1 and 2 of this paragraph.


ARTICLE 89 (DISCLOSURE REGULATIONS)


         (1) The Stock Exchange shall adopt the Listed Corporation Disclosure
         Regulations (hereinafter referred to as the "Disclosure Regulations")
         in order to disclose the financial standing and business activity of
         stock-listed corporations and conduct the supervision of stock-listed
         corporations.

         (2) The Disclosure Regulations under paragraph (1) shall include the
         following matters. In this case, the matters provided in subparagraphs
         1 and 2 shall meet the provisions of Article 186:

         1.Matters relating to the information on which a stock-listed
         corporation is to make a report or a disclosure;

         2.Matters relating to the methods and procedures which a stock-listed
         corporation is to follow in making a report or disclosure;

         3.Matters relating to the standards for deciding upon whether or not a
         stock-listed corporation follows the provisions of subparagraphs 1 and
         2 and to the measures for a securities company against such provisions;


<PAGE>

         4.Matters relating to the supervision of stock-listed corporations,
         such as the suspension of their sale and purchase transactions; and

         5.Other necessary matters relating to a report or disclosure which
         stock-listed corporations are to make.
         [This Article Newly Inserted by Act No. 6623, Jan. 26, 2002]


ARTICLES 90 THROUGH 93
         Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 94 (OPERATING RULES)


         (1) Matters relating to the sale and purchase transactions of
         securities on the securities market shall be determined by the
         operating rules of the Stock Exchange. In this case, matters relating
         to futures markets may be determined by separate operating rules.

         (2) The operating rules as referred to in paragraph (1) shall provide
         for the following matters: (Amended by Act No. 5736, Feb. 1, 1999; Act
         No. 6423, Mar. 28, 2001; Act No. 6623, Jan. 26, 2002)

         1.Types of sale and purchase transactions and matters on consignment;

         2.Matters relating to the opening, closing, suspending, or temporary
         closing of the securities market;

         3.Methods of the conclusion of sale and purchase transaction contract
         and the settlement;

<PAGE>

         4.Matters relating to the regulation of sale and purchase transactions,
         such as payment of deposit money;

         5.Matters relating to the review of abnormal trade and supervision of
         members, and disciplinary action against members, officers and
         employees as a result of such review and supervision;

         5-2.Matters concerning the self-regulatory mediation of any dispute
         over sale and purchase transactions on the securities market;

         6.Deleted; and (by Act No. 6623, Jan. 26, 2002)

         7.Matters necessary for the sale and purchase transactions in addition
         to those as referred to in subparagraphs 1 through 5-2.
         [This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]


ARTICLE 95 (JOINT COMPENSATION FUND FOR DAMAGE INCURRED FROM CONTRAVENTION OF
CONTRACTS)


         (1) Members shall set aside a joint compensation fund for damage
         incurred from contraventions of contracts (hereinafter referred to as
         the "compensation fund") in the Stock Exchange in order to compensate
         for the damage incurred from any contravention of trading contracts on
         the securities market: Provided, That the same shall not apply to any
         member, etc. prescribed by the Stock Exchange in the articles of
         association, who does not bear the responsibility for executing the
         settlement of sale and purchase transactions. (Amended by Act No. 3945,
         Nov. 28, 1987; Act No. 6423, Mar. 28, 2001)

         (2) Any member (excluding the member referred to in the proviso of
         paragraph (1)) shall, within the extent of the compensation fund
         referred to in paragraph (1), be liable jointly and severally for the
         damage incurred from any contravention of trading contract on the
         securities market. (Amended by Act No. 3945, Nov. 28,
<PAGE>
         1987; Act No. 6423, Mar. 28, 2001)

         (3) The rate and limit of reserve, use, management, repayment of the
         compensation fund referred to in paragraph (1), and other necessary
         matters relating to the operation of the compensation fund shall be
         prescribed by the Presidential Decree.


ARTICLE 96 (APPROPRIATION OF MEMBER'S DEPOSIT AND GUARANTEE FUND FOR OBLIGATION)

         If a member has not fulfilled his obligation based on sale and purchase
         transactions on the securities market for the Stock Exchange or other
         members, the Stock Exchange may appropriate the member's deposit and
         guarantee fund for the payment of that obligation. (Amended by Act No.
         3945, Nov. 28, 1987)


ARTICLE 97 (COMPENSATION LIABILITIES OF STOCK EXCHANGE)


         (1) The Stock Exchange shall be liable to compensate for the damage
         incurred from contravention of trading contract by any member. (Amended
         by Act No. 3945, Nov. 28, 1987)

         (2) In case where the Stock Exchange compensates for the damage under
         paragraph (1), the compensation fund set aside under the provisions of
         Article 95 shall be appropriated in preference.

         (3) In case where the Stock Exchange compensates for the damage under
         paragraphs (1) and (2), the Stock Exchange shall be entitled to the
         right to indemnification for the compensated amount and all expenses
         required to do so against the member who contravened the trading
         contract. (Amended by Act No. 3945, Nov. 28, 1987)

         (4) The amount of money collected in accordance with paragraph (3)
         shall be, in

<PAGE>

         preference, appropriated for such amount as the Stock Exchange has
         compensated with its own money and all expenses required to do so, and
         the remainder shall be reserved in the compensation fund.

         (5) Matters with respect to the exercise of the right to
         indemnification referred to in paragraph (3) shall be prescribed by the
         Presidential Decree.


ARTICLE 98
         Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 99 (PREFERENTIAL RIGHT OF STOCK EXCHANGE OVER OTHER CREDITOR)


         (1) The Stock Exchange shall have a right to be paid in preference to
         any other creditors with respect to the deposit, member's guarantee
         fund and money or securities paid for the delivery and settlement.

         (2) When a member, in case where the Stock Exchange delivers securities
         to the member prior to the settlement, causes any damage to the Stock
         Exchange due to the unfulfillment of delivery or settlement by such
         member, the Stock Exchange shall have a right to be paid in preference
         to any other creditors with respect to property of such member:
         Provided, That the right shall not be in preference to obligations
         hypothecated by chonsegwon (right of registered lease on deposit
         basis), pledges or mortgage created prior to the arrival of settlement
         date. (Amended by Act No. 3945, Nov. 28, 1987)


ARTICLE 100 (PREFERENTIAL RIGHT OF ENTRUSTER DUE TO CONTRAVENTION OF CONTRACT BY
ENTRUSTEE AND RIGHT OF STOCK EXCHANGE IN PREFERENCE TO ENTRUSTER)

<PAGE>

         (1) Any person who entrusts the sale and purchase transactions on the
         securities market to a member shall, in case where the member entrusted
         with the transactions contravenes the entrustment contract, have a
         right to satisfy the claim based upon such contravention in preference
         to any other creditors with respect to the deposit and member's
         guarantee fund. (Amended by Act No. 3945, Nov. 28, 1987)

         (2) The preferential right referred to in Article 99 shall be in
         preference to such preferential right as prescribed by the provisions
         of paragraph (1).


ARTICLE 101 (PROHIBITION OF SALE AND PURCHASE IN CONTRAVENTION OF CONTRACT)

         Any securities company which has been entrusted with the sale and
         purchase transactions on the securities market, shall have such
         transactions made only through the securities market without fail. In
         this case, the provisions of Article 44 shall not apply. (Amended by
         Act No. 3945, Nov.
         28, 1987; Act No. 4469, Dec. 31, 1991)


ARTICLE 102
         Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 103 (PUBLICATION OF QUOTATIONS)

         The Stock Exchange shall, under the conditions as prescribed by the
         Presidential Decree, make public the quotations showing the daily
         trading volume, daily settled price, and the highest, lowest and
         closing prices of the securities on the securities market. (Amended by
         Act No. 3541, Mar. 29, 1982)


ARTICLE 104

<PAGE>

         Deleted. (by Act No. 5736, Feb. 1, 1999)


ARTICLES 105 AND 106
         Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 107 (RESTRICTIONS ON DISCRETIONARY SALE AND PURCHASE TRANSACTIONS)


         (1) If a securities company is entrusted by a customer to make a sale
         and purchase transaction of securities, the securities company may
         carry out such transaction under a discretionary decision only on the
         quantity, price and time of the transaction. In this case, the types
         and items of securities, the categories and methods of the transaction
         shall be determined only according to a decision of the customer.
         (Amended by Act No. 4469, Dec. 31, 1991)

         (2) If a securities company carries out a sale and purchase transaction
         of securities pursuant to paragraph (1), it shall observe the
         conditions as prescribed by the Ordinance of the Ministry of Finance
         and Economy. (Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254,
         Jan. 13, 1997; Act No. 5539, May 25, 1998)
         [This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]


ARTICLE 108
         Deleted. (by Act No. 5423, Dec. 13, 1997)


 SECTION 3 ENTRUSTMENT WITH SALE AND PURCHASE TRANSACTIONS ON SECURITIES MARKET


<PAGE>

ARTICLE 109 (RESTRICTIONS ON PLACES OF ENTRUSTMENT)


         (1) Deleted. (by Act No. 5736, Feb. 1, 1999)

         (2) A securities company may be entrusted with the sale and purchase
         transactions of securities by means of electronic communication and
         other manners as prescribed by the Presidential Decree.
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLES 110 AND 111
         Deleted. (by Act No. 5736, Feb. 1, 1999)


                      SECTION 4 ACCOUNTING AND SUPERVISION

ARTICLE 112 (REPORT AND INSPECTION)


         (1) The Financial Supervisory Commission may, if deemed necessary in
         the public interest or for the protection of investors, order the Stock
         Exchange to file reports or materials for reference with respect to its
         business and property, and have the FSS Governor inspect its business,
         status of property, accounting books, records, and other related
         materials. (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan.
         8, 1998)

         (2) The provisions of Article 53 (3) shall apply mutatis mutandis to
         the inspection referred to in paragraph (1).

         (3) In case where the FSS Governor inspects according to the provisions
         of paragraph (1), the FSS Governor shall report the result of the
         inspection to the

<PAGE>

         Financial Supervisory Commission. (Amended by Act No. 5254, Jan. 13,
         1997; Act No. 5498, Jan. 8, 1998)


ARTICLE 113
         Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 114
         Deleted. (by Act No. 6176, Jan. 21, 2000)


ARTICLE 115 (APPROVAL OF REGULATIONS)


         (1) Where the Stock Exchange intends to adopt the Business Regulations,
         Listing Regulations, Disclosure Regulations and other regulations
         (including rules; hereinafter the same shall apply) relating to
         business which are necessary for the administration of the securities
         market, the Stock Exchange shall obtain the approval of the Financial
         Supervisory Commission. The same shall also apply in case of the
         amendment or repeal thereof. (Amended by Act No. 3945, Nov. 28, 1987;
         Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539,
         May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999)

         (2) Where the Financial Supervisory Commission intends to grant
         approval referred to in paragraph (1), it shall consult in advance with
         the Minister of Finance and Economy. (Newly Inserted by Act No. 5498,
         Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999)


ARTICLE 116
         Deleted. (by Act No. 5254, Jan. 13, 1997)

<PAGE>

ARTICLE 117 (DISPOSITION IN EMERGENCY)


         (1) Deleted. (by Act No. 5736, Feb. 1, 1999)

         (2) When the Minister of Finance and Economy deems that the sale and
         purchase transactions of securities cannot be normally made because of
         natural disaster, warfare, disturbance, sudden and significant change
         in economic conditions or other incidents similar thereto, he may order
         the temporary closing of the securities market or take other necessary
         measures. (Amended by Act No.
         5254, Jan. 13, 1997; Act No. 5539, May 25, 1998)


                              CHAPTER VII DELETED.

ARTICLES 118 THROUGH 144
         Deleted. (by Act No. 5498, Jan. 8, 1998)


              CHAPTER VIII ORGANIZATIONS CONCERNED WITH SECURITIES

                      SECTION 1 SECURITIES FINANCE COMPANY

ARTICLE 145 (ESTABLISHMENT)


         (1) Any person who is engaged in the business referred to in Article
         147

<PAGE>

         (hereinafter referred to as a "securities finance company") shall be a
         licensed stock company by the Minister of Finance and Economy. (Amended
         by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998)

         (2) Any person who intends to obtain a license referred to in paragraph
         (1) shall file a written application including such information as
         designated in the following subparagraphs with the Minister of Finance
         and Economy: (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May
         25, 1998)

         1.Name;

         2.Location of business office; and

         3.Matters relating to stated capital and assets.

         (3) A written application referred to in paragraph (2) shall be
         accompanied by such documents as designated in the following
         subparagraphs: (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539,
         May 25, 1998)

         1.Articles of association and the regulations relating to business;

         2.Curricula vitae and certificates of identity of promoters;

         3.Project planning statement and the estimated income and expenditure
         statement for a period of two years after its establishment; and

         4.Documents prescribed by the Minister of Finance and Economy other
         than those referred to in subparagraphs 1 through 3.


ARTICLE 146 (AMOUNT OF STATED CAPITAL)

         Amount of stated capital of a securities finance company shall be two
         billion won or

<PAGE>

         more.


ARTICLE 147 (BUSINESS)


         (1) A securities finance company may manage any business referred to in
         the following subparagraphs: (Amended by Act No. 5254, Jan. 13, 1997;
         Act No. 5539, May 25, 1998; Act No. 6623, Jan. 26, 2002)

         1.To loan money for securities market making and money for underwriting
         to underwriters;

         2.To loan through the clearing organ of the Stock Exchange or the
         Association such money or securities as may be necessary in the
         settlement of sale and purchase transactions on the securities market
         or the Association brokerage market;

         3.To lend money by collateralizing securities or lend securities;

         4.To lend money to public investors through underwriters for purchasing
         stocks through public offering;

         5.To effect sale and purchase transactions of bonds within such extent
         as may be prescribed by the Presidential Decree;

         6.To undertake safekeeping in connection with securities;

         7.To trust money under the Trust Business Act;

         8.To perform the affairs of a trustee company under the Securities
         Investment Trust Business Act;

         9.To perform the affairs of a custodian under the Securities Investment
         Company


<PAGE>

         Act; and

         10.To be approved by the Minister of Finance and Economy other than
         those referred to in subparagraphs 1 through 9.

         (2) Where a securities finance company carries on the trust business
         under paragraph (1) 7, it shall be deemed a financial institution
         engaging concurrently in the trust business under the Trust Business
         Act, which is not subject to the provisions of Articles 7 (1), 8-2, 15,
         15-2, 16, and 24-3 of the Trust Business Act. (Newly Inserted by Act
         No. 6623, Jan. 26, 2002)


ARTICLE 148
         Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 149 (RESTRICTIONS ON OFFICERS)


         (1) Any officer who is engaged in the regular business of a securities
         finance company (including a person who practically performs the
         function of officer; hereinafter the same shall apply) shall be a
         person other than officers and employees of a securities company.
         (Amended by Act No. 3541, Mar. 29, 1982)

         (2) The provisions of Articles 33 (2) and 80 shall apply mutatis
         mutandis to any officer of a securities finance company: Provided, That
         a person may be appointed as an officer falling under subparagraph 1 of
         Article 80, in so far as he is not engaged in the regular business.
         (Amended by Act No. 3541, Mar. 29, 1982)


ARTICLE 150
         Deleted. (by Act No. 3945, Nov. 28, 1987)

<PAGE>

ARTICLE 151 (REPORT ON ARTICLES OF ASSOCIATION AND REGULATIONS)


         (1) Any securities finance company shall, when it changes its articles
         of association, file a report thereof with the Financial Supervisory
         Commission. (Amended by Act No. 6176, Jan. 21, 2000)

         (2) When a securities finance company has adopted, amended or repealed
         the regulations relating to its business, it shall report such fact to
         the Financial Supervisory Commission. (Amended by Act No. 5254, Jan.
         13, 1997; Act No. 5498, Jan. 8, 1998)

         (3) Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 152
         Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 153 (REQUEST TO DISCHARGE OFFICERS)

         When any officer of a securities finance company is elected by the
         illegal means, or violates this Act, the orders pursuant to this Act or
         the articles of association of the securities finance company, the
         Financial Supervisory Commission may request it to discharge such
         officer. (Amended by Act No. 5498, Jan. 8, 1998)


ARTICLE 154 (LIABILITIES OF OFFICERS)

         The provisions of Articles 58 and 83 shall apply mutatis mutandis to a
         securities finance company: Provided, That the provisions of Article 83
         (3) shall not apply mutatis mutandis to officers who are not engaged in
         full time.

<PAGE>

ARTICLE 155 (DISPOSITIONS AGAINST VIOLATIONS OF ACTS AND SUBORDINATE STATUTES)


         (1) The provisions of Article 55 (excluding paragraph (1) 5 through 7
         of the same Article) shall apply mutatis mutandis to the cancellation
         of a securities financial business license for a securities finance
         company. In this case, the "Financial Supervisory Commission" shall be
         deemed the "Minister of Finance and Economy". (Amended by Act No. 6176,
         Jan. 21, 2000)

         (2) Where any securities finance company falls under any of the
         following subparagraphs, the Financial Supervisory Commission may order
         the suspension of its business in whole or in part for a specified
         period not exceeding six months: (Amended by Act No. 6623, Jan. 26,
         2002)

         1.Where it does business without obtaining approval under Article 147
         (1) 10;

         2.Where it fails to comply with a request to discharge its officer
         under Article 153 without any justifiable cause; and

         3.Where it violates the provisions of Article 154.
         [This Article Wholly Amended by Act No. 5498, Jan. 8, 1998]


ARTICLE 156
         Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 157 (INSPECTION)

         The provisions of Article 53 shall apply mutatis mutandis to a
         securities finance company. In this case, the "cancellation of a
         securities business license" referred to










<PAGE>
         in Article 53 (5) 1 shall be deemed a "request for the cancellation of
         license to the Minister of Finance and Economy". (Amended by Act No.
         6176, Jan. 21, 2000)


ARTICLE 158 (DISCONTINUANCE OF BUSINESS AND DISSOLUTION)

         The resolution of a securities finance company for the discontinuance
         of its business and for the dissolution shall be subject to the
         authorization of the Minister of Finance and Economy. (Amended by Act
         No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998)


ARTICLE 159

         Deleted. (by Act No. 5736, Feb. 1, 1999)


ARTICLE 160 (ISSUANCE OF CORPORATE BONDS)


         (1) Notwithstanding the provisions of Article 470 of the Commercial
         Act, any securities finance company may issue the corporate bonds up to
         20 times the aggregate amount of its stated capital and reserve.
         (Amended by Act No. 5521, Feb. 24, 1998; Act No. 6176, Jan. 21, 2000)

         (2) The corporate bonds issued by a securities finance company pursuant
         to the provisions of paragraph (1) shall be considered to be the bonds
         pursuant to the provisions of Article 2 (1) 3.

         (3) Any securities finance company may temporarily issue corporate
         bonds in excess of the limit to redeem corporate bonds issued in
         accordance with paragraph (1). In this case, it shall be subject to the
         redemption of corporate bonds already issued within one month after
         they are issued. (Newly Inserted by Act No. 6176, Jan. 21, 2000)


<PAGE>

         (4) Matters necessary for the issuance of corporate bonds by a
         securities finance company pursuant to the provisions of paragraph (1),
         shall be prescribed by the Presidential Decree.
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLE 161 (DEPOSIT OF MONEY)


         (1) Any securities finance company may receive a deposit of money from
         the Stock Exchange, securities companies, other securities-related
         institutions, and such persons as designated by the Ordinance of the
         Ministry of Finance and Economy. (Amended by Act No. 5254, Jan. 13,
         1997; Act No. 5539, May 25, 1998)

         (2) Any securities finance company may, if necessary for the
         performance of deposit pursuant to paragraph (1), issue debt
         instruments in accordance with the Ordinance of the Ministry of Finance
         and Economy. (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May
         25, 1998)

         (3) In case of paragraphs (1) and (2), the Bank of Korea Act and the
         Banking Act shall not apply.


         SECTION 2 KOREA SECURITIES DEALERS ASSOCIATION

         SUB-SECTION 1 ESTABLISHMENT AND SUPERVISION

ARTICLE 162 (ESTABLISHMENT)

<PAGE>


         (1) A Korea Securities Dealers Association shall be established for the
         purpose of maintaining business orders between securities companies,
         assuring fair trading of securities, and protecting investors.

         (2) The Association shall be a juristic person as the organ consisting
         of members.

         (3) The Association shall place its principal office in the Seoul
         Special Metropolitan City, and may establish its branch offices in
         necessary places.

         (4) The Association shall come into existence by the registration of
         incorporation at the location of the principal office under the
         conditions as prescribed by the Presidential Decree.
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLE 162-2 (BUSINESS)

         The Association shall do such business as described in the following
         subparagraphs: (Amended by Act No. 5498, Jan. 8, 1998; Act No. 5736,
         Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Act No. 6423, Mar. 28, 2001;
         Act No. 6623, Jan. 26, 2002)

         1.Business relating to the maintenance of sound business orders between
         members and for the protection of investors;

         2.Business relating to the publication of Association-registered
         corporations, review of abnormal trade and supervision of members, and
         self-regulatory mediation of disputes in connection with sale and
         purchase transactions on the Association brokerage market, and the
         operation of the Association brokerage market;


<PAGE>

         3.Operation and management of fund managers in order to maintain sound
         order in business under Article 28 (2) 2;

         4.Examination and research of the system relating to securities;

         5.Business relating to the study and training with respect to
         securities;

         6.Business incidental to those as referred to in subparagraphs 1
         through 5; and

         7.Business as determined by the Presidential Decree other than those as
         referred to in subparagraphs 1 through 6. [This Article Newly Inserted
         by Act No. 5254, Jan. 13, 1997]


ARTICLE 162-3 (REVIEW OF ABNORMAL TRADE AND SUPERVISION OF MEMBERS)


         (1) Where the Association deems it necessary to ascertain the trading
         situation of the item of securities suspected of abnormal trade in the
         Association brokerage market (including the case of brokering the sale
         and purchase transaction of securities under Article 52-2; hereafter in
         this Article the same shall apply) or check whether a securities
         company complies with the trading regulations of the Association, it
         may request the securities company concerned to submit related
         materials with the reasons specified in writing.

         (2) Where the Association deems it necessary to ascertain the trading
         situation of the item of securities suspected of abnormal trade in the
         Association brokerage market or check whether a member complies with
         the trading regulations of the Association, it may supervise over the
         business, financial standing, books, documents, and other things of the
         member with respect to the trading in question.

         (3) Where the Association deems it necessary to conduct the review or
         supervision under paragraphs (1) and (2), it may request its members to
         file a report, submit

<PAGE>

         materials, or have the persons concerned present themselves to make a
         statement with respect to the abnormal trade, etc. under the conditions
         as determined by the articles of association.
         [This Article Newly Inserted by Act No. 6623, Jan. 26, 2002]


ARTICLE 163 (MATTERS TO BE PROVIDED FOR IN ARTICLES OF ASSOCIATION)

         Matters to be provided for in the articles of association of the
         Association shall be prescribed by the Presidential Decree.


ARTICLE 164 (REPORT ON REGULATIONS, ETC.)


         (1) Where the Association has adopted, amended or repealed regulations
         relating to its business, it shall report such fact to the Financial
         Supervisory Commission within ten days. (Amended by Act No. 3541, Mar.
         29, 1982; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999)

         (2) The Association shall, where it intends to change matters
         prescribed by the Presidential Decree in the articles of association,
         obtain approval from the Financial Supervisory Commission. (Newly
         Inserted by Act No. 6176, Jan. 21, 2000)


ARTICLE 165 (MEMBERSHIP DUES)

         The Association may collect membership dues from members under the
         conditions as prescribed by the articles of association.


ARTICLE 166

         Deleted. (by Act No. 5423, Dec. 13, 1997)

<PAGE>

ARTICLE 167

         Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 168 (ORDER OF SUSPENSION OF BUSINESS, ETC.)

         In case where any event described in the following subparagraphs
         occurs, the Financial Supervisory Commission may order the Association
         to suspend its business or may request it to discharge the officer
         concerned in the public interest and for the protection of investors:
         (Amended by Act No. 3541, Mar. 29, 1982; Act No. 5498, Jan. 8, 1998)

         1.When the Association has violated Acts and subordinate statutes or
         disposition taken by administrative authorities pursuant to Acts and
         subordinate statutes; and

         2.When any officer of the Association has violated the articles of
         association of the Association or regulations relating to the business
         of the Association or has abused his authorities.


ARTICLE 169 (OFFICERS AND SUPERVISION, ETC.)

         The provisions of Articles 33, 42, 53 and 117 shall apply mutatis
         mutandis to the Association. (Amended by Act No. 5254, Jan. 13, 1997;
         Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000) [This Article
         Wholly Amended by Act No. 3541, Mar. 29, 1982]


ARTICLE 170 (PROVISIONS OF CIVIL ACT APPLIED MUTATIS MUTANDIS)

         The provisions of the Civil Act relating to an incorporated association
         shall apply

<PAGE>

         mutatis mutandis to the Association except otherwise provided for in
         this Act or the orders pursuant to this Act.


ARTICLE 171 (PROHIBITION OF USE OF SIMILAR NAME)

         Any person other than the Korea Securities Dealers Association shall
         not use the name "Securities Dealers Association" or any other name
         similar thereto. (Amended by Act No. 5254, Jan. 13, 1997)


ARTICLE 172 (SECURITIES TRAINING INSTITUTE)

         The Association may establish a Securities Training Institute in order
         to improve qualifications of persons who engage in securities business
         and to diffuse professional knowledge about securities.


         SUB-SECTION 2 OPERATION OF ASSOCIATION BROKERAGE MARKET AND SALE AND
         PURCHASE TRANSACTIONS

ARTICLE 172-2 (REGISTRATION WITH ASSOCIATION AND OPERATION OF ASSOCIATION
BROKERAGE MARKET)


         (1) Any corporation that intends to get securities, prescribed by the
         Presidential Decree, traded on the Association brokerage market shall
         file a registration with the Association through a person who has
         obtained a business license under Article 28 (2) 3.


<PAGE>

         (2) The Association shall set up an Association Brokerage Market
         Operation Committee (hereinafter referred to as the "Association
         Brokerage Market Operation Committee") mandated to deal with affairs
         related with the operation of Association brokerage market.

         (3) Members of the Association Brokerage Market Operation Committee
         shall be elected at a general meeting of the Association.

         (4) The provisions of Articles 33 and 83 shall apply mutatis mutandis
         to the members of the Association Brokerage Market Operation Committee.
         [This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]


ARTICLE 172-3 (ADOPTION AND APPROVAL OF REGULATIONS)


         (1) The Association shall make necessary regulations governing the
         operation of Association brokerage market according to standards
         falling under each of the following subparagraphs. In this case, the
         detailed matters to be entered in the regulations shall be prescribed
         by the Presidential Decree: (Amended by Act No. 6423, Mar. 28, 2001)

         1.The operational regulations of the Association Brokerage Market
         Operation Committee, which govern matters concerning the makeup,
         operation, personnel affairs and budget, etc. of the Association
         Brokerage Market Operation Committee and its secretariat;

         2.Securities association registration regulations that govern matters
         concerning standards for the registration of securities, the
         examination of registration and the cancellation of registration, etc.;

         3.Business regulations that govern matters concerning the acceptance as
         a trustee,

<PAGE>

         suspension, and cancellation of purchase and sale transactions, etc.;
         and

         4.Regulations that govern matters concerning the publication, etc. of
         Association-registered corporations.

         (2) In case where the Association intends to make, alter, or repeal the
         regulations referred to in paragraph (1), the Association shall obtain
         approval from the Financial Supervisory Commission after going through
         a resolution of the Association Brokerage Market Operation Committee.
         (Amended by Act No. 5498, Jan. 8, 1998; Act No. 5539, May 25, 1998; Act
         No. 5982, May 24, 1999; Act No. 6423, Mar. 28, 2001)

         (3) Where the Financial Supervisory Commission intends to grant
         approval referred to in paragraph (2), it shall consult in advance with
         the Minister of Economy and Finance. (Newly Inserted by Act No. 5498,
         Jan. 8, 1998; Act No. 5539, May 25, 1998; Act No. 5982, May 24, 1999)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 172-4 (BUDGET AND PERSONNEL AFFAIRS OF ASSOCIATION BROKERAGE MARKET
OPERATION COMMITTEE AND SECRETARIAT)


         (1) The Association shall manage its budget separately from the budget
         of the Association Brokerage Market Operation Committee (including the
         budget of its secretariat; hereinafter the same shall apply). In this
         case, the Association shall appropriate an amount equivalent to the
         ratio set by the regulations on the Association Brokerage Market
         Operation Committee as the budget of such Committee from among revenues
         accruing from its membership fees and the operation of Association
         brokerage market.

         (2) In managing the personnel affairs of the secretariat of the
         Association Brokerage Market Operation Committee, the Association shall
         consult with the

<PAGE>

         chairman of the Association Brokerage Market Operation Committee. [This
         Article Newly Inserted by Act No. 6423, Mar. 28, 2001]


         SECTION 3 SECURITIES DEPOSITORY

ARTICLE 173 (ESTABLISHMENT)


         (1) A Securities Depository (hereinafter referred to as the
         "Depository") shall be established in order to promote a concentrated
         deposition of securities, transfer of securities between their
         accounts, and harmonious trading of securities.

         (2) The Depository shall be a juristic person.

         (3) The Depository shall come into existence by the registration of
         incorporation at the location of the principal office under the
         conditions as prescribed by the Presidential Decree.
         [This Article Wholly Amended by Act No. 4701, Jan. 5, 1994]


ARTICLE 173-2 (BUSINESS)


         (1) The Depository shall carry on the business as prescribed in the
         following subparagraphs in order to attain its objects: (Amended by Act
         No. 5254, Jan. 13, 1997; Act No. 5736, Feb. 1, 1999)

         1.Business concentrating the deposition of securities;

         2.Business transferring securities between accounts;


<PAGE>

         3.Business depositing securities and transferring between accounts
         through opening of a mutual account with a foreign juristic person
         (hereinafter referred to as a "foreign deposition institution") which
         carries on the business similar to the Depository;

         4.Securities transfer agency business (including the agency business
         for payment of dividend, interest, and redemption of securities and the
         agency business for issuing securities);

         5.Undertaking safekeeping of securities;

         6.Business other than those as referred to in subparagraphs 1 through
         5, which is authorized under this Act and other Acts;

         7.Business incidental to those as referred to in subparagraphs 1
         through 6; and

         8.Businesses as determined by the articles of association other than
         those as referred to in subparagraphs 1 through 7.

         (2) Deleted. (by Act No. 5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]


ARTICLE 173-3 (PROHIBITION OF CARRYING ON DEPOSITING BUSINESS)

         No person other than the Depository may carry on any business receiving
         securities, and settling accounts by means of a transfer between
         accounts in lieu of giving and receiving such securities.
         [This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]


ARTICLE 173-4 (MATTERS TO BE PROVIDED FOR IN ARTICLES OF ASSOCIATION)


<PAGE>

         The articles of association of the Depository shall include the
         following matters:

         1.Objectives;

         2.Name;

         3.Location of a principal office;

         4.Matters relating to stocks and stated capital;

         5.Matters relating to the general meeting of stockholders and the board
         of directors;

         6.Matters relating to officers;

         7.Matters relating to the accounting; and

         8.Method of the public notice.
         [This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]


ARTICLE 173-5 (PROVISIONS OF COMMERCIAL ACT APPLIED MUTATIS MUTANDIS)

         The provisions of the Commercial Act concerning the stock company shall
         apply mutatis mutandis to the depositor, unless otherwise prescribed by
         this Act or any order issued pursuant to this Act.
         [This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]


ARTICLE 173-6 (OFFICERS)


         (1) The officers of the Depository shall be the president, managing
         director,

<PAGE>

         director and auditor.

         (2) The president shall be appointed by the general meeting of
         stockholders, but he shall be subject to approval of the Minister of
         Finance and Economy. (Amended by Act No. 5736, Feb. 1, 1999)

         (3) The standing auditor shall be appointed by the general meeting of
         stockholders. (Newly Inserted by Act No. 5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]


ARTICLE 173-7 (DESIGNATION OF SECURITIES TO BE DEPOSITED)


         (1) The securities which may be deposited at the Depository
         (hereinafter referred to as "securities to be deposited"), shall be
         designated by the Depository.

         (2) Deleted. (by Act No. 5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 173-8 (NOTIFICATION OF DETAILS OF ISSUANCE AND DETAILS OF SECURITIES
STOLEN, LOST OR DESTROYED)


         (1) In case where an issuer of securities to be deposited issues newly
         securities, the issuer shall notify the type of such securities and
         other matters as prescribed by the Ordinance of the Ministry of Finance
         and Economy to the Depository without delay. (Amended by Act No.
         5539, May 25, 1998)

         (2) In case where an issuer of securities to be deposited is notified
         of orders with respect to the seizure, provisional seizure or
         provisional disposition of securities or receives a report that the
         securities are stolen, lost or destroyed (including public

<PAGE>

         summons and nullification judgment pursuant to the Civil Procedure
         Act), such issuer shall notify the type of such securities and other
         matters as prescribed by the Ordinance of the Ministry of Finance and
         Economy to the Depository without delay. (Amended by Act No. 5539, May
         25, 1998; Act No. 6423, Mar. 28, 2001)

         (3) The Depository which has received the notifications pursuant to
         paragraphs (1) and (2) shall make public the details of such reports.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 174 (DEPOSITION IN DEPOSITORY, ETC.)


         (1) Any person who intends to deposit securities in the Depository,
         shall open an account in the Depository. (Amended by Act No. 4701, Jan.
         5, 1994)

         (2) Any person who has opened an account pursuant to paragraph (1)
         (hereinafter referred to as a "depositor"), may deposit securities
         which he holds and has been deposited by his customers in the
         Depository with the consent of customers. (Amended by Act No. 4701,
         Jan. 5, 1994)

         (3) The Depository shall prepare and keep the depositors account book
         in which the following matters are stated, but shall establish therein
         a distinction between the portion owned by depositors and the portion
         deposited by customers: (Amended by Act No. 4701, Jan. 5, 1994; Act No.
         5254, Jan. 13, 1997; Act No. 5539, May 25, 1998)

         1.Name and address of a depositor;

         2.Type and number of securities which are deposited (hereinafter
         referred to as "deposited securities") and the name of an issuer; and

         3.Other matters as prescribed by the Ordinance of the Ministry of
         Finance and

<PAGE>

         Economy.

         (4) The Depository may keep deposited securities in a state mixed by
         type and item. (Amended by Act No. 4701, Jan. 5, 1994)

         (5) In case where a depositor or his customer accepts or subscribes for
         securities or requests issuance of securities based on other grounds,
         an issuer of securities may, upon a request of the depositor or his
         customer, issue or register (this refers to a registration pursuant to
         the State Bond Act or the Registration of Bonds and Debentures Act;
         hereinafter the same shall apply) securities by the name of the
         Depository in lieu of the depositor or his customer. (Newly Inserted by
         Act No. 4469, Dec. 31, 1991; Act No. 4701, Jan. 5, 1994; Act No. 5254,
         Jan. 13, 1997)
         [This Article Wholly Amended by Act No. 3945, Nov. 28, 1987]


ARTICLE 174-2 (DEPOSITION, ETC. TO DEPOSITOR BY CUSTOMERS)


         (1) Any depositor who redeposits securities deposited by customers in
         the Depository, shall prepare and keep the customers account book in
         which the following matters are stated: (Amended by Act No. 4701, Jan.
         5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25, 1998)

         1.Names and addresses of customers;

         2.Types and number of deposited securities, and names of issuers; and

         3.Other matters as prescribed by the Ordinance of the Ministry of
         Finance and Economy.

         (2) When a depositor has stated matters referred to in paragraph (1),
         he shall deposit without delay securities in the Depository specifying
         that such securities are deposited by customers. (Amended by Act No.
         4701, Jan. 5, 1994; Act No. 5254,

<PAGE>

         Jan. 13, 1997)

         (3) When a depositor has stated matters referred to in paragraph (1),
         he shall keep the securities separately from his own until he deposits
         them in the Depository pursuant to paragraph (2). (Amended by Act No.
         4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997)

         (4) The securities stated in the customers account book pursuant to
         paragraph (1) shall be considered deposited in the Depository at the
         time of statement. (Amended by Act No. 4701, Jan. 5, 1994) [This
         Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 174-3 (EFFECT OF STATEMENT IN ACCOUNT BOOK)


         (1) Persons who are stated in the customers account book and the
         depositors account book shall be considered to hold the respective
         securities.

         (2) If a transfer between accounts is stated in the customers account
         book and the depositors account book, the purpose of which is a
         transfer of or creation of pledge on securities, the statement of such
         transfer or creation shall have the same effect as if the securities
         had been delivered.

         (3) Notwithstanding the provisions of Article 3 (2) of the Trust Act, a
         trust of deposited securities may oppose against the third person, by
         stating that they are the trust properties in the customers account
         book or the depositors account book.

         (4) In case where a sale and purchase transaction of stocks on the
         securities market or Association brokerage market is settled by means
         of a transfer between accounts in the customers account book or the
         depositors account book before the stock certificates thereof are
         issued, notwithstanding the provisions of Article 335 (3) of the
         Commercial Act, it shall be effective against an issuing company.
         (Newly

<PAGE>

         Inserted by Act No. 5254, Jan. 13, 1997)
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 174-4 (PRESUMPTION OF RIGHT, ETC.)


         (1) Customers of a depositor and the depositor shall be presumed to
         have co-ownership share on the deposited securities according to the
         types, items and quantity of securities stated respectively in the
         customers account book and the depositors account book.

         (2) Any customer of a depositor or his pledgee may request at any time
         the depositor to return the deposited securities corresponding to a
         co-ownership share of the customer, and the depositor may request the
         Depository to return the deposited securities corresponding to his
         co-ownership share. In this case, a consent of the pledgee shall be
         required with respect to the deposited securities which are the object
         of the right of pledge. (Amended by Act No.
         4701, Jan. 5, 1994)

         (3) The Depository may, in case where such causes as prescribed by the
         Presidential Decree occur, limit the return or inter-account transfer
         of the portion deposited by customers among deposited securities under
         the conditions as designated by the Ordinance of the Ministry of
         Finance and Economy. (Newly Inserted by Act No. 5254, Jan. 13, 1997;
         Act No 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 6423,
         Mar. 28, 2001)
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 174-5 (LIABILITY FOR COVERAGE)


         (1) In case where the deposited securities becomes insufficient, the
         Depository and

<PAGE>

         the depositor as prescribed in Article 174-2 (1) shall make up such
         insufficient portion according to the methods and procedure as
         prescribed by the Presidential Decree. In this case, the Depository and
         the depositor may exercise a right to indemnification to a person who
         is liable for such insufficiency. (Amended by Act No. 4701, Jan. 5,
         1994; Act No. 5254, Jan. 13, 1997)

         (2) The depositor as referred to in paragraph (1) shall bear a
         liability for coverage pursuant to paragraph (1), even after closing
         the account as prescribed in Article 174 (1): Provided, That in case
         where five years has elapsed from the time at which the account is
         closed, he shall be exempted from the liability.
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 174-6 (EXERCISE OF RIGHT TO DEPOSITED SECURITIES)


         (1) The Depository may exercise the right to the deposited securities
         according to a request of a depositor or customer. In this case, a
         request of a customer shall be made through the depositor. (Amended by
         Act No. 4701, Jan. 5, 1994)

         (2) The Depository may request a change of entry in the register or a
         registration in its own name with respect to the deposited securities.
         (Amended by Act No. 5254, Jan. 13, 1997)

         (3) With respect to stocks with regard to which the entry in the
         register is changed in the name of the Depository pursuant to paragraph
         (2), it may exercise the right as a stockholder as to matters as
         prescribed in Article 358-2 of the Commercial Act, as to statement in
         the register of stockholders and as to stock certificates, even though
         there is no request by the depositor. (Amended by Act No. 4701, Jan. 5,
         1994)

         (4) In case where a company issuing stock certificates makes a
         notification or public notice on a convocation of the general meeting
         of stockholders, with respect

<PAGE>

         to stockholders holding stock certificates with regard to which the
         entry in the register is changed in the name of the Depository, the
         company shall notify personally or publicly the particulars concerning
         the exercise of voting rights held by the Depository as referred to in
         paragraph (5). (Newly Inserted by Act No. 4469, Dec. 31, 1991; Act No.
         4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997)

         (5) If a stockholder holding stock certificates with regard to which
         the entry in the register is changed in the name of the Depository
         fails to express his intention to exercise directly or by proxy or not
         to exercise his voting right to the Depository not later than five days
         before the date of the general meeting of stockholders, the Depository
         may exercise such voting right: Provided, That the same shall not apply
         to the following cases: (Newly Inserted by Act No. 4469, Dec. 31, 1991;
         Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498,
         Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000;
         Act No. 6623, Jan. 26, 2002)

         1.Where a company issuing the stock certificates fails to make a
         notification or public notice on the exercise of voting right by the
         Depository pursuant to paragraph (4);

         2.Where a company issuing the stock certificates requests the Financial
         Supervisory Commission to prevent the Depository from exercising its
         voting right;

         3.Where subject matters of the general meeting of stockholders fall
         under any of matters as prescribed in Articles 360-3, 360-16, 374, 438,
         518, 519, 522, 530-3 and 604 of the Commercial Act; and

         4.Where a stockholder concerned exercises directly or by proxy his
         voting right at the general meeting of stockholders.

         (6) Matters with respect to which any company issuing stock
         certificates is required to notify the Depository in order for the
         Depository to exercise its rights under paragraph (1) and other matters
         necessary for the Depository to exercise its voting right under
         paragraph (5) shall be prescribed by the Presidential Decree. (Amended

<PAGE>

         by Act No. 6423, Mar. 28, 2001)

         (7) The provisions of paragraph (3) shall apply mutatis mutandis to
         registered securities among the deposited securities. (Newly Inserted
         by Act No. 6423, Mar. 28, 2001) [This Article Newly Inserted by Act No.
         3945, Nov. 28, 1987]


ARTICLE 174-7 (EXERCISE OF RIGHT BY BENEFICIAL OWNER)


         (1) Co-owners of stock certificates of deposited securities
         (hereinafter referred to as "beneficial owners") shall be considered to
         hold stocks equivalent to the co-ownership shares as prescribed in
         Article 174-4 (1) in exercising the rights as stockholders.

         (2) A beneficial owner may not exercise the right as prescribed in
         Article 174-6 (3): Provided, That the same shall not apply with respect
         to a notification to stockholders by a company, and an inspection or
         transcription of the register of stockholders as prescribed in Article
         396 (2) of the Commercial Act.

         (3) When a company issuing stock certificates of deposited securities
         has fixed a certain period or date pursuant to Article 354 of the
         Commercial Act, the company shall notify the Depository of such fact
         without delay; and the Depository shall notify a company issuing stock
         certificates concerned or a company which conducts change of entry in a
         register as an agent of the matters referred to in the following
         subparagraphs with respect to beneficial owners on the first day of the
         period or on the date (hereafter in this Article referred to as "fixed
         date for the closing of register of stockholders") without delay:
         (Amended by Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997)

         1.Name and address; and


<PAGE>

         2.Types and number of stocks as prescribed in paragraph (1).

         (4) The Depository may request a depositor as prescribed in Article
         174-2 (1) to notify matters as referred to in subparagraphs of
         paragraph (3) with respect to beneficial owners on the fixed date for
         the closing of register of stockholders. In this case, the depositor,
         upon receiving the request, shall notify it without delay. (Amended by
         Act No. 4701, Jan. 5, 1994)

         (5) The provisions of paragraphs (3) and (4) shall apply mutatis
         mutandis where the issuer of stocks, etc. whose tender offer statement
         was submitted requests the Depository to communicate matters on
         beneficial owners in order to know the stockholding status by setting a
         specified date. (Newly Inserted by Act No. 5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 174-8 (PREPARATION OF REGISTER OF BENEFICIAL OWNERS, ETC.)


         (1) Any issuing company or company which conducts change of entry in a
         register as an agent shall, upon receiving a notification pursuant to
         Article 174-7 (3), prepare and keep a register of beneficial owners,
         stating therein the notified matters and the date of notification.

         (2) Any statement in a register of beneficial owners relating to stocks
         the certificates of which are deposited in the Depository, shall have
         the same effect as the statement in a register of stockholders.
         (Amended by Act No. 4701, Jan. 5, 1994)

         (3) When an issuing company or a company which conducts change of entry
         in a register as an agent pursuant to the provisions of paragraph (1)
         deems that a person stated in a register of stockholders as a
         stockholder is the same as a person stated in a register of beneficial
         owners as a beneficial owner, the issuing company

<PAGE>

         or the company which conducts change of entry in a register as an agent
         shall sum up the number of stocks on the register of stockholders and
         those on the register of beneficial owners for the exercise of rights
         as a stockholder.
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 174-9 (CIVIL EXECUTION)

         Matters necessary for the compulsory execution, execution of
         provisional seizure and provisional disposition, or auction with
         respect to the deposited securities, shall be determined by the Supreme
         Court Regulations.
         [This Article Newly Inserted by Act No. 3945, Nov. 28, 1987]


ARTICLE 174-10 (CERTIFICATE OF BENEFICIAL OWNERSHIP)


         (1) In case where a depositor or a customer of depositor requests the
         Depository to issue a document certifying the deposition of securities
         (hereinafter referred to as a "certificate of beneficial ownership") in
         order to exercise the right as a stockholder, the Depository may issue
         the certificate of beneficial ownership under the conditions as
         prescribed by the Ordinance of the Ministry of Finance and Economy. In
         this case, a request of the customer shall be made through the
         depositor. (Amended by Act No. 5539, May 25, 1998)

         (2) The Depository shall, in case of issuing the certificate of
         beneficial ownership pursuant to paragraph (1), notify the issuing
         company concerned of such fact without delay.

         (3) In case where a depositor or a customer of depositor has filed the
         certificate of beneficial ownership which is issued pursuant to
         paragraph (1) with the issuing company, notwithstanding the provisions
         of Article 337 (1) of the Commercial Act, the depositor or the customer
         of depositor may set up against the issuing company.


<PAGE>

         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 174-11 (SPECIAL CASE FOR DEPOSITION IN FOREIGN DEPOSITING INSTITUTIONS
AND FOREIGN CORPORATIONS, ETC.)


         (1) The provisions of Articles 174-2, 174-5, 174-6 (4) through (6),
         1747 and 174-8 (3) shall not apply to foreign depositing institutions:
         Provided, That this shall not apply where any foreign depositing
         institution makes a request for its application. (Amended by Act No.
         5736, Feb. 1, 1999)

         (2) In the event that an issuer of deposited securities is a foreign
         corporation, etc., the provisions of Articles 174 (5), 174-6 (4)
         through (6), 174-7, 174-8 and 174-10 shall not apply: Provided, That
         the same shall not apply to a case where the relevant foreign
         corporation, etc. requests the application thereof. (Newly Inserted by
         Act No. 6423, Mar. 28, 2001)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 174-12 (REPORT AND CONFIRMATION, ETC.)

         The Depository may request a depositor to file the report or data
         concerning the depositing business, inspect the relating account books,
         or confirm the status of custody, etc. of securities kept under the
         depositor's own custody.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 175 (REPORT ON REGULATIONS)

         Where the Depository makes, changes, or repeals the regulations
         relating to deposition and other business, it shall file a report
         thereof with the Financial Supervisory Commission.
         (Amended by Act No. 6176, Jan. 21, 2000)

<PAGE>

         [This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]


ARTICLE 176

         Deleted. (by Act No. 5736, Feb. 1, 1999)


ARTICLE 176-2 (CONTROL OF SECURITIES)


         (1) A listed corporation, Association-registered corporation and
         company which conducts change of entry in a register as an agent
         (referring to a person who obtains a license pursuant to Article 180
         (1); hereinafter the same shall apply) shall be subject to the
         Securities Handling Regulations as determined by the Depository with
         respect to printed form, issuance, retirement, issuance for
         replacement, effacement, and other matters regarding control of
         securities.

         (2) The Depository may control the printed forms of securities which
         any listed corporation or Association-registered corporation keeps as
         spares for issuance of securities (hereinafter referred to as "spare
         certificates").

         (3) The Depository may, if it deems necessary, ask any listed
         corporation, Association-registered corporation and any company which
         conducts change of entry in a register as an agent to submit data
         regarding the procedure of handling securities and the control of spare
         certificates pursuant to paragraph (1) and may direct it's staff
         personnels to confirm the data.

         (4) When an unlisted corporation intends to use printed forms pursuant
         to the Securities Handling Regulations of the Depository with respect
         to securities of the corporation concerned, it shall obtain the
         approval of the Depository. In this case, the provisions of paragraphs
         (1) through (3) shall apply mutatis mutandis.

         (5) If any listed corporation becomes an unlisted corporation, the
         provisions of

<PAGE>

         paragraphs (1) through (3) shall apply mutatis mutandis to such
         corporation until all of printed forms pursuant to the Securities
         Handling Regulations of the Depository and the securities issued by
         using the printed forms is entirely effaced.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 177

         Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 178 (OFFICERS, SUPERVISION, ETC.)

         The provisions of Articles 59 through 61, 74 (2), 80, 81, 83, 117 and
         157 shall apply mutatis mutandis to the Depository. (Amended by Act No.
         5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000)
         [This Article Wholly Amended by Act No. 5498, Jan. 8, 1998]


         SECTION 4 ORDER MATCHING COMPANY AND TRANSFER AGENT

ARTICLE 179 (ORDER MATCHING COMPANY)


         (1) Any person who may conduct the business of matching orders of sale
         and purchase transactions on the securities market shall be a stock
         company which obtains the license of the Financial Supervisory
         Commission. (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May
         25, 1998; Act No. 5736, Feb. 1, 1999; Act No. 5982, May 24, 1999)

         (2) Any person who obtained the license pursuant to paragraph (1)
         (hereinafter

<PAGE>

         referred to as an "order matching company") may conduct the business of
         purchase and sale of securities which is necessary in performing the
         function of order matching on the securities market.

         (3) Any order matching company shall be subject to inspection by the
         Stock Exchange with respect to its business and properties.

         (4) The provisions of Articles 53, 149, 151 (1), 153, 154, 155 and 158
         shall apply mutatis mutandis to an order matching company. (Amended by
         Act No. 5498, Jan. 8, 1998)


ARTICLE 180 (TRANSFER AGENT)


         (1) A person who may conduct the business of changing entry in a
         register as an agent shall be a stock company registered with the
         Financial Supervisory Commission. (Amended by Act No. 5254, Jan. 13,
         1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No.
         5982, May 24, 1999)

         (2) A transfer agent may conduct business of paying dividends,
         interests and redemption in connection with securities and issuing
         securities as an agent. (Amended by Act No. 3541, Mar. 29, 1982; Act
         No. 5254, Jan. 13, 1997)

         (3) The provisions of Articles 53, 70-2 (4), 70-11, 149, 151 (1), 153,
         154, 155 (2), and 158 shall apply mutatis mutandis to a transfer agent.
         (Amended by Act No. 5736, Feb. 1, 1999)


ARTICLE 181 (LICENSE AND SUPERVISION OF OTHER ORGANIZATIONS RELATING TO
SECURITIES)


         (1) Any person who intends to establish an organization which is
         composed of

<PAGE>

         investors in securities, stock-listed corporations, or other persons
         prescribed by the Presidential Decree for the purpose of assuring
         public interest, protecting investors or maintaining orderly securities
         market, shall obtain the license of the Minister of Finance and Economy
         under the conditions as prescribed by the Presidential Decree. (Amended
         by Act No. 3541, Mar. 29, 1982; Act No. 5254, Jan. 13, 1997; Act No.
         5539, May 25, 1998; Act No. 5736, Feb. 1, 1999)

         (2) The provisions of Articles 53, 151 (1) and 168 shall apply mutatis
         mutandis to organizations relating to securities which are established
         with the license pursuant to paragraph (1). (Amended by Act No. 5254,
         Jan. 13, 1997)


         CHAPTER IX CONTROL OF LISTED CORPORATIONS, ETC.

         SECTION 1 DISCLOSURE BY LISTED CORPORATIONS, ETC.

ARTICLE 182

         Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLES 183 THROUGH 185

         Deleted. (by Act No. 3541, Mar. 29, 1982)


ARTICLE 186 (DUTY OF REPORT AND DISCLOSURE OF LISTED CORPORATION, ETC.)

<PAGE>

         (1) Where a listed corporation or an Association-registered corporation
         falls under any of the following subparagraphs, such corporation shall
         report to the Financial Supervisory Commission and the Stock Exchange
         or the Association such fact or the contents of a resolution adopted at
         the meeting of the board of directors under the conditions as
         prescribed by the Presidential Decree without delay: (Amended by Act
         No. 3541, Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act No. 4701,
         Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998;
         Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000; Act No. 6423,
         Mar. 28, 2001)

         1.Where any issued bill or check is dishonored, or when transaction
         with banks is suspended or prohibited;

         2.Where the business is suspended in part or in whole;

         3.Where a petition for the reorganization procedure of the corporation
         is filed or the reorganization thereof is virtually commenced pursuant
         to the provisions of relevant Act;

         4.Where there is a resolution of the board of directors with respect to
         changing the objective of business;

         5.Where it suffers enormous damages caused by a disaster;

         6.Where a lawsuit which may have great influence upon the listed
         securities or the securities registered with the Association is filed
         against it;

         7.Where any of the events referred to in Articles 374, 522, 527-2,
         527-3 and 530-2 of the Commercial Act occurs;

         8.Where causes for dissolution pursuant to the provisions of relevant
         Act take place;

         9.Where there is a resolution of the board of directors with respect to
         increase or

<PAGE>

         decrease of capital or the retirement of stocks;

         10.Where the operation is suspended or is unable to be continued due to
         special causes;

         11.Where a correspondent bank commences a control of the corporation
         concerned;

         12.Where there is a resolution of the board of directors, or a decision
         of the representative director or other person who is prescribed by the
         Presidential Decree with respect to the acquisition and disposal of the
         treasury stocks; and

         13.Where the fact, which is prescribed by the Presidential Decree as
         the matters having serious effects on the management and properties,
         etc. of corporation other than subparagraphs 1 through 12, occurs.

         (2) The Stock Exchange or the Association may, if it is necessary for
         the fair transaction of securities and the protection of investors,
         request a listed corporation or an Association-registered corporation
         to confirm as to whether a rumor and news concerning such listed
         corporation or such Association-registered corporation is true or not;
         and the Stock Exchange or the Association may, if the price or the
         trading volume of securities issued by the listed corporation or the
         Association-registered corporation is changed remarkably, request such
         corporation to disclose as to whether there is important information as
         prescribed in Article 188-2. In this case, the corresponding
         corporation shall comply with it without delay, except in case where it
         is difficult to make such disclosure due to other Acts and subordinate
         statutes, natural disaster and/or other reasons similar thereto.
         (Amended by Act No. 4469, Dec. 31, 1991; Act No. 6176, Jan. 21, 2000)

         (3) If a listed corporation or an Association-registered corporation
         fails to discharge faithfully the duty of report pursuant to paragraph
         (1) or to comply with a request for confirmation or disclosure pursuant
         to paragraph (2), the Stock Exchange or the Association shall notify it
         to the Financial Supervisory Commission so as to take a measure as
         prescribed in the provisions of Article 193. (Newly

<PAGE>

         Inserted by Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991;
         Act No. 5498, Jan. 8, 1998; Act No. 6176, Jan. 21, 2000)

         (4) The provisions of Articles 8 (2) and 14 through 16 shall apply
         mutatis mutandis to the case of the report pursuant to the provisions
         of paragraph (1). (Newly Inserted by Act No. 5254, Jan. 13, 1997; Act
         No. 5736, Feb. 1, 1999)

         (5) Where the Financial Supervisory Commission, the Stock Exchange or
         the Association deems it necessary to promptly inform an investor of
         the contents of the matters listed in paragraph (1) 1, 3, 6, 8 and 11
         and matters requested to be confirmed or disclosed under paragraph (2)
         as they threaten to have important effect on the investors' judgement
         to invest, it may request any administrative agency or other related
         agencies to provide or exchange necessary information pursuant to the
         Presidential Decree. In this case, the agency which has received such
         request shall cooperate with it unless there exists any special cause.
         (Newly Inserted by Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21,
         2000)


ARTICLE 186-2 (SUBMISSION OF ANNUAL BUSINESS REPORT, ETC.)


         (1) A stock-listed corporation, Association-registered corporation
         and/or corporations as prescribed by the Presidential Decree shall
         submit an annual business report to the Financial Supervisory
         Commission and, the Stock Exchange or the Association, as the case may
         be, within 90 days after the lapse of each business year: Provided,
         That the same shall not apply to the case as determined by the
         Presidential Decree. (Amended by Act No. 5498, Jan. 8, 1998)

         (2) The objective, trade name, contents of business and matters
         concerning finance of a corporation and other matters as prescribed by
         the Presidential Decree shall be stated in an annual business report
         under paragraph (1). (Amended by Act No. 5539, May 25, 1998; Act No.
         6176, Jan. 21, 2000)


<PAGE>

         (3) Where a corporation is subject to submission of a business report
         under paragraph (1) for the first time, it shall promptly (by the time
         limit for submission, where a corporation is subject to submission of
         an annual business report during the period to submit the business
         report referred to in paragraph (1)) submit the annual business report
         of the immediately preceding business year to the Financial Supervisory
         Commission and the Stock Exchange or the Association: Provided, That
         this shall not apply where the corporation has already disclosed the
         matters equivalent to the annual business report of the immediately
         preceding business year through a registration statement of securities,
         etc. (Amended by Act No. 5736, Feb. 1, 1999)

         (4) The annual business report pursuant to paragraph (1) shall be
         prepared in accordance with such method and form determined by the
         Financial Supervisory Commission by type and line of business. (Amended
         by Act No. 5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No.
         6176, Jan. 21, 2000)

         (5) Where a corporation which has to submit an annual business report
         pursuant to paragraph (1) is a company affiliated with a conglomerate
         which has to prepare conglomerate combined financial statements
         pursuant to Article 1-3 of the Act on External Audit of Stock
         Companies, it shall submit conglomerate combined financial statements
         as prescribed by subparagraph 3 of Article 1-2 of the same Act to the
         Financial Supervisory Commission and the Stock Exchange or the
         Association within six months from the end of a business year. (Newly
         Inserted by Act No.
         5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 186-3 (SUBMISSION OF SEMIANNUAL REPORT, ETC.)

         A corporation which is under obligation to submit an annual report
         pursuant to the provisions of Article 186-2 (1), shall submit a
         business report for 6 months from the beginning of a business year
         (hereinafter referred to as a "semiannual report") and business reports
         for 3 months and 9 months from the beginning of a business

<PAGE>

         year (hereinafter referred to as "quarterly reports"), respectively, to
         the Financial Supervisory Commission and the Stock Exchange or the
         Association, as the case may be, within 45 days after the lapse of the
         period. (Amended by Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1,
         1999)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 186-4 (SPECIAL TREATMENT CONCERNING FOREIGN CORPORATION, ETC.)

         Notwithstanding the provisions of Articles 186-2 and 186-3, different
         regulations, such as providing for different period of submission,
         etc., may apply with respect to a foreign corporation, etc. under the
         conditions as prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 186-5 (PROVISIONS APPLIED MUTATIS MUTANDIS)

         The provisions of Articles 8 (2), 11 (1) through (3), 14 through 16,
         18, 19, and 20 shall apply mutatis mutandis to the annual business
         report, semiannual business report, and quarterly business report.
         (Amended by Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 187

         Deleted. (by Act No. 5254, Jan. 13, 1997)


         SECTION 2 PROHIBITION OF UNFAIR TRADE, ETC.

ARTICLE 188 (DISGORGEMENT OF SHORT-TERM SALES MARGIN OF INSIDER, ETC.)



<PAGE>

         (1) Officers, employees or major stockholders (referring to those who
         hold stocks or contribution certificates of 10/100 or more of the total
         number of voting stocks issued or of the total amount of contributions
         for their own account regardless of the title thereof, and those who
         are prescribed by the Presidential Decree; hereinafter the same shall
         apply) of a stock-listed corporation or Association-registered
         corporation shall not sell certificates of stocks (including
         contribution certificates), convertible bonds, bonds with warrants,
         warrants and securities as prescribed by the Ordinance of the Ministry
         of Finance and Economy (hereinafter referred to as "stock certificates,
         etc.") of the corporation listed on the Stock Exchange or registered
         with the Association, unless they own the stock certificates, etc.
         (Amended by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997;
         Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999)

         (2) Where officers, employees or major stockholders of a stock-listed
         corporation or Association-registered corporation gain any profit by
         selling stock certificates, etc. of the corporation concerned within
         six months after purchasing them, or by purchasing such stock
         certificates within six months after selling them, the corporation
         concerned may request such officers, employees or major stockholders to
         give such profit to the corporation. In this case, necessary matters
         relating to standards for calculation of such profit and procedures for
         return, etc. shall be determined by the Presidential Decree. (Amended
         by Act No. 4469, Dec. 31, 1991; Act No. 5254, Jan. 13, 1997; Act No.
         5423, Dec. 13, 1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1,
         1999; Act No. 6176, Jan. 21, 2000)

         (3) Stockholders of the corporation concerned or the Securities Futures
         Commission may demand that such corporation make the request pursuant
         to the provisions of paragraph (2), and such stockholders or the
         Securities Futures Commission may, unless the corporation concerned
         makes such request within two months after the date on which such
         stockholders or the Securities Futures Commission have demanded such
         request, make such request by subrogating the corporation concerned.
         (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998)


<PAGE>

         (4) When stockholders or the Securities Futures Commission instituting
         a lawsuit according to the provisions of paragraph (3) wins the
         lawsuit, the Securities Futures Commission or such stockholders may
         claim the legal cost and other actual expenses actually incurred in the
         lawsuit against the corporation concerned. (Newly Inserted by Act No.
         3541, Mar. 29, 1982; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8,
         1998)

         (5) The right referred to in paragraphs (2) and (3) shall lapse, unless
         the right is exercised within two years after the date on which such
         profit is gained.

         (6) Any officer or major stockholder of a stock-listed corporation or
         Association-registered corporation shall report the situation of such
         stocks of the corporation concerned, held by him for his own account
         regardless of the title thereof to the Securities Futures Commission,
         and the Stock Exchange or the Association under the conditions as
         designated by the Presidential Decree within ten days after he becomes
         an officer or major stockholder; and if the number of stocks held by
         him is changed, he shall report such fact to the Securities Futures
         Commission and the Stock Exchange or the Association under the
         conditions as prescribed by the Presidential Decree within the 10th day
         of the month following the month in which the date on which such change
         occurs is included. (Amended by Act No. 4469, Dec. 31, 1991; Act No.
         5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8,
         1998; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No.
         6176, Jan. 21, 2000)

         (7) The Securities Futures Commission and the Stock Exchange or the
         Association shall keep the report pursuant to paragraph (6), and shall
         make it available for public inspection. (Newly Inserted by Act No.
         3541, Mar. 29, 1982; Act No. 4469, Dec. 31, 1991; Act No. 5498, Jan. 8,
         1998; Act No. 5736, Feb. 1, 1999)

         (8) The provisions of paragraph (2) shall not apply in such case as
         prescribed by the Presidential Decree taking into consideration of the
         nature of selling or purchasing which was carried out in the capacity
         of an officer, employee or major

<PAGE>

         stockholder, and in such case where a major stockholder does not hold
         such capacity at a time when he sells or purchases stocks. (Amended by
         Act No. 4469, Dec. 31, 1991)

         (9) The provisions of paragraphs (2) and (3) shall apply mutatis
         mutandis to a securities company which makes arrangements for a public
         offering of new or outstanding securities or underwrites stocks issued
         by a stock-listed corporation or Association-registered corporation
         during the period as determined by the Presidential Decree. (Amended by
         Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 5254,
         Jan. 13, 1997; Act No. 5736, Feb. 1, 1999)


ARTICLE 188-2 (PROHIBITION OF USING UNDISCLOSED INFORMATION)


         (1) Any person who is informed of material information which is
         undisclosed to the public in relation with affairs, etc. of a listed
         corporation or Association-registered corporation (including
         corporations listed or registered with the Association within six
         months) in the course of performing his duties, from among those who
         fall under any of the following subparagraphs (including those for whom
         one year has not passed after they become not to fall under any of
         subparagraphs 1 through 5 of this paragraph), and those who are
         informed of such information from him, shall not use or have another
         person use the information in connection with sale and purchase or any
         other transaction of securities issued by the corporation concerned:
         (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5521, Feb. 24, 1998;
         Act No. 5736, Feb. 1, 1999)

         1.The corporation concerned and its officers, employees and agents;

         2.Major stockholders of the corporation concerned;

         3.A person who has the authority pursuant to Acts and subordinate
         statutes of license, authorization, direction, supervision or other
         authorities with respect to

<PAGE>

         the corporation concerned;

         4.A person who entered into a contract with the corporation concerned;
         and

         5.An agent, employee, and other staff personnel of a person who falls
         under any of subparagraphs 2 through 4 (in case where a person who
         falls under any of subparagraphs 2 through 4 is a corporation, the
         officers, employees and agents of such corporation).

         (2) The term "material information which is undisclosed to the public"
         in paragraph (1) means information which may have important effect on
         investors' judgment on investment and is undisclosed yet to the public
         by the corporation concerned under the conditions as prescribed by the
         Ordinance of the Ministry of Finance and Economy from among any
         information on fact, etc. falling under any subparagraph of Article 186
         (1). (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5539, May 25,
         1998)

         (3) The provisions of paragraphs (1) and (2) shall apply mutatis
         mutandis to the case of performing tender offer pursuant to Article 21.
         In this case, the term "the corporation concerned" in the main sentence
         of paragraph (1) shall be considered as the term "issuer of securities
         which are subject to tender offer"; the term "material information", as
         the term "information on carrying out or stopping tender offer"; and
         the term "the corporation concerned" in each subparagraph of paragraph
         (1), as the term "tender offerer". (Amended by Act No. 5254, Jan. 13,
         1997)
         [This Article Newly Inserted by Act No. 4469, Dec. 31, 1991]


ARTICLE 188-3 (LIABILITY FOR DAMAGES AGAINST USING UNDISCLOSED INFORMATION)


         (1) Any person who violates the provisions of Article 188-2, shall be
         liable for damages which a person who has made a purchase or sale of
         securities or other transaction suffers from that transaction.


<PAGE>

         (2) The claim for damages pursuant to paragraph (1) shall be
         extinguished by prescription, unless a claimant exercises such claim
         for damages for one year after the claimant is informed of the fact
         that an act in violation of the provisions of Article 188-2 is
         committed or for three years after the offense takes place. (Amended by
         Act No. 5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 4469, Dec. 31, 1991]


ARTICLE 188-4 (PROHIBITION OF UNFAIR TRANSACTION SUCH AS MARKET MANIPULATION)


         (1) No person shall do any acts which fall under any of the following
         subparagraphs for the purpose of creating a misleading appearance of
         active trading or causing any person to make a false judgment with
         respect to the sale and purchase transaction of securities listed on
         the securities market or registered on the Association brokerage
         market:

         1.Selling securities after a person has conspired in advance with other
         person that other person purchases securities at the same time when the
         person sells securities and at the same price;

         2.Purchasing securities after a person has conspired in advance with
         other person that other person sells securities at the same time when
         the person purchases securities and at the same price;

         3.Making fictitious sale and purchase transaction which does not
         accompany the transfer of ownership in the securities transaction; and

         4.Entrusting or being entrusted with action as prescribed in
         subparagraphs 1 through 3 of this paragraph.

         (2) No person shall do any acts which fall under any of the following
         subparagraphs

<PAGE>

         for the purpose of inducing the sale and purchase transaction of
         securities on the securities market or Association brokerage market:

         1.To effect, to entrust or to be entrusted with, alone or in conspiracy
         with other persons, sale and purchase transactions in the securities,
         creating a false or misleading appearance of active trading or making
         the price of such securities fluctuate;

         2.Disseminating the rumor that the price of concerned securities
         fluctuates by his or other person's manipulation; and

         3.Making willfully the representation which is false or misleading with
         respect to important matters in selling or purchasing the concerned
         securities.

         (3) No person shall effect, entrust or to be entrusted with,
         independently or jointly, the sale and purchase transaction of
         securities on the securities market or Association brokerage market,
         for the purpose of pegging or stabilizing price of securities in
         violation of the conditions as prescribed by the Presidential Decree.

         (4) With respect to purchase and sale or other transaction of
         securities, no person shall commit an act which falls under any of the
         following subparagraphs:

         1.Disseminating intentionally the false quotations or untrue facts or
         other rumors or using a deceptive scheme for the purpose of gaining
         unjust benefits; and

         2.Intending to gain money or other benefits which has property value by
         inducing misunderstanding of other persons, through false
         representation of any material fact or making use of document in which
         any fact required is omitted.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 188-5 (LIABILITY FOR DAMAGES AGAINST MARKET MANIPULATION)



<PAGE>

         (1) A person who violates the provisions of Article 188-4 shall be
         liable for damages which a person who has effected a sale and purchase
         transaction of securities or has entrusted such securities transaction
         at the price formed due to such violative act on the securities market
         or Association brokerage market suffers from such transaction or
         entrustment.

         (2) The claim for damages pursuant to paragraph (1) shall be
         extinguished by prescription, unless a claimant exercises such claim
         for damages for one year after the claimant is informed of the fact
         that an act in violation of the provisions of Article 188-4 is
         committed or for three years after the offense has taken place.
         (Amended by Act No. 5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


         SECTION 3 SPECIAL TREATMENT FOR LISTED CORPORATION, ETC.

ARTICLE 189 (RETIREMENT OF STOCKS)


         (1) Any stock-listed corporation or any Association-registered
         corporation may, if the articles of incorporation of such corporation
         provide that such corporation may retire its stocks based on a
         resolution of the board of directors under Article 434 of the
         Commercial Act as dividends for its stockholders, retire its stocks
         based on a resolution of the boards of directors except as otherwise
         provided for in the provisions of other Acts.

         (2) In the event that it is intended to retire stocks under paragraph
         (1), the board of directors shall vote on matters falling under each of
         the following subparagraphs. In this case, the stocks to be retired
         shall be limited to stocks acquired after a

<PAGE>

         resolution of the board of directors:

         1.Kinds and numbers of stocks to be retired;

         2.Total value of stocks to be acquired for retirement; and

         3.Period for which it is intended to acquire stocks. In this case, such
         period shall expire prior to a regular general meeting of stockholders
         called for the first time after the resolution of the board of
         directors.

         (3) Any stock-listed corporation or any Association-registered
         corporation shall, if it acquires its stocks for the purpose of
         retiring such stocks under paragraph (1), acquire such stocks according
         to the standards falling under each of the following subparagraphs:

         1.The stocks shall be acquired according to the method of any
         subparagraph of Article 189-2 (1). In this case, where the stocks are
         acquired according to the method of subparagraph 1 of the same
         paragraph, the acquisition period therefor and method thereof shall be
         made to conform to the standards prescribed by the Presidential Decree;
         and

         2.The amount to be acquired for retiring stocks shall not exceed the
         amount prescribed by the Presidential Decree within limits of dividends
         available for stockholders at the end of the relevant business year
         under Article 462 (1) of the Commercial Act.

         (4) Any stock-listed corporation or any Association-registered
         corporation shall, if it retires its stocks under paragraph (1), report
         the matters of each subparagraph of paragraph (2) and the fact of
         retiring such stocks to a regular general meeting of stockholders
         called for the first time after a resolution of the board of directors
         with respect to the retirement of such stocks.

         (5) In the event that any stock-listed corporation or any
         Association-registered

<PAGE>

         corporation acquires stocks and retires them in violation of the limits
         as prescribed in paragraph (3) 2, directors who vote for retiring such
         stocks at a meeting of the board of directors shall be jointly and
         severally liable for compensating for the value accruing from the
         acquisition of the stocks in excess of the limits: Provided, That the
         same shall not apply to a case where such directors prove that the
         stocks are acquired and retired in excess of the limits despite their
         reasonable care.
         [This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]


ARTICLE 189-2 (ACQUISITION OF TREASURY STOCKS)


         (1) Any stock-listed corporation or any Association-registered
         corporation shall acquire treasury stocks (excluding the acquisition
         under the provisions of Article 341 of the Commercial Act) in a manner
         falling under any of the following subparagraphs under its name and for
         its own account. In this case, the acquisition amount shall be within
         the limit of allowing any dividend in accordance with the provisions of
         Article 462 (1) of the Commercial Act: (Amended by Act No. 6176, Jan.
         21, 2000; Act No. 6423, Mar. 28, 2001)

         1.A manner in which the acquisition is made on the securities market or
         Association brokerage market; and

         2.A manner in which the open purchase is made in accordance with the
         provisions of Chapter IV.

         (2) Where a stock-listed corporation or an Association-registered
         corporation acquires treasury securities through money trust contract
         as determined by the Presidential Decree, an amount calculated
         according to what is prescribed by the Presidential Decree shall be
         deemed the acquisition amount as described in the provisions of the
         later part of paragraph (1). (Amended by Act No. 6176, Jan. 21, 2000)


<PAGE>

         (3) Where a stock-listed corporation or an Association-registered
         corporation acquires the treasury stocks (including the conclusion of a
         trust contract, etc.; hereafter the same in this Article shall apply)
         pursuant to paragraphs (1) and (2) or intends to dispose of the
         treasury stocks acquired pursuant to paragraphs (1) and (2) (including
         the cancellation of a trust contract, etc.; hereafter the same in this
         Article shall apply), it shall report the matters relating to the
         acquisition or disposal of treasury stocks to the Financial Supervisory
         Commission and, the Stock Exchange, or the Association according to the
         criteria as prescribed by the Presidential Decree, such as necessary
         conditions and procedure, etc. (Amended by Act No. 5254, Jan. 13, 1997;
         Act No. 5498, Jan. 8, 1998; Act No. 5521, Feb. 24, 1998; Act No. 5736,
         Feb. 1, 1999; Act No. 6423, Mar. 28, 2001)

         (4) Where a stock-listed corporation or an Association-registered
         corporation acquires the treasury stocks in excess of the limit as
         referred to in paragraph (1) due to a reduction of the limit to
         distribute the dividend, the stock-listed corporation shall dispose of
         the excessive portion within such period as determined by the
         Presidential Decree from that day. (Amended by Act No. 5254, Jan. 13,
         1997; Act No. 5539, May 25, 1998; Act No. 5736, Feb. 1, 1999; Act No.
         6423, Mar. 28, 2001)

         (5) The provisions of Articles 14 (1), 15, 16, 19 and 20 shall apply
         mutatis mutandis in the case of acquiring or disposing of the treasury
         stocks. (Newly Inserted by Act No. 5254, Jan. 13, 1997; Act No. 5736,
         Feb. 1, 1999)

         (6) The provisions of Article 341-2 (1) of the Commercial Act shall not
         apply to the case in which a stock-listed corporation or an
         Association-registered corporation acquires treasury securities
         pursuant to the provisions of paragraph (1). (Newly Inserted by Act No.
         6176, Jan. 21, 2000)
         [This Article Newly Inserted by Act No. 4701, Jan. 5, 1994]

<PAGE>

ARTICLE 189-3 (CAPITAL INCREASE BY PUBLIC OFFERING)


         (1) A stock-listed corporation or Association-registered corporation
         may issue new stocks by public offering as prescribed in the
         Presidential Decree by a resolution of the board of directors in
         accordance with the articles of association of the corporation.
         (Amended by Act No. 5736, Feb. 1, 1999)

         (2) In case where new stocks are issued by public offering pursuant to
         paragraph (1), the price of the new stocks shall not be less than the
         price calculated by the methods as prescribed by the Presidential
         Decree.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 189-4 (STOCK OPTIONS)


         (1) Notwithstanding the provisions of Articles 340-2 through 340-5 of
         the Commercial Act, any stock-listed corporation or any
         Association-registered corporation shall offer newly issued stocks at
         the pre-set price to officers and employees of such corporation or its
         affiliated company as prescribed by the Presidential Decree (excluding
         any officer or employee prescribed by the Presidential Decree) who have
         contributed or are able to contribute to the establishment, management,
         overseas business, technological renovations, etc. of such corporation
         in compliance with a resolution (hereafter in this Article referred to
         as the "special resolution") adopted as prescribed by the articles of
         association in accordance with the provisions of Article 434 of the
         Commercial Act and grant such officers and employees the right to
         purchase its stocks (hereinafter referred to as the "stock option") in
         accordance with the provisions of this Article under the conditions as
         prescribed by the Presidential Decree. (Amended by Act No. 6176, Jan.
         21, 2000; Act No. 6623, Jan. 26, 2002)

         (2) Any stock-listed corporation or any Association-registered
         corporation (hereinafter referred to as the "stock option granting
         corporation") that intends to grant the stock option shall enter
         matters falling under each of the following

<PAGE>

         subparagraphs in its articles of association: (Amended by Act No. 6176,
         Jan. 21, 2000)

         1.The fact that the corporation may grant the stock option in certain
         cases;

         2.The types and total number of stocks to be issued through the
         exercise of the stock option;

         3.The qualifications of a person who is to be granted the stock option;
         and

         4.The fact that a corporation may cancel the stock option in certain
         cases.

         (3) Any stock option granting corporation may, if there is a special
         resolution containing matters falling under each of the following
         subparagraphs, grant stock option up to the limits prescribed by the
         Presidential Decree within the scope of 20/100 of the total number of
         stocks issued: Provided, That notwithstanding paragraph (1) and the
         main sentence of this paragraph, such corporation may offer such stock
         option up to the limits prescribed by the Presidential Decree within
         the scope of 10/100 of the total number of stocks issued according to a
         resolution that contains matters falling under each of the following
         subparagraphs and is adopted by the board of directors as prescribed by
         the articles of association: (Amended by Act No. 6423, Mar. 28, 2001)

         1.The names of persons who are to be granted the stock option;

         2.The method of granting the stock option;

         3.The matters concerning option prices of the stock option and
         adjustment thereof;

         4.The period for which the stock option is exercised; and

         5.The kinds and numbers of stocks to be offered by the exercise of the
         stock option to each of persons who are granted such stock option.


<PAGE>

         (4) The stock option shall have the effect on a company that grants
         such stock option for a period ranging from the date of a resolution
         under paragraph (1) or the proviso of paragraph (3) to the date on
         which the exercise of the stock option prescribed by the relevant
         corporation in the articles of association expires. In this case, any
         person who is granted the stock option shall be allowed to exercise
         such stock option only after holding office or serving for not less
         than two years from the date of a resolution under paragraph (1) or the
         proviso of paragraph (3) save the case prescribed by the Ordinance of
         the Ministry of Finance and Economy. (Amended by Act No. 6423, Mar. 28,
         2001)

         (5) The stock option shall not be transferred to other persons:
         Provided, That when a person who has been granted the stock option
         dies, a successor of the person shall be deemed to be granted such
         option. (Amended by Act No. 6176, Jan. 21, 2000)

         (6) The provisions of Articles 340-3 (3) and 350 (2), the latter part
         of Article 350 (3), Articles 351 and 516-8 (1), (3), and (4), and the
         former part of Article 516-9 of the Commercial Act shall apply mutatis
         mutandis to the case in which new stocks are issued as a result of the
         exercise of the stock option. (Amended by Act No. 6176, Jan. 21, 2000)

         (7) The Financial Supervisory Commission may give necessary
         recommendations to a stock option granting corporation under the
         conditions as determined by the Presidential Decree. (Amended by Act
         No. 5498, Jan. 8, 1998; Act No. 6176, Jan. 21, 2000)

         (8) A stock option granting corporation shall, when making a resolution
         pursuant to paragraph (1), report such fact to the Financial
         Supervisory Commission and the Stock Exchange or the Association under
         the conditions as prescribed by the Presidential Decree, and the
         Financial Supervisory Commission and the Stock Exchange or the
         Association shall keep the content of such resolution to make it
         available for public inspection during the period from the date of
         report to the end

<PAGE>

         of duration of stock option. (Amended by Act No. 5498, Jan. 8, 1998;
         Act No. 6176, Jan. 21, 2000)

         (9) Matters necessary for stock option other than those provided in
         paragraphs (1) through (8) shall be determined by the Presidential
         Decree. (Newly Inserted by Act No. 5423, Dec. 13, 1997; Act No. 6176,
         Jan. 21, 2000)

         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 190 (MERGER WITH STOCK-LISTED CORPORATION OR ASSOCIATION-REGISTERED
CORPORATION)

         In the event that any corporation that is neither a stock-listed
         corporation nor an Association-registered corporation intends to merge
         with a stock-listed corporation or an Association-registered
         corporation, any approval therefor of a general meeting of stockholders
         under Article 522 of the Commercial Act shall not take effect unless it
         is made after two months from the date on which the relevant
         corporation has registered under Article 3. (Amended by Act No. 5254,
         Jan. 13, 1997; Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999;
         Act No. 6423, Mar. 28, 2001)


ARTICLE 190-2 (MERGER, ETC.)


         (1) Any stock-listed corporation or any Association-registered
         corporation shall, where it intends to merge with other corporations,
         report to the Financial Supervisory Commission and the Stock Exchange
         or the Association. In this case, the stock-listed corporation or
         Association-registered corporation shall report the matters relating to
         the merger according to standards for merger conditions such as the
         requirements and procedures as prescribed by the Presidential Decree.
         (Amended by Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001)

         (2) The provisions of paragraph (1) shall apply mutatis mutandis where
         a stock-

<PAGE>

         listed corporation or Association-registered corporation intends to
         split or merge by split-off, or to transfer or take over important
         business as prescribed by the Presidential Decree. (Amended by Act No.
         5736, Feb. 1, 1999)

         (3) The provisions of Articles 8 (2), 14 through 16, 19 and 20 shall
         apply mutatis mutandis in the case of report under paragraphs (1) and
         (2). (Amended by Act No. 5736, Feb. 1, 1999)
         [This Article Wholly Amended by Act No. 5254, Jan. 13, 1997]


ARTICLE 191 (APPRAISAL RIGHTS OF STOCKHOLDERS)


         (1) A stockholder (including stockholders who have non-voting rights
         pursuant to Article 370 (1) of the Commercial Act; hereafter the same
         shall apply in this Article) who opposes a resolution made at the
         meeting of the board of directors of a stock-listed corporation or an
         Association-registered corporation with regard to the matters under
         Articles 360-3, 360-9, 360-16, 374, 522, 527-2 and 530-3 of the
         Commercial Act (limited to a merger by split-off referred to in Article
         530-2 of the said Act) may demand of the corporation concerned the
         purchase of the stocks that he owns within twenty days after the date
         on which such resolution is made at the general meeting of stockholders
         (after the date on which two weeks have passed since the public notice
         or notification referred to in Articles 360-9 (2) and 527-2 (2) of the
         Commercial Act for stockholders of a company to become a complete
         subsidiary under Article 360-9 of the said Act and stockholders of a
         company to be extinguished under Article 527-2 of the said Act) by a
         written request in which class and number of stocks are stated, only in
         case where he has made written notification that he opposes the
         resolution of the corporation concerned prior to the general meeting of
         stockholders (within two weeks from the date on which a public notice
         or notification is made under Articles 360-9 (2) and 527-2 (2) of the
         Commercial Act for stockholders of a company to become a complete
         subsidiary under Article 360-9 of the same Act and stockholders of a
         company to be extinguished under Article 527-2 of the same Act).
         (Amended by Act No. 4469,

<PAGE>

         Dec. 31, 1991; Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997;
         Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001; Act No. 6623,
         Jan. 26, 2002)

         (2) A stock-listed corporation or an Association-registered corporation
         which has received a demand pursuant to paragraph (1) shall purchase
         the stocks concerned within one month after the expiration of the
         period for demand for purchase. (Amended by Act No. 5736, Feb. 1, 1999)

         (3) The purchase price under paragraph (2) shall be determined by
         consultation between the stockholder concerned and the corporation
         concerned: Provided, That the purchase price shall, where a purchase
         agreement has not been reached among them, be an amount calculated
         through the methods as determined by the Presidential Decree based on
         transaction price of the stocks concerned traded on the securities
         market or Association brokerage market prior to the date on which a
         resolution by the board of directors is made, and where the corporation
         concerned or the stockholders holding 30/100 or more of total number of
         stocks subject to such purchase object to this purchase price, the
         Financial Supervisory Commission may adjust it. In this case, an
         application for adjusting purchase price shall be made not later than
         ten days prior to the date on which such a purchase is to be finalized
         pursuant to paragraph (2). (Amended by Act No. 5498, Jan. 8, 1998; Act
         No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001)

         (4) Any stock-listed corporation or any Association-registered
         corporation shall, where it purchases stocks pursuant to paragraph (1),
         dispose of them within a period as prescribed by the Presidential
         Decree: Provided, That in the event that it is intended to retire
         stocks with dividends to be offered to stockholders, such stocks shall
         be retired in accordance with Article 189 (excluding the latter part
         other than each subparagraph of paragraph (2) of the same Article and
         paragraph (3) 1 of the same Article). In this case, in the application
         of paragraph (2) 2 of the same Article, "the total value of stocks to
         be acquired for retirement" shall be read "the total value of stocks to
         be retired," in the application of paragraph (2) 3 of the same Article,
         "the period for which it is intended to acquire stocks. In this case,
         the period" shall be read "the date on which it is intended to retire
         stocks. In this case,

<PAGE>

         the date", and in the application of paragraph (3) 2 of the same
         Article, "the amount to be acquired for retirement" shall be read "the
         total value of stocks to be retired," respectively. (Amended by Act No.
         5254, Jan. 13, 1997; Act No. 6423, Mar. 28, 2001)

         (5) Where any stock-listed corporation or any Association-registered
         corporation makes notification or public notice for the convocation of
         a general meeting of stockholders in order to resolve the matters
         prescribed in Articles 360-3, 360-16, 374, 522 and 530-3 of the
         Commercial Act (limited to merger by split-off referred to in Article
         530-2 of the said Act) or makes notification or public notice pursuant
         to Articles 360-9 (2) and 527-2 (2) of the same Act, under the
         conditions as prescribed by Article 363 of the same Act, it shall
         specify the contents and exercising methods of appraisal rights of
         stockholders pursuant to paragraph (1). In this case, the stock-listed
         corporation or Association-registered corporation shall notify
         stockholders having no voting rights pursuant to Article 370 (1) of the
         same Act or give a public notice thereof to them. (Newly Inserted by
         Act No. 3945, Nov. 28, 1987; Act No. 4701, Jan. 5, 1994; Act No. 5254,
         Jan. 13, 1997; Act No. 5736, Feb. 1, 1999; Act No. 6423, Mar. 28, 2001;
         Act No. 6623, Jan. 26, 2002)
         [This Article Wholly Amended by Act No. 3541, Mar. 29, 1982]


ARTICLE 191-2 (SPECIAL CASES FOR NONVOTING STOCKS)


         (1) In applying the limit on the number of nonvoting stocks pursuant to
         Article 370 (2) of the Commercial Act, where a stock-listed corporation
         (including a corporation which makes a public offering of new or
         outstanding stocks for the purpose of listing them initially) or an
         Association-registered corporation (including a corporation which makes
         a public offering of new or outstanding stocks for the purpose of
         trading them initially on the Association brokerage market) falls under
         any of the following subparagraphs, the nonvoting stocks issued by such
         corporation shall not be counted in the calculation of the limit:
         (Amended by Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 1998; Act
         No. 5539, May 25, 1998; Act No.

<PAGE>

         5736, Feb. 1, 1999)

         1.In case where such corporation issues stocks in a foreign country as
         prescribed by the Ordinance of the Ministry of Finance and Economy or
         issues stocks as a result of the excercise of the rights upon
         convertible bonds, bonds with warrants or any other certificates or
         instruments related to stocks issued in a foreign country; and

         2.In case where a corporation which is deemed necessary to issue
         nonvoting stocks in the public interest by the Financial Supervisory
         Commission and satisfies the criteria as prescribed by the Presidential
         Decree from among corporations carrying on an industry important for
         the national economy, such as the national key industry, issues stocks.

         (2) The aggregate number of nonvoting stocks falling under any
         subparagraph of paragraph (1) and those pursuant to Article 370 (2) of
         the Commercial Act shall not exceed 1/2 of the total number of issued
         and outstanding stocks.

         (3) A corporation of which the total number of nonvoting stocks exceeds
         1/4 of the total number of issued and outstanding stocks may issue
         nonvoting stocks within the ratio, by means of exercising preemptive
         right, capitalization of reserve or stock dividend, etc., as determined
         by the Presidential Decree. (Amended by Act No. 5423, Dec. 13, 1997;
         Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-3 (SPECIAL TREATMENT OF STOCK DIVIDEND)


         (1) Notwithstanding the proviso of Article 462-2 (1) of the Commercial
         Act, a stock-listed corporation or Association-registered corporation
         may make a dividend by newly issued stocks up to the limit of the total
         amount of dividend: Provided, That in case where the current price of
         concerned stock is less than par

<PAGE>

         value thereof, the same shall not apply. (Amended by Act No. 5736, Feb.
         1, 1999)

         (2) The method calculating the price of stock pursuant to the proviso
         of paragraph (1) shall be prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-4 (ISSUANCE OF NEW TYPE CORPORATE BONDS)


         (1) A stock-listed corporation or Association-registered corporation
         may issue new type of bonds which are different from those under
         Articles 513 (1) and 516-2 (1) of the Commercial Act, such as bonds
         entitled to participate in dividend, bonds with rights to demand an
         exchange with stocks or other securities, or other bonds as prescribed
         by the Presidential Decree. (Amended by Act No. 5736, Feb. 1, 1999)

         (2) Necessary matters such as contents and issuance method of bonds
         issued pursuant to the provisions of paragraph (1) shall be prescribed
         by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-5 (SPECIAL TREATMENT OF ISSUANCE OF BONDS)

         The amount corresponding to the portion with respect to which the
         conversion to stocks or the exercise of preemptive right is possible,
         of convertible bonds or bonds with warrants which are issued by a
         stock-listed corporation or Association-registered corporation, shall
         not be subject to the limits of the issuance of bonds pursuant to the
         provisions of Article 470 of the Commercial Act. (Amended by Act No.
         5736, Feb. 1, 1999)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]



<PAGE>

ARTICLE 191-6 (SPECIAL TREATMENT OF DIVIDEND BY PUBLIC CORPORATION)


         (1) In paying dividend of profits or interests, a public corporation
         (this refers to a public corporation pursuant to the provisions of
         Article 199 (2)) may, notwithstanding the provisions of Article 464 of
         the Commercial Act, pay all or part of dividend to which the Government
         is entitled to persons who fall under any of the following
         subparagraphs from among stockholders of the concerned corporation
         under the conditions as prescribed by the Presidential Decree:

         1.Employees who are members of an employee stock ownership association
         of the corporation which issued the stocks concerned; and

         2.Any person as prescribed by the Presidential Decree, taking into
         consideration a level of yearly income and amount of property owned.

         (2) In capitalizing all or a part of reserve, a public corporation may,
         notwithstanding the provisions of Article 461 (2) of the Commercial
         Act, issue stocks to which the Government is entitled in whole or in
         part, to stockholders who hold stocks issued by the public corporation
         for a period as prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-7 (PREFERENTIAL ALLOCATION TO MEMBER OF EMPLOYEE STOCK OWNERSHIP
ASSOCIATION)


         (1) In case where a stock-listed corporation or a corporation which
         intends to list stocks publicly offers or sells its stocks, member of
         employee stock ownership association of such corporation shall have the
         right to be allocated preferentially with stocks within the limit of
         20/100 of the total number of stocks to be offered or sold: Provided,
         That in case where it falls under any of the following subparagraphs,
         this shall not apply: (Amended by Act No. 5559, Sep. 16, 1998)


<PAGE>

         1.A case where a corporation as prescribed by the Presidential Decree
         from among foreign-invested enterprises pursuant to the Foreign
         Investment Promotion Act issues stocks; and

         2.Other case prescribed by the Presidential Decree as the case where
         preferential allocation to member of employee stock ownership
         association is difficult.

         (2) In case where the number of stocks owned by members of employee
         stock ownership association is more than 20/100 of the total number of
         stocks issued newly and stocks to have been issued already, paragraph
         (1) shall not apply.

         (3) The Minister of Finance and Economy may determine the criteria
         necessary for the stock dividend for member of employee stock ownership
         association pursuant to paragraph (1) and for the disposal of such
         stocks. (Amended by Act No. 5539, May 25, 1998)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-8 (PAYMENT OF DEPOSIT WITH LISTED SECURITIES, ETC.)


         (1) Deposit or deposit money as prescribed by the Presidential Decree
         from among those which are to be paid to the State, a local government
         or a government-invested institution pursuant to the Framework Act on
         the Management of Government-Invested Institutions (hereinafter
         referred to as a "government-invested institution") may be paid with
         listed securities (including securities registered in the Association
         pursuant to Article 172-2; hereafter the same shall apply in this
         Article). (Amended by Act No. 5736, Feb. 1, 1999)

         (2) The State, a local government or a government-invested institution
         may not refuse the payment with listed securities pursuant to paragraph
         (1).


<PAGE>

         (3) The listed securities which are eligible for a payment to the
         State, local government or government-invested institution pursuant to
         paragraph (1) and the valuation standard of such securities, shall be
         prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-9

         Deleted. (by Act No. 6176, Jan. 21, 2000)


ARTICLE 191-10 (PUBLIC NOTICE ON CONVOCATION OF GENERAL MEETING)


         (1) In case where a stock-listed corporation or Association-registered
         corporation convenes a general meeting of stockholders, with respect to
         stockholders who hold stocks not more than the number as prescribed by
         the Presidential Decree, the notice of convocation pursuant to Article
         363 (1) of the Commercial Act may be substituted by determining the
         date of a general meeting of stockholders under the conditions as
         prescribed by the articles of association of the corporation and giving
         twice or more public notices to the effect that the such corporation
         convenes the general meeting of stockholders and the subject matters of
         that meeting on two or more daily newspapers not later than two weeks
         before the date of the general meeting of stockholders. (Amended by Act
         No. 5736, Feb. 1, 1999)

         (2) In the event that any stock-listed corporation or any
         Association-registered corporation serves a convocation notice to each
         of the stockholders under Article 363 (1) of the Commercial Act or
         makes the public notice thereof under paragraph (1) for the purpose of
         holding a general meeting of stockholders to select and appoint
         directors, such stock-listed corporation or such Association-registered
         corporation shall notify each of the stockholders of names and brief
         personal records of candidates for such directors, persons who
         recommend such candidates and other matters concerning such candidates
         prescribed by the Presidential Decree or publish them. (Amended by Act
         No. 6423, Mar. 28, 2001)


<PAGE>

         (3) In the event that any stock-listed corporation or any
         Association-registered corporation serves the convocation notice of a
         general meeting of stockholders on each of the stockholders or makes a
         public notice thereof, such stock-listed corporation or such
         Association-registered corporation shall notify each of the
         stockholders of matters falling under each of the following
         subparagraphs or publish such matters: Provided, That the stock-listed
         corporation or the Association-registered corporation may run such
         matters on the information communications network and offer such
         matters for public perusal in places prescribed by the Ordinance of the
         Ministry of Finance and Economy in lieu of the notice and publication:
         (Newly Inserted by Act No. 6423, Mar. 28, 2001)

         1.Matters concerning the attendance rates of outside directors and
         other non-standing directors at meetings of board of directors, details
         of their activities such as pros and cons over the agendas of meetings
         of the board of directors and their remunerations;

         2.Matters prescribed by the Presidential Decree from among details of
         transactions with the biggest stockholder, etc. under Article 191-19;
         and

         3.Management reference matters prescribed by the Presidential Decree
         such as the outline of the business, current operations.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-11 (APPOINTMENT AND DISMISSAL OF AUDITOR)


         (1) In case where the total number of voting stocks of a stock-listed
         corporation or Association-registered corporation owned by the biggest
         stockholder and his specially related persons and/or other persons as
         prescribed by the Presidential Decree exceeds 3/100 of the total number
         of issued voting stocks of such corporation (in case where the articles
         of association of the corporation designates

<PAGE>

         a ratio lower than 3/100, such ratio shall apply), such stockholders
         shall not exercise the voting rights of stocks exceeding the ratio in
         case of the appointment or dismissal of an auditor or a member of the
         inspection committee (limited to any member who is not an outside
         director). (Amended by Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan.
         21, 2000)

         (2) A stock-listed corporation or Association-registered corporation
         shall, in case where it proposes the appointment of an auditor or the
         determination of remuneration for auditor as the subject matter of the
         general meeting of stockholders, propose and resolve that subject
         matter separately from the appointment of director or for the
         determination of remuneration for director. (Amended by Act No. 5736,
         Feb. 1, 1999)

         (3) The auditor or inspection committee of a stock-listed corporation
         or Association-registered corporation may, notwithstanding Article
         447-4 (1) of the Commercial Act, submit an auditing report to directors
         not later than one week before the date of the general meeting of
         stockholders. (Amended by Act No. 5736, Feb. 1, 1999; Act No. 6176,
         Jan. 21, 2000)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-12 (QUALIFICATIONS FOR AUDITOR)


         (1) A stock-listed corporation or Association-registered corporation as
         prescribed by the Presidential Decree, shall appoint one or more
         standing auditors: Provided, That the same shall not apply to the case
         in which the inspection committee is established in accordance with
         this Act or other Acts. (Amended by Act No. 5736, Feb. 1, 1999; Act No.
         6176, Jan. 21, 2000)

         (2) Deleted. (by Act No. 5736, Feb. 1, 1999)

         (3) A person who falls under any of the following subparagraphs shall
         not be a

<PAGE>

         standing auditor of a stock-listed corporation or
         Association-registered corporation, and any auditor of a stock-listed
         corporation who falls under any of the following subparagraphs shall
         lose his office: (Amended by Act No. 5736, Feb. 1, 1999)

         1.A minor, an incompetent, or a quasi-incompetent;

         2.A bankrupt who has not been reinstated yet;

         3.A person who has been sentenced to imprisonment without prison labor
         or a heavier punishment and for whom two years has not elapsed since
         the execution of such punishment was terminated or since the final
         judgment was rendered that the punishment on him would not be executed;

         4.A person who was discharged or dismissed from a stock-listed
         corporation or Association-registered corporation under this Act and
         for whom two years has not elapsed since the date of such discharge or
         dismissal;

         5.A major stockholder of the corporation concerned;

         6.A full-time officer or employee of the corporation concerned or a
         person who has been a full-time officer or employee thereof in the last
         two years; and

         7.A person who is capable of having influence on the management of the
         corporation concerned other than those under subparagraphs 5 and 6 and
         who is prescribed by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-13 (EXERCISE OF MINORITY STOCKHOLDERS' RIGHTS)


         (1) Any person who has been holding 1/10,000 or more of the total
         number of outstanding stocks issued by a stock-listed corporation or an
         Association-

<PAGE>

         registered corporation for six months under the conditions as
         prescribed by the Presidential Decree may exercise his right as a
         stockholder prescribed in Article 403 of the Commercial Act (including
         where it is applicable mutatis mutandis under Articles 324, 415, 424-2,
         467-2, and 542 of the Commercial Act). (Amended by Act No. 5539, May
         25, 1998; Act No. 5736, Feb. 1, 1999)

         (2) Any person who has been holding 50/100,000 or more (in case of a
         corporation prescribed by the Presidential Decree, 25/100,000 or more)
         of the total number of outstanding stocks issued by a stock-listed
         corporation or an Association-registered corporation for 6 months under
         the conditions as prescribed by the Presidential Decree may exercise
         his right as a stockholder prescribed in Article 402 of the Commercial
         Act. (Amended by Act No. 6423, Mar.
         28, 2001)

         (3) Any person who has been holding 10/10,000 or more (in case of a
         corporation prescribed by the Presidential Decree, 5/10,000 or more) of
         the total number of outstanding stocks issued by a stock-listed
         corporation or an Association-registered corporation for 6 months under
         the conditions as prescribed by the Presidential Decree may exercise
         his right as a stockholder under Article 466 of the Commercial Act.
         (Amended by Act No. 5736, Feb. 1, 1999; Act No.
         6423, Mar. 28, 2001)

         (4) Any person who has been holding stocks 50/10,000 or more (in case
         of a corporation prescribed by the Presidential Decree, 25/10,000 or
         more) of the total number of outstanding stocks issued by a
         stock-listed corporation or an Association-registered corporation for 6
         months under the conditions as prescribed by the Presidential Decree
         may exercise his right as a stockholder under Articles 385 (including a
         case where it is applicable mutatis mutandis in Article 415 of the
         Commercial Act) and 539 of the Commercial Act. (Newly Inserted by Act
         No. 6423, Mar. 28, 2001)

         (5) Any person who has been holding 30/1000 or more (in case of a
         corporation as prescribed by the Presidential Decree, 15/1000 or more)
         of the total number of outstanding stocks issued by a stock-listed
         corporation or an Association-

<PAGE>

         registered corporation for six months under the conditions as
         prescribed by the Presidential Decree may exercise his right as a
         stockholder prescribed in Articles 366 and 467 of the Commercial Act.
         In this case, when a person exercises his right as a stockholder
         prescribed in Article 366 of the Commercial Act, the number of stocks
         shall be calculated based on voting stocks. (Amended by Act No. 5736,
         Feb. 1, 1999)

         (6) When a stockholder pursuant to paragraph (1) of this Article
         institutes a lawsuit as prescribed in Article 403 of the Commercial Act
         (including where it is applicable mutatis mutandis under Articles 324,
         415, 424-2, 467-2 and 542 of the Commercial Act) and wins such lawsuit,
         the stockholder may request the company concerned to pay the cost of
         the lawsuit and other costs resulting from such lawsuit.
         [This Article Wholly Amended by Act No. 5521, Feb. 24, 1998]


ARTICLE 191-14 (STOCKHOLDER'S PROPOSAL)


         (1) A person who has been holding 10/1000 or more (in case of a
         corporation as prescribed by the Presidential Decree, 5/1000 or more)
         of the total number of issued and outstanding stocks of a stock-listed
         corporation or Association-registered corporation for six months under
         the Presidential Decree, may propose to the directors that such
         directors make certain matters as the subject matters of the general
         meeting of stockholders under the conditions as prescribed by the
         Presidential Decree (hereinafter referred to as a "stockholder's
         proposal"). (Amended by Act No. 5736, Feb. 1, 1999)

         (2) Any person who makes a stockholder's proposal pursuant to the
         provisions of paragraph (1) may ask directors to enter the summary of
         his proposal in a publication and a notice thereof in accordance with
         the provisions of Article 363 of the Commercial Act in addition to
         matters to be put on the agenda of a general meeting of stockholders on
         the conditions as prescribed by the Presidential Decree. (Newly
         Inserted by Act No. 6176, Jan. 21, 2000)


<PAGE>

         (3) The board of directors shall submit stockholder's proposal before
         the general meeting of stockholders as the subject matters thereof,
         except in the case where the contents of the stockholder's proposal
         violate Acts and subordinate statutes or the articles of association or
         in the case as prescribed by the Presidential Decree, and in case where
         there is a demand of a person who makes stockholder's proposal, the
         board of directors shall give him an opportunity to explain the
         concerned proposal in the general meeting of stockholders.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 191-15 (SPECIAL CASES FOR ISSUANCE BELOW PAR VALUE)


         (1) Notwithstanding the provisions of Article 417 of the Commercial
         Act, any stock-listed corporation or any Association-registered
         corporation may issue stocks below par value subject to a resolution of
         the general meeting of stockholders under Article 434 of the Commercial
         Act without authorization of a court: Provided, That this shall not
         apply where the corporation concerned fails to complete a redemption
         under Article 455 (2) of the Commercial Act. (Amended by Act No. 6423,
         Mar. 28, 2001)

         (2) The minimum issue value for stocks shall be determined by a
         resolution of the general meeting of stockholders under paragraph (1).
         In this case, the minimum issue value shall not be lower than price
         calculated according to the methods as determined by the Presidential
         Decree.

         (3) Except as otherwise determined by the general meeting of
         stockholders, stocks under paragraph (1) shall be issued within one
         month from the date on which a resolution of the general meeting of
         stockholders is made.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]



<PAGE>

ARTICLE 191-16 (APPOINTMENTS OF OUTSIDE DIRECTORS)


         (1) Any stock-listed corporation or any Association-registered
         corporation prescribed by the Presidential Decree shall make the number
         of outside directors not less than one fourth of total number of its
         directors: Provided, That any stock-listed corporation or any
         Association-registered corporation prescribed by the Presidential
         Decree shall have not less than three outside directors, but make the
         number of such outside directors not less than half of total number of
         its directors. (Amended by Act No. 6423, Mar. 28, 2001)

         (2) The provisions of paragraph (1) shall not apply to any stock-listed
         corporation or any Association-registered corporation that is a mutual
         fund incorporated pursuant to the Mutual Fund Act and any other
         stock-listed corporation or any other Association-registered
         corporation prescribed by the Presidential Decree. (Amended by Act No.
         6423, Mar. 28, 2001)

         (3) The provisions of Article 54-5 (4) and (5) shall apply mutatis
         mutandis to any outside director of a stock-listed corporation or an
         Association-registered corporation referred to in paragraph (1) and the
         provisions of Article 54-5 (2) and (3) shall apply mutatis mutandis to
         the stock-listed corporation or the Association-registered corporation
         referred to in the proviso of paragraph (1). (Amended by Act No. 6423,
         Mar. 28, 2001)

         (4) Any non-standing or outside director appointed under the Act on the
         Improvement of Managerial Structure and Privatization of Public
         Enterprises, the Banking Act and other Acts shall be deemed an outside
         director appointed under this Act.

         (5) Any director of a stock-listed corporation or an
         Association-registered corporation may seek assistance from experts at
         the expense of his company according to a resolution of the board of
         directors. (Newly Inserted by Act No. 6423, Mar. 28, 2001)


<PAGE>

         (6) Where any stock-listed corporation or any Association-registered
         corporation appoints any outside director or dismisses him or any
         outside director resigns prior to the expiration of his term of office,
         such stock-listed corporation or such Association-registered
         corporation shall file a report thereof with the Financial Supervisory
         Commission and the Stock Exchange or the Association by the day
         following the day on which such appointment, dismissal or resignation
         occurs. (Amended by Act No. 6423, Mar. 28, 2001)
         [This Article Newly Inserted by Act No. 6176, Jan. 21, 2000]


ARTICLE 191-17 (INSPECTION COMMITTEE)


         (1) Any stock-listed corporation or any Association-registered
         corporation prescribed by the Presidential Decree shall establish an
         inspection committee. (Amended by Act No. 6423, Mar. 28, 2001)

         (2) The provisions of Article 54-6 (2) through (6) shall apply mutatis
         mutandis to the composition of the inspection committee referred to in
         paragraph (1). (Amended by Act No. 6423, Mar. 28, 2001) [This Article
         Newly Inserted by Act No. 6176, Jan. 21, 2000]


ARTICLE 191-18 (SPECIAL CASES FOR CUMULATIVE VOTE)


         (1) In the event that a general meeting of stockholders is called for
         the purpose of selecting and appointing not less than two directors,
         notwithstanding Article 382-2 (1) of the Commercial Act, any
         stockholder holding stocks equivalent to not less than 1/100 of the
         total number of stocks issued, with the exception of non-voting stocks
         of any stock-listed corporation or any Association-registered
         corporation under the proviso of Article 191-16 (1), may apply to the
         relevant corporation for

<PAGE>

         selecting and appointing such directors in a cumulative vote manner,
         except as otherwise provided for in the articles of association.

         (2) In the event that any stock-listed corporation or any
         Association-registered corporation referred to in paragraph (1) intends
         to preclude the cumulative vote in the articles of association or to
         change the articles of association for such preclusion, any stockholder
         holding stocks in excess of 3/100 (if the percentage is set lower than
         it by the articles of association, such percentage shall be applied) of
         the total number of stocks issued, with the exception of non-voting
         stocks, shall be prohibited from exercising his voting right on the
         stocks held in excess.

         (3) In the event that any stock-listed corporation or any
         Association-registered corporation referred to in paragraph (1) intends
         to put on the agenda of a general meeting of stockholders the question
         of whether to change the articles of association for precluding the
         cumulative vote referred to in paragraph (2), such stock-listed
         corporation or such Association-registered corporation shall put such
         question on the agenda separately from other agenda relating to a
         change in the articles of association for other matters and resolve on
         changing the articles of association.
         [This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]


ARTICLE 191-19 (TRANSACTIONS WITH BIGGEST STOCKHOLDER, ETC. OF MAJOR
STOCK-LISTED CORPORATION AND MAJOR ASSOCIATION-REGISTERED CORPORATION)


         (1) In the event that any corporation prescribed by the Presidential
         Decree from among stock-listed corporations and Association-registered
         corporations intends to execute transactions falling under any of the
         following subparagraphs with the biggest stockholder (including any
         person specially related to him) of such corporation and any specially
         related person, such corporation shall obtain approval therefor from
         the board of directors and report matters prescribed by the
         Presidential Decree in connection with such transactions to a regular
         general

<PAGE>

         meeting of stockholders called for the first time after the board of
         directors resolves on such approval:

         1.The scale of the single transaction runs in excess of the scale
         prescribed by the Presidential Decree in terms of the total amount of
         assets or the total amount of sales; and

         2.The total amount of the transactions executed with a specified person
         during the current business year runs in excess of the scale prescribed
         by the Presidential Decree.

         (2) Notwithstanding the provisions of paragraph (1), any transactions
         falling under any of the following subparagraphs, including the normal
         transactions executed according to the business line of the relevant
         corporation, may be carried out without obtaining approval therefor
         from the board of directors and details of the transaction falling
         under subparagraph 2 shall not be required to be reported to a general
         meeting of stockholders:

         1.In the event that the relevant corporation is a financial
         institution, the transaction that is ordinarily executed according to
         the contractual terms and conditions under Article 11-2 (4) of the
         Monopoly Regulation and Fair Trade Act and in conformity with the
         standards prescribed by the Presidential Decree; and

         2.The transaction that is executed within the total amount approved by
         the board of directors.
         [This Article Newly Inserted by Act No. 6423, Mar. 28, 2001]


ARTICLE 192 (STANDARDS FOR FINANCIAL MANAGEMENT OF STOCK-LISTED CORPORATION,
ETC.)


         (1) The Financial Supervisory Commission may, for the protection of
         investors and the establishment of a fair transaction order, prescribe
         the standards for financial

<PAGE>

         management of any stock-listed corporation or any
         Association-registered corporation and may give necessary
         recommendation, with respect to the matters falling under any of the
         following subparagraphs on the conditions as prescribed by the
         Presidential Decree: (Amended by Act No. 5254, Jan. 13, 1997; Act No.
         5498, Jan. 8, 1998; Act No. 6176, Jan. 21, 2000)

         1.Matters relating to requirements for paid-in capital increase;

         2.Matters relating to reserves for improvement of financial structure;

         3.Matters relating to dividend;

         4.Matters relating to the issue of oversea securities prescribed by the
         Presidential Decree; and

         5.Other matters that are corresponding to subparagraphs 1 through 4 and
         prescribed by the Presidential Decree.

         (2) Any stock-listed corporation or any Association-registered
         corporation shall act in accordance with the standards for financial
         management referred to in paragraph (1). (Amended by Act No. 5254, Jan.
         13, 1997; Act No. 6423, Mar. 28, 2001)


ARTICLE 192-2

         Deleted. (by Act No. 5591, Dec. 28, 1998)


ARTICLE 192-3 (SPECIAL CASES ON DIVIDENDS)


         (1) A stock-listed corporation or Association-registered corporation
         which sets the term for the settlement of accounts as once per year may
         pay profit dividends in cash (hereinafter referred to as "interim
         dividends") through a resolution of the

<PAGE>

         board of directors to the stockholders as of the date only once during
         a business year by fixing a given date under the conditions as
         determined by the articles of association. (Amended by Act No. 5591,
         Dec. 28, 1998)

         (2) A resolution of the board of directors described in paragraph (1)
         shall be made not later than 45 days after a given date referred to in
         paragraph (1).

         (3) The interim dividends referred to in paragraph (1) shall be paid
         not later than one month after the date on which a resolution of the
         board of directors has been made: Provided, That this shall not apply
         in case where the articles of association otherwise provide the time of
         paying interim dividends.

         (4) The interim dividends shall be within the limit of the amount
         obtained by deducting the following from the amount of net property in
         a balance sheet in the immediately preceding term for the settlement of
         accounts:

         1.The amount of capital in the immediately preceding term for the
         settlement of accounts;

         2.The total amount of capital surplus reserve and earned surplus
         reserve accumulated until the immediately preceding term for the
         settlement of accounts;

         3.The amount determined to pay profits at a regular general meeting of
         stockholders in the immediately preceding term for the settlement of
         accounts; and

         4.The earned surplus reserve to be accumulated in the term for the
         settlement of accounts pursuant to interim dividends.

         (5) Where the net amount of property in a balance sheet in the term for
         the settlement of accounts is likely to fall short of the total amount
         listed in subparagraphs of Article 462 (1) of the Commercial Act, no
         interim dividends shall be paid.


<PAGE>

         (6) Where the net amount of property in a balance sheet in the term for
         settlement of accounts falls short of the total amount listed in
         subparagraphs of Article 462 (1) of the Commercial Act, any directors
         who voted for a resolution of interim dividends made by the board of
         directors shall be liable to compensate for the difference (where the
         interim dividends are smaller than the difference, the interim
         dividends) jointly and severally against the corporation: Provided,
         That this shall not apply in case where the director concerned has
         proved that he could not know that there was a concern listed in
         paragraph (5) even though he had paid considerable attention to it.

         (7) In applying the provisions of Articles 340 (1), 344 (1), 350 (3)
         (including where the provisions of Article 350 (3) are applicable
         mutatis mutandis under Articles 423 (1), 516 (2) and 516-9 of the
         Commercial Act; hereafter in this paragraph the same shall apply), 354
         (1), 370 (1), 457 (2), 458, and 464 and subparagraph 3 of Article 625
         of the Commercial Act, interim dividends shall be deemed profit
         dividends referred to in Article 462 (1) of the Commercial Act, in
         applying the provisions of Article 350 (3) of the Commercial Act, a
         given date listed in paragraph (1) shall be deemed the end of a
         business year, and in applying the provisions of Article 635 (1) 22-2
         of the Commercial Act, the period listed in paragraph (3) shall be the
         period listed in Article 464-2 (1) of the Commercial Act.

         (8) The provisions of Articles 399 (3) and 400 of the Commercial Act
         shall apply mutatis mutandis where directors bear joint and several
         liability pursuant to paragraph (6) and the provisions of Article 462
         (2) and (3) of the Commercial Act shall apply mutatis mutandis where
         interim dividends are paid in violation of paragraph (4).
         [This Article Newly Inserted by Act No. 5423, Dec. 13, 1997]


ARTICLE 193 (MEASURES AGAINST LISTED CORPORATION, ETC.)

         If any listed corporation or Association-registered corporation
         violates this Act, orders and regulations pursuant to this Act or
         orders of the Financial Supervisory

<PAGE>

         Commission, the Financial Supervisory Commission may recommend the
         general meeting of stockholders of such corporation to discharge
         officers concerned, or may set restrictions on issuance of securities
         for a fixed period of time or take such measures as prescribed by the
         Presidential Decree. (Amended by Act No. 5254, Jan. 13, 1997; Act No.
         5498, Jan. 8, 1998) [This Article Wholly Amended by Act No. 3541, Mar.
         29, 1982]


         CHAPTER X SUPPLEMENTARY PROVISIONS

ARTICLE 194 (OVER-THE-COUNTER TRANSACTIONS)


         (1) Sale and purchase transactions of securities outside the securities
         market and Association brokerage market, method of their settlement and
         other necessary matters shall be determined by the Presidential Decree.
         (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997;
         Act No. 5539, May 25, 1998; Act No. 6176, Jan. 21, 2000)

         (2) Deleted. (by Act No. 3945, Nov. 28, 1987)


ARTICLE 194-2 (REPORT, ETC. BY DIGITALLY RECORDED DOCUMENT)

         In case where a registration statement, a report, or other documents or
         data, etc. are to be filed with the Financial Supervisory Commission
         and the Securities Futures Commission, the Stock Exchange or the
         Association pursuant to this Act, such submission may be executed by
         digitally recorded document under the conditions as prescribed by the
         Presidential Decree.
         (Amended by Act No. 5498, Jan. 8, 1998)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]



<PAGE>

ARTICLE 194-3 (AUDIT CERTIFICATION BY EXTERNAL AUDITOR)


         (1) A person as prescribed by the Presidential Decree from among
         persons who files documents concerning finance with the Financial
         Supervisory Commission, the Stock Exchange or the Association pursuant
         to this Act, shall be audited with regard to financial accounting in
         accordance with the Act on External Audit of Stock Companies: Provided,
         That in case where the Presidential Decree prescribes, the same shall
         not apply. (Amended by Act No. 5498, Jan. 8, 1998)

         (2) The Financial Supervisory Commission may, if deemed necessary in
         the public interest or for the protection of investors, request an
         external auditor pursuant to the Act on External Audit of Stock
         Companies who audited with regard to financial accounting pursuant to
         paragraph (1) (hereinafter referred to as an "external auditor") or a
         corporation which is audited, to submit data and to report, and may
         take other necessary measures to such external auditor and corporation.
         (Amended by Act No. 5498, Jan. 8, 1998)

         (3) In case where a foreign corporation, etc. has been audited with
         respect to financial accounting to the foreign securities Acts and
         subordinate statutes, and when the audit meets the standards as
         prescribed by the Presidential Decree, it shall be considered that the
         foreign corporation, etc. has been audited pursuant to paragraph (1).
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLES 195 AND 196

         Deleted. (by Act No. 3541, Mar. 29, 1982)


ARTICLE 197 (COMPENSATION LIABILITIES OF AUDITORS)

<PAGE>

         (1) The provisions of Article 17 (2) through (7) of the Act on External
         Audit of Stock Companies shall apply mutatis mutandis to the
         compensation liabilities of auditors to bona fide investors. (Amended
         by Act No. 3541, Mar. 29, 1982; Act No. 5423, Dec. 13, 1997)

         (2) The provisions of Article 15 shall apply mutatis mutandis to the
         calculation of the amount compensated pursuant to paragraph (1).
         (Amended by Act No. 3541, Mar. 29, 1982)

         (3) Deleted. (by Act No. 5423, Dec. 13, 1997)


ARTICLE 198

         Deleted. (by Act No. 3541, Mar. 29, 1982)


ARTICLE 199 (RESTRICTION ON SOLICITATION FOR EXERCISE OF VOTING RIGHTS AS PROXY)


         (1) No one shall make solicitation for exercise of voting rights either
         by himself or by other persons as proxy with respect to listed stocks
         or stocks registered in the Association, in violation of the provisions
         of the Presidential Decree. (Amended by Act No. 5736, Feb. 1, 1999)

         (2) In case of a listed corporation or registered corporation which is
         prescribed by the Presidential Decree as corporations carrying on an
         industry important for the national economy, such as the national key
         industry, etc. (hereinafter referred to as a "public corporation"),
         only such public corporation may solicit for exercise of voting rights
         of its stocks as proxy under the conditions as prescribed by the
         Presidential Decree. (Newly Inserted by Act No. 3945, Nov. 28, 1987)


<PAGE>

ARTICLE 200 (RESTRICTION, ETC. ON OWNERSHIP OF STOCKS ISSUED BY PUBLIC
CORPORATION)


         (1) No one shall own, for his own account regardless of the title
         thereof, stocks issued by a public corporation in excess of the
         criteria prescribed in the following subparagraphs. In this case,
         nonvoting stocks shall not be counted in the total number of issued and
         outstanding stocks, and stocks owned in the names of specially related
         persons shall be regarded as those owned for his account: (Amended by
         Act No. 3541, Mar. 29, 1982; Act No. 3945, Nov. 28, 1987; Act No. 4469,
         Dec. 31, 1991; Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997;
         Act No. 5498, Jan. 8, 1998)

         1.The rate of ownership at the time of registration of securities
         concerned with the Financial Supervisory Commission pursuant to Article
         3, in case of stockholders who owned 10/100 or more of the total number
         of issued and outstanding stocks at such time; and

         2.The rate as determined by the articles of association within the
         limit of 3/100 of the total number of issued and outstanding stocks, in
         case of persons other than stockholders pursuant to subparagraph 1.

         (2) Notwithstanding the provisions of paragraph (1), if any person
         obtains the approval by the Financial Supervisory Commission on the
         rate limit of ownership, he may own the stocks issued by a public
         corporation up to such limit. (Amended by Act No. 4701, Jan. 5, 1994;
         Act No. 5498, Jan. 8, 1998)

         (3) Any person whose beneficial ownership is in excess of the criteria
         referred to in paragraphs (1) and (2) shall not exercise voting rights
         on the stocks in excess, and the Financial Supervisory Commission may
         order such person to rectify his stock holding position so as to comply
         with the criteria concerned. (Newly Inserted by Act No. 3541, Mar. 29,
         1982; Act No. 5498, Jan. 8, 1998)



<PAGE>

ARTICLE 200-2 (REPORT ON MASS HOLDING, ETC. OF STOCKS)


         (1) Any person (excluding those who are prescribed by the Presidential
         Decree) who holds stocks, etc. of a stock-listed corporation or
         Association-registered corporation in large quantities (this refers to
         such case where the number of the stocks, etc. owned by the person
         himself and specially related person is 5/100 or more of the total
         number of such stocks, etc.), shall report the situation of his
         holdings to the Financial Supervisory Commission and the Stock Exchange
         (meaning the Association in case of an Association-registered
         corporation; hereafter in this Article the same shall apply), within
         five days (the day as prescribed by the Presidential Decree shall not
         be counted therein; hereafter the same shall apply in this paragraph)
         from the day on which he comes to hold such stocks, etc., under the
         conditions as prescribed by the Presidential Decree, and if the rate of
         his holding is changed in excess of 1/100 of the total number of the
         stocks, etc. of such corporation (excluding such cases as prescribed by
         the Presidential Decree), he shall report the contents of such change
         to the Financial Supervisory Commission and the Stock Exchange, within
         five days after such change occurs, under the conditions as prescribed
         by the Presidential Decree: Provided, That with respect to the
         institutional investors, etc. as prescribed by the Presidential Decree,
         the time, contents, etc. of such report may be determined separately by
         the Presidential Decree. (Amended by Act No. 4701, Jan. 5, 1994; Act
         No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5539, May
         25, 1998; Act No. 6176, Jan. 21, 2000)

         (2) The provisions of Article 21 (4) shall apply mutatis mutandis with
         respect to the method of calculating the number and total number of
         stocks, etc. as prescribed in paragraph (1). (Newly Inserted by Act No.
         5254, Jan. 13, 1997)

         (3) In case where a report on the holding of stocks, etc. in large
         quantities or on a change therein is to be filed pursuant to paragraph
         (1), and another cause for a report occurs by the day immediately
         preceding the day on which the original report should be filed, such
         new change shall be reported together with the orignal cause to be
         reported. (Newly Inserted by Act No. 5254, Jan. 13, 1997)


<PAGE>

         (4) The Financial Supervisory Commission and the Stock Exchange shall
         keep the reports as referred to in paragraph (1) and make them
         available for public inspection. (Amended by Act No. 5498, Jan. 8,
         1998)

         (5) If it is deemed necessary for protecting the public interest or
         investors, the Financial Supervisory Commission may order the reporter
         as referred to in paragraph (1), the company which has issued the
         stocks, etc. and other interested persons to file any report or
         materials for reference, or have the FSS Governor investigate any
         accounting books, documents and other things. (Newly Inserted by Act
         No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan.
         8, 1998)

         (6) Any person who conducts the investigation as referred to in
         paragraph (5), shall carry with himself any certificate indicating his
         competence, and show it to any interested person. (Newly Inserted by
         Act No. 4701, Jan. 5, 1994; Act No. 5254, Jan. 13, 1997)
         [This Article Newly Inserted by Act No. 4469, Dec. 31, 1991]


ARTICLE 200-3 (RESTRICTION ON EXERCISE OF VOTING RIGHTS OF STOCKS, ETC.)

         Any person who fails to report on the holdings of stocks, etc. in large
         quantities or on a change therein (including the report on modification
         thereof) in violation of the provisions of Article 200-2 (1) and (3),
         may not exercise the voting rights with respect to stocks held in
         violation of the provisions concerning report from among stocks held in
         excess of 5/100 of the total number of issued and outstanding voting
         stocks during the period as prescribed by the Presidential Decree, and
         the Financial Supervisory Commission may order him to dispose of the
         violating portion concerned. (Amended by Act No. 5498, Jan. 8, 1998)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]



<PAGE>

ARTICLE 200-4 (PROVISIONS TO APPLY MUTATIS MUTANDIS)

         The provisions of Articles 11 (1) through (3) and 20 shall apply
         mutatis mutandis to the cases of the report on the situation of mass
         holdings and the report on the change of the situation of mass
         holdings.
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 201

         Deleted. (by Act No. 3541, Mar. 29, 1982)


ARTICLES 202 AND 202-2

         Deleted. (by Act No. 5498, Jan. 8, 1998)


ARTICLE 203 (RESTRICTIONS ON ACQUISITION OF SECURITIES BY FOREIGNERS)


         (1) Acquisition of securities by a foreigner or foreign corporation,
         etc. may be restricted by the provisions of the Presidential Decree.
         (Amended by Act No. 3945, Nov. 28, 1987; Act No. 5254, Jan. 13, 1997)

         (2) With respect to an acquisition of stocks of a public corporation by
         a foreigner or foreign corporation, etc., it may be restricted
         separately under the conditions as prescribed by the articles of
         association of the public corporation in addition to a restriction
         pursuant to paragraph (1). (Newly Inserted by Act No. 3945, Nov. 28,
         1987; Act No. 5254, Jan. 13, 1997)

         (3) Any person who has acquired stocks in contravention of the
         provisions of paragraph (1) or (2), may not exercise his voting rights
         to the stocks, and the Financial Supervisory Commission may order a
         correction to the person who acquired stocks in contravention of the
         provisions of paragraph (1) or (2). (Newly

<PAGE>

         Inserted by Act No. 3945, Nov. 28, 1987; Act No. 5498, Jan. 8, 1998)

         (4) Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLES 204 THROUGH 206

         Deleted. (by Act No. 5498, Jan. 8, 1998)


ARTICLE 206-2 (DELEGATION OF AUTHORITY)


         (1) The Financial Supervisory Commission may delegate part of its
         authority under this Act to the Securities Futures Commission under the
         conditions determined by the Presidential Decree.

         (2) Where the Securities Futures Commission decides on the matters
         delegated pursuant to paragraph (1), it shall make a report thereon
         with out delay to the Financial Supervisory Commission.

         (3) Where it is deemed that a decision by the Securities Futures
         Commission referred to in paragraph (2) is illegal or extremely unjust
         in the light of the protection of the public interest or investors, the
         Financial Supervisory Commission may cancel whole or part of the
         decision or suspend its execution.

         (4) Matters under the authority of the Financial Supervisory Commission
         or the Securities Futures Commission under this Act which require
         urgent disposition may be delegated to the Chairman of the Financial
         Supervisory Commission or the Chairman of the Securities Futures
         Commission, respectively, and minor matters may be entrusted to the FSS
         Governor.

         (5) The scope of urgent matters and minor matters listed in paragraph
         (4) shall be determined by the Presidential Decree.

<PAGE>

         [This Article Wholly Amended by Act No. 5498, Jan. 8, 1998]


ARTICLE 206-3 (INVESTIGATION, SEIZURE, AND SEARCH BY FINANCIAL SUPERVISORY
COMMISSION AND SECURITIES FUTURES COMMISSION)


         (1) Where there is a violation of this Act or an order under this Act
         or, a violation of the regulations of or an order under the Financial
         supervisory Commission, or where it is deemed necessary to protect
         public interest or investors, the Financial Supervisory Commission
         (referring to the Securities Futures Commission in case of the matters
         in violation of Articles 188, 188-2 and 188-4; hereafter in this
         Article the same shall apply) may order the person concerned to submit
         a report or materials for reference or have the FSS Governor
         investigate books, documents or other things.

         (2) The Financial Supervisory Commission may demand the following
         matters from the persons concerned in order to make an investigation
         referred to in paragraph (1):

         1.Submission of a statement on the facts and situation with regard to
         matters to be invested;

         2.Appearance for testimony pertaining to the matters to be invested;
         and

         3.Submission of books, documents, or other things necessary for an
         investigation.

         (3) In making investigation under paragraph (1), the Financial
         Supervisory Commission may take the following measures if it is
         necessary to find out any violation of Articles 188, 188-2, and 188-4:
         (Newly Inserted by Act No. 6623, Jan. 26, 2002)

         1.Provisional holding of books, documents, or other things submitted
         under

<PAGE>

         paragraph (2) 3; and

         2.Investigation into the business, books, documents, or other things
         through the entry into an office or workplace of the person concerned.

         (4) Where it is deemed necessary to make an investigation referred to
         in paragraph (1), the Financial Supervisory Commission may request a
         securities-related institution to submit documents necessary for the
         investigation under the conditions as determined by the Presidential
         Decree.

         (5) Where a violation of this Act or an order under this Act, or a
         violation of the regulations of or an order under the Financial
         Supervisory Commission has been proved as a result of an investigation
         referred to in paragraph (1), the Financial Supervisory Commission may
         make an order for correction or take other measures as determined by
         the Presidential Decree, and may determine the procedures necessary for
         the investigation and taking measures, standards for measures and other
         necessary matters.

         (6) Where the Stock Exchange or the Association has a suspicion that
         there is a violation of this Act or an order under this Act or a
         violation of the regulations of or an order under the Financial
         Supervisory Commission as a result of a member's supervision over an
         abnormal trade, it shall notify the Financial Supervisory Commission.
         (Amended by Act No. 6176, Jan.
         21, 2000)

         (7) Where it is deemed necessary to investigate any violation of
         Articles 188, 188-2, and 188-4 (hereafter in this Article, referred to
         as the "violation"), the Securities Futures Commission may order a
         public official of the Financial Supervisory Commission as determined
         by the Presidential Decree (hereinafter referred to as the
         "investigating officer"), to interrogate a person suspected of the
         violation, seize things, or search a workplace. (Newly Inserted by Act
         No. 6623, Jan. 26, 2002)

         (8) Where an investigating officer conducts a search or seizure to
         investigate any violation, he shall carry a warrant for search or
         seizure issued by a judge upon a

<PAGE>

         request of a public prosecutor. (Newly Inserted by Act No. 6623, Jan.
         26, 2002)

         (9) Where an investigating officer conducts an investigation,
         interrogation, search, or seizure under paragraph (3) 2 or (7), he
         shall carry a certificate indicating his authority and present it to
         the person concerned. (Newly Inserted by Act No. 6623, Jan. 26, 2002)

         (10) The provisions of the Criminal Procedure Act concerning search and
         seizure, execution of a warrant for search or seizure, return of seized
         articles, etc. shall apply mutatis mutandis to the search and seizure
         and the warrant for search or seizure as provided in this Act.
         (Newly Inserted by Act No. 6623, Jan. 26, 2002)

         (11) Where an investigating officer has conducted a provisional
         holding, interrogation, search, or seizure, he shall prepare a report
         thereon and add his signature and seal to it with an official watchman
         or interrogated person after confirmation of the report by such person.
         If such an official watchman or interrogated person fails or is unable
         to give any signature and seal, the reasons therefor shall be added.
         (Newly Inserted by Act No. 6623, Jan. 26, 2002)

         (12) Where an investigating officer has completed the investigation
         into a violation, he shall report the results thereof to the Securities
         Futures Commission. (Newly Inserted by Act No. 6623, Jan. 26, 2002)
         [This Article Wholly Amended by Act No. 5498, Jan. 8, 1998]


ARTICLE 206-4 (EXCHANGE OF INFORMATION WITH FOREIGN SECURITIES SUPERVISORY
AGENCIES, ETC.)


         (1) The Financial Supervisory Commission may exchange information with
         foreign securities supervisory agencies.

         (2) Where the Financial Supervisory Commission intends to exchange
         information

<PAGE>

         under paragraph (1), it shall consult in advance with the Minister of
         Finance and Economy: Provided, That this shall not apply to cases as
         determined by the Presidential Decree. (Amended by Act No. 5539, May
         25, 1998)

         (3) The Financial Supervisory Commission (referring to the Securities
         Futures Commission in case of matters relating to a violation of the
         provisions of Articles 188, 188-2, and 188-4) may, where any foreign
         securities supervisory agency asks for its cooperation in conducting an
         investigation or inspection under this Act, giving expressly the
         objective and scope, etc. of such investigation or inspection,
         cooperate with such foreign securities supervisory agency. In this
         case, the Financial Supervisory Commission may furnish the data on such
         investigation or inspection to such foreign securities supervisory
         agency or be furnished with such data from such foreign securities
         supervisory agency, according to the principle of reciprocity. (Newly
         Inserted by Act No. 6176, Jan. 21, 2000; Act No. 6623, Jan. 26, 2002)

         (4) The Financial Supervisory Commission may furnish the data on an
         investigation or inspection to a foreign securities supervisory agency
         under the latter part of paragraph (3), only in case where it meets the
         following requirements: (Newly Inserted by Act No. 6623, Jan. 26, 2002)

         1.The data on an investigation or inspection furnished to a foreign
         securities supervisory agency shall not be used for other than the
         purpose of furnishing;

         2.Confidentiality shall be kept on the data on an investigation or
         inspection and the fact of furnishing such data; and

         3.The data on an investigation or inspection furnished to a foreign
         securities supervisory agency shall not be used for the investigation
         into or trial of a criminal case in a foreign country without any prior
         consent from the Financial Supervisory Commission.
         [This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]



<PAGE>

ARTICLE 206-5 (DELIBERATION BY SECURITIES FUTURES COMMISSION)

         Where there exists a case falling under any of the following
         subparagraphs, the Financial Supervisory Commission shall go through
         prior deliberation by the Securities Futures Commission: (Amended by
         Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176,
         Jan. 21, 2000; Act No. 6623, Jan. 26, 2002)

         1.Where it provides for matters falling under any of the following:

         (a) Documents for registration referred to in Article 4;

         (b) Criteria for administration of registered corporations referred to
         in Article 6;

         (c) Procedures and criteria for taking measures referred to in Article
         20 (including where it is applicable mutatis mutandis under Articles
         27-2, 186-5, 189-2 (5), 190-2 (3) and 200-4);

         (d) Standards for financial management of stock-listed corporations or
         Association-registered corporations referred to in Article 192 (1); and

         (e) Procedures and standards for investigation and measures taken by
         the Financial Supervisory Commission referred to in Article 206-3 (5);

         2.Where it takes measures or issue orders falling under any of the
         following:

         (a) Measures referred to in Article 20 (including where it is
         applicable mutatis mutandis under Articles 27-2, 186-5, 189-2 (5),
         190-2 (3) and 200-4);

         (b) Orders referred to in Article 54 (including where it is applicable
         mutatis mutandis under Article 70-7);

         (c) Adjustment of purchase price of stocks referred to in Article 191
         (3);


<PAGE>

         (d) Deeming it necessary to issue non-voting stocks referred to in
         Article 191-2 (1) 2;

         (e) Measures referred to in Article 193;

         (f) Approval of stockholding rate limit referred to in Article 200 (2);

         (g) Measures pursuant to the results of investigation referred to in
         Article 206-3 (5);

         (h) Disposition to impose penalties referred to in Article 206-11; and

         (i) Disposition to impose a fine for negligence referred to in Article
         213 (3); and

         3.Matters other than those listed in subparagraphs 1 and 2 for which
         the Financial Supervisory Commission deems deliberation by the
         Securities Futures Commission to be necessary.
         [This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]


ARTICLE 206-6 (DIRECTION AND SUPERVISION, ETC. OVER FSS GOVERNOR)

         Where the Financial Supervisory Commission or the Securities Futures
         Commission deems it necessary in order to exercise its powers under
         this Act, it may direct and supervise the FSS Governor and have him
         change his method of executing his duties or give other supervisory
         orders.
         [This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]


ARTICLE 206-7 (DUTIES OF FINANCIAL SUPERVISORY SERVICE)

         The Financial Supervisory Service shall carry out the following duties
         under the

<PAGE>

         direction and supervision of the Financial Supervisory Commission or
         the Securities Futures Commission: (Amended by Act No. 5736, Feb. 1,
         1999)

         1.Matters on the registration of issuers of securities;

         2.Matters on the registration statement of securities;

         3.Matters on the tender offer of securities;

         4.Matters on inspections of institutions which are subject to
         inspection by the FSS Governor under this Act;

         5.Matters on the administration of listed corporations;

         6.Matters on the public notification of the analysis and substance of
         business of registered corporations and listed corporations;

         7.Matters on the supervision over sale and purchase transactions of
         securities outside the securities market and Association brokerage
         market;

         8.Business entrusted by the Government;

         9.Business assigned under this Act other than those listed in
         subparagraphs 1 through 8; and

         10.Business incidental to those listed in subparagraphs 1 through 9.
         [This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]


ARTICLE 206-8 (CONTRIBUTIONS)


         (1) Any person falling under any of the following subparagraphs shall
         bear part of

<PAGE>

         the working expenses of the Financial Supervisory Service:

         1.Securities companies which take commission from customers;

         2.Issuers who submit a report to the Financial Supervisory Commission
         pursuant to Article 8;

         3.Institutions which are subject to inspection by the FSS Governor
         under this Act; and

         4.Registered corporations.

         (2) The amount and limit of the contribution referred to in paragraph
         (1) and other matters necessary for the payment of contributions shall
         be determined by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]


ARTICLE 206-9 (LIABILITIES OF MEMBERS AND OFFICERS, ETC. OF FINANCIAL
SUPERVISORY COMMISSION, SECURITIES FUTURES COMMISSION AND FINANCIAL SUPERVISORY
SERVICE)

         The provisions of Article 83 shall apply mutatis mutandis to the
         liabilities of those falling under any of the following subparagraphs:

         1.Members and public officials of the Financial Supervisory Commission;

         2.Members of the Securities Futures Commission; and

         3.Governor, Vice-Governor, Assistant Vice-Governor, auditor and staff
         members of the Financial Supervisory Service.
         [This Article Newly Inserted by Act No. 5498, Jan. 8, 1998]

<PAGE>

ARTICLE 206-10 (HEARING)

         Where the Minister of Finance and Economy or the Financial Supervisory
         Commission intends to take a disposition falling under any of the
         following subparagraphs, it shall hold a hearing:

         1.Cancellation of license or registration of securities companies,
         investment advisory companies, and transfer agencies under Article 55
         or 70-11 (including where the provisions of Article 70-11 are
         applicable mutatis mutandis under Article 180 (3)); and

         2.Cancellation of license of securities financial companies and
         brokerage companies referred to in Article 155 (1) (including where it
         is applicable mutatis mutandis under Article 179 (4)).
         [This Article Wholly Amended by Act No. 5736, Feb. 1, 1999]


         CHAPTER X-2 IMPOSITION AND COLLECTION OF PENALTIES

ARTICLE 206-11 (PENALTIES)


         (1) The Financial Supervisory Commission may impose penalties of up to
         3/100 of the subscription or sales value on a statement of securities
         (up to two billion won where the price exceeds two billion won) on a
         person falling under any subparagraph of Article 14 (1) where he falls
         under any of the following subparagraphs: (Amended by Act No. 6423,
         Mar. 28, 2001)

         1.Where he makes a false entry or indication or fails to enter or
         indicate important matters in any registration statement, prospectus,
         or other documents to be

<PAGE>

         submitted under Article 8, 11 or 12; and

         2.Where he fails to submit a registration statement, prospectus, or
         other documents to be submitted under Article 8, 11 or 12.

         (2) The Financial Supervisory Commission may impose penalties of up to
         3/100 of the total estimated amount for tender offer stated in a tender
         offer statement (up to two billion won where the price exceeds two
         billion won) on a person falling under any subparagraph of Article 25-3
         (1) where he falls under any of the following subparagraphs. In this
         case, a total estimated amount for tender offer shall be an amount
         calculated by multiplying the tender offer price per stock by the
         number of stocks: (Amended by Act No. 6423, Mar. 28, 2001)

         1.Where he makes a false entry or indication or fails to enter or
         indicate important matters in any registration statement, prospectus,
         or other documents to be submitted or in the public notice to be made
         under Article 21-2, 22, 23-2 or 24; and

         2.Where he fails to submit any registration statement, prospectus, or
         other documents to be submitted or fails to make public notice of
         matters to be publicly notified under Article 21-2, 22, 23-2 or 24.

         (3) The Financial Supervisory Commission may impose penalties within
         the limit of not exceeding two billion won on any listed corporation or
         any Association-registered corporation where it falls under any of the
         following subparagraphs: (Amended by Act No. 6176, Jan. 21, 2000; Act
         No. 6423, Mar. 28, 2001)

         1.Where it makes a false statement or indication in matters to be
         reported or disclosed under Article 186 (1) or (2) or fails to enter or
         indicate important matters therein; and

         2.Where it fails to report or disclose matters to be reported or
         disclosed under Article 186 (1) or (2).


<PAGE>

         (4) The Financial Supervisory Commission may impose penalties of up to
         10/100 of an average daily transaction volume (up to two billion won
         where an amount exceeds two billion won or stocks issued by a
         corporation are not traded on the securities market or Association
         brokerage market) of stocks issued by a corporation quoted in the
         securities market or Association brokerage market in the immediately
         preceding year on the corporation which has to submit an annual
         business report, a semiannual business report or a quarterly report
         pursuant to Article 186-2 (1) or 186-3 where it falls under any of the
         following subparagraphs: (Amended by Act No. 6 423, Mar. 28, 2001)

         1.Where it makes a false entry or indication or fails to enter or
         indicate important matters in a report under Article 186-2 (1) or
         186-3; and

         2.Where it fails to submit a report under Article 186-2 (1) or 186-3.

         (5) The Financial Supervisory Commission may impose penalties of up to
         2/100 (1/100 for a consolidation and two billion won where the amount
         exceeds two billion won) of the total amount (based on the amount
         entered in reported documents submitted under Article 190-2) of the
         book value (for a transfer or takeover of business, the amount acquired
         or paid in compensation for the transfer or takeover) of stocks granted
         in compensation for a merger (including a merger by split-off) or
         split-off and the amount of debts taken over on a stock-listed
         corporation or Association-registered corporation where it falls under
         any of the following subparagraphs: (Amended by Act No. 6423, Mar. 28,
         2001)

         1.Where it makes a false entry or indication or fails to enter or
         indicate important matters in making a report under Article 190-2; and

         2.Where it fails to make a report under Article 190-2.

         (6) Where a securities company violates the provisions of Article 54-3
         (1) 1, 2, or 4, the Financial Supervisory Commission may impose
         penalties of up to 10/100 (up to one billion won where the amount
         exceeds one billion won) of the violated amount

<PAGE>

         of money (in case of Article 54-3 (1) 1, the amount acquired; in case
         of 54-3 (1) 2, the amount loaned or the amount given on credit; in case
         of 54-3 (1) 4, the amount acquired in excess of the ratio), on the
         securities company. (Newly Inserted by Act No. 6623, Jan. 26, 2002)

         (7) Penalties prescribed in paragraphs (1) through (6) shall be imposed
         on a person subject to the imposition of such penalties who violates
         the respective corresponding provisions by intention or by gross
         negligence. (Amended by Act No. 6623, Jan. 26, 2002) [This Article
         Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 206-12 (IMPOSITION OF PENALTIES)


         (1) In imposing penalties pursuant to Article 206-11, the Financial
         Supervisory Commission shall take account of the following matters
         according to the standards as determined by the Presidential Decree:

         1.Contents and severity of the offense;

         2.Duration and frequency of the offense; and

         3.Scale of benefits acquired by the offense.

         (2) The Financial Supervisory Commission shall seek opinions from the
         Stock Exchange or the Association in advance where it imposes penalties
         pursuant to Article 206-11 (3). (Amended by Act No. 6176, Jan. 21,
         2000)

         (3) Where a corporation which has violated the provisions of this Act
         merges, the Financial Supervisory Commission may impose and collect
         penalties on and from the corporation which continues to exist or is
         newly established after the merger, deeming the offense committed by
         the previous corporation to be an offense

<PAGE>

         committed by the existing or newly established corporation.

         (4) Matters necessary for the imposition of penalties shall be
         determined by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 206-13 (PRESENTATION OF OPINIONS)


         (1) The Financial Supervisory Commission shall, in advance, give a
         concerned party or interested person an opportunity to present his
         opinions prior to the imposition of penalties.

         (2) A concerned party or interested person described in paragraph (1)
         may attend a meeting of the Financial Supervisory Commission and state
         his opinions or present necessary materials.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 206-14 (FORMAL OBJECTION)


         (1) A person who is dissatisfied with a disposition of imposition of
         penalties under Article 206-11 may raise an objection to the Financial
         Supervisory Commission within thirty days from the date of receipt of
         notice of the said disposition by giving the reasons.

         (2) The Financial Supervisory Commission shall make a decision on the
         objection under paragraph (1) within thirty days: Provided, That where
         it cannot make a decision within such period for any compelling cause,
         it may extend the period up to thirty days.


<PAGE>

         (3) A person who is dissatisfied with a decision under paragraph (2)
         may apply for administrative appeal.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 206-15 (EXTENSION OF TIME LIMIT FOR PAYMENT FOR AND INSTALLMENT PAYMENT
OF PENALTIES)


         (1) Where the Financial Supervisory Commission deems that a person who
         has been subject to penalties (hereinafter referred to as a "person
         liable for the payment of penalties") has difficulty in paying
         penalties in full in a lump sum for a cause falling under any of the
         following subparagraphs, it may extend the time limit for payment or
         enable him to pay them in installments. In this case, it may, if deemed
         necessary, have him offer a security:

         1.Where he suffers a serious loss of property due to disaster or theft,
         etc.;

         2.Where his business is in a crisis due to worsening business
         conditions;

         3.Where he is expected to face serious financial difficulties due to
         payment of penalties in a lump sum; and

         4.Where there exist any other causes equivalent to those listed in
         subparagraphs 1 through 3.

         (2) Where a person liable for the payment of penalties intends to have
         the time limit for payment extended or pay them in installments, he
         shall apply for such extension or installments to the Financial
         Supervisory Commission not later than ten days prior to the expiration
         of the time limit for payment.

         (3) Where a person liable for the payment of penalties for whom the
         time limit for payment thereof is extended or payment thereof in
         installments is allowed pursuant

<PAGE>

         to paragraph (1) falls under any of the following subparagraphs, the
         Financial Supervisory Commission may cancel the extension of the time
         limit for payment or decision on payment in installments and collect
         penalties in a lump sum:

         1.Where he fails to pay penalties in installments within the time limit
         for payment;

         2.Where he fails to fulfill an order by the Financial Supervisory
         Commission which is necessary to change securities or otherwise
         supplement security;

         3.Where it deems that it cannot collect all or the residual of
         penalties due to compulsory execution, opening of auction, declaration
         of bankruptcy, dissolution of the corporation, disposition on default
         of national or local taxes; and

         4.Where there exist any other causes equivalent to those listed in
         subparagraphs 1 through 3.

         (4) Matters necessary for the extension of the time limit for payment
         of penalties, payment in installments, or security under paragraphs (1)
         through (3) shall be determined by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 206-16 (COLLECTION OF PENALTIES AND DISPOSITION ON DEFAULT)


         (1) The Financial Supervisory Commission may collect additional dues as
         determined by the Presidential Decree for the period from the date
         following the expiration date of the time limit for payment to the date
         preceding the date of payment where a person liable for the payment of
         penalties fails to pay penalties within the time limit for payment.

         (2) Where a person liable for the payment of penalties fails to pay
         penalties within the time limit, the Financial Supervisory Commission
         may urge him to pay the

<PAGE>

         penalties, by specifying a period, and where he fails to pay penalties
         and additional dues under paragraph (1) within the specified period,
         the Financial Supervisory Commission may collect them pursuant to the
         example of the disposition of national taxes in arrears.

         (3) The Financial Supervisory Commission may entrust its duties of the
         collection or disposition on default of penalties and additional dues
         under paragraphs (1) and (2) to the Commissioner of the National Tax
         Administration.

         (4) Matters necessary for the collection of penalties shall be
         determined by the Presidential Decree.
         [This Article Newly Inserted by Act No. 5736, Feb. 1, 1999]


ARTICLE 207

         Deleted. (by Act No. 5736, Feb. 1, 1999)


         CHAPTER XI PENAL PROVISIONS

ARTICLE 207-2 (PENAL PROVISIONS)


         (1) A person who falls under any of the following subparagraphs shall
         be punished by imprisonment for not more than ten years or by a fine
         not exceeding twenty million won: Provided, That if the amount
         equivalent to three times of the profit gained or loss evaded by the
         offense exceeds twenty million won, he shall be punished by a fine of
         the amount equivalent to or less than three times of such profit or
         loss amount evaded:

         1.A person who violates the provisions of Article 188-2 (1) or (3); and


<PAGE>

         2.A person who violates the provisions of Article 188-4.

         (2) Where the amount of the profit gained or loss evaded by any such
         offense as provided in any subparagraph of paragraph (1) is not less
         than five hundred million won, aggravated punishment shall be imposed
         according to the following subparagraphs: (Newly Inserted by Act No.
         6695, Apr. 27, 2002)

         1.Where the amount of the profit gained or loss evaded is not less than
         five billion won, the punishment of imprisonment for life or for not
         less than five years shall be imposed; and

         2.Where the amount of the profit gained or loss evaded is not less than
         five hundred million won but less than five billion won, the punishment
         of imprisonment for a limited term of not less than three years shall
         be imposed.

         (3) Where the punishment of imprisonment is imposed under paragraphs
         (1) and (2), the suspension of qualifications for not more than ten
         years may be imposed concurrently. (Newly Inserted by Act No. 6695,
         Apr. 27, 2002)
         [This Article Newly Inserted by Act No. 5254, Jan. 13, 1997]


ARTICLE 207-3 (PENAL PROVISIONS)

         Any person falling under any of the following subparagraphs shall be
         punished by imprisonment for not more than 5 years or by a fine not
         exceeding thirty million won:

         1.A person who makes a public offering of new or outstanding securities
         or issued new stocks in violation of Article 8 or who violates Article
         21-2 (1) and (2);

         2.A person who falsely enters important matters in the registration
         statement under Article 8, the additional documents of shelf
         registration statement under Article 10 (2), the amendment statement
         under Article 11 (including a case where the

<PAGE>

         provisions are applied mutatis mutandis in Article 186-5 or 200-4), the
         tender offer statement under Article 21-2 (2), the amendment statement
         under Article 23-2 (1), the report documents under Article 186 (1), the
         business report under Article 186-2, the semiannual report and the
         quarterly report under Article 186-3, or the report documents under
         Article 190-2 (1) and (2);

         3.A person who fails to submit the amendment statement in violation of
         the latter part of Article 11 (3) (including a case where the
         provisions are applied mutatis mutandis in Article 186-5 or 200-4) or
         to make an amendment publication in violation of Article 23-2 (2);

         4.A person who falsely makes a tender offer publication required under
         Article 21-2 (1), an amendment publication required under Article 23-2
         (2), or disclosure required under Article 186 (2) with respect to
         important matters; and

         5.A person who violates Article 52-3.
         [This Article Wholly Amended by Act No. 6423, Mar. 28, 2001]


ARTICLE 208 (PENAL PROVISIONS)

         A person who falls under any of the following subparagraphs shall be
         punished by imprisonment for not more than three years or a fine not
         exceeding twenty million won: (Amended by Act No. 3541, Mar. 29, 1982;
         Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 4701,
         Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998;
         Act No. 5736, Feb. 1, 1999; Act No. 6176, Jan. 21, 2000)

         1.A person who conducts the business concerned without a license
         therefor in accordance with the provisions of Article 28 (1), 28-2 (1),
         145 (1) or 179 (1), or who conducts the business concerned after
         cancellation of a license therefor in accordance with the provisions of
         Article 55 or 155 (including where the provisions of Article 155 are
         applicable mutatis mutandis under Article 179);


<PAGE>

         2.A person who violates the provisions of Articles 28-2 (3) and 35 (1);

         3.A person who violates the provisions of Articles 63 (including where
         the provisions of Article 63 are applicable mutatis mutandis under
         Article 70-7), 76, 95 (1), 107 (1) or 173-3;

         4.A person who violates the provisions of Article 59 (including where
         it is applicable mutatis mutandis under Article 70-7 or 178), Article
         60 (1) (including where it is applicable mutatis mutandis under Article
         70-7 or 178), or Article 61 (including where it is applicable mutatis
         mutandis under Article 70-7 or 178), or who refuses any investigation
         conducted by the Financial Supervisory Commission referred to in
         Article 206-3 (2) (meaning the Securities Futures Commission in case of
         violation of Articles 188, 188-2 and 188-4);

         5.A person who violates the provisions of Article 83 (including where
         it is applicable mutatis mutandis under Article 206-9); and

         6.Deleted. (by Act No. 5254, Jan. 13, 1997)


ARTICLE 209 (PENAL PROVISIONS)

         A person who falls under any of the following subparagraphs shall be
         punished by imprisonment for not more than two years or by a fine not
         exceeding ten million won: (Amended by Act No. 3541, Mar. 29, 1982; Act
         No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 4701,
         Jan. 5, 1994; Act No. 5254, Jan. 13, 1997; Act No. 5423, Dec. 13, 1997;
         Act No. 5498, Jan. 8, 1998; Act No. 5521, Feb. 24, 1998; Act No. 5736,
         Feb. 1, 1999; Act No. 6423, Mar. 28, 2001)

         1.Deleted; (by Act No. 6423, Mar. 28, 2001)

         2.A person who makes arrangements for a public offering of new or
         outstanding

<PAGE>

         securities in violation of the provisions of Article 8;

         3.A person who violates the provisions of Article 10;

         4.A person who violates the provisions of Article 21(1) or Article 23
         (including where the provisions of Article 23 are applicable mutatis
         mutandis under Article 23-2 (3));

         5.A person who carries out the business concerned after being suspended
         from such business in accordance with the provisions of Article 57 or
         155 (2) (including where the provisions of Article 155 (2) are
         applicable mutatis mutandis under Article 179 (4));

         6.A person who violates the provisions of Article 62 or 70-10;

         7.A person who violates any order issued upon the basis of the
         provisions of Article 54 (including where they are applicable mutatis
         mutandis under Article 70-7) or 168;

         8.A person who establishes an organization concerned with securities
         without a license in accordance with the provisions of Article 181 (1);
         and

         9.A person who violates the provisions of Article 188 (1), 189-2 (3),
         190-2 (1) and (2), or 199 or orders issued pursuant to Article 213, 200
         (3), 200-3, or 203 (3).


ARTICLE 210 (PENAL PROVISIONS)

         A person who falls under any of the following subparagraphs shall be
         punished by imprisonment for not more than one year or by a fine not
         exceeding five million won: (Amended by Act No. 3541, Mar. 29, 1982;
         Act No. 3945, Nov. 28, 1987; Act No. 4469, Dec. 31, 1991; Act No. 5254,
         Jan. 13, 1997; Act No. 5423, Dec. 13, 1997; Act No. 5498, Jan. 8, 1998;
         Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1,

<PAGE>

         1999)

         1.A person who violates any disposition of the Financial Supervisory
         Commission taken upon the basis of Article 20 (including where it is
         applicable mutatis mutandis under Article 27-2, 186-5, 189-2 (5), 190-2
         (3) or 200-4);

         2.A person who violates Article 13 (including where it is applicable
         mutatis mutandis under Article 24), 42 (including where it is
         applicable mutatis mutandis under Article 70-7, 154, 169, 178, 179 or
         180) through 44, or 70-2 (5);

         3.Deleted; (by Act No. 5254, Jan. 13, 1997)

         4.Deleted; (by Act No. 5736, Feb. 1, 1999)

         4-2.A person who conducts the business concerned without a registration
         as prescribed in Article 70-2 (1) and (2), 70-9 (1), or 180 (1), or who
         conducts the business concerned after registration is cancelled under
         Article 70-11 (including where it is applicable mutatis mutandis under
         Article 180 (3));

         5.A person who violates Article 70-6 (including where it is applicable
         mutatis mutandis under Article 70-8 (3)), 101, 188 (6), 194-3, or 200-2
         (1);

         6.Deleted; and (by Act No. 6423, Mar. 28, 2001)

         7.A person who fails to prepare and keep a depositors account book as
         prescribed in Article 174 (3) or a customers account book as prescribed
         in Article 174-2 (1), or who has made a false statement therein.


ARTICLE 211 (PENAL PROVISIONS)

         Any person who falls under any of the following subparagraphs shall be
         punished by a fine not exceeding five million won: (Amended by Act No.
         3945, Nov. 28, 1987;

<PAGE>

         Act No. 5254, Jan. 13, 1997; Act No. 5736, Feb. 1, 1999)

         1.A person who conducts the business concerned notwithstanding it is
         suspended under Article 57 (including where it is applicable mutatis
         mutandis under Article 70-7) or 155 (2) (including where it is
         applicable mutatis mutandis under Article 180 (3));

         2.A person who violates the provisions of Article 186 (1) and (2),
         186-2 or 186-3;

         3.A person who fails to report pursuant to the provisions of Article
         189-4 (8); and

         4.A person who violates the provisions of Article 200 (1).


ARTICLE 212 (PENAL PROVISIONS)

         A person who violates the provisions of Article 171 shall be punished
         by a fine not exceeding two million won. (Amended by Act No. 5254, Jan.
         13, 1997; Act No. 5498, Jan. 8, 1998; Act No. 5736, Feb. 1, 1999; Act
         No. 6176, Jan. 21, 2000)
         [This Article Wholly Amended by Act No. 4701, Jan. 5, 1994]


ARTICLE 213 (FINE FOR NEGLIGENCE)


         (1) A person who falls under any of the following subparagraphs shall
         be punished by a fine for negligence of not more than ten million won:
         (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998;
         Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6176,
         Jan. 21, 2000; Act No. 6623, Jan. 26, 2002)

         1.A person who has failed to file a registration in contravention of
         the provisions of Article 3;


<PAGE>

         2.A person who has committed a violation of the provisions of Article
         18-2;

         3.A person who has refused, interfered with, or evaded the inspection,
         investigation or confirmation under Article 19 (1) (including where it
         is applicable mutatis mutandis under Article 27-2, 186-5, 189-2 (5) or
         190-2 (3)), 53 (1) (including where it is applicable mutatis mutandis
         under Articles 70-7, 157, 169 or 178 through 181), 174-12 or 200-2 (5);

         4.A person who has committed a violation of the provisions of Article
         37 (including where they are applicable mutatis mutandis under Article
         70-7) or 70-8 (1); and

         5.A person who has neglected the disposal of stocks in contravention of
         the provisions of Article 189-2 (4) or 191 (4).

         (2) A person who falls under any of the following subparagraphs, shall
         be punished by a fine for negligence not exceeding five million won:
         (Amended by Act No. 5254, Jan. 13, 1997; Act No. 5498, Jan. 8, 1998;
         Act No. 5521, Feb. 24, 1998; Act No. 5736, Feb. 1, 1999; Act No. 6623,
         Jan. 26, 2002)

         1.A person who violates the provisions of Article 17 (including where
         they are applicable mutatis mutandis under Article 27-2), 36, 46 or 107
         (2);

         2.A person who fails to comply with a demand for the report, etc. or
         violates the order pursuant to Article 19 (1) (including where it is
         applicable mutatis mutandis under Article 27-2, 186-5, 189-2 (5) or
         190-2 (3)) or 53 (2) (including where it is applicable mutatis mutandis
         under Article 70-7, 157, 169 or 178 through 181);

         3.A person who violates the provisions of Article 47 (including where
         it is applicable mutatis mutandis under Article 70-7);

         4.A person who violates the provisions of Article 54-5 (1) through (3)
         or 191-16 (1) and (3);


<PAGE>

         5.A person who violates the provisions of Article 54-6 (1) and (2) or
         191-17;

         6.A person who violates the provisions of Article 174-2 (2) or who
         fails to make a notification, or makes a false notification, to the
         beneficial owners in violation of the provisions of Article 174-7 (3)
         through (5);

         7.A person who violates the provisions of Article 174-6 (4) or 174-8
         (1); and

         8.A person who violates the provisions of Article 191 (5), 191-10 (2)
         and (3), 191-11 (2), or 191-19 (1).

         (3) The fine for negligence as referred to in paragraphs (1) and (2)
         shall be imposed and collected by the Financial Supervisory Commission,
         under the conditions as prescribed by the Presidential Decree. (Amended
         by Act No. 5498, Jan. 8, 1998)

         (4) A person who is dissatisfied with the disposition of the fine for
         negligence as referred to in paragraph (3), may raise an objection to
         the person who is authorized to take the disposition, within thirty
         days after he is informed of such disposition.

         (5) If the person, who is subject to a disposition of fine for
         negligence pursuant to paragraph (3), has raised an objection pursuant
         to paragraph (4) of this Article, the person who is authorized to take
         the disposition shall without delay notify the competent court, which
         shall, upon receiving the notification, bring the case of fine for
         negligence to a trial under the Non-Contentious Case Litigation
         Procedure Act.

         (6) If neither objection is raised, nor fine for negligence is paid, in
         the period as referred to in paragraph (4) of this Article, it shall be
         collected according to the examples of the disposition of national
         taxes in arrears.
         [This Article Wholly Amended by Act No. 4701, Jan. 5, 1994]


ARTICLE 214 (CONCURRENT PUNISHMENT)


<PAGE>
     (1) A person who commits a crime as referred to in Articles 207-2 through
     210 may be confined to imprisonment and fined concurrently. (Amended by Act
     No. 5254, Jan. 13, 1997)

     (2) Where a violator of Article 207-2 (2) is subject to a fine in addition
     to the punishment of imprisonment in accordance with paragraph (1), he
     shall be punished by the fine of the amount equivalent to or less than
     three times of the profit gained or loss evaded in consequence of such
     violation. (Newly Inserted by Act No. 6695, Apr. 27, 2002)


ARTICLE 215 (JOINT PENAL PROVISIONS)

     If a representative of a juristic person, or an agent, employee or other
     employed person of the juristic person or an individual commits any offense
     as prescribed in Articles 207-2 through 212 in connection with the affairs
     of the juristic person or individual, the fine as prescribed in the
     respective Articles shall be imposed on such juristic person or individual,
     in addition to the punishment of the offender. (Amended by Act No. 5254,
     Jan. 13, 1997)
     [This Article Wholly Amended by Act No. 4701, Jan. 5, 1994]


     ADDENDA


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on February 1, 1977: Provided, That the
     provisions of Article 12 of the Addenda shall enter into force on the date
     of its promulgation.

<PAGE>


ARTICLE 2 (TRANSITIONAL MEASURES AS TO FILING OF REGISTRATION STATEMENT)


     (1) Any registration statement (including amendment statement) and
     notification which the Minister of Finance received prior to the effective
     date of this Act shall be regarded to have been received by the Commission,
     and any designation of effective date thereof shall be regarded as
     designated by the Commission.

     (2) Notwithstanding the provisions of Article 9 (3) 1, the Commission may,
     by December 31, 1977, designate an effective date of such registration
     statement filed by any corporation registered with the Commission.


ARTICLE 3 (TRANSITIONAL MEASURES AS TO SECURITIES COMPANIES)

     A securities company, as of the enforcement date of this Act, shall be
     regarded as a securities company under this Act: Provided, That unless a
     securities company obtains license by meeting the requirements referred to
     in Article 28 (3) within three years from the effective date of this Act,
     the license of such company shall be cancelled.


ARTICLE 4 (TRANSITIONAL MEASURES AS TO ACCOUNTING)

     Accounting of a securities company shall be in accordance with the previous
     provisions until the Commission adopts the Regulations relating to the
     Accounting Standards of Securities Companies pursuant to the provision of
     Article 47.


ARTICLE 5 (TRANSITIONAL MEASURES AS TO ORDER BY MINISTER OF FINANCE)

     Orders issued to a securities company by the Minister of Finance prior to
     the enforcement date of this Act with respect to extension of credit or
     other matters
<PAGE>

     shall be regarded as orders by the Commission pursuant to the provisions of
     Articles 49 and 54.


ARTICLE 6 (TRANSITIONAL MEASURES AS TO REGISTERED SALESMAN)

     A registered salesman who entered a registration with the Ministry of
     Finance as of the enforcement date of this Act shall be regarded to have
     been registered with the Commission under this Act: Provided, That when the
     qualification requirements are determined pursuant to the provisions of
     Article 65 (3), the Commission shall examine every registered salesman and
     have such one register again pursuant to the provisions thereof.


ARTICLE 7 (TRANSITIONAL MEASURES AS TO AUDITOR OF KOREA STOCK EXCHANGE)

     An auditor of the Korea Stock Exchange, as of the enforcement date of this
     Act, shall be regarded as a standing auditor of the Stock Exchange under
     this Act.


ARTICLE 8 (TRANSITIONAL MEASURES AS TO EXCHANGE MEMBERS)

     Any exchange member who was registered with the Korea Stock Exchange, as of
     the enforcement date of this Act, shall be regarded as registered under
     this Act.


ARTICLE 9 (TRANSITIONAL MEASURES AS TO LISTED SECURITIES)


     (1) Any security which was listed on the Korea Stock Exchange as of the
     enforcement date of this Act shall be regarded as a security listed under
     this Act.

     (2) Previous provisions shall apply to the listing of securities referred
     to in Article
<PAGE>

     88 (1), until the provisions of the Presidential Decree pursuant to the
     proviso of Article 88 (1) become effective.


ARTICLE 10 (TRANSITIONAL MEASURES AS TO SEMIANNUAL REPORTS)

     Any listed corporation as of the enforcement date of this Act, for which a
     period of six months has elapsed since its accounting period commenced,
     shall file a semiannual report referred to in Article 92 within forty-five
     days from the enforcement date of this Act.


ARTICLE 11 (TRANSITIONAL MEASURES AS TO CERTIFICATES OF CONTRIBUTION OF STOCK
EXCHANGE)

     Any certificate of contribution of the Stock Exchange which was owned as of
     the enforcement date of this Act by any person other than the Government or
     securities companies, may be cancelled through purchases by the Stock
     Exchange from the enforcement date of this Act. In such a case, the method
     of purchase, period, purchase price and other necessary matters shall be
     prescribed by the Presidential Decree.


ARTICLE 12 (ESTABLISHMENT OF SUPERVISORY BOARD)


     (1) The Minister of Finance shall organize an establishment commission
     composed of seven or less members appointed by the Minister, and have it
     handle affairs concerned with the establishment of the Supervisory Board.

     (2) The establishment commission shall prepare the articles of association
     of the Supervisory Board and obtain the authorization of the Minister of
     Finance with respect thereto.

<PAGE>

     (3) The establishment commission shall make the registration referred to in
     Article 130, after obtaining the authorization pursuant to the provisions
     of paragraph (2).

     (4) When the establishment commission has completed the registration
     referred to in paragraph (3), it shall turn over its business and property
     to the director of the Supervisory Board.

     (5) When the commission members were appointed pursuant to the provisions
     of paragraph (1), the Government may deliver a contribution referred to in
     Article 204 to the establishment Commission.


ARTICLE 13 (TRANSITIONAL MEASURES AS TO AUTHORITY OF COMMISSION)

     Authority of the Commission and the Supervisory Board pursuant to this Act
     shall be exercised by the Minister of Finance until the Commission is
     organized and the Supervisory Board is established.


ARTICLE 14 (TERMS OF OFFICE OF COMMISSIONERS FIRST TAKING OFFICE)

     Notwithstanding the provisions of Article 123, the terms of office of the
     Commissioners first taking office after the effective date of this Act
     shall be one year for one, two years for one and three years for one.


ARTICLE 15 (TRANSITIONAL MEASURES AS TO RESTRICTIONS ON OWNERSHIP OF STOCKS)

     The time of original listing referred to in Article 200 (1) as to a listed
     corporation as of the enforcement date of this Act shall be regarded as the
     record date for closing of a register of stockholders first taken after the
     enforcement of this Act.


<PAGE>

ARTICLE 16 (TRANSITIONAL MEASURES AS TO OFFICERS OF SECURITIES FINANCE COMPANY)

     Terms of office of directors and auditors of a securities finance company
     as of the enforcement date of this Act shall be in accordance with the
     previous provisions.


ARTICLE 17 (TRANSITIONAL MEASURES AS TO SECURITIES DEALERS ASSOCIATION)

     Any direction which was issued to the Securities Dealers Association by the
     Minister of Finance prior to the effective date of this Act shall be
     regarded as measures taken by the Commission under this Act.


ARTICLE 18 (TRANSITIONAL MEASURES AS TO MUTUAL OWNERSHIP OF STOCKS)

     Any stock which a listed corporation owns in violation of the provisions of
     Article 189 as of the effective date of this Act shall be transferred
     within one year from the effective date of this Act.


ARTICLE 19 (TRANSITIONAL MEASURES AS TO MERGERS OF UNLISTED CORPORATIONS)

     The provisions of Article 190 shall not apply until December 31, 1977, to
     the case where any listed corporation merges any registered corporation.


ARTICLE 20 (TRANSITIONAL MEASURES AS TO ACT OR SUBORDINATE STATUTE WHICH CITES
PROVISIONS OF PREVIOUS ACT)

     In case any other Act or subordinate statute cites the provisions of the
     previous Securities and Exchange Act, the provisions which fall within the
     purview thereof in this Act shall, if any, be regarded to be cited for
     replacement of the previous provisions.


<PAGE>


     ADDENDA (Act No. 3541, Mar. 29, 1982)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on April 1, 1982.


ARTICLE 2 (TRANSITIONAL MEASURES AS TO FILING OF REGISTRATION STATEMENT)


     (1) Registration statements received in accordance with the previous
     provisions of Article 8 as of the enforcement date of this Act shall take
     effect in accordance with the previous provisions.

     (2) Previous provisions shall apply, even after the enforcement of this
     Act, to the registration statement and documents accompanied thereby
     referred to in Article 8 (2), prospectus referred to in Article 12 and
     after-report referred to in Article 17 as far as the forms thereof are
     concerned, until the Commission fixes such forms in accordance with this
     Act.


ARTICLE 3 (TRANSITIONAL MEASURES AS TO ELIGIBILITY OF OFFICERS)


     (1) Notwithstanding the provisions of Article 33 (1) and (2) 5 (including
     the case where it shall apply mutatis mutandis under Article 149, 169 or
     178), officers of a securities company, securities finance company,
     Securities Dealers Association and securities depository corporation as of
     the enforcement date of this Act, may hold office for a period of their
     existing terms respectively.

<PAGE>

     (2) Notwithstanding the provisions of Article 33-2 (including the case
     where it shall apply mutatis mutandis under Article 150 or 178), officers
     of a securities company, securities finance company and securities
     depository corporation as of the enforcement date of this Act, may hold
     office for the period of their existing terms.


ARTICLE 4 (TRANSITIONAL MEASURES AS TO SECURITIES SAVINGS BUSINESS)

     Previous provisions shall apply to a securities savings business of a
     securities company, until the Commission adopts the Securities Savings
     Business Regulations in accordance with the provisions of Article 50 (1).


ARTICLE 5 (TRANSITIONAL MEASURES AS TO INVESTMENT COUNSELLORS)


     (1) A registered salesman registered with the Commission as of the
     enforcement date of this Act shall be regarded an investment counsellor
     registered with the Supervisory Board in accordance with this Act.

     (2) A securities company may, notwithstanding the provisions of Article 65
     (2), have its officer or employee perform duties of an investment
     counsellor in the business office thereof until two years have elapsed
     since the enforcement date of this Act.

     (3) Matters reported to the Commission in accordance with the previous
     provisions of Article 68 as of the enforcement date of this Act shall be
     regarded as reported to the Supervisory Board in accordance with this Act.

     (4) Dispositions taken by the Commission in accordance with the previous
     provisions of Article 69 as of the enforcement date of this Act shall be
     regarded taken by the Supervisory Board in accordance with this Act.

<PAGE>

ARTICLE 6 (TRANSITIONAL MEASURES AS TO ACCOUNTING AUDIT)

     Previous provisions shall apply to an audit on such corporation which has
     entered into an audit contract with certified public accountants as of the
     enforcement date of this Act.


ARTICLE 7 (TRANSITIONAL MEASURES AS TO OWNERSHIP OF BLOCK STOCKS)


     (1) A stockholder, as of the enforcement date of this Act, who comes to
     exceed the maximum limit referred to in the latter part of Article 200 (1)
     as a result of application of the provisions of the former part of
     paragraph (1) of the said Article shall report the contents thereof to the
     Commission within thirty days from the enforcement date of this Act and the
     person who reported this shall be regarded as the owner as of the time of
     original listing.

     (2) A person who reported the ownership of block stocks to the Commission
     in accordance with the previous provisions of Article 201 as of the
     enforcement date of this Act shall be regarded as reported as major
     stockholder to the Commission in accordance with the provisions of Article
     188 (6).


     ADDENDA (Act No. 3945, Nov. 28, 1987)


ARTICLE 1 (ENFORCEMENT DATE)


     (1) This Act shall enter into force on January 1, 1988, but the revised
     provisions of Articles 74 and 82 shall enter into force on the day on which
     the Government sells
<PAGE>

     all of its contribution certificates of the Stock Exchange.

     (2) If the Government does not sell all of its contribution certificates of
     the Stock Exchange until January 1, 1988, the revised provisions of those
     included in Chapter VI of this Act (excluding the revised provisions of
     Articles 89, 92, 105 and 107; hereinafter the same shall apply) shall enter
     into force on the date of its selling.


ARTICLE 2 (APPLICATION EXAMPLE CONCERNING REGISTRATION STATEMENT)

     The revised provisions of Article 8 (1) shall be applicable even in case
     where a registration statement is filed pursuant to the previous provisions
     at the time this Act enters into force.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING INVESTMENT ADVISORY BUSINESS)

     Any person who operates an investment advisory business at the time this
     Act enters into force, shall register the investment advisory business with
     the Ministry of Finance pursuant to the revised provisions of Article 70-2
     (1) within three months after this Act enters into force.


ARTICLE 4 (TRANSITIONAL MEASURES CONCERNING STOCK EXCHANGE)


     (1) The Stock Exchange shall satisfy requirements pursuant to this Act
     within three months after the enforcement of this Act (this refers to the
     enforcement of the revised provisions of those included in Chapter VI;
     hereafter the same shall apply in this Article).

     (2) Any exchange member registered with the Stock Exchange pursuant to the
     previous provisions at the time this Act enters into force shall be
     considered as a
<PAGE>

     member under this Act.

     (3) The capital of the Stock Exchange under the previous provisions at the
     time this Act enters into force shall be considered as the contribution of
     a member under this Act.

     (4) The president, executive officers and auditors of the Stock Exchange at
     the time this Act enters into force shall perform their duties according to
     the previous provisions until the chief director, managing director,
     standing directors and auditors are appointed under this Act.

     (5) If the president, standing officers and auditors existing at the time
     this Act enters into force are reappointed to the chief director, managing
     director, standing directors and auditors, respectively, their terms of
     office shall include the period of service pursuant to the previous
     provisions.


ARTICLE 5 (TRANSITIONAL MEASURE CONCERNING ASSISTANT GOVERNOR OF SUPERVISORY
BOARD)

     The Assistant Governor as prescribed by the articles of association of the
     Supervisory Board at the time this Act enters into force shall be
     considered as the Assistant Governor as prescribed by this Act, and his
     term of office shall run on the date he is appointed pursuant to the
     articles of association of the Supervisory Board.


     ADDENDA (Act No. 4469, Dec. 31, 1991)

     (1) (Enforcement Date) This Act shall enter into force on the date of its
     promulgation: Provided, That the revised provisions of Article 200 (1)
     shall enter into force at the expiration of six months from the enforcement
     date of this Act, and the revised provisions of Articles 187 and 200-2, at
     the expiration of three months from the enforcement date of this Act,
     respectively.

<PAGE>

     (2) (Transitional Measures concerning Capital of Securities Company)
     Notwithstanding the revised provisions of Article 28 (3), securities
     companies existing at the time this Act enters into force shall be
     considered to satisfy the requirements as prescribed by this Act.

     (3) (Transitional Measures concerning Restriction, etc. of Mass Holding of
     Stocks) Any person who falls under the revised provisions of Article 200
     (1) 1 of this Act at the time this Act enters into force, shall report the
     situation of his ownership to the Commission within one month after this
     Act enters into force.

     (4) (Transitional Measures concerning Report on Mass Holding of Stocks) Any
     person who is liable to make a report pursuant to the revised provisions of
     Article 200-2 (1) at the time this Act enters into force, shall report the
     situation of his ownership to the Commission and the Stock Exchange within
     one month from the enforcement date of this Act.


     ADDENDA (Act No. 4701, Jan. 5, 1994)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on April 1, 1994: Provided, That the
     revised provisions of Article 200 shall enter into force on April 1, 1997;
     and those of Section 3 of Chapter VIII (Articles 173, 173-2 through 173-6,
     174, 174-2, 174-4 through 174-8, 175, 176 and 178) and of Article 187, on
     the date at which the Securities Depository comes into existence. (Amended
     by Act No. 5254, Jan. 13, 1997)



ARTICLE 2 (EXAMPLES OF APPLICATION TO APPRAISAL RIGHTS OF STOCKHOLDERS)

<PAGE>

     The revised provisions of Article 191 shall be applicable to the portion
     for which a notification or public notice on a convocation of the general
     meeting of stockholders is made on or after the date this Act enters into
     force.


ARTICLE 3

     Deleted. (by Act No. 4701, Feb. 1, 1999)


ARTICLE 4 (TRANSITIONAL MEASURES CONCERNING REGISTRATION, ETC. OF INVESTMENT
COUNSELLOR)


     (1) Any investment counsellor who has registered with the Securities
     Supervisory Board at the time this Act enters into force, shall be
     considered to have been registered as investment counsellor with the
     Securities Dealers Association under this Act.

     (2) Matters reported to the Securities Supervisory Board under the previous
     Article 68 at the time this Act enters into force, shall be considered to
     have been reported to the Securities Dealers Association under this Act.


ARTICLE 5 (CONVERSION OF SECURITIES DEPOSITORY CORPORATION INTO SECURITIES
DEPOSITORY)


     (1) When the securities depository corporation as prescribed in the
     previous Article 173 (hereinafter referred to as the "securities depository
     corporation") at the time this Act enters into force, has obtained the
     approval of the Minister of Finance on the conversion to the Securities
     Depository through a resolution of the general meeting of stockholders, it
     shall be considered as the Securities Depository established under the
     revised provisions of Article 173.

<PAGE>

     (2) In the case as referred to in paragraph (1), the representative
     director of the securities depository corporation shall prepare the
     articles of association of the Securities Depository within three months
     after this Act enters into force, obtain the authorization of the Minister
     of Finance, and take charge of the affairs concerning the registration of
     incorporation, etc. of the Securities Depository.

     (3) The securities depository corporation shall carry on the affairs
     pursuant to the previous provisions until the Securities Depository comes
     into existence.

     (4) When the Securities Depository comes into existence, the stockholders
     of the securities depository corporation existing at that time shall be
     those of the Securities Depository, and all rights and duties of the
     securities depository corporation shall be succeeded en bloc to the
     Securities Depository. In this case, the securities depository corporation
     shall be extinguished on the day of such succession without going through
     the procedure of dissolution and liquidation under the Commercial Act.

     (5) The officers of the securities depository corporation existing at the
     time the Securities Depository comes into existence, shall be considered as
     those of the Securities Depository as prescribed by this Act, and their
     terms of office shall count from the day on which they have been appointed
     as officers of the securities depository corporation.


ARTICLE 6 (TRANSITIONAL MEASURES CONCERNING APPROVAL ON USE OF PRINTED FORMS OF
SECURITIES)

     Approval on the use of the printed forms of securities made by the
     Securities Supervisory Board for a non-listed corporation before the
     revised provisions of Article 187 enter into force, shall be considered as
     approval made by the Securities Depository.

<PAGE>

ARTICLE 7 (TRANSITIONAL MEASURES CONCERNING REPORT ON MASS HOLDING OF STOCKS)

     Any person who is to make a report pursuant to the revised provisions of
     Article 200-2 (1) at the time this Act enters into force, shall make a
     report on the situation of his holdings to the Commission and the Stock
     Exchange within one month after this Act enters into force.


ARTICLE 8 (TRANSITIONAL MEASURES CONCERNING CONCILIATION COMMISSION)


     (1) The dispute conciliation institution established by the previous
     provisions at the time this Act enters into force, shall be considered as
     the securities dispute conciliation commission under this Act.

     (2) Any request for a conciliation of dispute made pursuant to the previous
     provisions before this Act enters into force, shall be considered as a
     request for dispute conciliation under this Act.


ARTICLE 9 (RELATION WITH OTHER ACTS AND SUBORDINATE STATUTES)

     Any citation of the securities depository corporation in other Acts and
     subordinate statutes at the time the Securities Depository comes into
     existence, shall be considered as a citation of the Securities Depositor.


     ADDENDA (Act No. 5254, Jan. 13, 1997)



ARTICLE 1 (ENFORCEMENT DATE)

<PAGE>

     This Act shall enter into force on April 1, 1997: Provided, That the
     revised provisions of subparagraph 6 of Article 3 and Article 189-4 shall
     enter into force on the date of its promulgation; and the revised
     provisions of Section 2 of Chapter VIII (excluding the provisions of
     Article 167), on the date on which the Korea Dealers Association comes into
     existence, respectively. (Amended Act by No. 5498, Jan. 8, 1998)


ARTICLE 2 (APPLICABLE CASES CONCERNING LIABILITY FOR DAMAGES DUE TO FALSE
STATEMENTS)

     The revised provisions of subparagraph 5 of Article 14 and Article 15 (2)
     shall apply to a registration statement and a prospectus which are filed on
     or after the date this Act enters into force.


ARTICLE 3 (APPLICABLE CASES CONCERNING TENDER OFFER OF SECURITIES)

     The revised provisions of Chapter VI (Articles 21 through 27-2) shall not
     apply in case where a tender offer statement is filed according to the
     previous provisions before this Act comes into force.


ARTICLE 4 (APPLICABLE CASES CONCERNING QUALIFICATION OF OFFICERS OF SECURITIES
COMPANY)

     The revised provisions of Article 33 (2) 3 and 5 (including the case where
     it shall apply mutatis mutandis under Articles 70-7, 149 (2), 169, 178, 179
     (4) and 180 (3)), subparagraphs 4 and 5 of Article 80, subparagraphs 4 and
     5 of Article 121 and Article 133 (8) shall not apply with respect to an
     officer who is in office at the time of enforcement of this Act.


ARTICLE 5 (APPLICABLE CASES CONCERNING TERM OF OFFICE OF AUDITOR OF STOCK
EXCHANGE)

<PAGE>

     The revised provisions of Article 78 (7) shall apply to an auditor who is
     assigned on or after the date this Act comes into force.


ARTICLE 6 (APPLICABLE CASES CONCERNING ANNUAL REPORT AND SEMIANNUAL REPORT)

     The revised provisions of Articles 186-2 and 186-3 shall apply from the
     business year commencing newly after this Act comes into force: Provided,
     That in the case of a corporation of which the last day of business year
     falls under the period between December and February, they shall apply from
     the business year to which the date of enforcement of this Act belongs.


ARTICLE 7 (APPLICABLE CASES CONCERNING RETURN OF SHORT-TERM SALES MARGIN OF
INSIDER)

     The revised provisions of Article 188 (2) through (4) shall not apply, in
     case where six months has not elapsed since securities, etc. are bought or
     sold before this Act comes into force.


ARTICLE 8 (APPLICABLE CASES CONCERNING NOTIFICATION AND PUBLIC NOTICE ON
CONVOCATION OF GENERAL MEETING)

     The revised provisions of Article 191-10 (2) shall apply from the
     notification or public notice on the convocation of the general meeting
     effected for the first time after the enforcement of this Act.


ARTICLE 9 (APPLICABLE CASES CONCERNING APPOINTMENT AND DISMISSAL, ETC. OF
AUDITOR)

     The revised provisions of Article 191-11 (1) and (2) shall apply from the
     general meeting of stockholders which is convened for the first time after
     this Act comes into force; and the revised provisions of paragraph (3) of
     the said Article, from an

<PAGE>

     auditing report which an auditor submits to directors for the first time
     after this Act comes into force.


ARTICLE 10 (APPLICABLE CASES CONCERNING QUALIFICATIONS OF STANDING AUDITOR)

     The revised provisions of Article 191-12 (2) and (3) shall apply from an
     auditor who is appointed in the general meeting of stockholders convened
     for the first time after this Act comes into force.


ARTICLE 11 (TRANSITIONAL MEASURES CONCERNING EMPLOYEE STOCK OWNERSHIP
ASSOCIATION)

     An employee stock ownership association pursuant to subparagraph 5 of
     Article 2 of the Capital Market Promotion Act (Act No. 4679) at the time of
     enforcement of this Act, shall be considered as an employee stock ownership
     association pursuant to the revised provisions of Article 2 (18) of this
     Act.


ARTICLE 12 (TRANSITIONAL MEASURES CONCERNING LICENSE FOR SECURITIES BUSINESS)

     In case where the license for securities business referred to in the
     previous provisions of Article 2 (8) 4 is obtained pursuant to the
     provisions of Article 28 (2) 2 at the time of enforcement of this Act, it
     shall be considered as a license for securities business pursuant to the
     revised provisions of Article 2 (8) 4.


ARTICLE 13 (TRANSITIONAL MEASURES CONCERNING PROTECTION FUND)

     Securities company bound to set aside protection fund pursuant to the
     revised provisions of Article 69-2 (3), shall set aside the protection fund
     pursuant to the revised provisions of paragraph (2) of the said Article
     within one month after this Act comes into force.

<PAGE>

ARTICLE 14 (TRANSITIONAL MEASURES CONCERNING REPORT ON BUSINESS SIMILAR TO
INVESTMENT ADVISORY BUSINESS)

     A person who conducts a business similar to investment advisory business
     pursuant to Article 70-8 at the time of enforcement of this Act, shall
     report pursuant to the revised provisions of Article 70-8 within one month
     after the enforcement date of this Act.


ARTICLE 15 (TRANSITIONAL MEASURES CONCERNING FEES)

     Fees which has been collected by the Supervisory Board during the period
     from January 1, 1997 to the last day before the enforcement date of this
     Act according to the previous provisions of Article 143, shall be
     considered as the fees pursuant to the revised provisions of Article 143.


ARTICLE 16 (TRANSITIONAL MEASURES CONCERNING KOREA SECURITIES DEALERS
ASSOCIATION)


     (1) The Korea Securities Dealers Association, the incorporated association,
     which was established pursuant to the previous provisions of Article 162
     and is existing at the time of enforcement of this Act (hereinafter
     referred to as the "Association"), shall be considered as the Korea
     Securities Dealers Association which is established pursuant to the revised
     provisions of Article 162.

     (2) In case of paragraph (1) of this Article, the president of the
     Association shall prepare the articles of association of the Korea
     Securities Dealers Association within three months from the enforcement
     date of this Act and shall obtain the authorization of the Minister of
     Finance and Economy; and he shall manage the affairs relating to the
     registration of incorporation of the Korea Securities Dealers
<PAGE>

     Association.

     (3) The Association shall conduct the business pursuant to the previous
     provisions until the Korea Securities Dealers Association comes into
     existence.

     (4) When the Korea Securities Dealers Association comes into existence, the
     members of the Association at the time when it comes into existence shall
     become the members of the Korea Securities Dealer Association, and the
     Korea Securities Dealers Association shall succeed to the rights and
     obligations of the Association by a universal title. In this case, the
     Association shall cease to exist at the date of succession by a universal
     title without being subject to the procedure of dissolution and liquidation
     pursuant to the provisions of the Civil Act.

     (5) Officers of the Association at the time when it comes into existence
     shall be considered as officers of the Korea Securities Dealers Association
     pursuant to this Act, and the terms of office of such officers shall begin
     on the date on which officers of the Association has been appointed.


ARTICLE 17 (TRANSITIONAL MEASURES CONCERNING CORPORATION REGISTERED WITH
ASSOCIATION)

     A corporation registered with the Association pursuant to the previous
     provisions of Article 194 at the time this Act enters into force shall be
     regarded as a corporation registered with the Korea Securities Dealers
     Association pursuant to the revised provisions of Article 172-2.


ARTICLE 18 (TRANSITIONAL MEASURES CONCERNING DESIGNATION OF SECURITIES WHICH ARE
OBJECT OF DEPOSITING)

     The securities which the Securities Depository has designated at the time
     this Act enters into force shall be regarded that they have been designated
     pursuant to the revised provision of Article 173-7.

<PAGE>


ARTICLE 19 (TRANSITIONAL MEASURES CONCERNING KOREA LISTED COMPANIES ASSOCIATION)

     The Korea Listed Companies Association, the incorporated association, which
     is established pursuant to the Civil Act at the time this Act enters into
     force, shall be deemed to be established with the license by the Minister
     of Finance and Economy under the revised provisions of Article 181 (1).


ARTICLE 20 (TRANSITIONAL MEASURES CONCERNING NONVOTING STOCKS)

     In case where the number of nonvoting stocks issued pursuant to Article 7
     of the previous Capital Market Promotion Act (Act No. 3946) (including the
     number of nonvoting stocks issued after the enforcement of the Capital
     Market Promotion Act (Act No. 4679) due to the exercise of the rights of
     convertible bonds or bonds with warrants which have been issued before the
     enforcement of the Capital Market Promotion Act (Act No. 4679)), exceeds
     1/4 of the total number of the issued stocks, the portion exceeding such
     ratio shall be considered that it is issued under the revised provisions of
     each subparagraph of Article 191-2 (1).


ARTICLE 21 (TRANSITIONAL MEASURES CONCERNING ISSUANCE OF NEW TYPE OF BONDS)

     New type bonds issued pursuant to Article 9 of the Capital Market Promotion
     Act at the time this Act enters into force, shall be considered that they
     are issued pursuant to the revised provisions of Article 191-4.


ARTICLE 22 (TRANSITIONAL MEASURES CONCERNING PUBLIC NOTICE ON CONVOCATION OF
GENERAL MEETING)

     The public notice on the convocation of the general meeting of stockholders

<PAGE>

     effected pursuant to Article 23 of the Capital Market Promotion Act at the
     time this Act enters into force, shall be considered that it is effected
     pursuant to the revised provisions of Article 191-10 (1).


ARTICLE 23 (TRANSITIONAL MEASURES CONCERNING STANDING AUDITOR)

     A stock listed corporation which shall appoint a standing auditor pursuant
     to the revised provisions of Article 191-12 (1), shall appoint a standing
     auditor by the time of the regular general meeting of stockholders convened
     for the first time after this Act enters into force.


ARTICLE 24 (TRANSITIONAL MEASURES CONCERNING REPORT ON MASS HOLDING, ETC. OF
STOCKS)

     A person who shall make the report pursuant to the revised provisions of
     Article 200-2 (1) at the time this Act enters into force, shall report the
     situation of holdings to the Commission and the Stock Exchange within two
     months from the enforcement date of this Act.


ARTICLE 25 (REPEAL OF OTHER ACT, ETC.)


     (1) The Capital Market Promotion Act shall be repealed.

     (2) In case where the provisions of the previous Capital Market Promotion
     Act was quoted in other Acts and subordinate statutes at the time this Act
     enters into force, this Act and the provisions in this Act corresponding to
     the provisions of the previous Capital Market Promotion Act shall be
     considered to have been quoted in place of the provisions of the previous
     Capital Market Promotion Act.

<PAGE>

     ADDENDA (Act No. 5423, Dec. 13, 1997)

     (1) (Enforcement Date) This Act shall enter into force on April 1, 1998:
     Provided, That the amended provisions of Articles 69-5 and 192-2 shall
     enter into force on January 1, 1998. (Amended by Act No. 5498, Jan. 8,
     1998)

     (2) (Applicable Cases concerning Interim Dividends) The amended provisions
     of Article 192-3 shall apply from the business year commencing for the
     first time after January 1, 1998.

     (3) (Transitional Measures on Penal Provisions) The application of penal
     provisions to acts committed prior to the entry into force of this Act
     shall be governed by the previous provisions.


     ADDENDA (Act No. 5498, Jan. 8, 1998)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on April 1, 1998: Provided, That the
     provisions among the amended provisions of Articles 69-6 and 200-2 which
     pertain to Association-registered corporations, the amended provisions of
     Article 1 of the Addenda of Act No. 5254, and the amended provisions of
     paragraph (1) of the Addenda of Act No. 5423 shall enter into force on the
     date of its promulgation, the amended provisions of Article 206-10 shall
     enter into force on January 1, 1998, and the amended provisions of Article
     69-6 shall remain in force until March 31, 1998.


ARTICLE 2 (GENERAL TRANSITIONAL MEASURES PURSUANT TO REPEAL OF SECURITIES AND
EXCHANGE COMMISSION AND SECURITIES SUPERVISORY BOARD)

<PAGE>

     (1) Any approval, authorization, order, disposition, measures, consent,
     proposition, recommendation, direction, request, adjustment, etc. and
     inspection or investigation conducted by the Securities and Exchange
     Commission or the Securities Supervisory Board pursuant to the previous
     provisions prior to the entry into force of this Act shall be deemed to
     have been conducted by the Financial Supervisory Commission, the Securities
     Futures Commission or the FSB Director under this Act.

     (2) Any declaration and report, etc. received or accepted by the Securities
     and Exchange Commission or the Financial Supervisory Board prior to the
     entry into force of this Act shall be deemed to have been received or
     accepted by the Financial Supervisory Commission, the Securities Futures
     Commission or the FSB Director under this Act.

     (3) Any corporation registered with the Securities and Exchange Commission
     at the time when this Act enters into force shall be deemed to have been
     registered with the Financial Supervisory Commission under this Act.


ARTICLE 3 (TRANSITIONAL MEASURES ON LICENSE FOR SECURITIES BUSINESS IN FOREIGN
COUNTRIES)

     Any securities company which has obtained a license on operating a
     securities business in a foreign country from the Minister of Finance and
     Economy at the time when this Act enters into force shall be deemed to have
     made a report to the Financial Supervisory Commission pursuant to the
     amended provisions of Article 28 (7).


ARTICLE 4 (TRANSITIONAL MEASURES ON PROTECTION FUND)

     The fund management company referred to in the previous provisions of
     Article 69-2 (1) shall return the reserve accumulated by a securities
     company bound to set
<PAGE>

     aside the fund referred to in paragraph (3) of the same Article (including
     the right of indemnification referred to in Article 69-3 (4) where the real
     balance of the protection fund falls short of the reserve due to the
     payment, etc. referred to in Article 69-3 (1)) to the securities company
     bound to set aside the fund not later than one month from the date of entry
     into force of this Act.


ARTICLE 5 (TRANSITIONAL MEASURES ON LICENSE FOR INVESTMENT ADVISORY BUSINESS AND
DISCRETIONARY INVESTMENT BUSINESS IN FOREIGN COUNTRIES)

     Any investment advisory company which has obtained a license on operating
     investment advisory business or discretionary investment business in a
     foreign country from the Minister of Finance and Economy at the time when
     this Act enters into force shall be deemed to have made a report to the
     Financial Supervisory Commission pursuant to the amended provisions of
     Article 70-2 (3).


ARTICLE 6 (TRANSITIONAL MEASURES ON AUTHORIZATION, ETC. OF BUSINESS OF STOCK
EXCHANGE, ETC.)

     Any business which has obtained authorization or approval from the Minister
     of Finance and Economy pursuant to the previous provisions of Article 73
     (1) 8, subparagraph 7 of Article 162-2 and Article 173-2 (2) at the time
     when this Act enters into force shall be deemed to be a business authorized
     or approved by the Financial Supervisory Commission under this Act.


ARTICLE 7 (TRANSITIONAL MEASURES ON APPROVAL OF CHANGE OF ARTICLES OF
ASSOCIATION OF SECURITIES FINANCE COMPANY, ETC.)

     Any securities finance company, the Korea Securities Dealers Association,
     any order matching company, any transfer agency and other organizations
     relating to securities which have obtained approval from the Minister of
     Finance and Economy
<PAGE>

     on the change of articles of association at the time this Act enters into
     force shall be deemed to have obtained approval from the Financial
     Supervisory Commission pursuant to the amended provisions of Article 151
     (1) (including cases applied mutatis mutandis under Articles 169, 179, 180
     and 181)


ARTICLE 8 (TRANSITIONAL MEASURES ON EXCHANGE OF INFORMATION WITH FOREIGN
SECURITIES SUPERVISORY AGENCIES)

     Any exchange of information with a foreign securities supervisory agency by
     the Stock and Exchange Commission under the previous provisions of Article
     129-2 shall be deemed to have been effected by the Financial Supervisory
     Commission under this Act.


ARTICLE 9 (TRANSITIONAL MEASURES ON REPORT OF MASS HOLDING OF STOCKS OF
CORPORATIONS REGISTERED WITH ASSOCIATION)

     Any person who has to make a report referred to in the amended provisions
     of Article 200-2 at the time when this Act enters into force shall make a
     report to the Stock and Exchange Commission and the Korea Securities
     Dealers Association not later than one month from the date of entry into
     force of this Act.


ARTICLE 10 (TRANSITIONAL MEASURES ON CONTRIBUTIONS)

     Contribution paid to the Securities Supervisory Board at the time when this
     Act enters into force shall be deemed to be contributions paid to the
     Financial Supervisory Board pursuant to the amended provisions of Article
     206-8.


ARTICLE 11 (CONTINUANCE IN EXISTENCE OF SECURITIES SUPERVISORY BOARD AND
SUCCESSION TO ITS PROPERTY, RIGHTS AND DUTIES)

<PAGE>

     (1) Notwithstanding the amended provisions of this Act, the Securities
     Supervisory Board shall continue in existence until the date on which the
     Financial Supervisory Board is established pursuant to the Act on the
     Establishment, etc. of Financial Supervisory Organizations.

     (2) All the rights and duties which belong to the Securities Supervisory
     Board shall be succeeded to by universal title by the Financial Supervisory
     Board on the date on which the Financial Supervisory Board is established,
     and the titles of the Securities Supervisory Board indicated in its
     register or other public books on property and rights and duties shall be
     deemed to be the titles of the Financial Supervisory Board.

     (3) The value of property to which the Financial Supervisory Board succeeds
     pursuant to paragraph (2) shall be the book value at the time of its
     succession.


ARTICLE 11-2 (TRANSITIONAL MEASURES PURSUANT TO ABOLITION OF STOCK AND EXCHANGE
COMMISSION)


     (1) The Securities Supervisory Board shall be deemed the Financial
     Supervisory Board in the application of the provisions of Articles 18, 23,
     39 and Chapters IV and V of the Act on the Establishment, etc. of Financial
     Supervisory Organizations until the date on which the Financial Supervisory
     Board is established.

     (2) The Director of the Securities Supervisory Board shall be appointed by
     the President on the recommendation of the Financial Supervisory Commission
     until the Financial Supervisory Board is established, and the person who
     has been appointed as Chairman of the Stock and Exchange Commission prior
     to the entry into force of this Act shall be deemed to have been appointed
     as the Director of the Securities Supervisory Board.

<PAGE>

     (3) The provisions of Article 29 (3) of the Act on the Establishment, etc.
     of Financial Supervisory Organizations shall apply mutatis mutandis to the
     appointment of the Vice-Director and assistant vice-director of the
     Securities Supervisory Board until the date on which the Financial
     Supervisory Board is established: Provided, That any person who has been
     appointed under the previous Act at the time when this Act enters into
     force shall be deemed to have been appointed under the Act on the
     Establishment, etc. of Financial Supervisory Organizations until the date
     on which the Financial Supervisory Board is established.

     (4) Where the Director of the Securities Supervisory Board is unable to
     perform his duties due to an accident from the date on which the Securities
     and Exchange Commission is abolished to the date on which the Financial
     Supervisory Board is established, the Vice-Director shall act as chairman
     on his behalf. [This Article Newly Inserted by Act No. 5521, Feb. 24, 1998]


ARTICLE 12 (TRANSITIONAL MEASURES ON PENAL PROVISIONS)

     The application of penal provisions to acts committed prior to the entry
     into force of this Act shall be governed by the previous provisions.


ARTICLE 13 (TRANSITIONAL MEASURES ON FINE FOR NEGLIGENCE)


     (1) The application of the provisions of a fine for negligence to acts
     committed prior to the entry into force of this Act shall be governed by
     the previous provisions.

     (2) A fine for negligence imposed by the Minister of Finance and Economy at
     the time when this Act enters into force shall be deemed to have been
     imposed by the Financial Supervisory Commission pursuant to the amended
     provisions of Article 213 (3).

<PAGE>


ARTICLE 14

     Omitted.


ARTICLE 15 (RELATION TO OTHER ACTS AND SUBORDINATE STATUTES)

     Where other Acts and subordinate statutes cite the previous provisions at
     the time when this Act enters into force, if this Act includes the
     provisions corresponding to them, the provisions corresponding to this Act
     shall be deemed to have been cited in lieu of the previous provisions.


     ADDENDA (Act No. 5521, Feb. 24, 1998)

     (1) (Enforcement Date) This Act shall enter into force on April 1, 1998:
     Provided, That the amended provisions of Articles 21, 21-3, 25-2 (2), 188-2
     (1), and 189-2 (1) and subparagraph 4 of Article 209 shall enter into force
     on the date of its promulgation.

     (2) (Applicable Cases concerning Tender Offer of Securities) The amended
     provisions of Articles 21 (2), 21-3, and 25-2 (2) and subparagraph 4 of
     Article 209 shall not apply to cases where tender offer statements have
     been submitted pursuant to the previous provisions prior to the entry into
     force of this Act.


     ADDENDUM (Act No. 5539, May 25, 1998)

This Act shall enter into force on the date of its promulgation.

<PAGE>


     ADDENDA (Act No. 5559, Sep. 16, 1998)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force two months after the date of its
     promulgation.


ARTICLES 2 THROUGH 9 Omitted.


     ADDENDA (Act No. 5591, Dec. 28, 1998)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on the date of its promulgation. (Proviso
     Omitted.)


ARTICLES 2 THROUGH 5 Omitted.


     ADDENDA (Act No. 5736, Feb. 1, 1999)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on April 1, 1999: Provided, That the
     amended
<PAGE>

     provisions of Articles 186-3, 186-5 (limited to where Article 186-5 is
     applicable quarterly business reports), 191-12 (1) and (3) (limited to
     where Article 191-12 (1) and (3) is applicable to Association-registered
     corporations), and 191-13 shall enter into force on January 1, 2000, and
     the amended provisions of Articles 3, 23, 29, 30, 33 (1), 35, 45, 48, and
     65 through 69, Section 3 (Article 69-6), Articles 70-2 (3) and (4), 73, 78,
     81, 85, 86, 94, 104, 109 through 111, 115, 117, 159, 162-2, 164, 173-2,
     173-6, 173-7, 175, 176, 178, 179, 181, 186 (1), 189, 190, 191 (1) and (5),
     and 191-12 (2) shall enter into force on the date of its promulgation.


ARTICLE 2 (APPLICABLE CASES CONCERNING IMMUNITY FROM COMPENSATION LIABILITY DUE
TO FALSE ENTRY, ETC.)

     The amended provisions of Article 14 shall apply to a registration
     statement of securities or a prospectus (including a preliminary
     prospectus) submitted after this Act enters into force.


ARTICLE 3 (APPLICABLE CASES CONCERNING DISGORGEMENT OF SHORT-TERM SALES MARGIN
OF INSIDERS)

     With respect to officers, employees or major stockholders of an
     Association-registered corporation at the time when this Act enters into
     force, the amended provisions of Article 188 (1) and (2) shall apply to the
     portion of purchase or sale effected on or after the date this Act enters
     into force. In this case, in applying the amended provisions of Article 188
     (2), the calculation of a six-month period shall be reckoned from the point
     of purchase or sale effected initially after this Act enters into force.


ARTICLE 4 (APPLICABLE CASES CONCERNING APPOINTMENT AND DISMISSAL OF AUDITORS OF
ASSOCIATION-REGISTERED CORPORATION)

<PAGE>

     The amended provisions of Article 191-11 (1) and (2) shall apply starting
     from a general meeting of stockholders to which a bill for appointing,
     dismissing or determining remuneration for an auditor is first proposed
     after this Act enters into force, and the amended provision of paragraph
     (3) of the said Article shall apply starting from the audit report first
     submitted by the auditor to directors after the entry into force of this
     Act.


ARTICLE 5 (APPLICABLE CASES CONCERNING PENALTIES)

     The amended provisions of Article 206-11 shall apply starting from the
     portion submitted, stated, announced, disclosed or reported after the entry
     into force of this Act.


ARTICLE 6 (TRANSITIONAL MEASURES ON QUALIFICATIONS AS OFFICERS OF SECURITIES
COMPANIES)

     Where an officer of a securities company who has been in office at the time
     when this Act enters into force falls under the amended provisions of
     Article 33 (2) 4 due to a cause which occurred before this Act enters into
     force, he shall, notwithstanding the said amended provisions, be governed
     by the previous provisions until his term of office expires.


ARTICLE 7 (TRANSITIONAL MEASURES ON CUSTODY AND MANAGEMENT OF CUSTOMER DEPOSIT
MONEY BY SECURITIES COMPANIES)

     A securities company (including foreign securities company's domestic
     branches) engaged only in business listed in Article 28 (2) 2 at the time
     of the entry into force of this Act which has received, had custody of, and
     managed customer deposit money, shall, notwithstanding the amended
     provisions of Article 44-2, be governed by the amended provisions of
     Article 44-3 for two years from the date of the entry into force of this
     Act.

<PAGE>

ARTICLE 8 (TRANSITIONAL MEASURES ON SECURITIES COMPANIES' TRADE NAMES)

     A trade name of a securities company engaged only in business listed in
     Article 28 (2) 2 at the time of the entry into force of this Act shall,
     notwithstanding the amended provisions of the latter part of Article 62
     (1), be governed by the previous provisions.


ARTICLE 9 (TRANSITIONAL MEASURES ON REGISTRATION OR REPORT OF INVESTMENT
ADVISORY BUSINESS, ETC.)

     A person who has registered investment advisory business with, obtained a
     license for discretionary investment business from, and reported any
     similar investment advisory business to the Minister of Finance and Economy
     pursuant to the previous provisions at the time of the entry into force of
     this Act shall be deemed to have registered with, or reported to the
     Financial Supervisory Commission under the amended provisions of Articles
     70-2, 70-8 and 70-9.


ARTICLE 10 (TRANSITIONAL MEASURES ON REGISTRATION OF TRANSFER AGENTS)

     A transfer agent who has obtained a license from the Minister of Finance
     and Economy pursuant to the previous provisions at the time of the entry
     into force of this Act shall be deemed to have registered with the Minister
     of Finance and Economy under the amended provisions of Article 180 (1).


ARTICLE 11 (TRANSITIONAL MEASURES ON SUBMISSION OF CONGLOMERATE COMBINED
FINANCIAL STATEMENTS)

     In applying the amended provisions of Article 186-2 (5), conglomerate
     combined
<PAGE>

     financial statements of a business year commencing after January 1, 1999
     shall be submitted within seven months after the end of the business year.


ARTICLE 12 (TRANSITIONAL MEASURES ON REPORT OF STATUS OF STOCKHOLDINGS)

     The officers or major stockholders of an Association-registered corporation
     which has to report the status of stockholdings pursuant to the amended
     provisions of Article 188 (6) at the time when this Act enters into force
     shall, notwithstanding the amended provisions of the said Article and
     paragraph, report the status of stockholdings to the Securities Futures
     Commission and the Association within one month from the date when this Act
     enters into force.


ARTICLE 13 (TRANSITIONAL MEASURES ON LIMIT EXCESS OF ACQUISITION OF TREASURY
STOCKS BY ASSOCIATION-REGISTERED CORPORATIONS)

     An Association-registered corporation which holds treasury stocks in excess
     of the acquisition limit under the latter part of Article 189-2 (1) at the
     time when this Act enters into force shall dispose of the excess by the
     time the money trust contract under paragraph (2) of the same Article
     terminates.


ARTICLE 14 (TRANSITIONAL MEASURES ON APPOINTMENTS OF STANDING AUDITORS OF
ASSOCIATION-REGISTERED CORPORATIONS)

     An Association-registered corporation which has to appoint full-time
     auditors pursuant to the amended provisions of Article 191-12 (1) shall
     appoint them by the first stockholders meeting after this Act enters into
     force.


ARTICLE 15 (TRANSITIONAL MEASURES ON QUALIFICATIONS FOR STANDING AUDITORS)

<PAGE>

     Qualifications for full-time auditors who are in office at the time when
     this Act enters into force shall, notwithstanding the amended provisions of
     Article 191-12 (3), be governed by the previous provisions until their
     terms of office expire.


ARTICLE 16 (TRANSITIONAL MEASURES ON PENAL PROVISIONS)

     The application of penal provisions to any act committed before this Act
     enters into force shall be governed by the previous provisions.


     ADDENDA (Act No. 5982, May 24, 1999)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on the date of its promulgation. (Proviso
     Omitted.)


ARTICLES 2 THROUGH 6 Omitted.


     ADDENDA (Act No. 6176, Jan. 21, 2000)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on April 1, 2000: Provided, That the
     amended provisions of Articles 2, 3, 54-5, 54-6, 58, 64, 160, 174-6 (5),
     189-2, 189-4, 191-9, 191-11, 191-12, 191-14, 191-16 and 191-17 shall enter
     into force on the date

<PAGE>

     of its promulgation.


ARTICLE 2 (TRANSITIONAL MEASURES CONCERNING DISQUALIFICATIONS)

     Where any officer of a securities company, an investment advisory company,
     a securities finance company or the Association falls under the
     disqualification due to the cause under the amended provisions of Article
     33 (2) (including the case in which the provisions apply mutatis mutandis
     under the provisions of Articles 70-7, 149 (2) and 169) that has occurred
     prior to the enforcement of this Act at the time of the entry into force of
     this Act, his case shall be dealt with according to the previous provisions
     notwithstanding the amended provisions.


ARTICLE 3 (TRANSITIONAL MEASURES CONCERNING EQUITY CAPITAL REGULATION RATE)

     The amended provisions of Article 54-2 shall not apply to any securities
     company falling under any of the following subparagraphs until the day
     prescribed by the Presidential Decree:

     1.A securities company that has been incorporated as a result of the
     conversion of a financial institution or a securities company that has
     merged with a financial institution in accordance with the Act on the
     Structural Improvement of the Financial Industry; and

     2.A securities company that, after having been ordered to take timely and
     corrective measures under the Act on the Structural Improvement of the
     Financial Industry, is presently implementing a plan for such measures.


ARTICLE 4 (TRANSITIONAL MEASURES CONCERNING INTERNAL CONTROL STANDARDS OF
SECURITIES COMPANY)

<PAGE>

     Any securities company shall set its internal control standards in
     accordance with the amended provisions of Article 54-4 within six months
     after the enforcement of this Act.


ARTICLE 5 (TRANSITIONAL MEASURES CONCERNING APPOINTMENTS OF OUTSIDE DIRECTORS OF
SECURITIES COMPANY)

     Any securities company that has to appoint outside directors in accordance
     with the amended provisions of Article 54-5 shall appoint such outside
     directors in accordance with such amended provisions at a regular general
     meeting of stockholders that is called for the first time after the
     enforcement of this Act. In this case, any outside director appointed at
     the regular general meeting of stockholders shall be deemed to be
     recommended by the outside director candidate recommendation committee in
     accordance with the provisions of Article 54-5 (2) and (3).


ARTICLE 6 (TRANSITIONAL MEASURES CONCERNING ESTABLISHMENT OF INSPECTION
COMMITTEE OF SECURITIES COMPANY)

     Any securities company that has to establish an inspection committee in
     accordance with the amended provisions of Article 54-6 shall establish such
     inspection committee at a regular general meeting of stockholders that is
     called for the first time after the enforcement of this Act.


ARTICLE 7 (TRANSITIONAL MEASURES CONCERNING STOCK OPTION GRANTING CORPORATION)

     Any corporation that grants its officers and employees the stock option
     under the previous provisions at the time of the entry into force of this
     Act shall be deemed to grant them such stock option in accordance with the
     amended provisions of Article 189-4.

<PAGE>


ARTICLE 8 (TRANSITIONAL MEASURES CONCERNING APPOINTMENTS OF OUTSIDE DIRECTORS OF
STOCK-LISTED CORPORATION)


     (1) Any stock-listed corporation that has to appoint outside directors in
     accordance with the amended provisions of Article 191-16 shall appoint such
     outside directors in accordance with such amended provisions at a regular
     general meeting of stockholders that is called for the first time after the
     enforcement of this Act. In this case, any person appointed as an outside
     director at the regular general meeting of stockholders shall be deemed to
     be recommended by the outside director candidate recommendation committee
     in accordance with the provisions of Article 54-5 (2) and (3) that are
     applied mutatis mutandis by the amended provisions of Article 191-16 (3).

     (2) Any stock-listed corporation under the provisions of the proviso of
     Article 191-16 (1) shall, notwithstanding the amended provisions of the
     same Article, increase the number of outside directors to 3 or more prior
     to a regular general meeting of stockholders that is called for the first
     time after the end of the 2000 business year, but may make the number of
     outside directors less than half of the total number of directors on the
     board of directors.

     (3) Any outside director who holds office at a stock-listed corporation at
     the time that this Act is enforced shall be deemed to be an outside
     director appointed under this Act until his term of office expires.


ARTICLE 9 (TRANSITIONAL MEASURES CONCERNING ESTABLISHMENT OF INSPECTION
COMMITTEE OF STOCK-LISTED CORPORATION)

     Any stock-listed corporation that has to establish an inspection committee
     in accordance with the amended provisions of Article 191-17 shall establish
     such

<PAGE>

     inspection committee in accordance with the amended provisions at a regular
     general meeting of stockholders that is called for the first time after the
     enforcement of this Act.


ARTICLE 10 (TRANSITIONAL MEASURES CONCERNING STANDING AUDITOR FOLLOWING
ESTABLISHMENT OF INSPECTION COMMITTEE OF STOCK-LISTED CORPORATION)

     With respect to any standing auditor (in case that there are not less than
     two standing auditors, one standing auditor designated by the board of
     directors of a stock-listed corporation out of such not less than two
     standing auditors) who holds office at a stock-listed corporation that has
     to establish an inspection committee in accordance with the amended
     provisions of Article 191-17 at the time of the entry into force of this
     Act, where his term of office does not expire by the date on which a
     regular general meeting of stockholders is called to establish an
     inspection committee in accordance with the provisions of Article 9 of the
     Addenda and he is not dismissed at such regular general meeting of
     stockholders, he shall be deemed not an outside director but a member of
     the inspection committee until his term of office expires. In this case,
     such standing auditor shall be deemed a director appointed at a general
     meeting of stockholders in accordance with the provisions of Article 382
     (1) of the Commercial Act until his term of office expires.


     ADDENDA (Act No. 6423, Mar. 28, 2001)


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on April 1, 2001: Provided, That the
     amended provisions of Articles 2 (19), 54-5 (3), 54-6 (2) and (6), 64,
     172-4, 186 (1), 189-4, 191-13, 191-17 (2), 191-18, and 192 (2) shall enter
     into force on the date of its promulgation and the amended provisions of
     Article 2 (18) shall enter into force on

<PAGE>

     the date prescribed by the Presidential Decree.


ARTICLE 2 (APPLICABLE CASES FOR DISPOSITION RIGHT OF FINANCIAL SUPERVISORY
COMMISSION)

     The amended provisions of subparagraph 1 of Article 20 shall apply starting
     with the portion of any registration statement or any after-report
     submitted first after the enforcement of this Act.


ARTICLE 3 (APPLICABLE CASES FOR QUALIFICATIONS FOR COMPLIANCE OFFICER OF
SECURITIES COMPANY)

     The amended provisons of Article 54-4 (4) shall apply starting with the
     portion of the compliance officer selected and appointed first after the
     enforcement of this Act.


ARTICLE 4 (APPLICABLE CASES FOR SELECTION OF CHAIRMAN OF INSPECTION COMMITTEE OF
MAJOR STOCK-LISTED CORPORATION)

     In the event that the chairman of the inspection committee of any
     stock-listed corporation or any Association-registered corporation that is
     required to set up an inspection committee at the time that this Act enters
     into force is not an outside director, such stock-listed corporation or
     such Association-registered corporation shall select and appoint a chairman
     who is an outside director in compliance with the amended provisions of
     Article 54-6 (2) (including a case where the provisions are applied mutatis
     mutandis in Article 191-17 (2)) not later than three months after this Act
     takes effect.


ARTICLE 5 (APPLICABLE CASES FOR RECOMMENDATION OF CANDIDATES FOR PUBLIC INTEREST
DIRECTOR OF STOCK EXCHANGE)

<PAGE>

     The amended provisions of Article 78 (4) shall apply starting with the
     portion of a director representing the public interest selected and
     appointed first after the enforcement of this Act.


ARTICLE 6 (APPLICABLE CASES FOR GRANTING OF STOCK OPTION)

     The amended provisions of Article 189-4 (3) and (4) shall apply starting
     with the portion of the stock option granted first after the enforcement of
     this Act.


ARTICLE 7 (APPLICABLE CASES FOR APPRAISAL RIGHTS OF STOCKHOLDERS OF
ASSOCIATION-REGISTERED CORPORATION)

     The amended provisions of Article 191 shall apply starting with the portion
     of a resolution adopted first by the board of directors after the
     enforcement of this Act.


ARTICLE 8 (APPLICABLE CASES FOR IMPOSITION OF PENALTIES)

     The amended provisions of Article 206-11 shall apply starting with the
     portion of the submission, statement, public notice, disclosure, or report
     made first after the enforcement of this Act.


ARTICLE 9 (TRANSITIONAL MEASURE CONCERNING LICENSE OF SECURITIES BUSINESS)

     Any person who is licensed with his securities business under the previous
     provisions of Article 2 (8) 3 at the time that this Act enters into force
     shall be deemed licensed with his securities business under the amended
     provisions of Article 2 (8) 3.

<PAGE>

ARTICLE 10 (TRANSITIONAL MEASURE CONCERNING TENDER OFFER OF SECURITIES)


     (1) In the event that a tender offer statement is filed under the previous
     provisions of Article 21-2 prior to the enforcement of this Act,
     notwithstanding the amended provisions of Articles 21, 21-2, 21-3, 22, 23
     and 23-2, such tender offer statement shall be governed by the previous
     provisions.

     (2) With respect to a registration statement, etc. filed with the Financial
     Supervisory Commission, etc. under the previous provisions of Article 26
     prior to the enforcement of this Act, notwithstanding the amended
     provisions of Article 26, such registration statement, etc. shall be
     governed by the previous provisions.


ARTICLE 11 (TRANSITIONAL MEASURE CONCERNING RESTRICTIONS ON DIRECTORS HOLDING
CONCURRENT OFFICES)

     With respect to prohibiting any standing officer of a securities company,
     who is engaged in the regular business of a corporation that is not a
     company from holding any concurrent office under the previous provisions at
     the time that this Act enters into force, notwithstanding the amended
     provisions of Article 48, he shall be governed by the previous provisions
     until his term of office expires.


ARTICLE 12 (TRANSITIONAL MEASURE CONCERNING TRADE NAME OF SECURITIES COMPANY)

     With respect to any securities company that uses a trade name under the
     previous provisions at the time that this Act enters into force,
     notwithstanding the amended provisions of Article 62 (1), the use of such
     trade name by such securities company shall be governed by the previous
     provisions.


ARTICLE 13 (TRANSITIONAL MEASURE CONCERNING MANAGING DIRECTOR AND STANDING
DIRECTOR OF
<PAGE>
STOCK EXCHANGE)


     (1) Any person who works for the Stock Exchange as a managing director at
     the time that this Act enters into force shall be deemed appointed as vice
     chief director of the Stock Exchange under the amended provisions of
     Article 78 (1) 2 and (3) until his term of office expires.

     (2) Any person who works for the Stock Exchange as a standing director at
     the time that this Act enters into force shall be deemed an executive
     officer under the amended provisions of Article 74 (1) 5 until his term of
     office expires.


ARTICLE 14 (TRANSITIONAL MEASURE CONCERNING ASSOCIATION BROKERAGE MARKET
OPERATION COMMITTEE AND ITS MEMBERS)


     (1) The Committee on the Operation of Association Brokerage Market, which
     is established in accordance with the regulations on the operation of the
     previous Association brokerage market at the time that this Act enters into
     force, shall be deemed the Association Brokerage Market Operation Committee
     established pursuant to the amended provisions of Article 172-2 (2).

     (2) Members of the committee that is deemed the Association Brokerage
     Market Operation Committee under paragraph (1) shall be deemed members of
     the Association Brokerage Market Operation Committee established under the
     amended provisions of Article 172-2 (2) until their terms of office expire.


ARTICLE 15 (TRANSITIONAL MEASURE CONCERNING REGULATIONS ON OPERATION OF
ASSOCIATION BROKERAGE MARKET)

     The regulations made on the operation of Association brokerage market at
     the time
<PAGE>

     that this Act enters into force shall be deemed to be in conformity with
     the amended provisions of Article 172-3 within the limit of 6 months from
     the date on which this Act enters into force, until new regulations are
     made under the amended provisions of Article 172-3.


ARTICLE 16 (TRANSITIONAL MEASURES CONCERNING RETIREMENT OF STOCKS)

     Any treasury stocks held by any stock-listed corporation or any
     Association-registered corporation after having acquired them under Article
     189-2 at the time that this Act enters into force may be retired under the
     amended provisions of Article 189 (1). In this case, the requirements
     falling under each of the following subparagraphs shall be satisfied and
     Article 189 (4) and (5) shall be applied thereto:

     1.It is required to file a report thereon with the Financial Supervisory
     Commission, the Stock Exchange or the Association under Article 189-2 (3).
     In this case, in the application of the same paragraph of the same Article,
     the Financial Supervisory Commission may set separate standards;

     2.It is required to go through a resolution of the board of directors with
     respect to kinds and total numbers of stocks to be retired, the total value
     of stocks to be retired and the date on which it is intended to retire such
     stocks;

     3.The total value of the stocks to be retired is required to be within the
     limit provided for in Article 189 (3) 2; and

     4.The stocks to be retired are required to be in the lapse of 6 months from
     the date on which they are acquired.


ARTICLE 17 (TRANSITIONAL MEASURES CONCERNING SELECTION AND APPOINTMENT OF
OUTSIDE DIRECTORS OF ASSOCIATION-REGISTERED CORPORATION)

<PAGE>


     (1) Any Association-registered corporation that is required to select and
     appoint outside directors under the amended provisons of the main sentence
     of Article 191-16 (1) shall select and appoint such outside directors under
     the amended provisions at a regular general meeting of stockholders called
     for the first time after the enforcement of this Act. In this case,
     notwithstanding the amended provisions of the main sentence of the same
     paragraph of the same Article, the relevant Association-registered
     corporation shall increase the number of outside directors to not less than
     one prior to a regular general meeting of stockholders called for the first
     time after the end of the 2001 business year, but the number of the outside
     directors may be less than a quarter of the total number of directors on
     the board of directors.

     (2) Any Association-registered corporation that is required to select and
     appoint outside directors under the amended provisions of the proviso of
     Article 191-16 (1) shall select and appoint such outside directors under
     the same amended provisions at a regular general meeting of stockholders
     called for the first time after the enforcement of this Act. In this case,
     notwithstanding the amended provisions, the relevant Association-registered
     corporation shall make the number of outside directors not less than three
     prior to a regular general meeting of stockholders called for the first
     time after the end of the 2001 business year, but may make the number of
     the outside directors less than a half of the total number of directors on
     the board of directors. Any person who is selected and appointed as an
     outside director at a regular general meeting of stockholders called for
     the first time after the enforcement of this Act shall be deemed
     recommended by the outside director candidate recommendation committee.


ARTICLE 18 (TRANSITIONAL MEASURE CONCERNING ESTABLISHMENT OF INSPECTION
COMMITTEE OF ASSOCIATION-REGISTRATION CORPORATION)

     Any Association-registered corporation that is required to set up an
     inspection committee under the amended provisions of Article 191-17 shall
     establish such inspection committee under the same amended provisions by
     the date on which a
<PAGE>

     regular general meeting of stockholders is called for the first time after
     the enforcement of this Act.


ARTICLE 19 (TRANSITIONAL MEASURE CONCERNING STANDING AUDITOR FOLLOWING
ESTABLISHMENT OF INSPECTION COMMITTEE OF ASSOCIATION-REGISTERED CORPORATION)

     In the event the term of office of any standing auditor (referring to a
     standing auditor designated by the board of directors of the relevant
     company in the event of not less than two standing auditors) who serves in
     an Association-registered corporation that is required to set up an
     inspection committee under the amended provisions of Article 191-17 at the
     time of entry into force of this Act does not expire by the date on which a
     regular general meeting of stockholders is called to discuss the question
     of establishing an inspection committee under the provisions of Article 16
     of the Addenda and he is not dismissed at such regular general meeting of
     stockholders, such standing auditor shall be deemed a member, who is not an
     outside director, of the inspection committee of the relevant corporation
     until his term of office expires. In this case, the standing auditor shall
     be deemed a director selected and appointed at a general meeting of
     stockholders under Article 382 (1) of the Commercial Act until the time
     that his term of office expires.


ARTICLE 20 (TRANSITIONAL MEASURE CONCERNING PENAL PROVISIONS)

     The application of the penal provisions to any act committed prior to the
     enforcement of this Act shall be governed by the previous provisions.


     ADDENDA (Act No. 6623, Jan. 26, 2002)

     (1) (Enforcement Date) This Act shall enter into force on February 1, 2002.

<PAGE>

     (2) (Applicable Cases concerning Appraisal Rights of Stockholders) The
     amended provisions of Article 191 shall apply with respect to the public
     notice or notification which is made for the convocation of the general
     meeting of stockholders or which is made under Article 360-9 (2) or 527-2
     (2) of the Commercial Act on or after the date this Act takes effect.

     (3) (Transitional Measures concerning Reserve for Securities Transaction)
     The reserve for securities transaction set aside by a securities company in
     accordance with the previous provisions of Article 40 at the time of the
     entry into force of this Act shall be distributed proportionally over a
     fixed period as set and publicly announced by the Financial Supervisory
     Commission.

     (4) (Transitional Measures concerning Fine for Negligence) The application
     of a fine for negligence to any act committed prior to the enforcement of
     this Act shall be governed by the previous provisions.


     ADDENDA (Act No. 6695, Apr. 27, 2002)

     (1) (Enforcement Date) This Act shall enter into force on the date of its
     promulgation.

     (2) (Transitional Measures concerning Application of Penal Provisions) The
     imposition of a penalty on any act committed prior to the enforcement of
     this Act shall be governed by the previous provisions.









</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.6
<SEQUENCE>16
<FILENAME>u98617exv12w6.txt
<DESCRIPTION>EX-12.6 KOREAN TRUST BUSINESS ACT
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                                                    Exhibit 12.6



TRUST BUSINESS ACT


- --------------------------------------------------------------------------------

<TABLE>
<S>                            <C>                   <C>
                               1961.12.31            Act No. 945

        Amended By             1968.12.31            Act No. 2064

        Amended By             1998.1.13             Act No. 5502

        Amended By             1999.1.29             Act No. 5700

        Amended By             1999.5.24             Act No. 5982

        Amended By             2000.1.21             Act No. 6180
</TABLE>


     CHAPTER I GENERAL PROVISIONS


ARTICLE 1 (PURPOSE)

     The purpose of this Act is to serve to develop the national economy through
     the sound management of trust companies and the protection of
     beneficiaries.
     [This Article Wholly Amended by Act No. 6180, Jan. 21, 2000]


ARTICLE 1-2 (DEFINITION)

     The term "trust business" in this Act means performing the business of
     trust in accordance with the provisions of Article 1 (2) of the Trust Act.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 2 (OPERATION OF TRUST COMPANY)

     The companies that are engaged in the trust business (hereinafter referred
     to as the "trust company") in Korea shall be operated in accordance with
     this Act and orders issued thereunder. < Amended by Act No. 2064, Dec. 31,
     1968; Act No. 5502, Jan. 13, 1998 >
<PAGE>
ARTICLE 3 (BUSINESS AUTHORIZATION)


     (1) The trust business shall not be conducted without obtaining
     authorization from the Financial Supervisory Commission. < Amended by Act
     No. 5502, Jan. 13, 1998; Act No. 5700, Jan. 29, 1999; Act No. 5982, May 24,
     1999 >

     (2) A person who intends to receive authorization under paragraph (1) shall
     secure the capital according to the classification falling under any of the
     following subparagraphs: < Newly Inserted by Act No. 5700, Jan. 29, 1999 >

     1.25 billion won or more in case of an accepting trust of money; and

     2.10 billion won or more in case of an accepting trust of properties other
     than money.

     (3) Any person who intends to obtain authorization under paragraph (1)
     shall file an application with the Financial Supervisory Commission under
     the conditions as prescribed by the Presidential Decree. < Amended by Act
     No. 6180, Jan. 21, 2000 >

     (4) The Financial Supervisory Commission may attach conditions to the
     authorization under paragraph (1). < Newly Inserted Act No. 6180, Jan. 21,
     2000 >


ARTICLE 3-2 (PUBLIC ANNOUNCEMENT OF AUTHORIZATION, ETC.)

     The Financial Supervisory Commission shall, when it grants authorization
     under the provisions of Article 3 (1) or 29-4 (1), or revokes authorization
     under the provisions of Article 29-2 or 29-6 (1), announce publicly without
     delay its content in the Official Gazette, and make it known to the public
     by making use of computer communications, etc.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]
<PAGE>
ARTICLE 3-3 (REQUIREMENTS FOR AUTHORIZATION)

     (1) Any person who intends to obtain authorization under the provisions of
     Article 3 (1) shall meet the requirements falling under each of the
     following subparagraphs:

     1.He shall be able to protect beneficiaries, and is equipped with manpower
     and physical facilities such as computer equipments, that are enough to
     perform the intended trust business;

     2.His business plan shall be proper and sound;

     3.Plans for a separate management between the trust division and the
     inherent division and for a separate management among the trust commodities
     shall be appropriate; and

     4.Major investors as prescribed by the Presidential Decree shall possess
     the ample ability to make investments, the sound financial standings and
     the social credits.

     (2) Necessary matters concerning detailed requirements for authorization
     under paragraph (1) shall be prescribed by the Presidential Decree.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 4

     Deleted. < by Act No. 5700, Jan. 29, 1999 >


ARTICLE 5

     Deleted. < by Act No. 2064, Dec. 31, 1968 >


ARTICLE 6 (INVALIDATION OF AUTHORIZATION)
<PAGE>
     (1) Where a trust company fails to commence its business within six months
     from the date of authorization granted under Article 3, the authorization
     thereof shall become invalidated.

     (2) The Financial Supervisory Commission may, in case where deemed that
     there exist justifiable reasons, extend, upon application, the period under
     paragraph (1). < Amended by Act No. 5502, Jan. 13, 1998; Act No. 5700, Jan.
     29, 1999; Act No. 5982, May 24, 1999 >


ARTICLE 7 (CORPORATE NAME)

     (1) A trust company shall use the letter of "trust" in its corporate name.
     < Amended by Act No. 2064, Dec. 31, 1968; Act No. 6180, Jan. 21, 2000 >

     (2) No person other than a trust company shall use in its corporate name
     any letters indicating that the person is engaged in the trust business:
     Provided, That this shall not apply to persons engaged in the trust
     business concerning secured debentures. < Amended by Act No. 2064, Dec. 31,
     1968 >


ARTICLE 8 (MATTERS FOR AUTHORIZATION)

     (1) Where a trust company intends to merge or dissolve, or suspend its
     trust business, it shall obtain authorization from the Financial
     Supervisory Commission under the conditions as prescribed by the
     Presidential Decree. < Amended by Act No. 5700, Jan. 29, 1999; Act No.
     5982, May 24, 1999; Act No. 6180, Jan. 21, 2000 >

     (2) Where a trust company has modified the articles of incorporation or the
     type or method of business, it shall file a report thereof with the
     Financial Supervisory Commission. In this case, the Financial Supervisory
     Commission
<PAGE>
     may, in case where it deems that the reported contents are in contravention
     of the Acts and subordinate statutes on trust business and the sound order
     of transactions in the trust business, demand the relevant trust company to
     change the contents. < Amended by Act No. 5700, Jan. 29, 1999; Act No.
     6180, Jan. 21, 2000 >

     (3) The Financial Supervisory Commission may determine the standards and
     procedures for the establishment or closure of branch offices, agencies and
     other business places or offices of a trust company, and the relocation of
     the head office, branch offices, agencies and other business places or
     offices, under the conditions as prescribed by the Presidential Decree.
     [This Article Wholly Amended by Act No. 5502. Jan. 13, 1998]


ARTICLE 8-2 (QUALIFICATIONS FOR OFFICERS)

     Any person falling under any of the following subparagraphs shall not
     become an officer of the trust company, and when he becomes to fall
     thereunder after he has become one, he shall lose the relevant office:

     1.A minor, a person of incompetency or of quasi-incompetency;

     2.A person who has yet to be reinstated after having been declared
     bankrupt;

     3.A person who has been sentenced to imprisonment without prison labor or
     heavier one, and for whom 5 years have yet elapsed from the date when the
     execution of such sentence was terminated (including the case where the
     said execution is deemed to be terminated) or the said execution is
     exempted;

     4.A person who has been sentenced to a fine or heavier one for committing a
     violation of the finance-related Acts and subordinate statutes as
     prescribed by the Presidential Decree, and for whom 5 years have yet
     elapsed from the date on which the execution of such sentence is terminated
     (including the case where the said execution is deemed to be terminated) or
     the said execution is exempted;
<PAGE>
     5.A person who is in the period of stay of execution after having been
     sentenced to a stay of imprisonment without labor or heavier one;

     6.A person who has been dismissed or removed by a disciplinary action under
     this Act or the finance-related Acts and subordinate statutes as prescribed
     by the Presidential Decree, and for whom 5 years have yet elapsed after he
     was dismissed or removed by a disciplinary action; and

     7.A person who was an officer or employee of a corporation or a company
     whose license and authorization of business have been cancelled under this
     Act or the finance-related Acts and subordinate statutes as prescribed by
     the Presidential Decree (limited to any person prescribed by the
     Presidential Decree, who has been directly and correspondingly responsible
     for the occurrence of the relevant causes for such cancellation), and for
     whom five years have yet elapsed from the date on which the revocation for
     the relevant corporation or company was made.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


     CHAPTER II BUSINESS

ARTICLE 9 (SCOPE OF BUSINESS)

     (1) A trust company may conduct, within the scope of this Act and other
     related Acts, the business concerning the acceptance of trust and the
     management, operation and disposition of trusted properties. < Amended by
     Act No. 2064, Dec. 31, 1968; Act No. 5502, Jan. 13, 1998 >

     (2) Deleted. < by Act No. 5502, Jan. 13, 1998 >


ARTICLE 10 (LIMITATION ON TRUSTED PROPERTIES)
<PAGE>
     (1) A trust company shall not accept the trust of any property other than
     those mentioned below:

     1.Money;

     2.Securities;

     3.Monetary claims;

     4.Movables;

     5.Land, and fixtures thereto; and

     6.Surface rights, chonsegwon (registered lease on a deposit basis), and
     lease of land.

     (2) The Financial Supervisory Commission may set forth the standards
     necessary for the types of trust, the replenishment of principal or
     interests, and other conditions for trust transactions, with respect to
     accepting the trust of properties falling under each subparagraph of
     paragraph (1), under the conditions as prescribed by the Presidential
     Decree. < Newly Inserted by Act No. 5502, Jan. 13, 1998 >


ARTICLE 11

     Deleted. < by Act No. 5502, Jan. 13, 1998 >


ARTICLE 12 (DISTINCTION BETWEEN TRUST PROPERTY AND TRUSTEE'S OWN PROPERTY)

     (1) The provisions of the proviso to Article 31 (1) of the Trust Act shall
     not apply to trust companies.

     (2) If, in the case of money trusts, the property acquired by its
     management is subject to quotations at the securities market, association
     brokerage market or
<PAGE>
     markets in foreign country similar to those under Securities and Exchange
     Act, the trust company may convert it into its own property in compliance
     with what is prescribed by the act of trust, only in cases where it is
     necessary for performing its obligations which it owes to the beneficiary
     by virtue of the act of trust. < Amended by Act No. 6180, Jan. 21, 2000 >


ARTICLE 12-2 (ACCOUNTING AUDIT OF TRUST PROPERTIES)

     (1) Any trust company shall undergo an accounting audit of each trust
     property by an auditor under Article 3 (1) of the Act on External Audit of
     Stock Companies (hereinafter referred to as the "auditor"): Provided, That
     the same shall not apply to the case prescribed by the Presidential Decree.

     (2) The Financial Supervisory Commission may, in case where deemed
     necessary for the protection of public interests or the investors, order
     the auditor to furnish the data or file a report related to an accounting
     audit of trust property, and take other necessary dispositions.

     (3) The provisions of Article 9 of the Act on External Audit of Stock
     Companies shall apply mutatis mutandis to an accounting audit of the trust
     property under paragraph (1).

     (4) Matters necessary for an appointment of auditor, the standards for
     audit, the power of auditor, the criteria for accounting settlements, the
     submission of audit report and the public announcements, etc. shall be
     prescribed by the Presidential Decree.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 12-3 (AUDITOR'S LIABILITY FOR COMPENSATION FOR DAMAGES)

     (1) Any auditor shall, where he fails to enter important matters as a
     result of the accounting audit under Article 12-2 (1) on his audit report
     or makes false
<PAGE>
     entries, whereby causing damages to any beneficiary who has made use of
     such report, be held liable to compensate for such damages to the relevant
     beneficiary. In this case, where an audit team is the auditor, any person
     participating in the audit of relevant trust property shall be held jointly
     liable to compensate for such damages.

     (2) Where an auditor is liable to compensate for damages to a beneficiary
     of trust property, if any director or auditor of the relevant trust company
     (referring to any member of the Audit Committee, if such Committee is set
     up; hereafter the same shall apply in this paragraph) is also responsible,
     such auditor and director or auditor shall be held jointly liable to
     compensate for such damages.

     (3) The provisions of Article 17 (5) through (7) of the Act on External
     Audit of Stock Companies shall apply mutatis mutandis to the case of
     paragraphs (1) and (2).
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 13 (INCIDENTAL BUSINESS)


     (1) A trust company may operate only the business falling under any of the
     following subparagraphs which are incidental to the trust business:
     < Amended by Act No. 2064, Dec. 31, 1968 >

     1.Receiving deposits for safe custody;

     2.Providing guarantees for debts;

     3.Acting as intermediary in the transactions of real estates;

     4.Acting as intermediary in the loan of money or the lease of real estates;

     5.Flotation of public bonds, corporate debentures or stocks, receiving
     subscription money thereof, or handling of the payment of principal and
     dividends thereof;
<PAGE>
     6.Executing a will with respect to properties;

     7.Inspecting the accounts; and

     8.Acting as an agent for the following matters:

     (a) Acquisition, management, disposition or lease of properties;

     (b) Adjustment or liquidation of assets;

     (c) Collection of claims;

     (d) Performance of obligations; and

     (e) Insurance.

     (2) The Financial Supervisory Commission may prescribe necessary
     restrictions on the guarantee of debts. < Amended by Act No. 5502, Jan. 13,
     1998 >


ARTICLE 14

     Deleted. < by Act No. 2064, Dec. 31, 1968 >


ARTICLE 15 (RESTRICTION ON OPERATION OF TRUSTEE'S OWN FUND)

     (1) A trust company shall not operate the trustee's own fund except in the
     following ways: < Amended by Act No. 2064, Dec. 31, 1968; Act No. 5502,
     Jan. 13, 1998; Act No. 6180, Jan. 21, 2000 >

     1.Subscription, underwriting or purchase of public bonds, corporate
     debentures and stocks;

     2.Loans secured by the securities listed in subparagraph 1;
<PAGE>
     3.Loans secured by the movables;

     4.Purchases of real estates;

     5.Loans secured by real estates or by a foundation established by the Acts
     and subordinate statutes;

     6.Loans to public organizations;

     7.Deposits in financial institutions prescribed by the Presidential Decree
     or postal savings; and

     8.Purchase of bills accepted by banks or trust companies.

     (2) The Financial Supervisory Commission may, in case where deemed
     necessary, prescribe the type of corporate debentures, stocks, and movables
     under paragraph (1). < Amended by Act No. 5700, Jan. 29, 1999 >

     (3) The aggregate of a purchase price of real estates under paragraph (1) 4
     shall not exceed the total sum of paid-in capital and reserves. < Amended
     by Act No. 2064, Dec. 31, 1968 >


ARTICLE 15-2 (RESTRICTION ON OPERATION OF TRUST FUND)

     (1) A trust company may operate the money belonging to the trust property
     only by the methods falling under any of the following subparagraphs:

     1.Subscribing for, accepting or purchasing the government bonds, public
     bonds, corporate debentures or stocks, and other securities;

     2.Loans; and

     3.Other methods as prescribed by the Presidential Decree.
<PAGE>
     (2) The specific scope for operating methods under paragraph (1) 1 and 2
     shall be prescribed by the Presidential Decree.

     (3) The Financial Supervisory Commission may, in case where deemed
     necessary for the protection of truster and the maintenance of order for
     sound trust transactions, set forth the standards for the objects,
     conditions and scopes, etc. of operating the trust fund under paragraph
     (1), under the conditions as prescribed by the Presidential Decree.
     [This Article Wholly Amended by Act No. 5502, Jan. 13, 1998]


ARTICLE 15-3 (OPERATION OF SURPLUS FUND)

     Any trust company shall operate any surplus fund arising from the business
     of real estate trust in a manner falling under any of the following
     subparagraphs:

     1.Deposits in financial institutions prescribed by the Presidential Decree;

     2.Acceptance or purchase of the government or public bonds;

     3.Acceptance or purchase of the securities for which the Government or
     financial institutions have given a payment guarantee; and

     4.Other manners prescribed by the Presidential Decree.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 16 (DUTY TO DEPOSIT)

     (1) Trust companies shall, under the conditions as determined by the
     Financial Supervisory Commission, deposit cash or the government bonds
     equivalent to the amount of not less than 1/10 of the paid-in capital as
     security against damages to be incurred upon the beneficiaries due to a
     breach of trust duties. < Amended by Act No. 5502, Jan. 13, 1998 >
<PAGE>
     (2) The amount in excess of 3/5 of the deposit funds under paragraph (1)
     may be substituted by the securities under Article 15 (1) 1 in lieu of the
     government bonds. < Amended by Act No. 5502, Jan. 13, 1998 >


ARTICLE 17 (PREFERENCE OF BENEFICIARIES)

     The beneficiaries shall have the rights to receive the repayment in
     preference to other creditors with respect to the cash, government bonds
     and securities which are deposited by the trust company under Article 16.
     < Amended by Act No. 5502, Jan. 13, 1998 >


ARTICLE 17-2 (ISSUANCE OF BENEFICIARY CERTIFICATE)

     (1) A trust company may issue the beneficiary certificates indicating the
     right to benefit by the money trust contract.

     (2) On issuance of the beneficiary certificates, the authorization from the
     Financial Supervisory Commission shall be obtained in advance. < Amended by
     Act No. 5502, Jan. 13, 1998 >

     (3) Beneficiary certificates shall be bearer certificates: Provided, That
     this shall not apply if a beneficiary demands otherwise.

     (4) Beneficiary certificates in the non-bearer certificates shall be
     converted into bearer certificates by the request of beneficiaries.
     [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968]


ARTICLE 17-3 (PARTICULARS TO BE ENTERED ON BENEFICIARY CERTIFICATE)

     Each beneficiary certificate shall contain a mark, a serial number and a
     provision for trust, and the particulars falling under the followings, and
     shall be signed and
<PAGE>
     sealed by the representative director of the trust company: < Amended by
     Act No. 5502, Jan. 13, 1998 >

     1.Corporate name of the trustee;

     2.Name or title of the beneficiary in a case of non-bearer certificate;

     3.Face value;

     4.Contents of operational manners, if they are set forth;

     5.Contents of a contract for replenishment of principal or interests under
     Article 10 (2), if it is concluded;

     6.Period of a trust contract;

     7.Period and place of repayment of the principal of trust and of allocation
     of incomes;

     8.Calculating method of the remuneration for trust; and

     9.Other matters as prescribed by the Presidential Decree.
     [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968]


ARTICLE 17-4 (TRANSFER AND EXERCISE OF RIGHT TO BENEFIT)

     In case where the beneficiary certificates have been issued, the transfer
     and exercise of the right to benefit under the relevant trust contract
     shall be performed only by such certificates: Provided, That this shall not
     apply to a case where the certificates are of a non-bearer form.
     [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968]


ARTICLE 17-5 (SUCCESSION TO RIGHTS AND OBLIGATIONS OF TRUSTER)
<PAGE>
     A person acquiring the beneficiary certificates shall succeed to the rights
     and obligations with respect to the relevant beneficiary certificates.
     [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968]


ARTICLE 17-6 (PURCHASE OF BENEFIT CERTIFICATES)

     A trust company may purchase the beneficiary certificates as the trustee's
     own property under the conditions as determined by the Financial
     Supervisory Commission. In this case, the provisions of Article 29 of the
     Trust Act shall not be applied thereto. < Amended by Act No. 5502, Jan. 13,
     1998 >
     [This Article Newly Inserted by Act No. 2064, Dec. 31, 1968]


ARTICLE 17-7 (EXERCISE OF RIGHTS OVER STOCKS ACQUIRED FROM TRUST PROPERTY)

     (1) Any rights over the stocks acquired from trust property shall be
     exercised by the trust company concerned.

     (2) Any trust company shall, where it exercises the rights over the stocks
     under paragraph (1), exercise them in good faith for the interest of
     beneficiaries.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 17-8 (RESTRICTIONS ON EXERCISE OF VOTING RIGHTS ON TRUST PROPERTY)

     (1) Any trust company shall, where it falls under any of the following
     subparagraphs, exercise its voting rights, notwithstanding the provisions
     of Article 17-7 (1), in a manner not affecting the content of a resolution
     made by the number of stocks arrived at by a deduction of the number of
     stocks forming a trust property from the number of stocks participating in
     a general meeting of shareholders of a corporation that has issued the
     stocks forming a trust property: Provided, That the same shall not apply to
     the case where a corporation that has issued the stocks forming a trust
     property is obviously
<PAGE>
     expected to incur a loss to such trust property due to a merger, a transfer
     or takeover of business, the appointment of officers and other matters
     corresponding thereto:

     1.Where a person falling under any of the following items aims at
     incorporating a corporation which has issued the stocks forming the
     relevant trust property into an affiliated company under subparagraph 3 of
     Article 2 of the Monopoly Regulation and Fair Trade Act (hereinafter
     referred to "affiliated company"):

     (a) A trust company, or a person in a special relation as prescribed by the
     Presidential Decree with it; and

     (b) A person prescribed by the Presidential Decree who exercises the de
     facto power of controlling a trust company;

     2.Where a corporation that has issued the stocks forming a trust property
     is in a relation falling under each of the following items with the
     relevant trust company: and

     (a) Where it is in a relation of an affiliate; and

     (b) Where it is in a relation as prescribed by the Presidential Decree,
     which exercises the de facto power of controlling the trust company;

     3.Where there exist some concerns about inflicting harms to the protection
     of beneficiaries or the proper operation of trust properties, and which is
     prescribed by the Presidential Decree.

     (2) Any trust company shall, where the stocks forming a trust property come
     to fall under any of the following subparagraphs, not be allowed to
     exercise the voting rights with respect to the relevant stocks:

     1.Where it has acquired the stocks in excess of 15/100 of the total sum of
     stocks issued by the same stock company, the relevant stocks in excess; and

     2.Where a corporation which has issued the stocks forming a trust property
     has
<PAGE>
     a trust company acquire under a trust contract in order to secure its own
     stocks, the stocks of a relevant corporation.

     (3) A trust company shall not commit an act for the purpose of being
     acquitted of the application of the provisions of paragraph (1) and (2),
     such as a cross-exercise of voting rights under a contract, etc. with a
     third party.

     (4) The Financial Supervisory Commission may, where a trust company
     exercises the voting rights with respect to the stocks forming a trust
     property in contravention of paragraphs (1) through (3), order a
     disposition of the relevant stocks.

     (5) The provision of the proviso of paragraph (1) shall not apply to any
     trust company belonging to a large-scale business group under Article 9 (1)
     of the Monopoly Regulation and Fair Trade Act.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 17-9 (PUBLIC ANNOUNCEMENT CONCERNING EXERCISE OF VOTING RIGHTS)

     Any trust company shall, where it exercises the voting rights under Article
     17-7 (1) on the matters related to a change of the management right such as
     a merger, a transfer or takeover of business and the appointment of
     officers, etc., make a public announcement thereof under the conditions as
     determined by the Financial Supervisory Commission.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 17-10 (BOOKS AND DOCUMENTS CONCERNING TRUST PROPERTY, ETC.)

     (1) A beneficiary may request a trust company for a perusal of books and
     documents pertaining to a trust property related with him, or for a
     delivery of their certified copies or abridged copies during business
     hours, and a trust company shall not refuse such a request without
     justifiable reasons.
<PAGE>
     (2) Matters necessary for the scope of books and documents subject to a
     perusal or a delivery of the certified copies or abridged copies under
     paragraph (1) shall be determined by the Financial Supervisory Commission.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


     CHAPTER III ACCOUNTING

ARTICLE 18 (BUSINESS YEAR)

     The business year of trust companies shall be as determined by the articles
     of incorporation.


ARTICLE 19 (OBLIGATION TO SUBMIT REPORTS)

     Trust companies shall submit monthly and annual business reports to the
     Financial Supervisory Commission: Provided, That in case where the
     Financial Supervisory Commission sets forth it otherwise under the
     conditions as prescribed by the Presidential Decree, this shall not apply.
     < Amended by Act No. 5502, Jan. 13, 1998 >


ARTICLE 20 (PUBLIC NOTICE OF BALANCE SHEET AND ACCOUNTING SETTLEMENT)

     (1) Deleted. < by Act No. 6180, Jan. 21, 2000 >

     (2) The Financial Supervisory Commission may set forth the standards for
     accounting settlements concerning the trust business of trust companies
     under the conditions as prescribed by the Presidential Decree. < Newly
     Inserted by Act No. 5502, Jan. 13, 1998 >


ARTICLE 21 (AGGRAVATION OF DEPOSIT RESPONSIBILITY TO RESERVE FUNDS)
<PAGE>
     A trust company shall deposit not less than 1/10 of its profits as a
     reserve fund whenever the profits are allotted, until the said funds reach
     to the total sum of its paid-in capital. < Amended by Act No. 5502,
     Jan. 13, 1998; Act No. 6180, Jan. 21, 2000 >


     CHAPTER IV MATTERS PROHIBITED

ARTICLE 22 (RESTRICTIONS ON HOLDING OF CONCURRENT OFFICE BY OFFICERS, ETC.)

     Any standing officer of a trust company shall, where he falls under the
     requirements as prescribed by the Presidential Decree, not be concurrently
     engaged in another company or other profit-making corporations as an
     executive director.
     [This Article Wholly Amended by Act No. 6180, Jan. 21, 2000]


ARTICLE 23

     Deleted. < by Act No. 5700, Jan. 29, 1999 >


ARTICLE 24

     Deleted. < by Act No. 2064, Dec. 31, 1968 >


     CHAPTER V SUPERVISION

ARTICLE 24-2 (SUPERVISION OF TRUST COMPANY)

     The Financial Supervisory Commission may supervise the business of trust
     companies, and issue an order required therefor, in order to protect the
     beneficiaries and maintain a sound order in trust transactions.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]
<PAGE>
ARTICLE 24-3 (GUIDANCE FOR SOUND MANAGEMENT)


     (1) A trust company shall observe the management guidance standards set
     forth by the Financial Supervisory Commission with respect to matters
     falling under each of the following subparagraphs in order to maintain the
     soundness of management, under the conditions as prescribed by the
     Presidential Decree:

     1. Matters relating to the appropriateness of capital;

     2. Matters relating to the soundness of assets;

     3. Matters relating to the liquidity; and

     4. Other matters necessary to secure the soundness of management.

     (2) The Financial Supervisory Commission may, where it deems that a trust
     company fails to observe the management guidance standards under paragraph
     (1) and is feared to greatly undermine the soundness of management, request
     such trust company to take measures necessary for the improvement of its
     management such as increasing its paid-in capital and restricting the
     allotment of profits, etc.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 25 (REPORT AND SUBMISSION OF DOCUMENT, ETC.)

     The Financial Supervisory Commission may, where it deems necessary, have a
     trust company report on the status of business and assets or submit
     documents or accounting books. < Amended by Act No. 5502, Jan. 13, 1998;
     Act No. 6180, Jan. 21, 2000 >


ARTICLE 25-2 (MODIFICATION, ETC. OF STANDARD CONTRACTUAL TERMS AND CONDITIONS,
ETC.)
<PAGE>
     (1) A trust company shall, where it intends to set forth or modify the
     standard contractual terms and conditions or the standard contract
     (hereinafter referred to as "standard contract, etc.") related to the trust
     transactions, report in advance to the Financial Supervisory Commission.

     (2) The Financial Supervisory Commission may, where it deems necessary for
     the maintenance of a sound order in trust transactions, order the trust
     company to modify the standard contract, etc.

     (3) The Financial Supervisory Commission may set forth the time, procedures
     and other necessary matters for reporting on an institution or modification
     of the standard contract, etc. under the conditions as prescribed by the
     Presidential Decree.

     (4) A trust company shall make a public announcement of the contract
     conditions, etc. for the trust transactions, under the conditions as
     determined by the Financial Supervisory Commission.
     [This Article Newly Inserted by Act No. 5502, Jan. 13, 1998]


ARTICLE 25-3 (PUBLIC ANNOUNCEMENT OF MANAGEMENT STATUS)

     A trust company shall make a public announcement of matters necessary for
     the protection of beneficiaries and which are prescribed by the
     Presidential Decree, under the conditions as determined by the Financial
     Supervisory Commission.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 26 (INSPECTION, ETC.)

     (1) The Governor of the Financial Supervisory Service established pursuant
     to the Act on the Establishment, etc. of Financial Supervisory
     Organizations (hereinafter referred to as the "Governor of Financial
     Supervisory Service")
<PAGE>
     shall have the officials under his control inspect the business and assets
     of trust companies.

     (2) The Governor of the Financial Supervisory Service may, where he deems
     it necessary to conduct the inspection under paragraph (1), request a trust
     company to file a report on its business and assets, furnish the data and
     have an interested party attend and state his opinions.

     (3) A person in charge of making the inspection under paragraph (1) shall
     carry a certificate showing his authority and produce it to persons
     concerned.
     [This Article Wholly Amended by Act No. 6180, Jan. 21, 2000]


ARTICLE 26-2 (SANCTION, ETC. AGAINST OFFICERS AND EMPLOYEES)

     (1) The Financial Supervisory Commission may, where an officer of a trust
     company violates this Act or the regulations, orders and instructions under
     this Act or commits an act of greatly undermining the sound management of a
     trust company, order the suspension of performance of duties of the
     relevant officer according to a recommendation from the Governor of the
     Financial Supervisory Service, or advise the person entitled to appoint to
     dismiss him, and have the Governor of the Financial Supervisory Service
     take proper measures, such as a warning, etc. < Amended by Act No. 6180,
     Jan. 21, 2000 >

     (2) The Governor of the Financial Supervisory Service may, where an
     employee of a trust company violates this Act or the regulations, orders
     and instructions under this Act or commits an act of greatly undermining
     the sound management of a trust company, request the president of such
     trust company to take proper censure measures, such as a dismissal, a
     suspension of work, a cut in salary and a reprimand, etc. < Amended by Act
     No. 6180, Jan. 21, 2000 >

     (3) The Governor of the Financial Supervisory Service may, where a trust
     company operates its business in the unsound manner while continually
     violating this Act, etc., recommend to the Financial Supervisory Commission
     to order a change in types or methods of business, or a business
     suspension, of the
<PAGE>
     relevant trust company.
     [This Article Newly Inserted by Act No. 5502, Jan. 13, 1998]


ARTICLE 27

     Deleted. < by Act No. 6180, Jan. 21, 2000 >


ARTICLE 28 (SUSPENSION OF BUSINESS)

     The Financial Supervisory Commission may order the suspension of a trust
     business within the limit of not exceeding six months, in case where a
     trust company violates the Acts and subordinate statutes, the articles of
     incorporation, or the orders or instructions of the Financial Supervisory
     Commission or the Governor of the Financial Supervisory Service, or commits
     an act harming the public interests.
     [This Article Wholly Amended by Act No. 5982, May 24, 1999]


ARTICLE 29

     Deleted. < by Act No. 5982, May 24, 1999 >


ARTICLE 29-2 (REVOCATION OF AUTHORIZATION)

     The Financial Supervisory Commission may revoke the authorization of a
     trust business, in case where a trust company comes to fall under any of
     the following subparagraphs: < Amended by Act No. 6180, Jan. 21, 2000 >

     1.Where the company has deranged an order in trust transactions by
     significant illegal acts or unsound business operations;

     1-2.Where it has obtained an authorization of trust business by falsity and
     other illegal means;

     1-3.Where it has violated the contents or terms of permission;
<PAGE>
     2.Where it has come to fall under the causes listed in Article 28;

     2-2.Where it has operated the business during a period of business
     suspension; and

     3.Where such revocation is deemed necessary in accordance with the status
     of readjustments with respect to the trust company which has received an
     order of business suspension under Article 27 or 28.
     [This Article Wholly Amended by Act No. 5982, May 24, 1999]


ARTICLE 29-3 (EXCLUSION OF APPLICATIONS)

     The provisions of Articles 7 (1), 8-2, 15 and 21 shall not apply to a
     financial institution under the Banking Act which concurrently operates the
     trust business.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


     CHAPTER VI DOMESTIC BRANCHES OF FOREIGN FINANCIAL INSTITUTIONS

ARTICLE 29-4 (AUTHORIZATION FOR FOREIGN FINANCIAL INSTITUTIONS)

     (1) Any foreign financial institution (referring to an institution
     established under the foreign Acts and subordinate statutes and which runs
     a trust business in a foreign state; hereinafter the same shall apply)
     shall, when it intends to set up a branch office or a business place
     (hereinafter referred to as the "branch, etc.") in order to operate a trust
     business in the Republic of Korea, obtain an authorization of the Financial
     Supervisory Commission, under the conditions as prescribed by the
     Presidential Decree.

     (2) The Financial Supervisory Commission may attach conditions to the
<PAGE>
     authorization under paragraph (1).
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 29-5 (APPLICATION OF ACTS TO FOREIGN FINANCIAL INSTITUTIONS)

     (1) Any branch, etc. of a foreign financial institution, which has been
     granted an authorization under Article 29-4 (1) shall be considered a trust
     company under this Act: Provided, That the provisions of Article 3 (2)
     shall not apply thereto.

     (2) The business fund, etc. of the branch, etc. of a foreign financial
     institution and other necessary matters shall be prescribed by the
     Presidential Decree.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 29-6 (REVOCATION OF AUTHORIZATION, ETC.)

     (1) The Financial Supervisory Commission may, where the head office of a
     foreign financial institution comes to fall under each of the following
     subparagraphs, revoke an authorization granted to its branch, etc. of the
     relevant foreign financial institution:

     1.Where it ceases to exist due to a merger or a transfer of business;

     2.Where it is subjected to a disciplinary punishment corresponding to an
     administrative disposition taken by a supervisory agency under Article
     29-2, for the reasons of delicts and unsound business operations, etc.; and

     3.Where it suspends or interrupts its business.

     (2) The branch, etc. of a foreign financial institution shall, where the
     head office of relevant financial institution comes to fall under any
     subparagraph of paragraph (1), file a report thereof with the Financial
     Supervisory Commission within 7 days from the date on which the relevant
     cause occurred.
<PAGE>
     (3) Where the head office of a foreign financial institution is dissolved,
     goes bankrupt, ceases to run the trust business or faces revocation of the
     authorization of trust business, the authorization granted to the branch,
     etc. of such foreign financial institution under Article 29-4 (1) shall be
     considered to have been revoked on the date on which the relevant cause
     occurs.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


     CHAPTER VII SUPPLEMENTARY PROVISIONS

ARTICLE 30 (EFFECT OF MERGER)

     (1) When a trust company merges with another one, the surviving trust
     company or the established trust company after the merger shall succeed to
     the rights and obligations related to the trust contracts of the
     disappearing trust company due to the merger.

     (2) In case where there exists any beneficiary raising objections to the
     merger of trust companies, the provisions of Articles 11 and 17 (1) and (3)
     of the Trust Act shall apply mutatis mutandis to the trust concerned.


ARTICLE 31 (CHANGE OF PURPOSES)

     (1) In case where a trust company changes its purposes and continues to
     exist as a company to engage in another business, the Financial Supervisory
     Commission may order the relevant company to deposit its assets or issue
     other necessary orders until it completely pays off its obligations related
     to its trust business. < Amended by Act No. 5502, Jan. 13, 1998 >
<PAGE>
     (2) The provisions of Articles 25 and 26 shall apply mutatis mutandis to
     the case as provided in the paragraph (1). < Amended by Act No. 5502, Jan.
     13, 1998 >


ARTICLE 32 (EFFECT OF CANCELLING BUSINESS LICENSE)

     A trust company shall be dissolved when its business license is cancelled.


ARTICLE 33 (SUPERVISION OF LIQUIDATION)

     (1) The liquidation of a trust company shall be supervised by the Financial
     Supervisory Commission. < Amended by Act No. 5502, Jan. 13, 1998 >

     (2) The Financial Supervisory Commission may inspect the status of the
     liquidating business and assets, order the deposit of assets, or issue
     other orders necessary for the supervision of liquidation. < Amended by Act
     No. 5502, Jan. 13, 1998 >


ARTICLE 34 (APPOINTMENT OF LIQUIDATOR)

     In case where a trust company is dissolved due to the cancellation of its
     business license, the Financial Supervisory Commission shall appoint a
     liquidator thereof. < Amended by Act No. 5502, Jan. 13, 1998 >


ARTICLE 35 (SPECIAL CASE OF APPOINTMENT OF LIQUIDATOR)

     In case where the Court appoints, pursuant to the Commercial Act, a
     liquidator upon request by the public prosecutor or interested parties, and
     where there exists no liquidator, the Financial Supervisory Commission
     shall appoint the liquidator upon request by interested parties or ex
     officio. < Amended by Act No. 5502, Jan. 13, 1998 >
<PAGE>
ARTICLE 36 (REMUNERATION FOR LIQUIDATOR)

     In case where the Financial Supervisory Commission has appointed a
     liquidator, it shall have the trust company pay remunerations to him. Its
     amount shall be determined by the Financial Supervisory Commission.
     < Amended by Act No. 5502, Jan. 13, 1998 >


ARTICLE 37 (DISMISSAL OF LIQUIDATOR)

     The Financial Supervisory Commission may, when there exist any important
     reasons, dismiss the liquidator upon request by interested parties or ex
     officio. < Amended by Act No. 5502, Jan. 13, 1998 >


ARTICLE 37-2 (ENTRUSTMENT OF AUTHORITY)

     The Financial Supervisory Commission may entrust in part its authority
     under this Act to the Governor of the Financial Supervisory Service, under
     the conditions as prescribed by the Presidential Decree.
     [This Article Newly Inserted by Act No. 5502, Jan. 13, 1998]


ARTICLE 37-3 (HEARINGS)

     The Financial Supervisory Commission shall, in case where it intends to
     revoke the authorization of business of the trust company under Article
     29-2, hold hearings. < Amended by Act No. 5700, Jan. 29, 1999; Act
     No. 5982, May 24, 1999 >
     [This Article Newly Inserted by Act No. 5502, Jan. 13, 1998]


ARTICLE 38 (CASES OF COMPOSITION, BANKRUPTCY AND COMPULSORY COMPOSITION)
<PAGE>
     (1) In the case of composition, bankruptcy and compulsory composition of a
     trust company, the Court may request the persons engaged in the inspection
     or supervision of such a trust company to state their opinions, or
     commission them to perform the inspection or examination. < Amended by Act
     No. 5502, Jan. 13, 1998 >

     (2) In the case of paragraph (1), the persons requested or commissioned by
     the Court may state their opinions to the Court. < Amended by Act No. 5502,
     Jan. 13, 1998 >


ARTICLE 38-2 (SHARE OF EXPENSES)

     (1) A trust company undergoing an inspection by the Financial Supervisory
     Service shall pay to the Financial Supervisory Service the share of
     expenses to be appropriated for the inspection expenses.

     (2) The ratio of the share of expenses under paragraph (1) and its limit
     and other matters necessary for the payment of shares of expenses shall be
     prescribed by the Presidential Decree.
     [This Article Newly Inserted by Act No. 5502, Jan. 13, 1998]


     CHAPTER VIII PENAL PROVISIONS

ARTICLE 39 (PENAL PROVISIONS)

     Any person falling under each of the following subparagraphs shall be
     punished by imprisonment with prison labor for not more than 5 years or by
     a fine not exceeding 30 million won:

     1.Person who has run the trust business without obtaining an authorization
     under Article 3 (1);
<PAGE>
     2.Person who has obtained an authorization under Article 3 (1) by falsity
     and other illegal means; and

     3.Person who has exercised the voting rights in contravention of the
     provisions of Article 17-8 (1) through (3).
     [This Article Wholly Amended by Act No. 6180, Jan. 21, 2000]


ARTICLE 40 (PENAL PROVISIONS)

     Any person falling under each of the following subparagraphs shall be
     punished by imprisonment with prison labor for not more than 3 years or by
     a fine not exceeding 20 million won:

     1.Person who has violated the provisions of Article 12 (2);

     2.Person who has failed to undergo an accounting audit under Article 12-2
     (1) without any justifiable reasons;

     3.Person who has divulged secrets related to an accounting audit of trust
     property in contravention of Article 12-2 (3);

     4.Person who has failed to make depositions in contravention of Article 16
     (1); and

     5.Person who has failed to accumulate the reserve fund in contravention of
     Article 21.
     [This Article Wholly Amended by Act No. 6180, Jan. 21, 2000]


ARTICLE 41 (PENAL PROVISIONS)

     Any person falling under each of the following subparagraphs shall be
     punished by imprisonment with prison labor for not more than 1 year or by a
     fine not exceeding 10 million won:
<PAGE>
     1.Person who has violated the provisions of Article 7 (2);

     2.Person who has violated the provisions of Article 10;

     3.Person who has refused, obstructed or evaded the orders by the Financial
     Supervisory Commission under Article 12-2 (2), such as to furnish the data
     or file reports;

     4.Person who has violated the provisions of Article 13;

     5.Person who has violated the provisions of Article 15;

     6.Person who has violated the provisions of Article 15-2;

     7.Person who has issued the beneficiary certificates in contravention of
     the provisions of Article 17-2 (2);

     8.Person who has failed to make a public announcement in contravention of
     the provisions of Article 17-9; and

     9.Person who has violated the orders under the provisions of Articles 24-2,
     31 (1) and 33 (2).
     [This Article Wholly Amended by Act No. 6180, Jan. 21, 2000]


ARTICLE 42 (JOINT PENAL PROVISIONS)

     Where the representative of a corporation or the agent, servant and other
     employees of a corporation or an individual commits the act of violating
     Articles 39 through 41 in relation to the business of such corporation or
     individual, the corporation or the individual shall be each fined according
     to relevant Articles in addition to the punishment of the actor.
     [This Article Newly Inserted by Act No. 6180, Jan. 21, 2000]


ARTICLE 43 (FINE FOR NEGLIGENCE)
<PAGE>
     (1) Any person falling under each of the following subparagraphs shall be
     punished by a fine for negligence not exceeding 10 million won: < Amended
     by Act No. 6180, Jan. 21, 2000 >

     1.Person who has violated the provisions of Article 8 (1) or (2);

     2.Person who has violated the provisions of Article 17-10;

     3.Person who has failed to submit a report or the data under Article 19 or
     25, or submitted by falsity;

     4.Person who has made an accounting settlement in contravention of Article
     20 (2);

     5.Person who has failed to make a public announcement under Article 25-2
     (4) or 25-3, or made by falsity; and

     6.Person who has refused, obstructed or evaded the inspection under Article
     26 (1) (including the case of application mutatis mutandis by Article 31
     (2)) or 33 (2).

     (2) The fine for negligence under paragraph (1) shall be imposed and
     collected by the Financial Supervisory Commission under the conditions as
     prescribed by the Presidential Decree. < Newly Inserted by Act No. 5502,
     Jan. 13, 1998; Act No. 5700, Jan. 29, 1999; Act No. 5982, May 24, 1999 >

     (3) Persons who have objections against the disposition of a fine for
     negligence under paragraph (2) may file an objection with the Financial
     Supervisory Commission within thirty days since accepting the notification
     of relevant disposition. < Newly Inserted by Act No. 5502, Jan. 13, 1998;
     Act No. 5982, May 24, 1999 >

     (4) Where the person who has been subjected to the disposition of a fine
     for negligence under paragraph (2) has filed an objection under paragraph
     (3), the
<PAGE>
     Financial Supervisory Commission shall notify without delay the competent
     court of the relevant fact, and the court so notified shall hold a trial on
     the fine for negligence as prescribed by the Non-Contentious Case
     Litigation Procedure Act. < Newly Inserted by Act No. 5502, Jan. 13, 1998;
     Act No. 5982, May 24, 1999 >

     (5) Where an objection is not filed within the period under paragraph (3),
     nor the fine for negligence is paid, the fine for negligence shall be
     collected following the procedures for the recovery of national taxes in
     arrears. < Newly Inserted by Act No. 5502, Jan. 13, 1998 >


ARTICLE 44

     Deleted. < by Act No. 5502, Jan. 13, 1998 >


   ADDENDA

     (1) (Enforcement Date) This Act shall enter into force on the date of its
     promulgation.

     (2) (Repealing Act) The Chosun Trust Business Decree, Decree No. 8,
     promulgated on June 9, 1931, shall be hereby repealed.

     (3) (Transitional Measures) Those persons who have obtained a business
     license of trust in accordance with the Chosun Trust Business Decree shall
     be deemed to have obtained such license in accordance with this Act.

     (4) (Idem) The measures taken by the Minister of Finance and Economy in
     accordance with the Chosun Trust Business Decree implemented prior to this
     Act shall be deemed to have been taken under this Act, if there are
     equivalent provisions in this Act thereof.


   ADDENDUM < Act No. 2064, Dec. 31, 1968 >
<PAGE>
This Act shall enter into force on the date of its promulgation.


   ADDENDA < Act No. 5502, Jan. 13, 1998 >


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on April 1, 1998: Provided, That the
     amended provision of Article 37-3 shall enter into force on January 1,
     1998.


ARTICLE 2 (GENERAL TRANSITIONAL MEASURES)

     (1) Authorization, approval, decision, order, disposition, and other
     measures done by the Minister of Finance and Economy under the previous
     provisions before this Act enters into force shall be deemed to be measures
     done by the Minister of Finance and Economy, the Financial Supervisory
     Commission, or the Governor of the Financial Supervisory Service under this
     Act.

     (2) Application, reporting, and other conducts done to the Minister of
     Finance and Economy under the previous provisions before this Act enters
     into force shall be deemed to be conducted to Minister of Finance and
     Economy, the Financial Supervisory Commission, or the Governor of the
     Financial Supervisory Service under this Act.


ARTICLE 3 (EXAMPLE OF APPLICATION CONCERNING SANCTIONS AGAINST OFFICERS AND
EMPLOYEES)

     The amended provisions of Article 26-2 shall apply to the conducts first
     done after the enforcement of this Act.


ARTICLE 4 (TRANSITIONAL MEASURE CONCERNING STANDARDS FOR PAID-IN CAPITAL)
<PAGE>
     A person who has received an authorization for trust business at the time
     when this Act enters into force, shall meet the standards for paid-in
     capital prescribed in the amended provisions of Article 4 within three
     years after this Act enters into force.


   ADDENDUM < Act No. 5700, Jan. 29, 1999 >

This Act shall enter into force on the date of its promulgation.


   ADDENDA < Act No. 5982, May 24, 1999 >


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on the date of its promulgation. (Proviso
     Omitted.)


ARTICLES 2 THROUGH 6

     Omitted.


   ADDENDA < Act No. 6180, Jan. 21, 2000 >

     (1) (Enforcement Date) This Act shall enter into force three months after
     the date of its promulgation.

     (2) (Transitional Measures concerning Qualification Requirements for
     Officers) In case where any officer of a trust company has, at the time
     when this Act is enforced, come to fall under the cause of disqualification
     under the amended provision of Article 8-2 due to causes that occurred
     prior to the enforcement of
<PAGE>
     this Act, the previous provisions shall govern, notwithstanding such
     amended provisions.

     (3) (Application Example concerning Accounting Audit of Trust Property) The
     amended provisions of Articles 12-2 and 12-3 shall apply to any trust
     established under the standard contractual terms and conditions first set
     forth or modified after the enforcement date of this Act (including the
     trust established under the standard contractual terms and conditions set
     forth or modified prior to the enforcement date of this Act, which is
     additionally trusted after the enforcement date of this Act).

     (4) (Transitional Measures concerning Penal Provisions and Fine for
     Negligence) In the application of the penal provisions and the regulation
     of the fine for negligence to any acts committed prior to the enforcement
     of this Act, the previous provisions shall govern.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.7
<SEQUENCE>17
<FILENAME>u98617exv12w7.txt
<DESCRIPTION>EX-12.7 KOREAN SPECIALIZED CREDIT FIN BUSINESS ACT
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                                                    Exhibit 12.7



SPECIALIZED CREDIT FINANCIAL BUSINESS ACT

- --------------------------------------------------------------------------------
<TABLE>
<S>                                 <C>                     <C>
                                    1997.8.28               Act No. 5374

        Amended By                  1998.1.13               Act No. 5505

        Amended By                  1999.2.1                Act No. 5741

        Amended By                  1999.2.8                Act No. 5819

        Amended By                  1999.5.24               Act No. 5982

        Amended By                  2000.12.29              Act No. 6316

        Amended By                  2001.3.28               Act No. 6430

        Amended By                  2002.3.30               Act No. 6681

        Amended By                  2002.8.26               Act No. 6705
</TABLE>


     CHAPTER I GENERAL PROVISIONS

ARTICLE 1 (OBJECTIVE)

     The purpose of this Act is to seek financial conveniences for the people
     and to contribute to the growth of the national economy by supporting sound
     and inventive development of persons engaged in credit card business,
     facilities leasing business, installment financing business, and venture
     capital business.


ARTICLE 2 (DEFINITIONS)

     The definitions of terms used in this Act shall be as follows: < Amended by
     Act No. 5741, Feb. 1, 1999; Act No. 5982, May 24, 1999; Act No. 6430, Mar.
     28, 2001; Act No. 6681, Mar. 30, 2002 >

     1."Specialized credit financial business" includes credit card business,
     facilities leasing business, installment financing business, and venture
     capital business;

     2."Credit card business" means operation as a business of two or more
     functions from among those falling within each of the following items,
     including that of item (b):

     (a) Issuance and management of credit cards;

     (b) Settlement of charges in respect of the use of credit cards; or

     (c) Establishment and maintenance of merchant networks of credit cards;

     2-2."Credit card company" means a person who has obtained a license, or
     made a registration, for credit card business under Article 3 (1):
     Provided, That where the person
<PAGE>
     falling under Article 3 (3) 1 engages in the business under Article 13 (1)
     2 and 3, he shall be deemed as a credit card company insofar as the
     business is concerned;

     3."Credit card" means a card issued by a credit card company (including
     persons who carry on the credit card business in a foreign country), which
     authorizes the holder to purchase goods or procure services repeatedly by
     presenting it to a credit card merchant, or to settle the matters as
     prescribed by the Ordinance of the Ministry of Finance and Economy;

     4."Credit card holder" means an individual who is issued a credit card
     through a contract with the credit card company;

     5."Credit card merchant" means a person falling under any of the following
     items:

     (a) A person who sells goods or provides services, etc. to credit card
     holders, debit card holders, or pre-paid card holders (hereinafter referred
     to as the "credit card holders, etc.") through the transactions by means of
     a credit card, debit card, or pre-paid card (hereinafter referred to as the
     "credit card, etc.") in compliance with the contract with the credit card
     company; and

     (b) A person acting for the transactions by means of a credit card, etc.
     (hereinafter referred to as the "agency for settlements") for the persons
     who sell goods or provide services, etc. to credit card holders, etc. in
     compliance with the contract with the credit card company;

     6."Debit card" is a card issued by the credit card company whereby the
     provision of goods and services and payment therefor can be done
     simultaneously by means of an electronic or magnetic fund transfer between
     the bank accounts of the debit card holders and the debit card merchants;

     7."Debit card holder" is an individual who is issued a debit card under a
     contract with the credit card company;

     8."Pre-paid card" is a card which is issued by the credit card company upon
     receipt of a set amount beforehand and on which the set amount is recorded
     (through electronic or magnetic means) and against the presentation of
     which the credit card merchant provides goods and services within the set
     amount;

     9."Facilities leasing business" means to carry on facilities leasing as a
     business;

     10."Facilities leasing" means a financing method whereby goods specified by
     the Presidential Decree (hereinafter referred to as "specified goods")
     newly purchased or leased are leased to others for use for a certain period
     against payment therefor receivable periodically in installments. The
     disposal of the goods at the end of that period shall be decided by an
     agreement between the parties concerned;

     11."Deferred payment sale" means a financing method whereby acquired
     specified goods
<PAGE>
     are delivered to the other party for use, against payment of the price plus
     interest, etc., by periodic installments for a period equal to or more than
     the period prescribed by the Presidential Decree. The time of ownership
     transfer and other conditions shall be decided by an agreement between the
     parties concerned;

     12."Installment financing business" means operation as a business of
     installment financing;

     13."Installment financing" means a method of financing whereby a sum of
     money lent to a buyer for purchase of goods or services is paid to the
     seller (limited to an enterprise but including an individual in the case of
     a housing), and the principal and interest thereon are collected from the
     buyer in installments, by means of an agreement with the buyer and the
     seller;

     14."Venture capital business" means operation as a business of various
     services referred to in each of subparagraphs of Article 41 (1);

     15."Specialized credit financial business companies" means persons
     exclusively carrying on services referred to in subparagraphs of Article 46
     (1), who are licensed by the Financial Supervisory Commission or registered
     with the Financial Supervisory Commission in accordance with the provisions
     of Article 3 (1) or (2) for a specialized credit financial business; or

     16."Concurrent loan service providers" means those other than specialized
     credit financial business companies, who are licensed by the Financial
     Supervisory Commission or registered with the Financial Supervisory
     Commission in accordance with the proviso of Article 3 (3) for a
     specialized credit financial business.


     CHAPTER II LICENSE OR REGISTRATION

ARTICLE 3 (LICENSE OR REGISTRATION OF BUSINESS)


     (1) A person who wishes to perform a credit card business shall obtain a
     license from the Financial Supervisory Commission: Provided, That persons
     falling under paragraph (3) 2 may carry on a credit card business by
     registering with the Financial Supervisory Commission. < Amended by Act
     No. 6681, Mar. 30, 2002 >

     (2) A person who is carrying out or wishes to carry out a facilities
     leasing business, installment financing business or venture capital
     business, and wishes to avail himself of the provisions of this Act, shall
     register with the Financial Supervisory Commission according to each
     category of business. < Newly Inserted by Act No. 6681, Mar. 30, 2002 >
<PAGE>
     (3) A person who is eligible to obtain license or make registration under
     paragraph (1) or (2) shall be restricted to one who is or wishes to be a
     specialized credit financial business company: Provided, That this shall
     not apply to those who falls under any of the following subparagraphs:
     < Amended by Act No. 5505, Jan. 13, 1998; Act No. 5741, Feb. 1, 1999; Act
     No. 5982, May 24, 1999; Act No. 6681, Mar. 30, 2002 >

     1.A financial institution established by the provisions of other Acts or
     one designated by the Presidential Decree from among financial institutions
     with authorization or license from the Financial Supervisory Commission; or

     2.Persons designated by the Presidential Decree as appropriate to combine a
     credit card business with others in terms of the nature of business
     performed by them.

     (4) The Financial Supervisory Commission may attach the conditions to the
     license under paragraph (1). < Newly Inserted by Act No. 6430, Mar. 28,
     2001 >


ARTICLE 4 (APPLICATION FOR LICENSE OR REGISTRATION)

     A person who wishes to obtain license or make registration according to the
     provisions of Article 3 (1) or (2) shall submit to the Financial
     Supervisory Commission an application for license or registration
     indicating the following, accompanied by documents prescribed by the
     Presidential Decree: < Amended by Act No. 5741, Feb. 1, 1999; Act No. 5982,
     May 24, 1999; Act No. 6430, Mar. 28, 2001; Act No. 6681, Mar. 30, 2002 >

     1.Trade name and the location of main office;

     2.Capital stock, and the names or titles of contributors and their
     respective shares (excluding minority contributors prescribed by the
     Ordinance of the Ministry of Finance and Economy);

     3.Names of directors or officers;

     4.Category of specialized credit financial business to be performed;

     5.Purposes for which the person wishes to be a specialized credit financial
     business company; and

     6.Contents of business being carried out by the person who wishes to be a
     concurrent loan service provider.


ARTICLE 5 (CAPITAL STOCK)

     (1) A person who is eligible to be a specialized credit financial business
     company by
<PAGE>
     being licensed or registered for specialized credit financial business
     shall be restricted to a stock corporation, whose capital stock exceeds the
     amount of money referred to in each of the following subparagraphs:

     1.20 billion won where he wishes to operate two or less kinds of
     specialized credit financial businesses; or

     2.40 billion won where he wishes to operate three or more kinds of
     specialized credit financial businesses.

     (2) Concurrent loan service providers eligible to make a registration for
     the credit card business pursuant to the provisions of Article 3 (3) 2
     shall be restricted to stock corporations with capital stock and equity
     capital (referring to the total amount of capital stock, reserves and other
     surplus: hereinafter the same shall apply) exceeding 2 billion won.
     < Amended by Act No. 5741, Feb. 1, 1999; Act No. 6681, Mar. 30, 2002 >


ARTICLE 6 (REQUIREMENTS FOR LICENSE OR REGISTRATION)

     (1) No person who falls hereunder shall obtain license or make a
     registration under Article 3: < Amended by Act No. 5741, Feb. 1, 1999; Act
     No. 6430, Mar. 28, 2001 >

     1.A corporation or its majority stockholder (referring to an investor as
     determined by the Presidential Decree: hereinafter the same shall apply) of
     the relevant corporation at the time of the revocation or cancellation of
     the registration or license under Article 10 or 57 (2) and (3), for which
     or for whom three years have not passed since its registration or license
     under Article 10 or 57 (2) and (3) was revoked or cancelled;

     2.A company under reorganization procedures under the Company
     Reorganization Act and its majority stockholder;

     3.A person of bad credit standing under subparagraph 7 of Article 2 of the
     Use and Protection of Credit Information Act as determined by the
     Presidential Decree;

     4.A person who has been subject to a fine or more severe punishment in
     violation of any finance-related Acts and subordinate statutes as
     determined by the Presidential Decree in the most recent three years on the
     basis of the date of application for license or registration;

     5.A person who falls short of the standards for financial soundness as
     determined by the Presidential Decree (limited to the case of license); and

     6.A corporation in which any person falling under any of subparagraphs 1
     through 5 is a majority stockholder.
<PAGE>
     (2) Any person who intends to obtain a license for credit card business
     under the text of Article 3 (1) shall meet the following requirements:
     < Newly Inserted by Act No. 6430, Mar. 28, 2001; Act No. 6681, Mar. 30,
     2002 >

     1.He shall hold the capital stock under Article 5;

     2.He shall be capable of protecting the transactors and be equipped with
     professional manpower and physical facilities sufficient to deal with the
     intended business;

     3.His business plans shall be proper and sound; and

     4.Major investors as prescribed by the Presidential Decree shall be
     equipped with sufficient investment capability, sound financial status and
     social credits.

     (3) Deleted. < by Act No. 6681, Mar. 30, 2002 >

     (4) Matters necessary for the detailed requirements of license under
     paragraph (2) shall be prescribed by the Presidential Decree. < Newly
     Inserted by Act No. 6430, Mar. 28, 2001 >


ARTICLE 7 (ADMINISTRATION OF LICENSE OR REGISTRATION)

     (1) In case of receipt of an application for license or registration
     pursuant to the provisions of Article 4, the Financial Supervisory
     Commission shall notify the applicant within 3 months from the date of
     receipt as to whether he grants the license or not. < Amended by Act No.
     5741, Feb. 1, 1999; Act No. 5982, May 24, 1999 >

     (2) Where the applicant for license or registration pursuant to the
     provisions of Article 4 does not violate the provisions of Articles 5 and
     6, the Financial Supervisory Commission shall forthwith administer
     registration and notify the applicant. < Amended by Act No. 5741, Feb. 1,
     1999; Act No. 5982, May 24, 1999 >

     (3) Where documents submitted under Article 4 are defective, the Financial
     Supervisory Commission may request such documents to be supplemented within
     10 days from the date of receipt. In such cases, necessary period for
     supplementation shall not be added to the period referred to in paragraph
     (1). < Amended by Act No. 5741, Feb. 1, 1999; Act No. 5982, May 24, 1999 >


ARTICLES 8 AND 9

     Deleted. < by Act No. 5741, Feb. 1, 1999 >


ARTICLE 10 (REQUEST FOR ELIMINATION OF REGISTRATION)
<PAGE>
     (1) A person who has made a registration under Article 3 (1) (proviso) or
     (2) may make a request for elimination of such registration as prescribed
     by the Presidential Decree. < Amended by Act No. 5741, Feb. 1, 1999; Act
     No. 6430, Mar. 28, 2001; Act No. 6681, Mar. 30, 2002 >

     (2) The Financial Supervisory Commission shall, upon receipt of a request
     under paragraph (1) above, without delay revoke the relevant registration.
     < Amended by Act No. 6430, Mar. 28, 2001 >


ARTICLE 11 (PUBLIC NOTICE OF LICENSES, ETC.)

     The Financial Supervisory Commission shall, where falling under any of the
     following subparagraphs, without delay notify its content on the official
     gazette, and make it known to the public by utilizing the computer
     communications, etc.: < Amended by Act No. 6681, Mar. 30, 2002 >

     1.Where granting the license or registration under Article 3 (1) or (2);

     2.Where revoking the registration pursuant to Article 10 (2); and

     3.Where ordering the business suspension or revoking the license or
     registration pursuant to Article 57 (1) through (3).
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


     CHAPTER III SPECIALIZED CREDIT FINANCIAL BUSINESS

     SECTION 1 CREDIT CARD BUSINESS

ARTICLE 12 (SCOPE OF APPLICATION)

     This Section shall apply to credit card business conducted by credit card
     companies and their incidental business in accordance with the provisions
     of Article 13.


ARTICLE 13 (INCIDENTAL BUSINESS OF CREDIT CARD COMPANIES)

     (1) A credit card company may conduct incidental businesses referred to in
     the following subparagraphs according to the standards determined by the
     Presidential Decree: < Amended by Act No. 5741, Feb. 1, 1999; Act No. 6430,
     Mar. 28, 2001 >
<PAGE>
     1.Financing to the credit card holders;

     2.Issue of debit cards and settlement of payments; and

     3.Issue and sale of pre-paid cards and settlement of payments.

     (2) The credit card company may allow a third party to perform the business
     referred to in paragraph (1) under the conditions as determined by the
     Presidential Decree. < Amended by Act No. 5741, Feb. 1, 1999; Act No. 6430,
     Mar. 28, 2001 >

     (3) Deleted. < by Act No. 5741, Feb. 1, 1999 >


ARTICLE 14 (ISSUANCE OF CREDIT CARDS OR DEBIT CARDS)

     (1) A credit card company may issue a credit card or debit card only upon
     application: Provided, That this shall not apply to the case where the
     credit card holders or debit card holders have consented to renew or
     reissue the issued credit card or debit card under the conditions as
     prescribed by the Presidential Decree. < Amended by Act No. 6681, Mar. 30,
     2002 >

     (2) A credit card company shall verify whether or not an application for
     issuance under paragraph (1) is made by the principal. < Newly Inserted by
     Act No. 6681, Mar. 30, 2002 >

     (3) Necessary standards for an issuance of credit cards or debit cards and
     the method of recruiting the members by a credit card company shall be
     prescribed by the Presidential Decree. < Newly Inserted by Act No. 6681,
     Mar. 30, 2002 >


ARTICLE 15 (PROHIBITION OF TRANSFER, ETC. OF CREDIT CARDS)

     A credit card may not be transferred, assigned, or pledged.


ARTICLE 16 (LIABILITY TO CREDIT CARD HOLDERS)

     (1) Where a credit card holder or a debit card holder reports to a credit
     card company on loss or theft of the card, from that time, the credit card
     company shall be liable to the credit card holder or the debit card holder
     for use of the credit card or the debit card.

     (2) Where a credit card company receives a report in accordance with the
     provisions of paragraph (1), it shall forthwith notify the reporting person
     of information on the recipient of the report, receipt number or other
     matters certifying such receipt.
<PAGE>
     (3) A credit card company shall be liable to a credit card holder, etc. for
     the use of false or forged credit cards, etc. < Amended by Act No. 6681,
     Mar. 30, 2002 >

     (4) Notwithstanding the provisions of paragraph (3), where a credit card
     company enters into an agreement with a holder of credit card, etc. to the
     effect that if the said company provides evidences of the existence of an
     intent or a serious negligence on the part of such credit card holder, etc.
     in respect of forgery or alteration of credit card, etc., the whole or part
     of such liabilities may be attributed to the holder of credit card, etc.,
     the said company may make the said holder to be liable for the details of
     such contract. < Newly Inserted by Act No. 6681, Mar. 30, 2002 >

     (5) Such an agreement referred to in paragraph (4) shall be effective only
     where it is made in writing, and a serious negligence on the part of the
     credit card holder, etc. shall be restricted to what are specifically
     indicated in the agreement. < Amended by Act No. 6681, Mar. 30, 2002 >

     (6) A credit card company shall take measures including purchase of
     insurances or subscription to mutual associations or maintenance of reserve
     funds, etc. so as to bear liabilities under the provisions of paragraph (1)
     or (3), and Article 17.

     (7) The scope of an intent or a serious negligence of the credit card
     holder, etc. under paragraph (4) shall be prescribed by the Presidential
     Decree. < Newly Inserted by Act No. 6681, Mar. 30, 2002 >

     (8) A credit card company shall, where a credit card holder raises an
     objection in writing against the amount of using his credit card, be unable
     to receive the relevant amount from such credit card holder not later than
     the time when any investigation thereon is completed. < Newly Inserted by
     Act No. 6681, Mar. 30, 2002 >


ARTICLE 16-2 (RECRUITING CREDIT CARD MERCHANTS)

     A credit card company shall, where recruiting credit card merchants, visit
     the business places of persons who intend to become such merchants, and
     confirm whether or not such business is undertaken.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


ARTICLE 17 (LIABILITY AGAINST CREDIT CARD MERCHANTS)

     (1) A credit card company may not transfer to credit card merchants losses
     out of transactions falling within each of the following subparagraphs,
     except where a credit card company enters into an agreement with them to
     the effect that the latter is responsible for losses, in whole or in part,
     where the former provides evidences of the existence of an intent or a
     serious negligence on the part of the latter in respect of such
<PAGE>
     transactions:

     1.Transactions by lost or stolen credit cards or debit cards; or

     2.Transactions by false or forged credit cards, etc.

     (2) The provisions of Article 16 (5) shall apply mutatis mutandis to an
     agreement or a serious negligence on the part of credit card merchants
     under the proviso of paragraph (1). < Amended by Act No. 6681, Mar. 30,
     2002 >


ARTICLE 18 (DUTY TO NOTIFY TRANSACTION CONDITIONS)

     The credit card company shall notify the credit card holders and credit
     card merchants of the following matters, by methods as prescribed by the
     Ordinance of the Ministry of Finance and Economy: < Amended by Act
     No. 5741, Feb. 1, 1999 >

     1.The interest rate, discount rate, and overdue interest rate and other
     rates set by the credit card company;

     2.Settlement method of the amount of the credit card and the prepaid card
     used;

     3.Responsibility to credit card holders referred to in Article 16;

     4.Responsibility to credit card merchants and matters to be observed by
     credit card merchants as referred to in Articles 17 and 19; and

     5.Other matters prescribed by the Ordinance of the Ministry of Finance and
     Economy.


ARTICLE 19 (MATTERS TO BE OBSERVED BY CREDIT CARD MERCHANTS)

     (1) The credit card merchants shall not refuse to sell goods or to provide
     services, etc. or treat card holders unfavorably, because of transaction by
     credit card. < Amended by Act No. 6681, Mar. 30, 2002 >

     (2) For each credit card transaction, the credit card merchant shall verify
     whether the credit card is being properly used by the principal. < Amended
     by Act No. 6681, Mar. 30, 2002 >

     (3) The credit card merchant may not pass the merchant fees to the credit
     card holder, etc.

     (4) Credit card merchants shall not engage in practices falling under each
     of the following subparagraphs: Provided, That in the case of an agency for
     settlements, the provisions of subparagraphs 1, 4 and 5 shall not apply:
     < Amended by Act No. 6681, Mar. 30, 2002 >
<PAGE>
     1.Practices of pretending a transaction by credit cards without actual
     sales of goods or provision of services, etc.;

     2.Practices of making a transaction by using credit cards in excess of the
     actual amount of sales;

     3.Practices of making a transaction by using credit cards, etc. in the name
     of an other credit card merchant;

     4.Practices of lending a credit card merchant's name to another merchant;
     or

     5.Practices of acting for a transaction by using credit cards, etc.

     (5) An agency for settlements shall observe the matters as prescribed by
     the Presidential Decree, such as a provision, to the credit card company,
     of credit information on the person who sells goods or provides services,
     etc. and the details of acting for credit card transactions. < Newly
     Inserted by Act No. 6681, Mar. 30, 2002 >


ARTICLE 20 (PROHIBITION OF TRANSFER OF SALES CLAIMS)

     (1) Sales claims generated from transactions shall not be transferred to
     any entity other than a credit card company, and a person other than a
     credit card company shall not purchase these claims. < Amended by Act No.
     6681, Mar. 30, 2002 >

     (2) A person who is not a credit card merchant shall not make transactions
     by credit cards, etc. in the name of a credit card merchant. < Amended by
     Act No. 6681, Mar. 30, 2002 >


ARTICLE 21 (OBLIGATION OF TERMINATING CREDIT CARD MERCHANT AGREEMENT)

     A credit card company shall terminate without any delay the credit card
     merchant agreement where the credit card merchant falls under the causes as
     stipulated in the Presidential Decree, such as being sentenced to penalties
     under the Criminal Act, etc. in contravention of the provisions of Article
     19 or 20 (1). < Amended by Act No. 6681, Mar. 30, 2002 >
     [This Article Wholly Amended by Act No. 6430, Mar. 28, 2001]


ARTICLE 22 (OBLIGATION OF REPAYMENT OF AMOUNTS IN PRE-PAID CARDS)

     In the case of each of the following subparagraphs, a credit card company
     which has issued pre-paid cards shall forthwith pay back the balance
     remaining on the pre-paid card upon request of the pre-paid card holder:
<PAGE>
     1.Where it becomes impossible for the holder to use a pre-paid card because
     credit card merchants can not provide goods or services due to natural
     disasters, etc.;

     2.Where it becomes impossible for credit card merchants to provide goods or
     services due to defects of pre-paid cards; or

     3.Where the balance on a pre-paid card is less than 10/100 of the face
     amount of the pre-paid card.


ARTICLE 23 (RESTRICTION ON SOLICITATION OF CREDIT CARD MERCHANTS OR WAYS OF
USING THEM)

     (1) The scope of credit card merchants which may be solicited by a
     concurrent loan service provider with a registration of credit card
     business pursuant to the provisions of Article 3 (1) (proviso) shall be
     prescribed by the Presidential Decree. < Amended by Act No. 6681, Mar. 30,
     2002 >

     (2) The Financial Supervisory Commission may order credit card companies
     (excluding concurrent loan services providers under the provisions of
     paragraph (1); hereafter in this paragraph the same shall apply) to jointly
     deal with other credit card merchants by way of cross-purchase of sales
     slips, or receipt or payment of sales slips on behalf of other credit card
     companies for convenient uses of credit cards and efficient services by
     credit card companies. < Amended by Act No. 5505, Jan. 13, 1998 >

     (3) Where orders are made for joint uses of credit card merchants pursuant
     to the provisions of paragraph (2), the Financial Supervisory Commission
     shall ensure a fair competition between credit card companies by allowing
     member fees charged to credit card merchants to be determined freely by
     each credit card company, or by allowing payments made between credit card
     companies to be determined at a reasonable level, etc. < Amended by Act No.
     5505, Jan. 13, 1998 >


ARTICLE 24 (MAXIMUM LIMITS OF CREDIT CARDS, ETC.)

     The Financial Supervisory Commission, subject to the Presidential Decree,
     may impose upon credit card companies limits prescribed in each of the
     following subparagraphs, or take other necessary measures: < Amended by Act
     No. 5505, Jan. 13, 1998; Act No. 5741, Feb. 1, 1999; Act No. 6430, Mar. 28,
     2001 >

     1.Maximum limit of cash services by credit cards;

     2.Maximum amount per use or per day of debit cards; or

     3.Gross maximum number of pre-paid cards and maximum limit of the face
     amount thereof.
<PAGE>
ARTICLE 25 (DEPOSIT)

     (1) The Financial Supervisory Commission may order a credit card company,
     who issued pre-paid cards, to deposit an amount prescribed by the
     Presidential Decree, not exceeding 10/100 of the total pre-paid card amount
     issued. < Amended by Act No. 5505, Jan. 13, 1998 >

     (2) The deposit, in accordance with paragraph (1), shall be made at a place
     where the main office or a principal office of the credit card company who
     issued pre-paid cards is located.

     (3) When the entity fulfills the deposit order, in accordance with
     paragraph (1), it shall report without delay to the Financial Supervisory
     Commission. < Amended by Act No. 5505, Jan. 13, 1998 >

     (4) A credit card company which made a deposit as referred to in paragraph
     (1) may have the deposit returned with approval from the Financial
     Supervisory Commission. < Amended by Act No. 5505, Jan. 13, 1998 >

     (5) The types of goods to be deposited, timing thereof, and other
     conditions needed on the deposit referred to in paragraph (1), shall be
     prescribed by the Ordinance of the Ministry of Finance and Economy.
     < Amended by Act No. 5741, Feb. 1, 1999 >


ARTICLE 26 (DISTRIBUTION OF DEPOSITED ARTICLES)

     (1) When a credit card company, which made a deposit as referred to in
     Article 25, is not able to refund the pre-paid card payment to the credit
     card merchant who supplied goods and services and the unredeemed prepaid
     card amount, the Financial Supervisory Commission shall designate an
     executor (hereinafter referred to as a "rights executor") who shall
     withdraw the credit card company's deposit and distribute to the credit
     card merchants and unredeemed pre-paid card holders (hereinafter referred
     to as "unredeemed creditors") and give public notice under the conditions
     as prescribed by the Ordinance of the Ministry of Finance and Economy.
     < Amended by Act No. 5505, Jan. 13, 1998; Act No. 5741, Feb. 1, 1999 >

     (2) Eligibility for a rights executor referred to in paragraph (1) shall be
     prescribed by the Presidential Decree.

     (3) The unredeemed creditors may receive distribution by reporting the
     unredeemed amount to the rights executor.
<PAGE>
     (4) The rights executor shall give public announcement on the period,
     method, and location of the report under paragraph (3) in compliance with
     the Ordinance of the Ministry of Finance and Economy. < Amended by Act No.
     5741, Feb. 1, 1999 >

     (5) The rights executor may, in priority to other claims, withdraw the
     deposit with the approval of the Financial Supervisory Commission, within
     the scope of the total amount reported in accordance with paragraph (2)
     above and the expenditures therefor. < Amended by Act No. 5505, Jan. 13,
     1998 >

     (6) The deposit withdrawn by the rights executor shall be distributed in
     compliance with the methods and procedures set by the Financial Supervisory
     Commission to the unredeemed creditors. < Amended by Act No. 5505, Jan. 13,
     1998 >

     (7) The credit card company which made a deposit in accordance with Article
     25 shall not be able to get the deposit returned prior to the completion of
     the distribution procedures referred to in paragraphs (1) through (6).


ARTICLE 27 (PROHIBITION ON USAGE OF SIMILAR NAMES)

     An entity other than a credit card company may not use credit card or a
     similar designation in its trade name.


     SECTION 2 FACILITIES LEASING BUSINESS

ARTICLE 28 (SCOPE OF APPLICATION)

     This Section shall apply to facilities leasing businesses and deferred
     payment sales services provided by a person registered for carrying out a
     facilities leasing business (hereinafter referred to as the "lessor")
     pursuant to the provisions of Article 3 (2). < Amended by Act No. 6681,
     Mar. 30, 2002 >


ARTICLE 29 (UTILIZATION OF VARIOUS FUNDS)

     In case where a person who has concluded a leasing or deferred payment sale
     contract with a lessor (hereinafter referred to as a "lessee") is qualified
     to be financed with funds being provided for the purpose of support for
     investment in facilities, the lessor may borrow from the funds concerned on
     behalf of the lessee, acquire specified objects and execute leasing or
     deferred payment sale (hereinafter referred to as the "leasing, etc.").


ARTICLE 30 (SPECIAL CASES TO FOREIGN TRADE ACT)
<PAGE>
     (1) Deleted. < by Act No. 6316, Dec. 29, 2000 >

     (2) In case where specified objects leased by a lessor are facilities or
     equipment to be used for the purpose of earning foreign currency, the
     earning of foreign currency corresponding to the amount of import under
     Article 19 of the Foreign Trade Act shall be conducted by the lessee.


ARTICLE 31 (SPECIAL CASES TO PHARMACEUTICAL AFFAIRS ACT)

     (1) Notwithstanding the provisions of Article 34 (3) of the Pharmaceutical
     Affairs Act, a lessor may directly import medical equipment and instruments
     as specified objects for the purpose of leasing, etc. provided that they
     are tested by using the facilities and equipment as determined by the
     Minister of Health and Welfare.

     (2) Notwithstanding the provisions of Article 42 of the Pharmaceutical
     Affairs Act, a lessor may transfer the specified objects of medical
     equipment and instruments imported under paragraph (1) hereof.


ARTICLE 32 (SPECIAL CASES TO ADMINISTRATIVE DISPOSITIONS)

     In case where a lessor acquires, imports or leases specified objects for
     the purpose of leasing, etc., if the lessee satisfies requirements for
     permission, approval, recommendations and other administrative dispositions
     in addition to the provisions of Articles 30 and 31 thereof, such
     requirements shall be regarded as met by the lessor.


ARTICLE 33 (SPECIAL CASES TO REGISTRY AND REGISTRATION)

     (1) In case where a leasing company executes leasing, etc. of construction
     machinery or vehicles, the registration may be made in the name of the
     lessee (in the case of deferred payment sale, the person who acquires the
     ownership of specified objects shall be excluded, and the same shall apply,
     hereinafter), notwithstanding the provisions of the Construction Machinery
     Management Act or the Automobile Management Act.

     (2) In case where a lessor wishes to register the ownership of a ship or
     aircraft for the purpose of leasing, etc., if the lessee satisfies the
     registration requirements under Article 2 of the Ship Act or Article 6 of
     the Aviation Act, the lessor shall be regarded as satisfying the
     requirements for such registration during the period of use thereof.
<PAGE>
ARTICLE 34 (SPECIAL CASES TO PERFORMING DUTIES)

     (1) In case where a lessee uses specified objects through leasing, various
     duties imposed in accordance with the provisions of other Acts and
     subordinate statutes on the owner of the specified objects regarding the
     maintenance and management of the objects such as inspection shall be
     performed by the lessee as the party concerned.

     (2) When duties under paragraph (1) hereof are imposed on the lessor, the
     lessor shall inform the lessee of the imposition without delay.


ARTICLE 35 (LIABILITY FOR INDEMNITY FOR DAMAGE CAUSED BY AUTOMOBILES, ETC.)

     In case where a lessee who operates construction machinery or vehicles
     acquired by leasing, etc., injures another person by an illegal act, the
     lessor shall not be regarded as "the person who operates the automobile for
     himself" when applying Article 3 of the Guarantee of Automobile Accident
     Compensation Act.


ARTICLE 36 (IDENTIFICATION OF LEASING, ETC.)

     (1) A lessor shall attach to specified objects leased tags indicating that
     they are the subjects of leasing, etc. (except where the ownership of the
     specified objects is transferred by deferred payment sale) under the
     conditions prescribed by the Ordinance of the Ministry of Finance and
     Economy. < Amended by Act No. 5741, Feb. 1, 1999 >

     (2) Tags under paragraph (1) above shall not be damaged, removed, modified
     or relocated by anyone other than the lessor which executed leasing, etc.
     of such specified objects.


ARTICLE 37 (SUPPORT FOR SMALL FIRMS)

     (1) The Financial Supervisory Commission, subject to the Presidential
     Decree, may order the lessor to appropriate a certain ratio of the yearly
     execution of facilities leasing services, etc. for small or medium
     enterprises (referring to small or medium enterprises pursuant to the
     provisions of Article 2 of the Framework Act on Small and Medium
     Enterprises). < Amended by Act No. 5505, Jan. 13, 1998; Act No. 5741, Feb.
     1, 1999; Act No. 6430, Mar. 28, 2001 >

     (2) The ratio referred to in paragraph (1) above shall not exceed 50/100.
<PAGE>
     SECTION 3 INSTALLMENT FINANCING BUSINESS

ARTICLE 38 (SCOPE OF APPLICATION)

     This Section shall apply to installment financing businesses performed by a
     person registered therefor (hereinafter referred to as the "installment
     financing company") pursuant to the provisions of Article 3 (2). < Amended
     by Act No. 6681, Mar. 30, 2002 >


ARTICLE 39 (OBLIGATORY NOTICE OF INFORMATION ON TERMS OF TRANSACTION)

     The installment financing company shall notify the buyer of goods and
     services which are subject matter of installment financing contracts made
     between the former and the latter (hereinafter referred to as the "customer
     of installment services") of matters relating to each of the following
     subparagraphs by means of ways prescribed by the Ordinance of the Ministry
     of Finance and Economy: < Amended by Act No. 5741, Feb. 1, 1999 >

     1.Original interest rates or overdue interest rates, or other various rates
     of charges determined by the installment financing company;

     2.Ways by which payments of financed money (hereinafter referred to as the
     "financed capital") are to be made; and

     3.Other matters prescribed by the Ordinance of the Ministry of Finance and
     Economy.


ARTICLE 40 (CODE OF PRACTICE OF INSTALLMENT FINANCING COMPANY)

     (1) No installment financing company shall be allowed to make a loan to
     customers of installment goods and services moneys exceeding the amount of
     purchase price of goods and services to be financed. < Amended by Act No.
     5741, Feb. 1, 1999 >

     (2) The installment financing company shall make direct payment of financed
     capital to the seller of the goods and services to be financed. < Amended
     by Act No. 5741, Feb. 1, 1999 >


     SECTION 4 VENTURE CAPITAL BUSINESS

ARTICLE 41 (SCOPE OF APPLICATION)

     (1) This Section shall apply to services falling under each of the
     following subparagraphs, which are provided by a person registered for
     carrying out a venture capital business
<PAGE>
     (hereinafter referred to as a "venture capitalist") pursuant to the
     provisions of Article 3 (2): < Amended by Act No. 6681, Mar. 30, 2002 >

     1.Investment in venture businessmen;

     2.Provision of loans to venture businessmen;

     3.Provision of managerial and technical assistance to venture businessmen;

     4.Establishment of venture business investment association; or

     5.Administration or operation of funds of venture business investment
     association.

     (2) The term "venture businessmen" in paragraph (2) means new technology
     venture businessmen under the provisions of subparagraph 1 of Article 2 of
     the Korea Technology Credit Guarantee Fund Act. < Amended by Act No. 6705,
     Aug. 26, 2002 >

     (3) Reference in paragraph (1) 4 to "venture business investment
     association" means associations prescribed by each of the following
     subparagraphs, which are established for the investment in venture
     businessmen:

     1.Associations, established by venture capitalists together with those who
     are not venture capitalists; or

     2.Associations whose funds are administered or operated by venture
     capitalists.


ARTICLE 42 (BORROWING OF MONEY)

     A venture capitalist may borrow money for investment in or loans to venture
     businessmen from the Government or the funds prescribed by the Presidential
     Decree, notwithstanding the provisions of Article 47 (1).


ARTICLE 43 (TAX SUPPORT)

     Subject to the provisions of the Restriction of Special Taxation Act, the
     Government may provide tax support to venture capitalists or their
     investors, venture business investment associations and subscribers thereto
     for the development of venture capital business. < Amended by Act No. 6430,
     Mar. 28, 2001 >


ARTICLE 44 (VENTURE BUSINESS INVESTMENT ASSOCIATIONS)

     (1) The bylaws of a venture business investment association (hereafter
     referred to in this
<PAGE>
     Article as the "association") shall include matters falling under each of
     the following subparagraphs:

     1.The fact that venture capitalists are administering and operating funds
     of the association. In such cases, venture capitalists may entrust the
     operation of funds of the association, in whole or in part, to those who
     are not venture capitalists, by making agreements therefor with the
     association; or

     2.The fact that funds of the association shall be invested into venture
     businessmen.

     (2) The association may pay to the venture capitalist a fee for its
     services not exceeding 20/100 of investment profits generated by the
     administration and operation of funds as set out in its bylaws.

     (3) Where there occurs a loss from the administration and operation of its
     funds, the association may determine the loss distribution rate favorably
     to those who are not venture capitalists, as set out in its bylaws.


ARTICLE 45 (MATTERS TO BE OBSERVED BY VENTURE CAPITALISTS)

     Where venture capitalists perform loan services pursuant to the provisions
     of Article 41 (1) 2, they shall not exceed the limit of loans as determined
     by the Ordinance of the Ministry of Finance and Economy.
     [This Article Wholly Amended by Act No. 5741, Feb. 1, 1999]


     CHAPTER IV SPECIALIZED CREDIT FINANCIAL BUSINESS COMPANY

ARTICLE 46 (BUSINESS)

     (1) Business performed by specialized credit financial business company
     shall be limited as follows: < Amended by Act No. 6430, Mar. 28, 2001 >

     1.Licensed or registered specialized credit financial business under the
     provisions of Article 3;

     2.Business incidental to credit card business under the provisions of
     Article 13 (limited to the licensed credit card business);

     3.Deferred payment sales business (limited to the registered facilities
     leasing business);

     4.Credit loans or secured loan services:
<PAGE>
     5.Discount business of bills;

     6.Assumption, management, or collection business of trade credit which
     enterprises procure in exchange for provision of goods and services;

     7.Other businesses equivalent to subparagraphs 1 through 6, which are
     prescribed by the Presidential Decree; or

     8.Credit investigation relating to business of subparagraphs 1 through 7
     and incidental business.

     (2) Deleted. < by Act No. 5741, Feb. 1, 1999 >


ARTICLE 47 (WAYS OF RAISING MONEY)

     (1) Ways by which a specialized credit financial business company raises
     money shall be restricted to those prescribed in each of the following
     subparagraphs: < Amended by Act No. 5505, Jan. 13, 1998; Act No. 5741, Feb.
     1, 1999; Act No. 5982, May 24, 1999 >

     1.Borrowing from financial institutions established by the provisions of
     other Acts or authorized or licensed by the Financial Supervisory
     Commission;

     2.Issuance of bonds or bills;

     3.Sales of securities held;

     4.Transfer of loaned credit held; or

     5.Other ways prescribed by the Presidential Decree.

     (2) The issuance of bonds or bills pursuant to paragraph (1) 2 and the sale
     of securities held pursuant to subparagraph 3 of the same paragraph may be
     restricted in the method of issuance or sale and target persons thereof by
     the Presidential Decree.


ARTICLE 48 (SPECIAL CASES OF ISSUANCE OF BONDS)

     (1) A specialized credit financial business company may issue bonds up to
     an amount ten times as much as its equity capital, notwithstanding the
     provisions of Article 470 of the Commercial Act. < Amended by Act No. 5741,
     Feb. 1, 1999 >

     (2) A specialized credit financial business company may issue bonds
     temporarily
<PAGE>
     exceeding the maximum limit in order to repay the bonds issued according to
     the provisions of paragraph (1). In such cases, the repayment shall be made
     within a month after the bonds are issued.

     (3) Where bonds issued by a specialized credit financial business company
     in accordance with the provisions of paragraphs (1) and (2) are subject to
     the application of the provisions of the Securities and Exchange Act, they
     shall be treated as bonds under the provisions of Article 2 (1) 3 of the
     said Act.

     (4) Matters necessary for issuance of bonds other than those prescribed in
     paragraphs (1) through (3) shall be determined by the Presidential Decree.


ARTICLE 49 (RESTRICTION OF ACQUISITION OF REAL ESTATE)

     (1) Real estate used for business which a specialized credit financial
     business company is allowed to acquire shall be restricted to those
     prescribed in each of the following subparagraphs: < Amended by Act No.
     5741, Feb. 1, 1999 >

     1.Main or branch offices, or other offices;

     2.Housing or dormitories for officers and employees, and employees'
     training center; or

     3.Other real estates prescribed by the Ordinance of the Ministry of Finance
     and Economy as needed for the business.

     (2) The Financial Supervisory Commission may restrict the total value of
     real estate used for business which a specialized credit financial business
     company is allowed to acquire pursuant to paragraph (1) to a certain ratio
     exceeding 100/100 of its equity capital, where he deems it necessary to
     restrain excessive acquisition of real estate. < Amended by Act No. 5505,
     Jan. 13, 1998 >

     (3) The total value of real estate used for business pursuant to the
     provisions of paragraph (2) shall be computed upon the basis of book value.

     (4) A specialized credit financial business company may be allowed to
     acquire real estate falling under the following in addition to that used
     for business:

     1.The real estate which is the object leased or subject to deferred payment
     sales; or

     2.The real estate acquired by exercise of secured rights.

     (5) Deleted. < by Act No. 5741, Feb. 1, 1999 >
<PAGE>
ARTICLE 50 (MAXIMUM LIMIT OF LOANS TO RELATED PARTIES)

     (1) The aggregate amount of loans (referring to an amount calculated by the
     method as determined by the Ordinance of the Ministry of Finance and
     Economy; hereinafter the same shall apply) which a specialized credit
     financial business company is allowed to provide to persons specially
     related to the company may not exceed 100/100 of its equity capital.
     < Amended by Act No. 5741, Feb. 1, 1999 >

     (2) The scope of specially related persons prescribed in paragraph (1)
     shall be prescribed by the Ordinance of the Ministry of Finance and
     Economy. < Amended by Act No. 5741, Feb. 1, 1999 >


ARTICLE 50-2 (PROHIBITED ACTS RELATED TO FINANCIAL SUPPORT)

     (1) The specialized credit financial companies shall not do an act falling
     under any of the following subparagraphs with other financial institutions
     (referring to the financial institutions under the Act on the Structural
     Improvement of the Financial Industry; hereafter in this Article, the same
     shall apply) or other companies: < Amended by Act No. 6681, Mar. 30, 2002 >

     1.Act of holding the voting stocks under mutual crossing or providing
     credit for the purpose of avoiding the maximum limit under Article 50;

     2.Act of acquiring stocks under mutual crossing for the purpose of avoiding
     the limit of acquiring its own stocks under Article 341 of the Commercial
     Act or Article 189-2 of the Securities and Exchange Act; or

     3.Other acts as stipulated by the Presidential Decree, which are likely to
     harm greatly the interests of transactors.

     (2) The stocks acquired in contravention of paragraph (1) shall not have
     voting rights.

     (3) The specialized credit financial companies shall not perform the acts
     of granting credit for enabling to purchase the stocks of such specialized
     credit financial companies, or of intermediating funds for the purpose of
     avoiding maximum credit limit under Article 50.

     (4) The Financial Supervisory Commission may take necessary measures, such
     as ordering a specialized credit financial company, which has acquired
     stocks or granted credit in contravention of paragraph (1) or (3), to
     dispose of relevant stocks or to recover the credit amount.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]
<PAGE>
ARTICLE 50-3 (QUALIFICATIONS OF OFFICERS)

     Any person falling under any of the following subparagraphs shall not
     become an officer of a specialized credit financial company, and if he
     comes to fall under it after he has become one, he shall lose his post:

     1.A minor, quasi-incompetent or incompetent person;

     2.A bankrupt who is yet reinstated;

     3.A person who has been consigned to an unsuspended sentence of
     imprisonment without prison labor or to a heavier sentence, and for whom 5
     years have not passed after the execution (including the case where its
     execution is deemed to be over) or the exemption from its execution;

     4.A person who has been consigned to a sentence of fine or to a heavier
     sentence due to a contravention of this Act or the finance-related Acts and
     subordinate statutes as stipulated by the Presidential Decree (hereafter in
     this Article, referred to as "finance-related Acts and subordinate
     statutes"), and for whom 5 years have not passed after the completion
     (including the case where its execution is deemed to be over) of, or
     exemption from its execution;

     5.A person who is under a grace period after having been consigned to a
     suspended sentence of imprisonment without prison labor or to a heavier
     sentence;

     6.A person for whom not more than 5 years have passed after a dismissal or
     a disciplined discharge pursuant to this Act or the finance-related Acts
     and subordinate statutes; and

     7.An officer or employee of a corporation or company whose license,
     authorization or registration of business has been revoked pursuant to this
     Act, or the finance-related Acts and subordinate statutes (limited to
     persons who are directly responsible or equivalently responsible for the
     occurrence of causes for such revocations, and who are stipulated in the
     Presidential Decree), and for whom 5 years have not passed since the date
     on which a revocation was made against the relevant corporation or company.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


ARTICLE 50-4 (SELECTION OF OUTSIDE DIRECTOR)

     (1) A specialized credit financial company (limited to a specialized credit
     financial company satisfying the criteria as stipulated by the Presidential
     Decree taking into consideration the property, business, etc. being
     conducted; hereafter in this Article, the same shall apply), shall assign 3
     or more directors who are not engaged in the permanent affairs of the board
     of directors (hereinafter referred to as "outside directors"). In this
     case, the outside directors shall be not less than one half of the total
     number of directors.
<PAGE>
     (2) A specialized credit financial company shall establish the committee
     under Article 393-2 of the Commercial Act in order to recommend the
     candidates for outside directors (hereinafter referred to as the "committee
     for recommending the candidates for outside directors"). In this case, the
     committee for recommending the candidates for outside directors shall
     consist of such outside directors as are to be not less than one half of
     the total members.

     (3) The outside directors shall be elected by the shareholders' meeting
     from among those who are recommended by the committee for recommending the
     candidates for outside directors.

     (4) A person who falls under any of subparagraphs of Article 54-5 (4) of
     the Securities and Exchange Act shall not become an outside director, and
     if he comes to fall under it after he has become one, he shall lose his
     post.

     (5) A specialized credit financial company shall, where the composition of
     the board of directors does not conform to the requirements under paragraph
     (1) due to such cause as a resignation or death, etc. of outside directors,
     make the composition of the board of directors conform to the requirements
     under paragraph (1) at the stockholders' meeting convened for the first
     time after the date on which such causes occurred.

     (6) With respect to a specialized credit financial company which is to
     assign the outside directors as it comes to fall for the first time under
     the requirements of paragraph (1), the provisions of the latter part of
     paragraph (2) shall not be applicable.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


ARTICLE 50-5 (AUDIT COMMITTEE)

     (1) A specialized credit financial company (limited to a specialized credit
     financial company satisfying the criteria as stipulated by the Presidential
     Decree taking into consideration the property, business, etc. being
     conducted; hereafter in this Article, the same shall apply), shall
     establish the audit committee (referring to the audit committee under
     Article 415-2 of the Commercial Act; hereinafter the same shall apply).

     (2) The audit committee shall fill up not less than two-thirds of the total
     members with outside directors.

     (3) The members of audit committee who are not the outside directors shall
     not fall under any of the subparagraphs of Article 191-12 (3) of the
     Securities and Exchange Act: Provided, That any person who is an incumbent
     member of the audit committee as not an outside director, may become a
     member of the audit committee as not an outside director, notwithstanding
     the provisions of Article 191-12 (3) 6 of the same Act.
<PAGE>
     (4) The audit committee shall, where its composition does not conform to
     the requirements under paragraph (2) due to such cause as a resignation or
     death, etc. of the members of audit committee, make its composition conform
     to the requirements under paragraph (2) at the stockholders' meeting
     convened for the first time after the date on which such causes occurred.

     (5) The provisions of Article 415-2 (2) (proviso) of the Commercial Act
     shall not be applicable to the composition of the audit committee under
     paragraph (1).
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


ARTICLE 50-6 (CRITERIA FOR INTERNAL CONTROL)

     (1) A specialized credit financial company shall set forth the basic
     procedures and criteria to be observed by its officers and employees in
     performing their duties in order to comply to the Acts and subordinate
     statutes, to make its property operation sound, and to protect customers
     (hereinafter referred to as the "criteria for internal control").

     (2) A specialized credit financial company shall assign one or more persons
     who are to check whether or not the criteria for internal control are
     observed, and to investigate the violations of said criteria, and to report
     thereon to the auditor or the audit committee (hereinafter referred to as
     the "compliance officer").

     (3) A specialized credit financial company shall, where it intends to
     appoint or dismiss the compliance officer, go through a resolution of the
     board of directors.

     (4) The compliance officer shall satisfy the following requirements:

     1.He shall have the career falling under any of the following items:

     (a) Any person who has the career of serving for not less than 10 years in
     the Bank of Korea, or the institutions subject to inspection under Article
     38 of the Act on the Establishment, etc. of Financial Supervisory
     Organizations (including foreign financial institutions equivalent to
     them);

     (b) Any person who has obtained a master or a higher academic degree and
     has the career of serving for not less than 5 years at posts of or higher
     posts than a researcher or full-time lecturer in a research institution or
     a college or university;

     (c) Any person who is qualified as a lawyer or a certified public
     accountant, and who has the career of engaging in the affairs related to
     such qualifications; and

     (d) Any person who has the career of serving for not less than 5 years in
     the Ministry of Finance and Economy, the Financial Supervisory Commission,
     the Securities Futures Committee, or the Financial Supervisory Service, and
     for whom 5 years have passed after
<PAGE>
     he retired or resigned from the relevant institution;

     2.He shall not fall under any subparagraph of Article 50-3; and

     3.He shall not have any facts of receiving such measures as falling under
     the demand for caution or warning from the Financial Supervisory Commission
     or the Governor of the Financial Supervisory Service due to violations of
     the finance-related Acts and subordinate statutes during recent 5 years.

     (5) Matters necessary for the criteria for internal control under paragraph
     (1) and the compliance officer under paragraph (2) shall be prescribed by
     the Presidential Decree.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


ARTICLE 50-7 (EXERCISE OF MINORITY SHAREHOLDERS' RIGHTS)

     (1) Any person who has continually held not less than 5/100,000 of the
     total issued stocks of the specialized credit financial company (limited to
     the specialized credit financial company falling under the criteria as
     stipulated by the Presidential Decree taking into consideration the
     property and business being conducted, etc.: hereafter in this Article, the
     same shall apply) for not less than 6 months under the conditions as
     prescribed by the Presidential Decree, may exercise the shareholders'
     rights as stipulated under Article 403 of the Commercial Act (including the
     cases where mutatis mutandis applied in Articles 324, 415, 424-2, 467-2 and
     542 of the same Act).

     (2) Any person who has continually held not less than 250/1,000,000 of the
     total issued stocks of the specialized credit financial company (not less
     than 125/1,000,000 in the case of the specialized credit financial company
     which falls under the criteria as stipulated by the Presidential Decree)
     for not less than 6 months under the conditions as prescribed by the
     Presidential Decree, may exercise the shareholders' rights as stipulated
     under Article 402 of the Commercial Act.

     (3) Any person who has continually held not less than 50/100,000 of the
     total issued stocks of the specialized credit financial company (not less
     than 25/100,000 in the case of the specialized credit financial company
     which falls under the criteria as stipulated by the Presidential Decree)
     for not less than 6 months under the conditions as prescribed by the
     Presidential Decree, may exercise the shareholders' rights as stipulated
     under Article 466 of the Commercial Act.

     (4) Any person who has continually held not less than 250/100,000 of the
     total issued stocks of the specialized credit financial company (not less
     than 125/100,000 in the case of the specialized credit financial company
     which falls under the criteria as stipulated by the Presidential Decree)
     for not less than 6 months under the conditions as prescribed by the
     Presidential Decree, may exercise the shareholders' rights as stipulated
     under Article 385 of the Commercial Act (including the case of mutatis
     mutandis application in Article
<PAGE>
     415 of the same Act) and Article 539 of the same Act.

     (5) Any person who has continually held not less than 50/10,000 of the
     total issued stocks of the specialized credit financial company (not less
     than 25/10,000 in the case of the specialized credit financial company
     which falls under the criteria as stipulated by the Presidential Decree)
     for not less than 6 months under the conditions as prescribed by the
     Presidential Decree, may exercise the shareholders' rights as stipulated
     under Article 363-2 of the Commercial Act. In this case, where exercising
     the shareholders' rights under Article 363-2 of the Commercial Act, it
     shall be based upon the voting stocks.

     (6) Any person who has continually held not less than 150/10,000 of the
     total issued stocks of the specialized credit financial company (not less
     than 75/10,000 in the case of the specialized credit financial company
     which falls under the criteria as stipulated by the Presidential Decree)
     for not less than 6 months under the conditions as prescribed by the
     Presidential Decree, may exercise the shareholders' rights as stipulated
     under Articles 366 and 467 of the Commercial Act. In this case, where
     exercising the shareholders' rights under Article 366 of the Commercial
     Act, it shall be based upon the voting stocks.

     (7) In case where the shareholder under paragraph (1) has instituted a
     lawsuit under Article 403 of the Commercial Act (including the cases
     mutatis mutandis applied in Articles 324, 415, 424-2, 467-2 and 542 of the
     same Act) and won the case, he may request the specialized credit financial
     company to pay the expenses for such lawsuit and all other costs on account
     of the lawsuit.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


ARTICLE 51 (PROHIBITION OF USE OF SIMILAR TRADE NAMES)

     A person who is not a specialized credit financial business company may not
     use the same or similar indication as credit, credit card, facilities
     leasing, lease, installment financing, or venture capital business in his
     trade name.
     [This Article Wholly Amended by Act No. 5741, Feb. 1, 1999]


ARTICLE 52 (RELATIONS WITH OTHER ACTS AND SUBORDINATE STATUTES)

     (1) The provisions of the Bank of Korea Act and the Banking Act shall not
     apply to a specialized credit financial business company and a concurrent
     loan service provider pursuant to the provisions of Article 3 (3) 2.
     < Amended by Act No. 5505, Jan. 13, 1998; Act No. 6681, Mar. 30, 2002 >

     (2) Articles 3 through 9, 24, and 26 and subparagraph 4 of Article 27 of
     the Act on the Structural Improvement of the Financial Industry shall apply
     to a specialized credit financial business company. < Amended by Act No.
     6681, Mar. 30, 2002 >
<PAGE>
     CHAPTER V SUPERVISION

ARTICLE 53 (SUPERVISION)

     (1) The Financial Supervisory Commission shall supervise whether a
     specialized credit financial business company or a concurrent loan service
     provider (hereinafter referred to as a "specialized credit financial
     business company, etc.") observes this Act or orders made thereunder.
     < Amended by Act No. 5505, Jan. 13, 1998 >

     (2) The Financial Supervisory Commission may, where deems necessary for
     supervision under the provisions of paragraph (1), may require a
     specialized credit financial business company, etc. to file reports on
     current state of business operation and business situations. < Amended by
     Act No. 5505, Jan. 13, 1998; Act No. 6430, Mar. 28, 2001 >

     (3) Deleted. < by Act No. 6430, Mar. 28, 2001 >

     (4) The Financial Supervisory Commission may make orders necessary for
     correction of breaches of this Act or orders made thereunder which are
     found from such reports as referred to in the provisions of paragraph (2).
     < Amended by Act No. 5505, Jan. 13, 1998; Act No. 6430, Mar. 28, 2001 >


ARTICLE 53-2 (INSPECTION)

     (1) The Governor of the Financial Supervisory Service may have the
     officials belonging to him inspect the business and asset status of the
     specialized credit financial business company, etc.

     (2) The officials who make the inspection under paragraph (1) shall present
     their vouchers indicating their authority to the persons interested.

     (3) The Governor of the Financial Supervisory Service may request the
     specialized credit financial business company, etc. to furnish the books,
     recorded documents and other data necessary for such inspection, or to have
     the related persons attend and state their opinions.

     (4) The Governor of the Financial Supervisory Service may request the
     external auditor selected by the specialized credit financial business
     company, etc. pursuant to the Act on External Audit of Stock Companies to
     furnish the information and data relating to the soundness of management
     which have come to his knowledge as a result of audit of the relevant
     specialized credit financial business companies, etc.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]
<PAGE>
ARTICLE 53-3 (GUIDANCE OF SOUND MANAGEMENT)

     (1) The Financial Supervisory Commission may set forth the criteria for
     management guidance falling under any of the following subparagraphs under
     the conditions as prescribed by the Presidential Decree, in order to guide
     the sound management of the specialized credit financial business company
     and to prevent the financial troubles:

     1.Matters on the adequacy of equity capital;

     2.Matters on the soundness of property;

     3.Matters on the liquidity; and

     4.Other matters necessary for securing the soundness of management.

     (2) The Financial Supervisory Commission may advise, demand or order the
     relevant specialized credit financial business company to improve its
     management under the conditions as determined by the said Commission, in
     case where its financial status falls short of the criteria under paragraph
     (1), such as the equity capital of the specialized credit financial
     business company falls short of a specified level, and where deemed likely
     to harm greatly the protection of traders and the stability of financial
     order as the self normalization of management has been delayed, and may
     issue the necessary order or take the measures, including the transfer of
     contracts.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


ARTICLE 54 (SUBMISSION OF BUSINESS REPORTS, ETC.)

     A specialized credit financial business company, etc. shall submit business
     reports and reports on actual results of management to the Financial
     Supervisory Commission under the conditions as determined by the Financial
     Supervisory Commission. In such cases, those reports shall be submitted
     through the Specialized Credit Financial Business Association when it has
     been established by the provisions of Article 62. < Amended by Act
     No. 5505, Jan. 13, 1998; Act No. 5741, Feb. 1, 1999 >


ARTICLE 54-2 (DISCLOSURE OF OPERATIONS)

     (1) The Financial Supervisory Commission may have a specialized credit
     financial business company disclose important information and data on the
     conditions of operation.

     (2) The matters necessary for the kinds, scope, and methods of disclosure
     under paragraph
<PAGE>
     (1) shall be determined by the Financial Supervisory Commission.
     [This Article Newly Inserted by Act No. 5741, Feb. 1, 1999]


ARTICLE 55 (ACCOUNTING ADMINISTRATION)

     A specialized credit financial business company, etc. shall administer
     accounting of licensed or registered specialized credit financial business
     separately from that of other businesses so as to analyze fund management
     and business performance.


ARTICLE 56 (DESIGNATION OF AUDITORS)

     Where a specialized credit financial business company falls under any cause
     as determined by the Presidential Decree such as the violation of this Act,
     the Financial Supervisory Commission may designate an auditor of the
     specialized credit financial business company after deliberation by the
     Securities Futures Commission.
     [This Article Wholly Amended by Act No. 5741, Feb. 1, 1999]


ARTICLE 57 (REVOCATION, ETC. OF LICENSE OR REGISTRATION)

     (1) The Financial Supervisory Commission may make orders with the effect of
     suspending, in whole or in part, credit card business or the business
     incidental thereto under Article 13 by setting time limit not exceeding 6
     months, where a credit card company falls under each of the following
     subparagraphs: < Amended by Act No. 5505, Jan. 13, 1998; Act No. 6430, Mar.
     28, 2001 >

     1.Where, without satisfying requirements prescribed by Article 13 (1), it
     performs incidental business referred to in each subparagraph of the same
     paragraph;

     2.Where it violates the provisions of Articles 14, 16 (1) through (4), 17,
     18, 21, 22, 23 (1) or 25 (4); or

     3.Where it fails to comply with orders or measures taken by the Financial
     Supervisory Commission pursuant to the provisions of Articles 23 (2), 24,
     25 (1), 53 (4), or 53-3 (2).

     (2) Where a credit card company falls under each of the following
     subparagraphs, the Financial Supervisory Commission may revoke its license
     or registration: < Amended by Act No. 5741, Feb. 1, 1999; Act No. 5982, May
     24, 1999; Act No. 6681, Mar. 30, 2002 >

     1.Where it obtains a license or makes a registration under the provisions
     of Article 3 (1) by fraud or unlawful ways;

     2.Where it falls under the provisions of Article 6 (1) 2 through 4 (limited
     to a specialized
<PAGE>
     credit financial business company);

     3.Where it fails to comply with orders for suspension of business under the
     provisions of paragraph (1);

     4.Where it fails to continue to conduct its operations for one year or more
     without any justifiable reason; and

     5.Where it closes out virtually its operations due to a corporate merger,
     bankruptcy, or closure of its operations.

     (3) Where a facilities leasing service company, an installment financing
     company, or a venture capitalist falls under each of the following
     subparagraphs, the Financial Supervisory Commission may revoke its
     registration: < Amended by Act No. 5505, Jan. 13, 1998; Act No. 5741, Feb.
     1, 1999; Act No. 5982, May 24, 1999; Act No. 6430, Mar. 28, 2001; Act No.
     6681, Mar. 30, 2002 >

     1.Where it registers under the provisions of Article 3 (2) by fraud or
     unlawful ways;

     2.Where it falls under the provisions of Article 6 (1) 2 through 4 (limited
     to a specialized credit financial business company);

     3.Where it fails to comply with orders made by the Financial Supervisory
     Commission under the provisions of Article 53 (4);

     3-2.Where it receives an order of contract transfer under Article 53-3 (2);

     4.Where it fails to continue to conduct its operations for one year or more
     without any justifiable reason; and

     5.Where it closes out virtually its operations due to a corporate merger,
     bankruptcy, or closure of its operations.

     (4) Deleted. < by Act No. 5982, May 24, 1999 >


ARTICLE 58 (IMPOSITION OF PENALTY)

     (1) Where a specialized credit financial business company violates the
     provisions of Article 46, 47, 48, 49 (1) and (4) or 50 or fails to comply
     with orders made by the Financial Supervisory Commission pursuant to the
     provisions of Article 49 (2), the Financial Supervisory Commission may
     impose a penalty not exceeding 100 million won under the conditions as
     prescribed by the Presidential Decree. < Amended by Act No. 5505, Jan. 13,
     1998; Act No. 5741, Feb. 1, 1999 >
<PAGE>
     (2) Where a credit card company falls under each of subparagraphs of
     Article 57 (1), the Financial Supervisory Commission may impose a penalty
     not exceeding 100 million won instead of taking measures of suspending
     business under the conditions as prescribed by the Presidential Decree.
     < Amended by Act No. 5505, Jan. 13, 1998 >

     (3) In case of the following subparagraphs, the Financial Supervisory
     Commission may impose a penalty not exceeding 50 million won under the
     conditions as prescribed by the Presidential Decree: < Amended by Act No.
     5505, Jan. 13, 1998 >

     1.Where a facilities leasing service company fails to comply with orders
     made by the Financial Supervisory Commission pursuant to the provisions of
     Article 37;

     2.Where an installment financing company violates the provisions of Article
     39 or 40; or

     3.Where a venture capitalist violates the provisions of Article 45.

     (4) The types or degrees of breaches subject to the imposition of penalty
     pursuant to the provisions of paragraphs (1) through (3) or other necessary
     matters shall be prescribed by the Presidential Decree.

     (5) The Financial Supervisory Commission shall collect penalties according
     to procedures for the recovery of national taxes in arrears, where
     penalties imposed by the provisions of paragraphs (1) through (3) are not
     paid within the specified time-limit. < Amended by Act No. 5505, Jan. 13,
     1998 >

     (6) The Financial Supervisory Commission may, under the conditions as
     prescribed by the Presidential Decree, entrust the Commissioner of the
     National Tax Service with the affairs relating to the collection of penalty
     surcharge and the disposition for arrears. < Newly Inserted by Act
     No. 6430, Mar. 28, 2001 >


ARTICLE 59

     Deleted. < by Act No. 6430, Mar. 28, 2001 >


ARTICLE 60 (MEASURES AFTER REVOCATION OF LICENSE OR REGISTRATION OF CREDIT CARD
BUSINESS)

     A credit card company may continue to perform the business for settling
     accounts in respect of credit card transactions conducted prior to the
     revocation of the license or registration pursuant to the provisions of
     Article 57 (2). < Amended by Act No. 6681, Mar. 30, 2002 >


ARTICLE 61 (HEARING)

     The Financial Supervisory Commission shall hold hearings where it intends
     to revoke
<PAGE>
     license or registration under the provisions of Article 57 (2) or (3).
     < Amended by Act No. 5741, Feb. 1, 1999; Act No. 5982, May 24, 1999 >


     CHAPTER VI SPECIALIZED CREDIT FINANCIAL BUSINESS ASSOCIATION

ARTICLE 62 (ESTABLISHMENT)


     (1) Specialized credit financial business companies, etc. may establish a
     specialized credit financial business association (hereinafter referred to
     as the "Association") to pursue reliable development of specialized credit
     financial business.

     (2) The Association shall be a juristic person.

     (3) Where specialized credit financial business companies, etc. wish to
     establish the Association, they shall draw up the articles of association
     at the inaugural general meeting and obtain permission thereon by the
     Financial Supervisory Commission. < Amended by Act No. 5741, Feb. 1, 1999;
     Act No. 5982, May 24, 1999 >

     (4) There shall be a president, directors, auditors, or other officers at
     the Association according to the articles of association.

     (5) Deleted. < by Act No. 5741, Feb. 1, 1999 >

     (6) Except as otherwise provided in this Act with regard to the
     Association, the provisions of the Civil Act relating to an incorporated
     association shall apply mutatis mutandis.


ARTICLE 63 (ACCESSION)

     The Association may not refuse accession or impose unfair conditions
     thereto without justifiable causes, where a specialized credit financial
     business company, etc. intends to accede to the Association.


ARTICLE 64 (FUNCTIONS)

     The Association shall carry out functions falling under each of the
     following subparagraphs:

     1.To guide and recommend members to comply with this Act or other Acts and
     subordinate statutes;
<PAGE>
     2.To recommend members to improve on methods of carrying out business for
     the protection of customers;

     3.To undertake submission of reports prescribed by the provisions of
     Article 54 on behalf of member companies, and to analyse their financial
     situations;

     4.To consult with customers and deal with their general inquiries;

     5.To encourage exchange of credit information between members;

     6.To maintain information on credit card merchants;

     7.To research and investigate for development of specialized credit
     financial businesses and specialized credit financial business companies;

     8.Deleted; or < by Act No. 5741, Feb. 1, 1999 >

     9.To carry out other functions to achieve objectives of the Association.


ARTICLE 65 (ARTICLES OF ASSOCIATION)

     The articles of association of the Association shall contain matters
     falling under each of the following subparagraphs:

     1.Objectives, designation and the place of office;

     2.Qualification for members;

     3.Election of directors and officers;

     4.Scope of services:

     5.Membership dues, budgets and accounting; and

     6.Meetings and other matters necessary for the operation of the
     Association.


ARTICLES 66 THROUGH 68

     Deleted. < by Act No. 5741, Feb. 1, 1999 >


     CHAPTER VII SUPPLEMENTARY PROVISIONS

ARTICLE 69 (CONTRIBUTIONS)
<PAGE>
     (1) Deleted. < by Act No. 6430, Mar. 28, 2001 >

     (2) Specialized credit financial business companies, etc. which undergo an
     investigation by the Financial Supervisory Service shall pay contributions
     for meeting the investigation expenses to the Financial Supervisory
     Service.

     (3) The sharing ratio, limit or other matters for the payment of
     contributions referred to in paragraph (2) shall be determined by the
     Presidential Decree.
     [This Article Wholly Amended by Act No. 5505, Jan. 13, 1998]


ARTICLE 69-2 (ENTRUSTMENT OF AUTHORITY)

     (1) The Financial Supervisory Commission may, if necessary for elevating
     the efficiency of supervision against the specialized credit financial
     business companies, entrust a part of his authority under this Act to the
     Governor of the Financial Supervisory Service under the conditions as
     prescribed by the Presidential Decree.

     (2) The Financial Supervisory Commission may, where deemed necessary for
     protecting the traders, entrust a part of his authority other than that
     under paragraph (1) to the president of the Association under the
     conditions as prescribed by the Presidential Decree.
     [This Article Newly Inserted by Act No. 6430, Mar. 28, 2001]


     CHAPTER VIII PENAL PROVISIONS

ARTICLE 70 (PENAL PROVISIONS)

     (1) Any person who falls under any of the following subparagraphs shall be
     punished by imprisonment for not more than 7 years or a fine not exceeding
     50 million won: < Amended by Act No. 6681, Mar. 30, 2002 >

     1.A person who alters or forges credit cards;

     2.A person who sells or uses counterfeited or altered credit cards;

     3.A person who sells or uses the lost or stolen credit cards or debit
     cards;

     4.A person who sells or uses credit cards or debit cards acquired by taking
     by force or embezzlement, or by deceiving or threatening a person;
<PAGE>
     5.A person who acquires the forged or altered credit cards, etc. for the
     purpose of using them;

     6.A person who retains other persons' credit card information detected by
     falsity and other illegal means, or makes a transaction by credit cards by
     utilizing it;

     7.A person who carries on a credit card business without obtaining a
     license or making a registration under Article 3 (1); and

     8.A person who obtains a license or makes a registration under Article 3
     (1) by falsity and other illegal means.

     (2) Any person who falls under any of the following subparagraphs shall be
     punished by imprisonment for not more than 3 years or a fine not exceeding
     20 million won: < Amended by Act No. 6681, Mar. 30, 2002 >

     1.Deleted; < by Act No. 6681, Mar. 30, 2002 >

     2.A person who registers as referred to in Article 3 (2) by false or
     illegal means;

     3.A person who makes a transaction by credit cards or has such sales by
     credit cards made by proxy in excess of the actual transaction amount or by
     forging the sales of goods and the provision of services, etc., or one who
     mediates them;

     4.A person who makes a transaction by credit cards, etc. in the name of
     other credit card merchants in contravention of Article 19 (4) 3;

     5.A person who makes a transaction by credit cards, etc. by proxy in
     contravention of Article 19 (4) 5;

     6.A person who transfers sales claims and who takes over them in
     contravention of Article 20 (1); and

     7.A person who makes a transaction by credit cards, etc. in the name of
     other credit card merchants in contravention of Article 20 (2).

     (3) Any person who falls under any of the following subparagraphs shall be
     punished by imprisonment for not more than one year or a fine not exceeding
     10 million won: < Amended by Act No. 5741, Feb. 1, 1999; Act No. 6430, Mar.
     28, 2001; Act No. 6681, Mar. 30, 2002 >

     1.A person who transfers, acquires or pledges credit cards in violation of
     Article 15;

     2.A person who refuses a sale of goods or a provision of services, etc. or
     who unfavorably treats a holder of credit card for a reason of a
     transaction by credit cards, in contravention of Article 19 (1);
<PAGE>
     3.A person who passes the merchant fees to the credit card holders in
     violation of Article 19 (3);

     4.A person who lends the credit card merchant name to another person in
     violation of Article 19 (4) 4;

     5.and 6.Deleted; and < by Act No. 6681, Mar. 30, 2002 >

     7.A person who violates the provisions of Article 27, 50-2 (1) or (3), or
     51.

     (4) Any person who violates the provisions of Article 36 (2) shall be
     punished by a fine not exceeding 5 million won.

     (5) An attempt of crime under paragraphs (1) 1 and 2 shall be punished.

     (6) A person who prepares for or plots any crime under paragraph (1) 1 with
     an intention of consummation thereof shall be punished by imprisonment for
     not more than 3 years or a fine not exceeding 20 million won: Provided,
     That with respect to a person who voluntarily surrenders before reaching to
     a commitment of the intended crime, his punishment may be mitigated or
     exempted. < Newly Inserted by Act No. 6681, Mar. 30, 2002 >

     (7) The imprisonment and the fine referred to in paragraphs (1) through (3)
     may be imposed concurrently.


ARTICLE 71 (JOINT PENAL PROVISIONS)

     Where a person representing a juristic person, an agent acting on behalf of
     or working for a juristic person or an individual, or other employees
     perform activities falling under the provisions of Article 70 in respect of
     business to be done by such juristic person or individual, such juristic
     person or individual shall be subject to imposition of penalty of the said
     Article in addition to the offenders themselves.


ARTICLE 72 (FINE FOR NEGLIGENCE)

     (1) A person falling under each of the following subparagraphs shall be
     punished by a fine for negligence not exceeding 5 million won: < Amended by
     Act No. 5741, Feb. 1, 1999; Act No. 6681, Mar. 30, 2002 >

     1.A person who fails to elect an outside director in contravention of
     Article 50-4;

     2.Deleted; < by Act No. 5741, Feb. 1, 1999 >
<PAGE>
     3.Where he fails to submit reports or submits fraudulent reports in
     contravention of the provisions of Article 54;

     4.Where he fails to make a disclosure referred to in Article 54-2 or makes
     a false disclosure; or

     5.Where he violates the provisions of Article 55.

     (2) A fine for negligence referred to in paragraph (1) shall be imposed and
     collected by the Financial Supervisory Commission under the conditions as
     determined by the Presidential Decree. < Amended by Act No. 5505, Jan. 13,
     1998; Act No. 5741, Feb. 1, 1999 >

     (3) A person who is dissatisfied with a disposition of a fine for
     negligence pursuant to the provisions of paragraph (2) may raise objections
     to the Financial Supervisory Commission within 30 days from the date on
     which such measures are received. < Amended by Act No. 5505, Jan. 13, 1998;
     Act No. 5741, Feb. 1, 1999 >

     (4) Where a person subject to a disposition of a fine for negligence
     pursuant to the provisions of paragraph (2) raises objections according to
     the provisions of paragraph (3), the Financial Supervisory Commission shall
     forthwith give notice of that fact to the competent court, and the noticed
     court shall commence legal proceedings of a fine for negligence according
     to the Non-Contentious Case Litigation Procedure Act. < Amended by Act No.
     5505, Jan. 13, 1998; Act No. 5741, Feb. 1, 1999 >

     (5) Where no objection pursuant to the provisions of paragraph (3) is
     raised nor payment of a fine for negligence is made, collection of a fine
     for negligence shall be made according to procedures for the recovery of
     national taxes in arrears.


     ADDENDA

ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on January 1, 1998.


ARTICLE 2 (REPEAL OF ENACTMENTS)

     The Credit Card Business Act and the Equipment Rental Business Act are
     hereby repealed.


ARTICLE 3 (EXAMPLES OF APPLICATION)
<PAGE>
     The provisions of Article 68 shall apply beginning with the date on which
     the Association is established according to the provisions of Article 62.


ARTICLE 4 (TRANSITIONAL MEASURES AS TO CREDIT CARD BUSINESS)

     (1) At the time when this Act enters into force, a person with
     authorization for credit card business pursuant to the provisions of
     Article 3 of the Credit Card Business Act and with license, subject to the
     provisions of Article 6 (2) of the said Act, of all the business prescribed
     in subparagraphs 1 through 5 of the said paragraph shall be deemed to have
     been licensed to perform credit card business as a specialized credit
     financial business company.

     (2) At the time this Act enters into force, a person with authorization of
     credit card business pursuant to the provisions of Article 3 of the Credit
     Card Business Act, but without license under the provisions of Article 6
     (2) of the said Act, or with license only for business prescribed in
     subparagraph 1 from among those falling under subparagraphs 1 through 5 of
     the said paragraph shall be deemed to have been licensed to perform credit
     card business as a concurrent loan service provider in combination with
     other business.

     (3) At the time when this Act enters into force, a person with
     authorization of finance business pursuant to the provisions of Article
     17-2 of the Credit Card Business Act shall be deemed to have been
     registered to perform finance business as a financial business company
     specialized in loans.

     (4) At the time when this Act enters into force, a facilities leasing
     service company with authorization of leasing business pursuant to the
     provisions of Article 3 of the Equipment Rental Business Act shall be
     deemed to have been registered to perform leasing business as a specialized
     credit financial business company.

     (5) At the time when this Act enters into force, a person with
     authorization of facilities leasing business pursuant to the provisions of
     Article 3 of the Equipment Rental Business Act, who is not a rental service
     company, shall be deemed to have been registered to perform rental services
     as a concurrent loan service provider.

     (6) At the time this Act enters into force, a person with authorization of
     venture capital business pursuant to the provisions of Article 4 of the
     Financial Assistance to New Technology Businesses Act shall be deemed to
     have been registered to carry out venture capital business and facilities
     leasing business. < Amended by Act No. 5819, Feb. 8, 1999 >

     (7) A person who is deemed to have been licensed or registered according to
     the provisions of paragraphs (1) through (6) shall submit to the Minister
     of Finance and Economy documents prescribed by the provisions of Article 4
     within a month from the
<PAGE>
     date this Act enters into force.

ARTICLE 5

     Deleted. < by Act No. 5741, Feb. 1, 1999 >


ARTICLE 6 (TRANSITIONAL MEASURES AS TO PENALITY AND FINE FOR NEGLIGENCE)

     The previous provisions of the Credit Card Business Act and the Equipment
     Rental Business Act shall apply to a penalty and fine for negligence in
     respect of activities made before this Act enters into force.


ARTICLE 7

     Omitted.


     ADDENDA < Act No. 5505, Jan. 13, 1998 >

     (1) (Enforcement Date) This Act shall enter into force on April 1, 1998.
     (Proviso Omitted.)

     (2) (Transitional Measures relating to Dispositions) At the time of the
     entry into force of this Act, authorization granted or other actions taken
     by administrative agencies, etc. or various reports submitted to or other
     actions taken toward administrative agencies, etc. under the previous
     provisions, shall be deemed to be actions taken by or toward administrative
     agencies, etc. under this Act.

     (3) through (5) Omitted.


     ADDENDUM < Act No. 5741, Feb. 1, 1999 >

This Act shall enter into force on the date of its promulgation.


     ADDENDA < Act No. 5819, Feb. 8, 1999 >


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on the date of its promulgation.


ARTICLES 2 THROUGH 12
<PAGE>

     Omitted.


     ADDENDA < Act No. 5982, May 24, 1999 >


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force on the date of its promulgation. (Proviso
     Omitted.)


ARTICLES 2 THROUGH 6

     Omitted.

     ADDENDA < Act No. 6316, Dec. 29, 2000 >


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force three months after the date of its
     promulgation.


ARTICLE 2

     Omitted.


     ADDENDA < Act No. 6430, Mar. 28, 2001 >


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force three months after the date of its
     promulgation.


ARTICLE 2 (TRANSITIONAL MEASURES ON CHANGES IN QUALIFICATIONS OF OFFICERS)

     In case where incumbent officers of the specialized credit financial
     business company at the time of enforcement of this Act have come to fall
     under the amendments to Article 50-3 due to the causes occurred prior to
     the enforcement of this Act, the previous provisions shall govern,
     notwithstanding the same amendments.


ARTICLE 3 (TRANSITIONAL MEASURES ON ELECTION OF OUTSIDE DIRECTORS)
<PAGE>
     The specialized credit financial business company which is to elect the
     outside directors under the amendments to Article 50-4, shall elect the
     outside directors at the regular shareholders' meeting convened for the
     first time after the enforcement of this Act. In this case, a person who
     has been elected as an outside director at the said regular shareholders'
     meeting shall be deemed to have been recommended under paragraph (2) of the
     same Article by the committee for recommending the candidates for outside
     directors.


ARTICLE 4 (TRANSITIONAL MEASURES ON ESTABLISHMENT OF AUDIT COMMITTEE)

     The specialized credit financial business company which is to establish the
     audit committee under the amendments to Article 50-5, shall make that the
     audit committee under the same amended provisions is to be composed at the
     regular shareholders' meeting convened for the first time after the
     enforcement of this Act.


ARTICLE 5 (TRANSITIONAL MEASURES ON FULL-TIME AUDITOR FOLLOWING ESTABLISHMENT OF
AUDIT COMMITTEE)

     An incumbent full-time auditor of the specialized credit financial business
     company which is to establish the audit committee under the amendments to
     Article 50-5 at the time of enforcement of this Act (where there are more
     than two auditors, referring to the full-time auditor nominated in advance
     by the board of directors of the relevant specialized credit financial
     business company), shall be regarded as the member who is not an outside
     director from among the members of the audit committee of the relevant
     specialized credit financial business company until the expiry of his term
     of office, in case where his term is not expired by the date of
     shareholders' meeting whereat the audit committee shall be established
     under Article 4 of the Addenda and he is not dismissed at the relevant
     shareholders meeting. In this case, the relevant full-time auditor shall be
     considered to have been elected at the shareholders' meeting under Article
     382 (1) of the Commercial Act, until the expiry of his term of office.


ARTICLE 6 (TRANSITIONAL MEASURES ON ELECTION OF COMPLIANCE OFFICER)

     The specialized credit financial business company which is to appoint the
     compliance officer under the amendments to Article 50-6 (2) shall appoint
     the compliance officer at the board of directors convened for the first
     time after the enforcement of this Act.


     ADDENDA < Act No. 6681, Mar. 30, 2002 >

     (1) (Enforcement Date) This Act shall enter into force three months after
     the date of its promulgation.
<PAGE>
     (2) (Transitional Measures on Registration of Credit Card Business) A
     person who falls under previous Article 3 (2) 2 and who has obtained a
     license for credit card business shall be deemed to have made a
     registration of a credit card business under the amended provisions of the
     proviso of paragraph (1) of the same Article.


     ADDENDA < Act No. 6705, Aug. 26, 2002 >


ARTICLE 1 (ENFORCEMENT DATE)

     This Act shall enter into force three months after the date of its
     promulgation.


ARTICLES 2 THROUGH 4

     Omitted.

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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