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(Mark One)
o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2005
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from           to
OR
o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		Date of event requiring this shell company report

N/A		The Republic of Korea
(Translation of registrant’s name into English)		(Jurisdiction of incorporation or organization)

Title of Each Class:		Name of Each Exchange on Which Registered:
Common stock, par value Won 5,000 per share		New York Stock Exchange*
American depositary shares		New York Stock Exchange

*	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.

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						Page
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
				Independent Registered Public Accounting Firms			6
ITEM 2.				OFFER STATISTICS AND EXPECTED TIMETABLE			6
ITEM 3.				KEY INFORMATION			7
				Selected Financial Data			7
				Exchange Rates			13
				Risk Factors			14
ITEM 4.				INFORMATION ON THE COMPANY			34
				History and Development of Shinhan Financial Group			34
				The Merger of Shinhan Bank and Chohung Bank			40
				Business Overview			45
				Description of Assets and Liabilities			79
				Supervision and Regulation			146
				Properties			177
ITEM 5.				OPERATING AND FINANCIAL REVIEW AND PROSPECTS			178
ITEM 6.				DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			248
				Directors and Senior Management			248
				Compensation			251
				Corporate Governance			251
				Board Practices			254
				Employees			256
				Share Ownership			257
ITEM 7.				MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			261
				Major Shareholders			261
				Related Party Transactions			263
ITEM 8.				FINANCIAL INFORMATION			264
				Consolidated Financial Statements and Other Financial Information			264
ITEM 9.				THE OFFER AND LISTING			266
				Market Price Information and Trading Market			266
ITEM 10.				ADDITIONAL INFORMATION			273
				Articles of Incorporation			273
				Exchange Controls			282
				Taxation			286
				Documents On Display			293
ITEM 11.				QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			293
ITEM 12.				DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			293
				Description of American Depositary Receipts			293

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						Page
ITEM 13.				DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			301
ITEM 14.				MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			301
ITEM 15.				CONTROLS AND PROCEDURES			301
ITEM 16A.				AUDIT COMMITTEE FINANCIAL EXPERT			302
ITEM 16B.				CODE OF ETHICS			302
ITEM 16C.				PRINCIPAL ACCOUNTANT FEES AND SERVICES			303
ITEM 16D.				EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			304
ITEM 16E.				PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			304
ITEM 17.				FINANCIAL STATEMENTS			304
ITEM 18.				FINANCIAL STATEMENTS			304
ITEM 19.				EXHIBITS			304
INDEX TO FINANCIAL STATEMENT							F-1
INDEX OF EXHIBITS							E-1
EX-1.1 ARTICLES OF INCORPORATION
EX-4.4 MERGER AGREEMENT
EX-4.5 SPLIT MERGER AGREEMENT
EX-8.1 LIST OF SUBSIDIARIES
EX-12.1 CERTIFICATION OF CEO
EX-12.2 CERTIFICATIONS OF CFO
EX-13.1 CERTIFICATIONS OF CEO
EX-13.2 CERTIFICATIONS OF CFO

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ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Name		Position
Eung Chan Ra		Chairman of the Board of Directors and Head of the Board Steering Committee
In Ho Lee		President and Chief Executive Officer and a member of the Board Steering Committee
Young Hwi Choi		Executive Director

Name		Position
Young Seok Choi		Non-Executive Director; Audit Committee member
Yong Woong Yang		Non-Executive Director
Il Sup Kim		Outside Director; Head of Audit Committee; Compensation Committee member
Sang Yoon Lee		Outside Director; Board Steering Committee member, Audit Committee member; Compensation Committee member
Yoon Soo Yoon		Outside Director; Risk Management Committee member; Compensation Committee member
Shee Yul Ryoo		Outside Director; Board Steering Committee member; Risk Management Committee member, Compensation Committee member
Byung Hun Park		Outside Director, Board Steering Committee member
Young Hoon Choi		Outside Director
Si Jong Kim		Outside Director; Audit Committee member
Philippe Reynieix		Outside Director; Risk Management Committee member
Haeng Nam Chung		Outside Director
Myoung Soo Choi		Outside Director

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Name		Position
Jae Woo Lee		Chief Operating Officer; Managing Director of General Affairs Team, Public Relations Team and Human Resources Team
Byung Jae Cho		Chief Financial Officer; Managing Director of Finance Planning Team, Risk Management Team and Investor Relations Team
Jin Won Suh		Chief Strategy Officer; Managing Director of Strategic Planning Team, Information & Technology Planning Team and Future Strategy & Management Team
Jae Woon Yoon		Group Synergy Officer; Managing Director of Synergy Management Team, Joint Procurement Team and Audit & Compliance Team

						Membership in
Name		Period		Address		Professional Bodies
Samil PricewaterhouseCoopers		For the year ended December 31, 2003		Kukje Center Building 15th Floor 191 Hangangro 2ga, Yongsan-gu, Seoul, Korea		Korean Institute of Certified Public Accountants
KPMG Samjong Accounting Corp.		For the years ended December 31, 2004 and 2005		Star Tower 10th Floor 737 YeokSam-dong, KangNam-gu, Seoul 135-984 Korea		Korean Institute of Certified Public Accountants

ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE

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ITEM 3.	KEY INFORMATION

	Consolidated Income Statement Data

		Year Ended December 31,
		2001				2002				2003				2004				2005				2005
		(In billions of Won and millions of US$, except per common share data)
Interest and dividend income		W	3,694			W	3,735			W	5,331			W	7,712			W	7,488			$	7,413
Interest expense			2,439				2,305				2,998				4,138				4,014				3,974
Net interest income			1,255				1,430				2,333				3,574				3,474				3,439
Provision (reversal) for credit losses			405				246				965				135				(183	)			(182	)
Noninterest income			632				1,037				1,118				2,092				2,702				2,675
Noninterest expense			828				1,302				1,937				3,152				3,662				3,625
Income tax expense			223				320				248				764				942				933
Minority interest			(1	)			10				26				153				16				16
Income before extraordinary item and effect of accounting change			432				589				275				1,462				1,739				1,722
Extraordinary gain			64				—				—				28				—				—
Cumulative effect of a change in accounting principle, net of taxes			—				—				—				(23	)			—				—
Net income		W	496			W	589			W	275			W	1,467			W	1,739			$	1,722
Net income per common share (in currency unit):
Net income — basic(1)		W	1,948			W	2,246			W	1,024			W	4,875			W	5,190			$	5.14
Net income — diluted(2)			1,663				2,243				984				4,347				4,882				4.83
Weighted average common shares outstanding-basic (in thousands of common shares)			254,680				262,480				262,987				292,465				333,424
Weighted average common shares outstanding-diluted (in thousands of common shares)			299,215				262,812				279,745				337,479				356,140

(1)	Basic earnings per share are calculated by dividing the net income available to common stockholders by the weighted average number of common shares issued and outstanding for the period.
(2)	Diluted earnings per share are 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 two categories of potentially dilutive common shares: (i) shares issuable on exercise of stock option and (ii) shares issuable on conversion of preferred shares.

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	Consolidated Balance Sheet Data

		As of December 31,
		2001				2002				2003				2004				2005				2005
		(In billions of Won and millions of US$, except per common share data)
Assets
Cash and cash equivalents		W	580			W	282			W	1,897			W	2,444			W	2,434			$	2,410
Restricted cash			678				1,365				3,662				3,301				3,644				3,608
Interest-bearing deposits			255				125				409				220				627				621
Call loans and securities purchased under resale agreements			1,816				576				1,898				1,591				1,499				1,485
Trading assets:
Trading securities and other			858				926				2,857				4,639				3,573				3,538
Derivatives assets			98				139				520				1,678				934				925
Securities:
Available-for-sale securities			7,087				8,737				18,099				18,108				22,480				22,257
Held-to-maturity securities			6,038				4,408				3,605				3,099				2,963				2,934
Loans (net of allowance for loan losses of W720 billion in 2001, W996 billion in 2002, W3,631 billion in 2003, W2,311 billion in 2004 and W1,512 billion in 2005)			32,997				44,139				91,791				94,868				104,447				103,413
Customers’ liability on acceptances			1,566				928				2,365				2,012				1,879				1,860
Premises and equipment, net			530				828				2,003				1,848				1,876				1,858
Goodwill and intangible assets			4				219				1,676				1,660				2,957				2,928
Security deposits			390				466				966				968				1,078				1,067
Other assets			2,205				1,648				4,601				7,072				4,724				4,676
Total assets		W	55,102			W	64,786			W	136,349			W	143,508			W	155,115			$	153,580
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Interest-bearing		W	31,036			W	35,886			W	82,161			W	79,934			W	83,278			$	82,454
Non-interest-bearing			1,184				1,163				1,328				2,746				3,143				3,112
Trading liabilities			119				131				513				1,758				1,048				1,038
Acceptances outstanding			1,566				928				2,365				2,012				1,879				1,860
Short-term borrowings			5,759				6,994				11,204				10,954				11,968				11,850
Secured borrowings			4,088				4,706				6,316				6,308				7,502				7,427
Long-term debt			4,876				8,235				21,218				23,617				26,172				25,913
Future policy benefit			—				—				—				—				4,778				4,730
Accrued expenses and other liabilities			3,562				3,193				6,555				9,713				7,089				7,019
Total liabilities			52,190				61,236				131,660				137,042				146,857				145,403
Minority interest			2				288				583				66				80				79
Redeemable convertible preferred stock			—				—				711				736				368				364
Stockholders’ equity:
Common stock			1,462				1,462				1,472				1,596				1,795				1,779
Additional paid-in capital			1,041				1,048				1,073				1,658				2,407				2,383
Retained earnings			638				1,077				1,189				2,456				3,953				3,914
Accumulated other comprehensive income, net of taxes			164				70				58				158				(100	)			(99	)
Less: treasury stock, at cost			(395	)			(395	)			(397	)			(204	)			(245	)			(243	)
Total stockholders’ equity			2,910				3,262				3,395				5,664				7,810				7,734
Total liabilities, minority interest, Redeemable Convertible Preferred Stock and stockholders’ equity		W	55,102			W	64,786			W	136,349			W	143,508			W	155,115			$	153,580

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	Dividends

			Year Ended December 31,
			2001(1)				2002(2)				2003(2)				2004(2)				2005(2)
			(In Won and US$, except ratios)
U.S. GAAP:
Cash dividends per share of common stock:
	In Korean Won		W	750			W	600			W	600			W	600			W	750
	In U.S. dollars		$	0.63			$	0.50			$	0.50			$	0.50			$	0.74
Cash dividends per share of preferred stock
	In Korean Won			N/A				N/A				N/A			W	135.12			W	365.34
	In U.S. dollars			N/A				N/A				N/A			$	0.13			$	0.36
Stock dividends per share of common stock				—				—				—				—				—
Korean GAAP:
Cash dividends per share of common stock:(3)
	In Korean Won		W	600			W	600			W	600			W	600			W	750
	In U.S. dollars		$	0.50			$	0.50			$	0.50			$	0.50			$	0.74
	Dividend ratio(4)			12.00	%			12.00	%			12.00	%			12.00	%			15.00	%
Cash dividends per share of preferred stock:
	In Korean Won			N/A				N/A				N/A			W	857			W	1,183
	In U.S. dollars			N/A				N/A				N/A			$	0.83			$	1.17
	Dividend ratio(4)			N/A				N/A				N/A				17.14	%			23.66	%
Stock dividends per share of common stock				—				—				—				—				—

(1)	Represents, under U.S. GAAP, dividends declared on common stock of Shinhan Bank for the year ended December 31, 2000 and, under Korean GAAP, dividends accrued in the period to which such dividends relate for the year ended December 31, 2001.
(2)	Represents dividends declared on the common stock of Shinhan Financial Group for the year ended December 31, 2002, 2003, 2004 and 2005.
(3)	Represents, under Korean GAAP, for each year ended December 31, 2001 and 2002, dividends accrued on the common stock of Shinhan Financial Group for such year, and, for each year ended December 31, 2003, 2004 and 2005, dividends declared on common stock of Shinhan Financial Group in such year. 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.
(4)	Dividends declared and paid as a percentage of par value of W5,000 per common share of Shinhan Financial Group.

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	Profitability Ratios

				Year Ended December 31,
				2001				2002				2003				2004				2005
				(Percentages)
Net income as a percentage of:
	Average total assets(1)				0.94	%			0.94	%			0.29	%			1.01	%			1.16	%
	Average stockholders’ equity(1)(2)				16.14				15.99				8.83				31.44				29.80
		Including Redeemable Convertible Preferred Stock(3)			N/A				N/A				8.15				27.22				27.08
		Including Redeemable Convertible Preferred Stock and Redeemable Preferred Stock(3)			N/A				N/A				8.24				22.73				19.98
Dividend payout ratio(4)					38.91				25.59				57.20				15.87				15.99
Net interest spread(5)					2.28				2.39				2.48				2.63				2.64
Net interest margin(6)					2.66				2.58				2.65				2.78				2.70
Efficiency ratio(7)					43.88				52.78				56.13				55.63				59.29
Cost-to-average assets ratio(8)					1.57				2.08				2.01				2.18				2.45
Equity to average asset ratio(9):					5.84				5.89				3.24				3.22				3.91
	Including Redeemable Convertible Preferred Stock(3)				N/A				N/A				3.51				3.72				4.30
	Including Redeemable Convertible Preferred Stock and Redeemable Preferred Stock(3)				N/A				N/A				4.04				4.83				5.39

(1)	Average balances are based on (a) daily balances for Shinhan Bank, Chohung Bank and Jeju Bank and (b) quarterly balances for other subsidiaries.
(2)	Does not include the Redeemable Preferred Stock or the Redeemable Convertible Preferred Stock described below.
(3)	As consideration for our acquisition of Chohung Bank, in August 2003, we issued to the Korea Deposit Insurance Corporation (i) 46,583,961 shares of our Redeemable Preferred Stock, with an aggregate redemption price of W842,517,518,646 and (ii) 44,720,603 shares of our Redeemable Convertible Preferred Stock, with an aggregate redemption price of W808,816,825,858, which were convertible into shares of our common stock. In November 2005, Korea Deposit Insurance Corporation converted 22,360,302 shares of these shares of our Redeemable Convertible Preferred Stock into 22,360,302 shares of our common stock, representing 6.22% of our total issued shares (or 5.86% of our total issued shares on a fully diluted basis) of our common stock. In April 2006, Korea Deposit Insurance Corporation sold to BNP Paribas S.A. and other institutional investors all of our common shares held by it. As of the date hereof, Korea Deposit Insurance Corporation does not hold any share of our common stock but still holds 22,360,301 shares of Redeemable Convertible Preferred Stock, representing 6.22% of the total issued shares (or 5.86% of the total issued shares on a fully diluted basis) of our common stock. Korea Deposit Insurance Corporation is entitled to convert such shares into our common stock beginning in August 2006. 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. These Redeemable Preferred Stock are treated as debt under U.S. GAAP. Pursuant to the terms of our 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 our Redeemable Convertible Preferred Stock is convertible into one share of our common stock. The dividend ratios on our Redeemable Preferred Stock

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	and Redeemable Convertible Preferred Stock are 4.04% and 2.02%, respectively. In August 2003, we also 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 through Strider Securitization Specialty Co., Ltd., a special purpose vehicle. These redeemable preferred shares have terms that are different from the redeemable preferred shares issued to Korea Deposit Insurance Corporation. We are required to redeem these preferred shares issued to the special purpose vehicle in three installments in 2006, 2008 and 2010. See “Item 4. Information on the Company — The Merger of Shinhan Bank and Chohung Bank — Liquidity and Capital Resources” and “Item 10. Additional Information — Articles of Incorporation — Description of Capital Stock — Description of Redeemable Preferred Stock”.
(4)	Represents the ratio of total dividends declared on common stock as a percentage of net income.
(5)	Represents the difference between the yield on average interest-earning assets and cost of average interest-bearing liabilities.
(6)	Represents the ratio of net interest income to average interest-earning assets.
(7)	Represents the ratio of noninterest expense to the sum of net interest income and noninterest income, a measure of efficiency for banks and financial institutions. Efficiency ratio may be reconciled to comparable line-items in our income statements for the periods indicated as follows:

			Year Ended December 31,
			2001				2002				2003				2004				2005
			(In billions of Won, except percentages)
Non-interest expense(A)			W	828			W	1,302			W	1,937			W	3,152			W	3,662
Divided by
The sum of net interest income and noninterest income(B)				1,887				2,467				3,451				5,666				6,176
	Net interest income			1,255				1,430				2,333				3,574				3,474
	Noninterest income			632				1,037				1,118				2,092				2,702
Efficiency ratio ((A) as a percentage of(B))				43.88	%			52.78	%			56.13	%			55.63	%			59.29	%

(8)	Represents the ratio of noninterest expense to average total assets.
(9)	Represents the ratio of average stockholders’ equity (not including the Redeemable Preferred Stock or the Redeemable Convertible Preferred Stock) to average total assets.

	Asset Quality Ratios

		As of December 31,
		2001				2002				2003				2004				2005
		(In billions of Won, except percentages)
Total loans		W	33,665			W	45,052			W	95,295			W	97,080			W	105,848
Total allowance for loan losses			720				996				3,631				2,311				1,512
Allowance for loan losses as a percentage of total loans			2.14	%			2.21	%			3.81	%			2.38	%			1.43	%
Total non-performing loans(1)		W	530			W	518			W	1,844			W	1,750			W	1,594
Non-performing loans as a percentage of total loans			1.57	%			1.15	%			1.94	%			1.80	%			1.51	%
Non-performing loans as a percentage of total assets			0.96	%			0.80	%			1.35	%			1.22	%			1.03	%
Impaired loans(2)		W	1,492			W	1,263			W	3,488			W	2,646			W	2,285
Allowance for impaired loans			385				480				1,349				885				704
Impaired loans as a percentage of total loans			4.43	%			2.80	%			3.66	%			2.73	%			2.16	%
Allowance for impaired loans as a percentage of impaired loans			25.80	%			38.00	%			38.68	%			33.47	%			30.81	%

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(1)	Non-performing loans are defined as loans, whether corporate or consumer, that are past due more than 90 days.
(2)	Impaired loans include loans that are classified as “substandard” or below according to the asset classification guidelines of the Financial Supervisory Commission, loans that are past due for 90 days or more and loans that qualify as “troubled debt restructurings” under U.S. GAAP.

	Capital Ratios

			As of December 31,
			2001				2002				2003				2004				2005
			(Percentages)
Requisite capital ratio(1)				134.43	%			130.93	%			118.41	%			129.41	%			132.81	%
Total capital adequacy ratio for Shinhan Bank(2)				11.99				10.92				10.49				11.94				12.23
	Tier I capital adequacy ratio(2)			8.24				6.81				6.34				7.45				8.16
	Tier II capital adequacy ratio(2)			3.75				4.11				4.15				4.49				4.07
Total capital adequacy ratio for Chohung Bank(3)				10.43				8.66				8.87				9.40				10.94
	Tier I capital adequacy ratio(3)			5.91				4.61				4.47				4.99				6.52
	Tier II capital adequacy ratio(3)			4.52				4.05				4.40				4.41				4.42
Adjusted equity capital ratio of Shinhan Card(4)				N/A				10.86				13.78				16.48				17.68
Solvency ratio for Shinhan Life Insurance(5)				204.5				238.9				224.7				265.7				232.1

(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 — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy”). This computation is based on our consolidated financial statements prepared in accordance with Korean GAAP.
(2)	Shinhan Bank’s capital adequacy ratios are computed in accordance with the regulations 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, 2002 were calculated 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, 2002, 2003, 2004 and 2005 were 10.91%, 10.59%, 11.96% and 12.27%, 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 — Principal Regulations Applicable to Banks — Capital Adequacy.”
(3)	Chohung Bank’s capital adequacy ratios are computed in accordance with the regulations 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, 2002 were calculated using these revised guidelines. Under these regulations, Chohung Bank is required to maintain a minimum capital adequacy ratio of 8%. Applying the previous calculation, which only takes into account credit risks,

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	Chohung Bank’s total capital adequacy ratio as of December 31, 2002, 2003, 2004 and 2005 was 8.64%, 8.89%, 9.39% and 10.94%, respectively. This computation is based on the Chohung Bank’s consolidated financial statements prepared in accordance with Korean GAAP. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Banks — Capital Adequacy.”

(4)	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 regulations, 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.
(5)	Solvency ratio is the ratio of Solvency Margin to Standard Amount of Solvency Margin and is computed in accordance with the regulations issued by the Financial Supervisory Commission for life insurance companies. Under these regulations Shinhan Life Insurance is required to maintain a minimum solvency ratio of 100%. Based on the calculation, Shinhan Life Insurance’s solvency ratio as of March 31, 2006 was 230.8%.

			At End
Year Ended December 31,			of Period				Average(1)				High				Low
			(Won per US$1.00)
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				1,250.31				1,332.00				1,160.60
2003				1,192.00				1,192.08				1,262.00				1,146.00
2004				1,035.10				1,139.30				1,195.10				1,035.10
2005				1,010.00				1,023.75				1,059.80				997.00
2006 (through June 23)				955.80				962.29				1,002.90				927.40
	January			958.90				981.44				1,002.90				958.90
	February			970.90				969.84				976.30				962.00
	March			971.40				974.71				981.95				966.80
	April			942.80				952.60				970.40				939.60
	May			945.30				940.82				951.50				927.40
	June (through June 23)			955.80				953.75				961.80				942.70

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

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	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.

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	We are highly dependent on short-term funding sources that are susceptible to price competition, which dependence may adversely affect our operations.

	We have significant exposure to small- and medium-sized enterprises including smaller enterprises, which may result in a deterioration of our asset quality to this segment and have an adverse impact on us.

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	We may not be able to sustain the high rate of growth in our mortgage and home equity lending. In addition, we cannot assure that the asset quality of our mortgage and home equity loans, in particular the long-term mortgage and home equity loans, will not deteriorate.

	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.

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	We may experience a further deterioration of the credit quality of our credit card and other consumer lending portfolios.

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	Developments adversely affecting the business and liquidity of credit card companies in Korea, including LG Card, may result in losses in respect of our exposure to such companies.

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	We have significant exposure to the largest Korean business conglomerates, known as “chaebols”, and, as a result, recent and any future financial difficulties of chaebols may have an adverse impact on us.

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	Future financial difficulties of chaebols may adversely affect the credit quality of our small- and medium-sized enterprise customers who serve chaebols.

	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.

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	The recent announcement by the Korean National Tax Service relating to the tax treatment of certain deposit products may adversely affect our financial condition and results of operations.

	The loss of deposit accounts maintained by Korean courts with Chohung Bank may adversely affect Chohung Bank’s financial position and results of operations.

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	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.

	As a holding company, we are dependant on receiving dividends from our subsidiaries in order to pay dividends on our common shares.

	•	Under the Korean Commercial Code, 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.

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	We may fail to fully realize the anticipated benefits of the merger of Shinhan Bank and Chohung Bank.

	•	difficulties in operating the integrated information technology system, electronic banking systems, risk management and other systems;
	•	difficulties in harmonizing the two corporate cultures;
	•	difficulties in integrating the currently separate labor unions of the former Chohung Bank and Shinhan Bank; and
	•	difficulties in retaining and attracting customers that overlapped between Chohung Bank and Shinhan Bank prior to the merger.

	We may need to raise additional capital, and adequate financing may not be available to us on acceptable terms, or at all.

	We may not succeed in improving customer service through the introduction of performance-based compensation.

	We may incur significant losses from our investment and, to a lesser extent, trading activities due to market fluctuations.

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	Protracted market declines can reduce liquidity in the markets, making it harder to sell assets and leading to material losses.

	We may generate lower revenue from brokerage and other commission- and fee-based business.

	Our Internet banking services are subject to security concerns relating to the commercial use of the Internet.

	We may experience disruptions, delays and other difficulties from our information technology systems.

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	We are subject to operational risks which our current risk management system may not detect in time or at all.

	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.

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	Structural reforms in the Korean economy and its financial sector may have a substantial impact on our business.

	The Financial Supervisory Commission may impose supervisory measures if it deems us or our operating subsidiaries to be financially unsound.

	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.

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	Unfavorable financial and economic conditions in Korea and worldwide may have a material adverse impact on our asset quality, liquidity and financial performance.

	•	failure of restructuring of chaebols 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;
	•	failure of restructuring of large troubled companies, including LG Card and other troubled credit card companies and financial institutions;
	•	volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including continued weakness of the U.S. dollar and/or the appreciation of the Korean Won against foreign currencies), interest rates and stock markets;
	•	increased reliance on exports to service foreign currency debts, which could cause friction with Korea’s trading partners;
	•	adverse developments in the economies of countries to which Korea exports goods and services (such as the United States, China and Japan), or in emerging market economies in Asia or elsewhere that could result in a loss of confidence in the Korean economy;
	•	the continued emergence of China, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and relocation of the manufacturing base from Korea to China);
	•	social and labor unrest or declining consumer confidence or spending resulting from lay-offs, increasing unemployment and lower levels of income;
	•	uncertainty and volatility in real estate prices arising, in part, from the Korean government’s policy-driven tax and other regulatory measures;
	•	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;
	•	political uncertainty or increasing strife among or within political parties in Korea, including as a result of the increasing polarization of the positions of the ruling progressive party and the conservative opposition; 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.

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	Tensions with North Korea could have an adverse effect on us and the price of our common stock and our American depositary shares.

	Korea’s new legislation allowing class action suits related to securities transactions may expose us to additional litigation risk.

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	Labor unrest may adversely affect the Korean economy and our operations.

	There are restrictions on withdrawal and deposit of common shares under the depositary facility.

	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.

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	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.

	Ownership of our shares is restricted under Korean law.

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	Holders of American depositary shares will not have preemptive rights in certain circumstances.

	•	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.

	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.

	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.

	•	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.

	Holders of American depositary shares may be required to pay a Korean securities transaction tax upon withdrawal of underlying common shares or the transfer of American depositary shares.

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	We do not prepare interim financial information on a U.S. GAAP basis.

	We are generally subject to Korean corporate governance and disclosure standards, which differ in significant respects from those in other countries.

	You may not be able to enforce a judgment of a foreign court against us.

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ITEM 4.	INFORMATION ON THE COMPANY

	•	Shinhan Bank, a nationwide commercial bank;
	•	Shinhan Securities Co., Ltd., a securities brokerage company;
	•	Shinhan Capital Co., Ltd., a leasing company; and
	•	Shinhan Investment Trust Management Co., Ltd., an investment trust management company.

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	•	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. Upon the merger of Shinhan Bank and Chohung Bank in April 2006, we split off the credit card services division of Chohung Bank and merged it into Shinhan Card. Following such split-merger, Shinhan Card is expected to have W4 trillion in assets, W25 trillion in total credit card use (excluding corporate cards) and 5.9 million customers. In terms of the amount of the total credit card use, Shinhan Card currently ranks fourth among credit card service providers (including banks) following the split-merger. In addition, as opportunity arises, we may pursue growth through acquisitions, including the acquisition of LG Card that we are currently targeting.
	•	in insurance, we have sought to achieve economies of scale by acquiring Shinhan Life Insurance in December 2005 in addition to SH&C Life Insurance, which joined the group in 2002, enabling the development and distribution of more diversified insurance products and services to meet the growing needs of our customers.
	•	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.

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

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	•	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 from which certain 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.

	•	preventing overlapping investments in solution development, information technology related investments, new investments in distribution channels, hiring and training of employees; and
	•	identifying and realizing synergies such as combined information technology systems, call centers and shared customer services, distribution channels and new products and services;

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			Due August
			2006				2007				2008				2009				2010				Total
			(In millions of Won)
Redeemable preferred stock issued to KDIC			W	168,503			W	168,503			W	168,504			W	168,504			W	168,504			W	842,518
Redeemable preferred stock issued in the market through a special purpose vehicle				525,000				—				365,000				—				10,000				900,000
Redeemable convertible preferred Stock(1)				—				—				404,408				—				—				404,408
	Total		W	693,503			W	168,503			W	937,912			W	168,504			W	178,504			W	2,146,926

(1)

In November 2005, Korea Deposit Insurance Corporation (“KDIC”) converted 22,360,302 shares of Redeemable Convertible Preferred Stock into 22,360,302 shares of our common stock, representing 6.22% of the total issued shares (or 5.86% of the total issued shares on a fully diluted basis) of our common stock. The figures herein assumes no further conversion of the Redeemable Convertible Preferred Stock into our common stock.

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																									Good
					Shinhan Bank								Chohung Bank												Morning								Shinhan
																									Shinhan				Shinhan				Life
					Retail				Corporate				Retail				Corporate				Jeju Bank				Securities				Card(1)				Insurance				Total
Seoul and metropolitan						162				48				189				44				1				35				5				48				532
Kyunggi Province						75				15				74				15				—				10				3				12				204
Six major cities:						48				16				78				15				1				18				5				27				208
	Incheon					17				5				18				3				—				2				1				7				53
	Busan					11				5				24				4				1				5				1				7				58
	Kwangju					5				1				6				2				—				2				1				5				22
	Taegu					6				3				13				3				—				4				1				3				33
	Ulsan					4				1				7				1				—				2				—				1				16
	Taejon					5				1				10				2				—				3				1				4				26
		Sub-total				285				79				341				74				3				63				13				87				944
Others						28				10				107				15				29				14				3				30				236
			Total			313				89				448				89				32				77				16				117				1,180

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

	Banking Branch Network

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	Retail Banking Branches

	Corporate Banking Branches

	Self-Service Terminals

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			For the Year Ended December 31,
			2003				2004				2005
Shinhan Bank:
	ATMs and cash dispensers			2,373				2,459				2,751
	Number of transactions (millions)			107				105				111
	Fee revenue (billions of Won)		W	20			W	20			W	20
Chohung Bank:
	ATMs and cash dispensers			4,655				4,397				4,395
	Number of transactions (millions)			281				262				205
	Fee revenue (billions of Won)		W	42			W	34			W	33

	Electronic Banking

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			For the Year Ended December 31,
			2003				2004				2005
Shinhan Bank:
Telephone banking(1):
	Number of users(2)			1,109,552				1,398,827				1,685,031
	Number of transactions (in thousands)			39,670				36,646				41,608
Internet banking(1):
	Number of users(2)			1,023,195				1,339,571				1,656,196
	Number of transactions (in thousands)(3)			306,667				359,160				403,869
Total fee revenue (millions of Won)			W	18,325			W	29,884			W	26,693
Chohung Bank:
Telephone banking(1):
	Number of users(2)			2,670,658				720,492				976,606
	Number of transactions (in thousands)(3)			120,931				108,745				82,349
Internet banking(1):
	Number of users			2,417,415				2,472,415				1,395,770	(4)
	Number of transactions (in thousands)(3)			141,196				166,937				298,452
Total fee revenue (millions of Won)			W	35,052			W	45,007			W	43,953

(1)	Includes customers simultaneously using both telephone banking and internet banking.
(2)	Includes customers using services of both Shinhan Bank and Chohung Bank.
(3)	Includes balance transfers.
(4)	The decrease in the number of internet banking users of Chohung Bank was due primarily to Chohung bank’s efforts during 2005 to close “non-active” user accounts (meaning accounts that were not used for six months or more).

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	Overseas Branch Network

Business Unit			Location		Year Established or Acquired
Subsidiaries
	Shinhan Finance Limited		Hong Kong SAR, China			1990
Branches
	Tokyo		Japan			1988
	Osaka		Japan			1986
	Fukuoka		Japan			1997
	New York		U.S.A.			1989
	London		United Kingdom			1991
	Ho Chi Minh City		Vietnam			1995
	Shanghai		China			2003
	Qingdao		China			2005

Business Unit			Location		Year Established or Acquired
Subsidiaries
	Chohung Finance Ltd., Hong Kong(1)		Hong Kong SAR, China			1982
	Chohung Bank (Deutschland) GmbH(2)		Germany			1994
	CHB America Bank(3)		U.S.A.			2003
	Chohung Vina Bank(4)		Vietnam			2000
Branches
	Tokyo		Japan			1981
	Singapore		Singapore			1990
	Tianjin		China			1994
	Mumbai		India			1996

(1)	Renamed as Shinhan Asia Ltd. following the merger of Shinhan Bank and Chohung Bank on April 3, 2006.
(2)	Renamed as Shinhan Bank Europe GmbH following the merger of Shinhan Bank and Chohung Bank on April 3, 2006.
(3)	Created as a result of a merger of 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; renamed as Shinhan Bank America following the merger of Shinhan Bank and Chohung Bank on April 3, 2006.
(4)	Renamed as Shinhan Vina Bank following the merger of Shinhan Bank and Chohung Bank on April 3, 2006.

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	Credit Card Distribution Channels

	Securities Brokerage Distribution Channels

	Insurance Sales and Distribution Channels

	•	Commercial banking services, consisting of the following:

	•	Retail banking services;
	•	Corporate banking services, comprised of two divisions:

	—	Small- and medium-sized enterprises banking; and

	•	Credit cards services;
	•	Treasury and securities investment

	•	Other banking services
	•	Securities brokerage services
	•	Insurance Services

	•	Life insurance services

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	•	Bancassurance
	•	Other insurance services
	•	Reinsurance for life insurance and other insurance services

	•	Asset management services, including brokerage and trading of various securities, related margin lending and deposit and trust services, and other asset management to the extent permitted by law
	•	Other services, including leasing and equipment financing, investment trust management, regional banking, investment banking advisory and loan collection and credit reporting.

	Deposit-Taking Activities

	•	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 10.1% of our total deposits as of December 31, 2004 and paid average interest of 1.33% in 2004, and approximately 8.1% of our total deposits as of December 31, 2005 and paid an average interest of 1.90% in 2005.
	•	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 certain financial indexes, including the Korea 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 five years. Retail and corporate time deposits constituted approximately 47.7% of our total deposits as of December 31, 2004 and paid average interest of 3.83% in 2004, and approximately 42.7% of our total deposits as of December 31, 2005 and paid average interest of 3.69% in 2005.
	•	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. Mutual installment deposits constituted approximately 2.9% of our total deposits as of December 31, 2004 and paid average interest of 4.54% in 2004, and approximately 1.8% of our total deposits as December 31, 2005 and paid average interest of 4.16% in 2005.
	•	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 zero to 3.05%. Saving deposits constituted approximately 29.5% of our total deposits as of December 31, 2004 and paid average interest of 1.24% in 2003, and approximately 31.4% of our total deposits as of December 31, 2005 and paid average interest of 0.96% in 2005.
	•	Marketable deposits, consisting of certificates of deposit, cover bills and bonds sold under repurchase agreements that have maturities ranging from 30 days to two years. 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.

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	•	Foreign currency deposits, which accrue interest at an adjustable rate and are available to Korean residents, nonresidents and overseas immigrants. Shinhan Bank offers foreign currency demand and time deposits and checking and passbook accounts in 20 currencies and Chohung Bank offers such accounts in 20 foreign currencies. Deposits in foreign currency constituted approximately 5.81% of our total deposits as of December 31, 2004 and paid average interest of 0.60% in 2004, and approximately 4.41% of our total deposits as of December 31, 2005 and paid average interest of 1.77% in 2005.

	•	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 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 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.

			As of December 31,
			2003				2004				2005
			(In thousands, except branches)
Shinhan Bank:
Retail deposit customers(1)				5,551				5,934				6,436
	Active retail deposit customers(2)			1,621				1,753				1,727
Corporate deposit customers				101				113				121
Domestic branches				354				372				402
Chohung Bank:
Retail deposit customers(1)				9,239				10,361				9,063
	Active retail deposit customers(3)			2,619				2,563				2,932
Corporate deposit customers				138				142				145
Domestic branches				557				533				537

(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

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	those small- and medium-sized enterprises to whom a credit of less than W1 billion has been extended and who are sole proprietors.
(2)	For Shinhan Bank, represents customers (i) whose average monthly account balance is W300,000 or more or (ii) who is 20 years of age or more, has an average loan balance during the year, and accordingly is required to maintain a deposit account with Shinhan Bank to service payment of interest on, and principal of, such loans.
(3)	For Chohung Bank, represents customers whose aggregate of outstanding balances of all accounts as of December 31 of each year was W100,000 or more.

	Retail Banking Services

	Overview

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	Consumer Lending Activities

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

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			As of December 31,
			2003				2004				2005
			(In billions of Won, except percentages)
Consumer loans(1)
	Mortgage and home-equity		W	20,517			W	22,180			W	25,840
	Other consumer			14,580				15,546				17,874
Percentage of consumer loans to total gross loans				36.8	%			38.9	%			41.3	%

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

	Pricing

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	Private Banking

	Corporate Banking Services

	Overview

			As of December 31,
			2003								2004								2005
			(In billions of Won, except percentages)
Small- and medium-sized enterprises loans(1)			W	38,055				40.0	%		W	38,713				39.9	%		W	39,943				37.7	%
Large corporate loans(2)				16,031				16.8				15,909				16.4				17,948				16.9
	Total corporate loans		W	54,086				56.8	%		W	54,622				56.3	%		W	57,891				54.6	%

(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. Certain loans to sole proprietorships are included under retail lending.
(2)	Includes loans to government-controlled companies.

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	Small- and Medium-sized Enterprises Banking

	•	positioned itself based on accumulated expertise. We believe Shinhan Bank 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. Shinhan Bank has 89 corporate banking branches with relationship management teams. These relationship management teams market products and review and approve smaller loans that pose less credit risks; and
	•	begun to focus on cross-selling loan products with other products. For example, when Shinhan Bank 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.

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	Large Corporate Banking

	Corporate Lending Activities

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	Pricing

	Interest rate  =	(Shinhan Bank’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.

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

	Electronic Corporate Banking

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	Credit Card Services

	Overview

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	Products and Services

	•	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 higher credit limits and provide additional services in return for higher annual membership fees;
	•	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.

	•	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 18 to 48 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;
	•	cash advances, which are repayable on a lump-sum basis at the end of a monthly billing cycle and generally accrue interest effective annual rates of approximately 9.8% to 26.8% for Shinhan Card and 18.0% to 26.97% for Chohung Bank; and
	•	payments on a revolving payment basis, which allow customers to roll over their balance into a revolving basis with fixed minimum percentage or amount of the total outstanding balance.

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	Customers and Merchants

		As of December 31,
		2003				2004				2005
		(In thousands, except
		percentages)
Shinhan Card:
Number of credit card holders			2,773				3,002				3,467
Personal accounts			2,678				2,905				3,370
Corporate accounts			95				97				96
Active ratio(1)			56.6	%			50.7	%			63.8	%
Number of merchants			2,112				2,513				2,934
Chohung Bank:
Number of credit card holders			3,205				2,819				2,494
Personal accounts			3,138				2,756				2,434
Corporate accounts			66				63				60
Active ratio(1)			53.9	%			50.9	%			56.4	%
Number of merchants(2)			2,091				2,165				2,225

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(1)	Represents the ratio of accounts used at least once within the last six months to total accounts as of year end.
(2)	Represents the number of merchants of BC Card’s merchant network.

	Financial and Statistical Information

				As of or for the Year Ended December 31,
				2003								2004								2005
				Shinhan				Chohung				Shinhan				Chohung				Shinhan				Chohung
				Card				Bank(1)				Card				Bank(1)				Card				Bank(1)
				(In billions of Won, except percentages)
Interest income:
	Installments			W	42			W	133			W	40			W	84			W	49			W	64
	Cash advances				164				354				30				212				111				181
	Card loans(2)				35				93				34				97				30				60
	Annual membership				5				6				2				5				9				4
	Revolving(3)				7				113				6				71				6				49
	Late payments				21				5				6				11				18				15
		Total		W	274			W	704			W	118			W	480			W	223			W	373
Credit card fees:
	Merchant fees(4)			W	176			W	195			W	146			W	200			W	188			W	211
	Other fees				4				23				8				2				10				5
		Total		W	180			W	218			W	154			W	202			W	198			W	216

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						As of or for the Year Ended December 31,
						2003								2004								2005
						Shinhan				Chohung				Shinhan				Chohung				Shinhan				Chohung
						Card				Bank(1)				Card				Bank(1)				Card				Bank(1)
						(In billions of Won, except percentages)
Charge volume:(5)
	General purchases					W	3,695			W	5,484			W	4,835			W	5,519			W	6,255			W	6,039
	Installment purchases						1,143				2,505				1,247				2,099				1,650				2,003
	Cash advances						6,805				12,585				4,355				6,875				3,488				5,564
		Total				W	11,643			W	20,574			W	10,437			W	14,493			W	11,393			W	13,606
Outstanding balance (at year end):(6)
	General purchases					W	395			W	455			W	456			W	538			W	539			W	528
	Installment purchases						455				786				292				563				333				497
	Cash advances						725				1,025				474				653				423				575
	Revolving purchases						39				484				158				200				89				199
	Card loans						329				745				233				529				255				289
	Others						489				185				376				213				284				190
		Total				W	2,432			W	3,680			W	1,989			W	2,696			W	1,923			W	2,278
Average balance						W	2,212			W	4,957			W	2,186			W	3,288			W	1,916			W	2,618
Delinquent balances:(7)
	From 1 day to 1 month					W	173			W	376			W	67			W	109			W	49			W	92
	Over 1 month:
		From 1 month to 3 months				W	80			W	150			W	35			W	71			W	17			W	31
		From 3 months to 6 months					71				172				38				44				18				29
		Over 6 months					—				—				—				—				—				—
			Sub-total				151				322				73				115				35				60
				Total		W	324			W	698			W	140			W	224			W	84			W	152
Delinquency ratios:(8)
	From 1 day to 1 month						7.11	%			10.22	%			3.37	%			4.04	%			2.53	%			4.04	%
	Over 1 month:
		From 1 month to 3 months					3.29	%			4.08	%			1.76	%			2.63	%			0.87	%			1.34	%
		From 3 months to 6 months					2.92				4.67				1.91				1.63				0.95				1.30
		Over 6 months(9)					—				—				—				—				—				—
			Sub-total				6.21				8.75				3.67				4.27				1.82				2.64
				Total			13.32	%			18.97	%			7.04	%			8.33	%			4.36	%			6.68	%
Rewritten loans(10)						W	25			W	680			W	9			W	495			W	4			W	269
Gross charge-offs						W	290			W	1,304			W	223			W	649			W	94			W	227
Recoveries							32				58				20				35				25				47
	Net charge-offs					W	258			W	1,246			W	203			W	614			W	69			W	180
Gross charge-off ratio(11)							13.11	%			26.31	%			10.20	%			19.74	%			4.92	%			8.66	%
Net charge-off ratio(12)							11.66	%			25.14	%			9.29	%			18.67	%			3.62	%			6.87	%

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	(1)	Represents the credit card business of Chohung Bank, consisting of both BC Card and “Forever” Card, which we acquired in 2003. Effective as of April 3, 2006, the credit card division of Chohung Bank was split off and merged into Shinhan Card.
	(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.
	(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) of Shinhan Card and in March 25, 2000 for certain creditworthy credit card customers of Chohung Bank.
	(4)	Merchant discount fees consist of merchant membership and maintenance fees, charges associated with prepayment by Shinhan Card or Chohung Bank (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)	Includes the unbilled balances of installment purchases.
	(8)	Represents the ratio of delinquent balances to outstanding balances for the year.
	(9)	Our charge-off policy for Shinhan Card (and Chohung Bank prior to the split-merger of its credit card division into Shinhan Card) has been to charge off all credit card balances which are 180 days past due.

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

	Supervisory Statistical Information prepared in accordance with Korean GAAP

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	Recent Regulatory Changes

	Personal Workout and Debt Forgiveness Program

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	Treasury and Securities Investment

	•	treasury;
	•	securities investment and trading;
	•	derivatives trading; and
	•	international business.

	Recent Regulatory Changes

	•	A private equity fund is a limited partnership company that is incorporated in accordance with the Korean Commercial Code, which has not less than one general partner and not less than one limited partner.
	•	The minimum value of the equity investment by limited partners is W1 billion for an individual investor or W2 billion for a legal entity.
	•	Details of the private equity fund, such as its objective, name, location, term of existence, information concerning partners, a summary of the operation, shall be registered with the Financial Supervisory Service.

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	•	A private equity fund shall apply 50% of its assets (provided that, if the Fund (as defined under the Framework Act on Fund Management) is a partner and its method of contribution is other than as capital commitment, such contribution shall be excluded from the calculation of assets), within two years after capital injection by the partners, to (1) an investment in excess of 10% of the total number of shares issued by the target company, (2) an investment that makes it possible for the private equity fund to exercise de facto control over major corporate governance matters including appointments and dismissals of officers, (3) an investment in Investment Securities (as defined under the Act on Business of Operating Indirect Investment and Asset) issued by SOC Investment Companies (as defined under the Promotion of Social Overhead Capital Investment Act) or (4) an investment in securities or equities of Investment Purpose Companies (as defined under the Act on Business of Operating Indirect Investment and Asset) under the Act on Business of Operating Indirect Investment and Asset. In addition, a private equity fund shall hold the acquired shares for at least six months following the date of investment.
	•	As a special rule, if a private equity fund meets the above requirements for investment, for ten years from the date on which such requirements are met, (1) the provisions governing holding companies as provided in the Monopoly Regulation and Fair Trade Act shall not apply and (2) the private equity fund shall not be deemed a financial holding company as provided in the Financial Holding Companies Act.

	Treasury

	Securities Investment and Trading

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	Derivatives Trading

	•	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 Euros;
	•	Foreign currency forwards, swaps and options;
	•	Credit derivatives; and
	•	KOSPI 200 indexed equity options.

	International Business

	Other Banking Services

	Trust Account Management Services

	— Overview

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	— Trust Products

	•	Guaranteed Fixed Rate Trust Accounts. Guaranteed fixed rate trust accounts offer customers a fixed-rate of return and guaranteed principal. We receive 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. We maintain two types of guaranteed fixed rate trust accounts: general unspecified money trusts and development money trusts. Korean banks, including Shinhan Bank (and, prior to the merger, Chohung Bank), have been 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, 2003, 2004 and 2005, under Korean GAAP, Shinhan Bank’s development money trusts amounted to W0.2 billion, W0.04 billion and W0.04 billion, respectively, and general unspecified money trusts amounted to an aggregate of W0.3 billion, W0.2 billion and W0.2 billion, respectively. As of December 31, 2005, under Korean GAAP, Chohung Bank’s development trusts had no outstanding balance and general unspecified money trusts amounted to an aggregate of W9.1 billion. See Note 35 of our consolidated financial statements in “Item 18. Financial Statements — Notes to consolidated financial statements of Shinhan Financial Group”.
	•	Variable Rate Trust Accounts. Variable rate trust accounts are trust accounts for which we do 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, we are entitled to receive fixed rate of trust fees. We also receive fees 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 fees from early termination.

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	— Distribution Channels and Marketing

	— Recent Regulatory Developments

	Securities Brokerage Services

	Overview

	Recent Regulatory Changes

	Products and Services

	•	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 2005, revenues generated by the Retail Business Division represented approximately 58.8% of total revenues of our Securities Brokerage Services in 2005. The Retail Business Division earns fees by managing client assets as well as commissions as a broker for our clients in the purchase and sale of securities. In addition, we generate net interest revenue by financing customers’ securities 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 our institutional and international customers. In addition, through our research center with more than 50 research analysts, we produce equity, bonds and derivatives research to serve both institutional and international investor clients.

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	•	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 our corporate customers.

	Other Services

	Leasing and Equipment Financing

	Investment Trust Management Services

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	Regional Banking Services

	Investment Banking and Advisory Services

	Bancassurance

	Life Insurance

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	Loan Collection and Credit Reporting

	Internet Portal Financial Services

	•	building a customer-oriented system to provide customers with diversified and customized financial services;
	•	establishing a flexible platform which can quickly adapt to new financial products and services;
	•	introducing a group-wide strategic enterprise management system designed to facilitate swift managerial response;

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	•	empowering the sales operation by a group-wide integrated enterprise data warehousing system and a group-wide integrated customer relationship management system, which are designed to provide us with comprehensive customer information, including transaction history, and thereby allow us to identify potential marketing and cross-marketing opportunities;
	•	further upgrading our information system in respect of the New Basel Capital Accord (Basel II), the initial layout for which was completed in March 2006;
	•	upgrading our information reporting system to enable us to monitor our internal control and to test its effectiveness and to enable us to comply with Section 404 of the Sarbanes-Oxley Act; and
	•	developing IT functions to improve comprehensive back office functions, including deposit taking, lending and foreign exchange activities, at the branch office level.

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	Loan Types

			As of December 31,
			2001				2002				2003				2004				2005
			(In billions of Won)
Corporate
	Commercial and industrial(1)		W	13,459			W	15,800			W	35,617			W	35,653			W	35,728
	Other commercial(2)			6,748				9,352				17,378				17,988				21,409
	Lease financing			598				636				1,091				981				754
Total — Corporate				20,805				25,788				54,086				54,622				57,891
Consumer
	Mortgages and home equity			7,253				11,539				20,517				22,180				25,840
	Other consumer(3)			3,537				4,962				14,580				15,546				17,875
	Credit cards			2,070				2,763				6,112				4,732				4,242
Total — Consumer				12,860				19,264				41,209				42,458				47,957
	Total gross loans(4)		W	33,665			W	45,052			W	95,295			W	97,080			W	105,848

(1)	Consists primarily of working capital loans, general purpose loans, bills purchased, trade-related notes and inter-bank loans.
(2)	Consists primarily of privately placed bonds, credit facility drawdowns and purchases of commercial paper or notes at a discount from its customers with recourse.
(3)	Consists of general unsecured loans and loans secured by collateral other than housing to retail customers.
(4)	As of December 31, 2003, 2004 and 2005, approximately 71.9%, 89.4% and 90.6% of our total gross loans, respectively, were Won-denominated.

	Loan Concentrations

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	Twenty Largest Exposures by Borrower

																											Amounts of
																											Impaired
																											Loans and
			Loans in				Loans in												Guarantees								Guarantees
			Won				Foreign				Equity				Debt				and								and
Company			Currency				Currency				Securities				Securities				Acceptances				Total Exposure				Acceptances
			(In billions of Won)
The Bank of Korea			W	—			W	—			W	—			W	6,100			W	—			W	6,100			W	—
Ministry of Finance and Economy				—				—				—				4,501				—				4,501				—
Korea Deposit Insurance Corporation				33				—				—				3,805				—				3,838				—
Korea Development Bank				—				—				—				1,137				—				1,137				—
Kookmin Bank				46				—				13				732				—				791				—
Samsung Electronics				—				584				180				—				22				786				—
Military Mutual Aid Association				691				—				—				—				—				691				—
SK Networks(1)				253				73				240				7				97				670				424
Industrial Bank of Korea				—				—				2				668				—				670				—
Samsung Card				395				20				—				194				5				614				—
Kia Motors				49				368				1				103				34				555				—
Korea Highway Corporation				—				—				—				551				—				551				—
Woori Bank				1				4				1				538				—				544				—
Korea Asset Management Corporation				—				—				14				510				—				524				—
Korea Exchange Bank				—				—				3				467				—				470				—
Hana Bank				—				10				—				416				—				426				—
Hyundai Motors				21				282				20				—				94				417				—
SK Corporation				69				72				132				43				82				398				—
National Agricultural Cooperative Federation				—				—				21				368				—				389				—
LG Electronics				—				331				7				24				12				374				—
	Total		W	1,558			W	1,744			W	634			W	20,164			W	346			W	24,446			W	424

(1)	Includes its remaining offshore subsidiaries, SK Networks Hong Kong and SK Networks Europe.

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	Exposure to Chaebols

																											Amounts of
																											Impaired
																											Loans and
			Loans in				Loans in												Guarantees								Guarantees
			Won				Foreign				Equity				Debt				and				Total				and
Chaebol			Currency				Currency				Securities				Securities				Acceptances				Exposure				Acceptances
			(In billions of Won)
Samsung			W	506			W	970			W	357			W	218			W	191			W	2,242			W	—
Hyundai Motors				576				826				25				240				251				1,918				—
SK				482				255				406				87				230				1,460				424
LG				229				696				52				55				120				1,152				—
Lotte				195				43				1				217				117				573				—
Doosan				159				47				3				—				202				411				—
Hyundai Heavy Industries				1				24				1				—				340				366				—
LS				39				52				2				5				263				361				—
Hanhwa				132				40				9				20				78				279				—
Hyosung				63				108				—				48				43				262				—
	Total		W	2,382			W	3,061			W	856			W	890			W	1,835			W	9,024			W	424

	Exposure to LG Card

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	Exposures to the Credit Card Industry

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							Securities
							Issued
							Through
							Asset-
							Backed								Loans in				Guarantees				Loans in
			Debt				Securiti-				Equity				Won				and				Foreign
Company			Securities				zation(1)				Securities				Currency				Acceptances				Currency				Total
			(In billions of Won)
Samsung Card(2)			W	194			W	281			W	—			W	395			W	5			W	20			W	895
LG Card				2				31				195				136				—				—				364
Hyundai Card				—				150				—				20				—				—				170
Lotte Card				129				—				—				19				—				—				148
KDB Capital(3)				—				—				—				20				—				—				20
	Total		W	325			W	462			W	195			W	590			W	5			W	20			W	1,597

(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)	Samsung Card recorded net loss of W1,301 billion in 2005, despite a turnaround beginning in the second half of 2005. In the first quarter of 2006, Samsung Card recorded net income of W76 billion.
(3)	KDB Capital is a subsidiary of Korea Development Bank, which is owned and controlled by the Korean government.

	Exposures to SK Group Companies

	•	the purchase by SK Networks of approximately US$540 million of the US$563 million of total indebtedness of its overseas subsidiaries held by non-Korean institutions in exchange for 43% of the

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		principal amount in promissory notes and 5% of the principal amount in the form of bonds with warrants;
	•	the purchase or inclusion in the restructuring plan of SK Networks of all of the approximately US$126 million of indebtedness of its overseas subsidiaries held by Korean financial institutions; and
	•	the entering into a Memorandum of Understanding on the Corporate Restructuring Implementation, or Memorandum, in respect of the restructuring of the approximately US$2 billion of indebtedness to SK Networks.

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																											Amounts of
																											Impaired
																											Loans and
			Loans in				Loans in												Guarantees								Guarantees
			Won				Foreign				Equity				Debt				and				Total				and
Company			Currency				Currency				Securities				Securities				Acceptances				Exposure				Acceptances
			(In billions of Won)
SK Networks			W	253			W	73			W	240			W	7			W	97			W	670			W	424
SK Corporation				69				72				132				43				82				398				—
K Power Co., Ltd.				59				—				—				—				—				59				—
SK Telecom Co., Ltd.				1				—				33				20				—				54				—
SK Chemical				10				18				—				3				21				52				—
SK C&C Co., Ltd.				40				—				—				—				2				42				—
SKC Co., Ltd.				5				11				—				15				2				33				—
SK Gas Co., Ltd (Kim Se Kwang)				3				24				—				—				—				27				—
SK Gas Co., Ltd.				—				27				—				—				—				27				—
SK Shipping				—				19				—				—				—				19				—
Walkerhill				6				—				—				—				8				14				—
SK Construction				—				—				—				—				13				13				—
Choongnam City Gas. Co., Ltd.				7				—				—				—				—				7				—
Daehan City Gas Co., Ltd.				7				—				—				—				—				7				—
Pohang City Gas				6				—				—				—				—				6				—
Pusan City Gas				5				—				—				—				—				5				—
Dong Shin Pharm, Co., Ltd.				—				3				—				—				1				4				—
Global Shipbuilding SA				—				4				—				—				—				4				—
Champion Shipbuilding SA				—				4				—				—				—				4				—
SK Telesys				—				1				—				—				2				3				—
Chonnam City Gas Co., Ltd.				3				—				—				—				—				3				—
InnoAce Co., Ltd.				2				—				—				—				—				2				—
In2gen				2				—				—				—				—				2				—
SK Sitech				—				—				—				—				2				2				—
Infosec Co., Ltd.				1				—				—				—				—				1				—
Kangwon Gas				1				—				—				—				—				1				—
	Total		W	480			W	256			W	405			W	88			W	230			W	1,459			W	424

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	Exposures to Ssangyong Group Companies

																											Amounts of
																											Impaired
																											Loans and
			Loans in				Loans in												Guarantees								Guarantees
			Won				Foreign				Equity				Debt				and				Total				and
Company (1)			Currency				Currency				Securities				Securities				Acceptances				Exposure				Acceptances
			(In billions of Won)
Ssangyong Corporation			W	3			W	91			W	49			W	—			W	78			W	221			W	172
Ssangyong Cement Industrial				87				—				87				—				—				174				—
Ssangyong Engineering & Construction				—				4				6				14				5				29				—
Ssangyong Resources Development Co., Ltd.				2				—				—				—				—				2				—
	Total		W	92			W	95			W	142			W	14			W	83			W	426			W	172

(1)	Includes domestic and overseas subsidiaries of each company.

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	Loan Concentration by Industry

							Percentage of Total
Industry			Aggregate Loan Balance				Corporate Loan Balance
			(In billions of Won)				(Percentages)
Manufacturing			W	22,823				39.42	%
Retail and wholesale				8,271				14.29
Real estate, leasing, and service				9,434				16.30
Construction				3,182				5.50
Hotel and leisure(1)				2,114				3.65
Finance and insurance				3,615				6.24
Transportation, storage and communication				2,511				4.34
Other service				5,854				10.11
Other				87				0.15
	Total		W	57,891				100.00	%

(1)	Consists principally of hotels, motels and restaurants.

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	Loan Concentration by Size of Loans

				Aggregate				Percentage of Total
				Loan Balance				Loan Balance
				(In billions				(Percentages)
				of Won)
Commercial and industrial
	Up to W10 million			W	116				0.11	%
	Over W10 million to W50 million				1,756				1.66
	Over W50 million to W100 million				2,220				2.10
	Over W100 million to W500 million				10,045				9.48
	Over W500 million to W1 billion				4,351				4.11
	Over W1 billion to W5 billion				8,357				7.90
	Over W5 billion to W10 billion				2,899				2.74
	Over W10 billion to W50 billion				4,538				4.29
	Over W50 billion to W100 billion				1,136				1.07
	Over W100 billion				310				0.29
		Sub-total		W	35,728				33.75	%
Other commercial
	Up to W10 million			W	64				0.06	%
	Over W10 million to W50 million				481				0.45
	Over W50 million to W100 million				546				0.52
	Over W100 million to W500 million				3,077				2.91
	Over W500 million to W1 billion				1,923				1.82
	Over W1 billion to W5 billion				5,125				4.84
	Over W5 billion to W10 billion				2,473				2.34
	Over W10 billion to W50 billion				5,668				5.36
	Over W50 billion to W100 billion				1,032				0.97
	Over W100 billion				1,020				0.96
		Sub-total		W	21,409				20.23	%
Lease financing
	Up to W10 million			W	2				—
	Over W10 million to W50 million				15				0.01	%
	Over W50 million to W100 million				18				0.02
	Over W100 million to W500 million				100				0.09
	Over W500 million to W1 billion				50				0.05
	Over W1 billion to W5 billion				214				0.20
	Over W5 billion to W10 billion				125				0.12
	Over W10 billion to W50 billion				230				0.22
	Over W50 billion to W100 billion				—				—
	Over W100 billion				—				—
		Sub-total		W	754				0.71	%

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					Aggregate				Percentage of Total
					Loan Balance				Loan Balance
					(In billions				(Percentages)
					of Won)
Mortgage and home equity
	Up to W10 million				W	391				0.37	%
	Over W10 million to W50 million					6,817				6.44
	Over W50 million to W100 million					7,662				7.24
	Over W100 million to W500 million					10,222				9.65
	Over W500 million to W1 billion					633				0.60
	Over W1 billion to W5 billion					115				0.11
	Over W5 billion to W10 billion					—				—
	Over W10 billion to W50 billion					—				—
	Over W50 billion to W100 billion					—				—
	Over W100 billion					—				—
		Sub-total			W	25,840				24.41	%
Other consumer
	Up to W10 million				W	3,507				3.31	%
	Over W10 million to W50 million					5,088				4.81
	5.00					2,598				2.45
	Over W100 million to W500 million					5,109				4.84
	Over W500 million to W1 billion					841				0.79
	Over W1 billion to W5 billion					686				0.65
	Over W5 billion to W10 billion					46				0.04
	Over W10 billion to W50 billion					0				0.00
	Over W50 billion					0				0.00
	Over W100 billion					0				0.00
		Sub-total			W	17,875				16.89	%
Credit cards
	Up to W10 million				W	2,998				2.84	%
	Over W10 million to W50 million					995				0.94
	Over W50 million to W100 million					89				0.08
	Over W100 million to W500 million					120				0.11
	Over W500 million to W1 billion					27				0.03
	Over W1 billion to W5 billion					13				0.01
	Over W5 billion to W10 billion					0				0.00
	Over W10 billion to W50 billion					0				0.00
	Over W50 billion to W100 billion					0				0.00
	Over W100 billion					0				0.00
		Sub-total			W	4,242				4.01	%
			Total		W	105,848				100.00	%

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	Maturity Analysis

				As of December 31, 2005
								Over 1 Year but
				1 Year or				Not More Than				Over
				Less				5 Years				5 Years				Total
				(In billions of Won)
Corporate:
	Commercial and industrial			W	30,361			W	4,666			W	701			W	35,728
	Other commercial				14,280				6,099				1,030				21,409
	Lease financing				422				325				7				754
	Total corporate			W	45,063			W	11,090			W	1,738			W	57,891
Consumer:
	Mortgage and home equity			W	9,885			W	4,648			W	11,307			W	25,840
	Other consumer				12,959				3,830				1,086				17,875
	Credit cards				4,068				162				12				4,242
	Total consumer			W	26,912			W	8,640			W	12,405			W	47,957
		Total gross loans		W	71,975			W	19,730			W	14,143			W	105,848

	Interest Rate Sensitivity

As of December 31, 2005

Due Within

Due After

1 Year

1 Year

Total

(In billions of Won)

Fixed rate loans(1)

W

34,605

W

15,892

W

50,497

Variable rate loans(2)

37,370

17,981

55,351

Total gross loans

W

71,975

W

33,873

W

105,848

(1)	Fixed rate loans are loans for which the interest rate is fixed for the entire term. Includes W18,693 billion of loans due within one year and W11,088 billion of loans due after one year, which are priced based on one or more reference rates which may vary at our discretion. However, it is not our 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.

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	Nonaccrual Loans and Past Due Accruing Loans

				As of December 31,
				2001				2002				2003				2004				2005
				(In billions of Won)
Loans accounted for on a nonaccrual basis
	Corporate			W	834			W	741			W	1,536			W	1,681			W	1,475
	Consumer				78				111				580				479				367
	Credit cards				234				358				1,016				294				210
		Sub-total			1,146				1,210				3,132				2,454				2,052
Accruing loans which are contractually past due one day or more as to principal or interest
	Corporate(1)				29				32				196				55				32
	Consumer(2)				32				38				27				17				32
	Credit cards				—				—				—				76				3
		Sub-total			61				70				223				148				67
Total				W	1,207			W	1,280			W	3,355			W	2,602			W	2,119

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(1)	Includes accruing loans which are contractually past due 90 days or more in the amount of W2 billion, W113 billion, W12 billion and W5 billion of corporate loans as of December 31, 2002, 2003, 2004 and 2005, respectively.
(2)	Includes accruing loans which are contractually past due 90 days or more in the amount of W10 billion, W7 billion, W6 billion and W7 billion of consumer loans as of December 31, 2002, 2003, 2004 and 2005, respectively.

	Troubled Debt Restructurings

		As of December 31,
		2001				2002				2003				2004				2005
		(In billions of Won)
Loans not included in “nonaccrual and past due loans” which are classified as “troubled debt restructurings”		W	360			W	145			W	1,179			W	916			W	735

	Credit Exposures to Companies in Workout, Court Receivership and Composition

	Workout

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	Court Receivership and Composition

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							Loans in												Guarantees
			Loans in				Foreign				Equity				Debt				and				Total
Company			Won Currency				Currency				Securities				Securities				Acceptances				Exposure(1)
			(In billions of Won)
SK Networks			W	253			W	73			W	240			W	7			W	97			W	670
LG Card				136				—				195				2				—				333
Ssangyong Corporation(2)				3				91				49				—				78				221
Hyundai Engineering & Construction(3)				—				8				56				32				62				158
Inchon Oil Refinery				98				—				5				—				—				103
Daewoo Electronics Corporation				38				—				28				—				—				66
Saehan Industries, Inc.				27				5				9				—				5				46
Hankook Ilbo				43				—				—				—				—				43
Daewoo Electronics Co., Ltd.				33				—				—				—				—				33
Dongbang Textile & Mart Co., Ltd.				3				10				—				—				13				26
	Total		W	634			W	187			W	582			W	41			W	255			W	1,699

(1)	Only includes the portion of total exposure identified by us as troubled debt restructuring and excludes amount of loans or other exposures to the same borrower that are not subject to workouts, composition or court receivership.
(2)	The sale of 8,374,236 shares, or 75.00%, of Ssangyong Corporation by the eight members of the creditor group to Morgan Stanley Private Equity Holdings AB for W8,091.31 per share, or W68 billion in the aggregate, was consummated in April 2006. As a result, in April 2006, Ssangyong Corporation graduated from the workout program.
(3)	In May 2006, Korea Exchange Bank, the lead creditor of Hyundai Engineering & Construction, announced Hyundai Engineering & Construction’s graduation from its workout program. It is expected that the shares currently held by the creditors group will be up for sale in the second half of 2006.

	Potential Problem Loans

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	Provisioning Policy

	Loan Classifications

Loan Classification		Loan Characteristics
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 made 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 made 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.

	Corporate Loans

	•	loans classified as “substandard” or below according to the asset classification guidelines of the 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.

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	— Loans individually identified for review and considered impaired

	— Loans collectively evaluated for impairment

	•	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; and
	•	Changes in lending policies and procedures, including underwriting standards and collection, charge-offs, and recovery practices.

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		As of December 31,
		2003				2004				2005
		(Percentages)
Normal			2.35	%			1.87	%			2.42	%
Precautionary			23.72				8.25				7.92
Substandard			33.01				27.79				22.41
Doubtful			68.63				83.15				47.60
Estimated loss			90.11				92.58				87.19

	— Loans not specifically identified as impaired

	Leases

	Consumer loans

	•	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

	•	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; and
	•	The effect of external factors such as regulatory or government requirements.

	— Credit Cards

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	•	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).

	Loan Aging Schedule

										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)
2001		W	32,648				96.98			W	487				1.45			W	144				0.43			W	386				1.14			W	33,665
2002			43,962				97.58				572				1.27				121				0.27				397				0.88				45,052
2003			91,940				96.48				1,511				1.59				714				0.75				1,130				1.18				95,295
2004			94,480				97.32				855				0.88				431				0.45				1,314				1.35				97,080
2005			103,601				97.87				652				0.62				243				0.23				1,352				1.28				105,848

	Non-Performing Loans

		As of December 31,
		2001				2002				2003				2004				2005
		(In billions of Won, except percentages)
Total non-performing loans		W	530			W	518			W	1,844			W	1,750			W	1,594
As a percentage of total loans			1.57	%			1.15	%			1.94	%			1.80	%			1.51	%

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	Analysis of Non-Performing Loans

				As of December 31,
				2001												2002												2003												2004												2005
												Ratio of												Ratio of												Ratio of												Ratio of												Ratio of
								Non-				Non-								Non-				Non-								Non-				Non-								Non-				Non-								Non-				Non-
				Total				Performing				Performing				Total				Performing				Performing				Total				Performing				Performing				Total				Performing				Performing				Total				Performing				Performing
				Loans				Loans				Loans				Loans				Loans				Loans				Loans				Loans				Loans				Loans				Loans				Loans				Loans				Loans				Loans
				(In billions of Won, except percentages)
Corporate
	Commercial and industrial			W	13,459			W	342				2.54	%		W	15,800			W	211				1.34	%		W	35,617			W	739				2.07	%		W	35,653			W	898				2.52	%		W	35,728			W	868				2.43	%
	Other commercial				6,748				125				1.85				9,352				205				2.19				17,378				558				3.21				17,988				468				2.60				21,409				387				1.81
	Lease financing				598				3				0.50				636				1				0.16				1,091				8				0.73				981				19				1.94				754				8				1.06
		Total corporate			20,805				470				2.26				25,788				417				1.62				54,086				1,305				2.41				54,622				1,385				2.54				57,891				1,263				2.18
Consumer
	Mortgage and home Equity				7,253				28				0.39				11,539				34				0.29				20,517				133				0.65				22,180				126				0.57				25,840				111				0.43
	Other consumer				3,537				16				0.45				4,962				19				0.38				14,580				232				1.59				15,546				155				1.00				17,875				172				0.96
	Credit cards				2,070				16				0.77				2,763				48				1.74				6,112				174				2.85				4,732				84				1.78				4,242				48				1.13
		Total consumer			12,860				60				0.47				19,264				101				0.52				41,209				539				1.31				42,458				365				0.86				47,957				331				0.69
Total				W	33,665			W	518				1.57	%		W	45,052			W	518				1.15	%		W	95,295			W	1,844				1.94	%		W	97,080			W	1,750				1.80	%		W	105,848			W	1,594				1.51	%

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	Top Twenty Non-Performing Loans

				As of December 31, 2005
						Gross Principal				Allowance for Loan
				Industry		Outstanding				Losses
				(In billions of Won)
1		Borrower A		Manufacturing		W	65				—
2		Borrower B		Manufacturing			54			W	54
3		Borrower C		Manufacturing			36				25
4		Borrower D		Manufacturing			32				33
5		Borrower E		Manufacturing			27				12
6		Borrower F		Real estate, leasing and service			16				—
7		Borrower G		Manufacturing			12				—
8		Borrower H		Finance and insurance			12				4
9		Borrower I		Hotel and leisure			12				7
10		Borrower J		Other service			11				—
11		Borrower K		Construction			10				1
12		Borrower L		Real estate, leasing and service			10				—
13		Borrower M		Real estate, leasing and service			9				7
14		Borrower N		Manufacturing			8				—
15		Borrower O		Manufacturing			7				7
16		Borrower P		Transportation, storage and communication			6				1
17		Borrower Q		Manufacturing			6				6
18		Borrower R		Manufacturing			6				6
19		Borrower S		Retail and wholesale			6				—
20		Borrower T		Manufacturing			6				—
						W	351			W	163

	Non-Performing Loan Strategy

	•	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

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	•	on a limited basis, identifying commercial loans subject to normalization efforts based on the cash-flow situation of the borrower.

	•	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.

	•	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 Shinhan Bank 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

				As of December 31,
				2001								2002								2003								2004								2005
				(In billions of Won, except percentages)
Corporate
	Commercial and Industrial			W	323				44.86	%		W	341				34.24	%		W	1,383				38.09	%		W	1,065				46.08	%		W	753				49.80	%
	Other commercial				275				38.19				365				36.65				626				17.24				410				17.74				305				20.17
	Lease financing				35				4.86				22				2.21				45				1.24				24				1.04				16				1.06
		Total corporate			633				87.91				728				73.10				2,054				56.57				1,499				64.86				1,074				71.03
Consumer
	Mortgages and home equity				9				1.25				30				3.01				53				1.46				36				1.56				19				1.26
	Other consumer				22				3.06				59				5.92				659				18.15				368				15.92				183				12.10
	Credit cards				56				7.78				179				17.97				865				23.82				408				17.66				236				15.61
		Total consumer			87				12.09				268				26.90				1,577				43.43				812				35.14				438				28.97
Total allowance for loan losses				W	720				100.00	%		W	996				100.00	%		W	3,631				100.00	%		W	2,311				100.00	%		W	1,512				100.00	%

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	Analysis of the Allowance for Loan Losses

					2001				2002				2003				2004				2005
					(In billions of Won, except percentages)
Balance at the beginning of the period					W	828			W	720			W	996			W	3,631			W	2,311
Amounts charged against income						411				236				1,011				195				(255	)
Allowance relating to loans repurchased from the Korea Asset Management Corporation						45				65				32				2				—
Gross charge-offs:
	Corporate:
		Commercial and industrial				379				105				255				465				297
		Other commercial				345				22				223				26				18
		Lease financing				5				10				6				—				—
	Consumer:
		Mortgage and home equity				2				2				12				18				19
		Other consumer				9				17				135				441				296
		Credit cards				39				60				765				872				316
			Total gross charge-offs			(779	)			(216	)			(1,396	)			(1,822	)			(946	)
Recoveries:
	Corporate:
		Commercial and industrial				60				53				82				105				69
		Other commercial				58				21				73				121				217
		Lease financing				1				2				—				2				4
	Consumer:
		Mortgage and home equity				—				—				1				1				3
		Other consumer				2				1				23				22				34
		Credit cards				7				17				69				56				72
			Total recoveries			128				94				248				307				399
Net charge-offs						(651	)			(122	)			(1,148	)			(1,515	)			(547	)
Acquisition of Chohung Bank						—				20				2,740				—				—
Acquisition of Jeju Bank						—				77				2,740				—				—
Acquisition of Good Morning Securities						64				—				2,740				—				—
Acquisition of Shinhan Securities						23				—				2,740				—				—
Acquisition of Shinhan Life Insurance						—				—				—				—				3
Balance at the end of the period					W	720			W	996			W	3,631			W	2,311			W	1,512
Ratio of net charge-offs during the period to average loans outstanding during the period						2.07	%			0.30	%			1.74	%			1.52	%			0.53	%

	Loan Charge-Offs

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	Basic Principles

	Loans To Be Charged-Off

	•	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

	Treatment of Loans Charged-Off

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	Treatment of Collateral

	U.S. GAAP Financial Statement Presentation

	Investment Policy

•	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.

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	Book Value and Market Value

				As of December 31,								As of December 31,								As of December 31,
				2003								2004								2005
				Book				Market				Book				Market				Book				Market
				Value				Value				Value				Value				Value				Value
				(In billions of Won)
Available-for-sale securities
Marketable equity securities				W	435			W	435			W	507			W	507			W	1,978			W	1,978
Debt securities:
	Korean treasury and governmental agencies				8,982				8,982				8,835				8,835				8,299				8,299
	Financial institutions				5,998				5,998				5,675				5,675				9,255				9,255
	Corporations				1,552				1,552				1,292				1,292				1,952				1,952
	Foreign government				13				13				57				57				50				50
	Mortgage-backed and asset-backed securities				1,119				1,119				1,742				1,742				946				946
Total — Available-for-sale					18,099				18,099				18,108				18,108				22,480				22,480
Held-to-maturity securities
Debt securities:
	Korean treasury and governmental agencies				2,351				2,472				1,662				1,814				1,686				1,706
	Financial institutions				553				574				1,219				1,268				1,211				1,208
	Corporations				365				376				218				225				66				66
	Mortgage-backed and asset-backed securities				336				339				—				—				—				—
Total — Held-to-maturity					3,605				3,761				3,099				3,307				2,963				2,980
Trading Securities
Marketable equity securities					279				279				312				312				465				465
Debt securities:
	Korean treasury and governmental agencies				1,152				1,152				1,995				1,995				493				493
	Financial institutions				1,013				1,013				1,322				1,322				1,145				1,145
	Corporations				369				369				965				965				1,307				1,307
	Mortgage-backed and asset-backed securities				40				40				20				20				140				140
Other trading assets(1)					4				4				25				25				23				23
		Total — Trading			2,857				2,857				4,639				4,639				3,573				3,573
Total securities				W	24,561			W	24,717			W	25,846			W	26,054			W	29,016			W	29,033

(1)	Consists of commodity indexed deposits.

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	Maturity Analysis

											Over 1 Year								Over 5 Years																Securities Not Due
			1 Year or Less								Through 5 Years								Through 10 Years								Over 10 Years								In a Single Maturity(1)								Total
							Weighted-								Weighted-								Weighted-								Weighted-								Weighted-								Weighted-
			Carrying				Average				Carrying				Average				Carrying				Average				Carrying				Average				Carrying				Average				Carrying				Average
			Amount				Yield(2)				Amount				Yield(2)				Amount				Yield(2)				Amount				Yield(2)				Amount				Yield(2)				Amount				Yield(2)
			(In billions of Won, except percentages)
Available-for-sale securities:
Korean treasury and governmental agencies			W	1,822				4.60	%		W	4,391				4.36	%		W	326				4.16	%		W	—				—			W	1,760				6.24	%		W	8,299				4.80	%
Financial institutions				5,563				4.06				3,329				4.44				227				6.46				60				6.17	%			76				4.93				9,255				4.28
Corporations				552				4.93				1,277				5.29				96				3.92				27				5.94				—				—				1,952				5.13
Foreign government				18				2.70				23				5.14				4				6.38				5				4.94				—				—				50				4.35
Mortgage-backed and asset-backed securities				143				5.04				523				5.11				280				5.21				—				—				—				—				946				5.13
	Total — Available for sale			8,098				4.26	%			9,543				4.55	%			933				5.01	%			92				6.04	%			1,836				6.19	%			20,502				4.61	%
Held-to-maturity securities:
Korean treasury and governmental agencies				338				6.72	%			1,318				5.71	%			30				4.01	%			—				—				—				—				1,686				5.88	%
Financial institutions				373				4.85				821				5.17				17				5.36				—				—				—				—				1,211				5.08
Corporations				11				6.07				55				5.56				—				—				—				—				—				—				66				5.64
	Total — Held-to- maturity			722				5.74	%			2,194				5.51	%			47				4.50	%			—				—				—				—				2,963				5.55	%
Trading securities:
Korean treasury and governmental agencies				72				4.41	%			362				4.15	%			8				3.90	%			1				4.79	%			50				5.05	%			493				4.27	%
Financial institutions				950				4.13				195				4.61				—				—				—				—				—				—				1,145				4.21
Corporations				417				4.35				890				5.42				—				—				—				—				—				—				1,307				4.99
Mortgage-backed and asset-backed securities				140				4.09				—				—				—				—				—				—				—				—				140				4.09
	Total — Trading			1,579				4.16	%			1,447				4.59	%			8				3.80	%			1				4.79	%			50				5.05	%			3,085				4.33	%
Total Securities			W	10,399							W	13,184							W	988							W	93							W	1,886							W	26,550

(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.

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	Concentrations of Risk

		As of December 31, 2005
		Book Value				Market Value
		(In billions of Won)
Name of issuer:
Korean Government		W	4,682			W	4,684
Korea Deposit Insurance Corporation			3,805				3,815
Bank of Korea			6,100				6,100
Korea Development Bank			1,137				1,137
Total		W	15,724			W	15,736

				As of December 31,
				2003				2004				2005
				(In billions of Won)
Commitments to extend credit:
	Corporate			W	32,922			W	39,323			W	46,336
	Credit cards(1)				17,207				23,606				16,080
	Consumer				3,752				5,961				5,863
Commercial letters of credit(2)					3,075				3,364				2,960
Standby letters of credit, other financial and performance guarantees and liquidity facilities to SPEs					4,686				3,407				4,604
		Total		W	61,642			W	75,661			W	75,843

(1)	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.
(2)	These are generally short-term and collateralized by the underlying shipments of goods to which they relate.

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				As of December 31, 2005
				Underlying Notional				Estimated Fair Value				Estimated Fair Value
				Amount(1)				Assets				Liabilities
				(In billions of won)
Trading:
Foreign exchange contracts:
	Forward contracts			W	32,420			W	341			W	376
	Futures				140				—				—
	Options purchased				4,067				19				26
	Options written				2,810				12				23
		Sub-total			39,437				372				425
Interest rate contracts:
	Swaps(2)				29,468				173				238
	Futures				98				—				—
	Options purchased				10				—				—
	Options written				—				—				—
		Sub-total			29,576				173				238
Cross currency swaps					11,336				310				268

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					As of December 31, 2005
					Underlying Notional				Estimated Fair Value				Estimated Fair Value
					Amount(1)				Assets				Liabilities
					(In billions of won)
Equity contracts:
	Futures					312				—				—
	Option purchased					935				68				—
	Option written					1,005								72
		Sub-total				2,252				68				72
Other derivatives:
	Option purchased					103				11				—
	Option written					103				—				11
		Sub-total				206				11				11
Credit derivatives						66				—				—
			Total		W	82,873			W	934			W	1,014
Hedge accounting:
	Interest rate swaps					1,041				1				13
		Sub-total				1,041				1				13
Nontrading that do not qualify for hedge accounting
	Interest rate swaps					5,587				13				100
	Cross currency swaps					777				2				11
			Total		W	6,364			W	15			W	111

(1)	Notional amounts in foreign currencies were converted into Won at prevailing exchange rates as of December 31, 2005.
(2)	While we engage in derivatives trading activities to hedge the interest rate risk exposure that arise from our 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 and 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 W6,364 billion, W15 billion and W111 billion, respectively.

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	Deposits

				2003								2004								2005
				Average				Average Rate				Average				Average Rate				Average				Average Rate
				Balance(1)				Paid				Balance(1)				Paid				Balance(1)				Paid
				(In billions of Won, except percentages)
Interest-bearing deposits:
	Interest-bearing demand deposits			W	2,653				1.39	%		W	7,880				1.33	%		W	6,594				1.90	%
	Savings deposits				15,922				1.46				21,987				1.24				26,100				0.96
	Certificates of deposit				4,954				4.44				6,735				4.08				8,838				3.81
	Other time deposits				27,776				4.19				41,863				3.83				39,031				3.69
	Mutual installment deposits(2)				2,109				5.36				2,487				4.54				1,997				4.16
		Total interest-bearing deposits(3)		W	53,414				3.31	%		W	80,952				2.93	%		W	82,560				2.71	%

(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 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.

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	Certificates of Deposit and Other Time Deposits

			As of December 31, 2005
											Mutual
			Certificates				Other Time				Installment
			of Deposit				Deposits				Deposits				Total
			(In billions of Won)
Maturing within three months				3,775				4,971				83				8,829
After three but within six months				2,247				2,526				62				4,835
After six but within 12 months				2,947				11,402				117				14,466
After 12 months				1,261				1,939				135				3,335
	Total			10,230				20,838				397				31,465

	Japanese Yen Deposits and Dispute with the Korean National Tax Service

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	Short-term Borrowings

		2003																				2004																				2005
										Highest																				Highest																				Highest
										Balances at				Weighted																Balances at				Weighted																Balances at				Weighted
						Average				Any				Average				Year-End								Average				Any				Average				Year-End								Average				Any				Average				Year-End
		Balance				Balance				Month-				Interest				Interest				Balance				Balance				Month-				Interest				Interest				Balance				Balance				Month-				Interest				Interest
		Outstanding				Outstanding(1)				End				Rate(2)				Rate				Outstanding				Outstanding(1)				End				Rate(2)				Rate				Outstanding				Outstanding(1)				End				Rate(2)				Rate
		(In billions of Won, except for percentages)
Borrowings from BOK(3)		W	1,964			W	1,122			W	2,669				2.41	%			1.12- 2.50	%		W	1,568			W	1,737			W	2,056				2.32	%			2.00- 2.50	%		W	1,668			W	1,581			W	1,719				1.85%				0.10- 4.65	%
Call money			179				1,803				3,742				3.55	%			0.15- 3.65	%			1,156				3,512				5,238				3.30	%			0.75- 5.00	%			994				2,930				5,648				3.24%				1.90- 6.80	%
Other borrowings(4)			9,061				8,475				11,300				2.04	%			0.05- 10.15	%			8,230				9,685				11,166				2.21	%			0.04- 18.00	%			9,306				10,464				11,945				2.23%				0.10- 9.00	%
		W	11,204			W	11,400			W	17,711				2.82	%						W	10,954			W	14,934			W	18,460				2.48	%						W	11,968			W	14,975			W	19,312				2.39%

(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 currencies and short-term debentures.

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	Overview

	•	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

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	Group Risk Management Committee

	•	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.

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	Group Risk Management Council

	•	changes in risk management policies and strategies for each subsidiary;
	•	matters warranting discussion of risk management at the group level and cooperation among the subsidiaries;
	•	the effect of externalities on the group’s risk; and
	•	other risk management-related matters.

	Credit Risk Management of Shinhan Bank

	•	achieve profit level corresponding to the level of risks involved;
	•	improve asset quality and achieve optimal industrial and rating loan portfolio;
	•	focus on the small- and medium-sized enterprises and markets;
	•	avoid excessive loan concentration to a particular borrower or sector;
	•	focus on borrower’s ability to repay the debt; and
	•	financially support our select customers’ growth.

	•	credit evaluation and approval;
	•	credit review and monitoring; and
	•	credit risk assessment and control.

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	Credit Evaluation and Approval

	— Consumer loans

	— Corporate loans

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	— Loan Approval Process

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Approval Limit of Loan Amount

Category

Approval Body

Grade B-

Grade AAA

1

Branch Manager (Individual Loans)

Unsecured

W100 million or less

W2 billion or less

Secured

W500 million W1 billion or less

W4 billion or less

2

Branch Manager (Corporate loans)

Unsecured

W300 million or less

W3 billion or less

Secured

W2 billion or less

W6 billion or less

3

Branch Manager and Credit Officer

Unsecured

W500 million or less

W5 billion or less

Secured

W3 billion or less

W10 billion or less

4

Credit Officer Committee

Unsecured

W1 billion or less

W10 billion or less

Secured

W5 billion or less

W20 billion or less

5

Senior Credit Officer Committee

Unsecured

W10 billion or less

W30 billion or less

Secured

W15 billion or less

W80 billion or less

6

Credit Review Committee

Unsecured

More than W10 billion

More than W30 billion

Secured

More than W15 billion

More than W80 billion

	Credit Review and Monitoring

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	Credit Risk Assessment and Control

	Credit Card Approval Process of Shinhan Card

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	Market Risk Management of Shinhan Bank

	Market Risk Exposure from Trading Activities

	•	trading activities to realize short-term trading profits in debt and stock markets and foreign exchange markets based on Shinhan Bank’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 Shinhan Bank’s customers and to cover market risk incurred from those trading activities.

	— Interest Rate Risk

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	— Foreign Exchange Risk

			As of December 31,
Currency			2003				2004				2005
			(In millions of US$)
U.S. dollars			US$	4.6			US$	52.3			US$	(2.39	)
Japanese yen				(8.7	)			(1.6	)			(18.36	)
Euro				0.7				0.9				(0.12	)
Others				1.0				(1.7	)			1.29
	Total			(2.4	)			49.9				(19.58	)

	— Equity Risk

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	Management of Market Risk from Trading Activities

			Trading Portfolio VaR for the Year 2005(1)
															As of
			Average				Minimum				Maximum				December 31
			(In billions of Won)
Shinhan Bank:
	Interest rate		W	3.06			W	1.62			W	6.19			W	2.54
	Foreign exchange(2)			0.35				0.12				0.78				0.28
	Equities			4.14				1.38				8.12				1.50
	Less: portfolio diversification(3)			(3.24	)			(1.78	)			(5.14	)			(1.74	)
	Total VaR(4)		W	4.31			W	1.33			W	9.96			W	2.55
Good Morning Shinhan Securities(5):
	Interest rate		W	0.3			W	0.1			W	1.1			W	0.2
	Equities			1.3				0.3				5.0				1.3
	Beneficiary certificates(6)			0.1				0.0				0.1				0.0
	Less: portfolio diversification(3)			(0.4	)			(0.0	)			(1.2	)			(0.5	)
	Total VaR		W	1.3			W	0.4			W	5.0			W	1.0

(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, 2005 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)	The change in market value of Good Morning Shinhan Securities’ trading portfolio was W0.7 billion per day.
(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.

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	•	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.

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	— Hedging and Derivative Market Risk

	•	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 our corporate customers, principally of Shinhan Bank and Good Morning Shinhan Securities, 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 we expect short-swing profits based on its market forecasts; and
	•	trading to hedge our interest rate and foreign currency risk exposure as described above.

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	Market Risk Management for Nontrading Activities

	— Interest Rate Risk

	•	Earnings: interest rate fluctuations have an effect on Shinhan Bank’s net interest income by affecting its interest-sensitive operating income and expenses.
	•	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.

	— 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 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 deterministic 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.

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	•	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

	•	With respect to the maturities and re-pricing dates of Shinhan Bank’s assets, we assume that the maturity of Shinhan Bank’s prime rate-linked loans is the same as that of its fixed-rate loans. We also assume that the debt securities in Shinhan Bank’s trading accounts have maturities of three months. Shinhan Bank excludes equity securities from interest-earning assets.
	•	With respect to the maturities and re-pricing of Shinhan Bank’s liabilities, we assume that money market deposit accounts and “non-core” demand deposits under the Financial Supervisory Commission guidelines have a maturity of three months or less. With respect to “core” demand deposits under the Financial Supervisory Commission guidelines, we assume a maturity of over three years.

			As of December 31, 2005
			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)
Interest-earning assets			W	37,723			W	8,678			W	4,983			W	3,215			W	2,710			W	2,888			W	60,197
	Fixed rates			7,021				2,440				4,188				2,924				2,189				1,760				20,522
	Floating rates			30,671				6,179				727				101				51				68				37,797
	Interest rate swaps			30				60				67				190				470				1,060				1,877
Interest-bearing liabilities			W	25,769			W	6,282			W	10,627			W	6,379			W	2,730			W	7,785			W	59,572
	Fixed liabilities			11,498				5,876				9,511				6,368				2,700				7,785				43,737
	Floating liabilities			12,521				387				1,039				10												13,958
	Interest rate swaps			1,750				20				77								30								1,877
Sensitivity gap				11,953				2,396				(5,645	)			(3,164	)			(20	)			(4,897	)			625
Cumulative gap				11,953				14,350				8,705				5,541				5,521				625
% of total assets				19.9	%			23.8	%			14.5	%			9.2	%			9.2	%			1.0	%

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		As of December 31, 2005
		0-3 Months				3-6 Months				6-12 Months				1-3 Years				Over 3 Years				Total
		(In millions of US$, except percentages)
Interest-earning assets		$	6,970			$	1,279			$	334			$	28			$	278			$	8,888
Interest-bearing Liabilities			6,511				1,512				527				38				208				8,798
Sensitivity gap			458				(233	)			(194	)			(11	)			70				90
Cumulative gap			458				225				31				20				90
% of total assets			5.2	%			2.5	%			0.4	%			0.2	%			1.0	%

	— Duration and Market Value Analysis

		Duration as of
		December 31,
		2005(1)
		(In months)
Interest-earning assets			8.1
Interest-bearing liabilities			13.2
Gap			(5.1	)

		Market Value as of December 31, 2005(1)
		Actual				1% Point Increase				Changes
		(In billions of Won)
Interest-earning assets		W	60,690			W	60,515			W	(175	)
Interest-bearing liabilities			58,578				58,149				(429	)
Gap			2,112				2,366				254

(1)	Includes interest rate swaps entered for the purpose of hedging.

	— Net Interest Income Simulation

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		Simulated Net Interest Income for 2006
		(For Nontrading Won-denominated Bank Accounts)(1)
														Change in Net Interest								Change in Net Interest
		Assumed Interest Rates												Income								Income
														Amount				% Change				Amount				% Change
						1% Point				1% Point				(1% Point				(1% Point				(1% Point				(1% Point
		No Change				Increase				Decrease				Increase)				Increase)				Decrease)				Decrease)
		(In billions of Won, except percentages)
Simulated interest income		W	3,481			W	3,872			W	3,090			W	390				11.2	%		W	(391	)			(11.2	)%
Simulated interest expense			2,104				2,379				1,826				275				13.1				(277	)			(13.2	)
Net interest income			1,378				1,493				1,263				115				8.4				(114	)			(8.3	)

(1)	Includes interest rate swaps for the purpose of hedging.

	— Interest Rate VaRs for Nontrading Assets and Liabilities

VaR for the Year 2005(1)

As of

Average

Minimum

Maximum

December 31

(In billions of Won)

Interest rate — available-for-sale securities

W

25.65

W

22.51

W

28.56

W

25.60

Interest rate mismatch — other assets and liabilities

10.68

7.61

14.35

10.21

(1)	One-day VaR results with a 99% confidence level.

	— Equity Risk

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VaR for the Year 2005(1)

As of

Average

Minimum

Maximum

December 31

(In billions of Won)

Equities

W

25.65

W

17.82

W

35.66

W27.15

(1)	One-day VaR results with a 99% confidence level.

	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.

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			As of December 31, 2005
											6-12								Over				Substandard
Won-denominated Accounts			0-3 Months				3-6 Months				Months				1-3 Years				3 Years				or Below				Total
			(In billions of Won except percentage)
Assets:			W	22,476			W	9,426			W	14,589			W	10,278			W	16,174			W	555			W	73,497
Liabilities:				20,063				6,910				13,344				11,900				15,227				0				67,443
For three months or less:
	Liquidity gap			2,413
	Liquidity ratio			112.0	%
	Limit:			105	%

			As of December 31, 2005
			7 Days or				7 Days-												6-12				Over 1				Substandard
Foreign Currencies Denominated Accounts:			Less				1 Months				3 Months				3-6 Months				Months				Years				or Below				Total
			(In millions of US$ except percentage)
Assets:			$	2,199			$	1,362			$	1,763			$	1,107			$	1,199			$	1,712			$	46			$	9,389
Liabilities				1,295				1,433				1,317				1,675				919				2,406				0				9,046
For three months or less:
	Assets											5,324
	Liabilities											4,045
	Liquidity ratio											131.6	%
	Limit											85	%

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	•	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.

	Market Risk Management of Chohung Bank

	Market Risk Exposure from Trading Activities

	•	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.

	— Interest Rate Risk

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	— Foreign Exchange Risk

			As of December 31,
Currency			2003				2004				2005
			(In millions of US$)
U.S. dollars			US$	8.4			US$	41.7			US$	18.0
Japanese Yen				0.3				0.2				(6.1	)
Euro				0.3				6.7				(5.0	)
Others				9.0				10.5				9.8
	Total		US$	18.0			US$	59.1			US$	16.7

	— Equity Risk

	Market Risk Management for Trading Activities

			Trading Portfolio Ten-day VaR for the Year 2005(1)
															As of
			Average				Minimum				Maximum				December 31
			(In billions of Won)
Chohung Bank:
	Interest rate		W	16.2			W	3.2			W	50.6			W	21.6
	Foreign exchange(2)			1.8				0.7				4.2				1.1
	Equities			3.2				0.2				28.7				4.1
	Total VaR(3)		W	17.5			W	5.5			W	50.8			W	22.4

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(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.

	•	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.

	•	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.

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	— Hedging and Derivative Market Risk

	•	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;

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	•	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 Management for Non-trading Activities

	— Interest Rate Risk

	•	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.

	— 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 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.

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	•	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

		Simulation Results for 2005
		Minimum(1)				Average				EaR(1)
		(In billions of Won)
Interest income (from interest-earning assets)		W	3,324.2			W	3,504.0			W	179.8
Interest expense (from interest-bearing liabilities)			1,764.2				1,852.6				88.3
Net interest income			1,560.0				1,651.5				91.5

(1)	At a 99% confidence level.

	— Interest Rate Gap Analysis

	•	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.

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	•	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 three months or less. With respect to “core” demand deposits under the Financial Supervisory Commission guidelines, Chohung Bank assumes a maturity of three years.

		As of December 31, 2005
		0-3 Months				3-6 Months				6-12 Months				1-3 Years				Over 3 Years				Total
		(In billions of Won, except percentages)
Interest-earning assets		W	31,633			W	4,399			W	6,779			W	3,844			W	2,918			W	49,573
(Including interest rate swaps)
Interest-bearing liabilities			20,035				6,095				8,410				10,683				5,582				50,805
(Including interest rate swaps)
Sensitivity gap			11,598				(1,696	)			(1,631	)			(6,839	)			(2,664	)			(1,232	)
Cumulative gap			11,598				9,902				8,271				1,432				(1,232	)
% of total assets			23.4	%			20.0	%			16.7	%			2.9	%			(2.5	)%

		As of December 31, 2005
		0-3 Months				3-6 Months				6-12 Months				1-3 Years				Over 3 Years				Total
		(In millions of US$, except percentages)
Interest-earning assets		$	4,151			$	536			$	135			$	30			$	(183	)		$	4,669
Interest-bearing liabilities			4,031				572				133				101				666				5,503
Sensitivity gap			120				(36	)			2				(71	)			(841	)			(834	)
Cumulative gap			120				84				86				15				(834	)
% of total assets			2.6	%			1.8	%			1.8	%			0.3	%			(17.9	)%

	— Duration and Market Value Analysis

		Duration as of
		December 31,
		2005(1)
		(In months)
Interest-earning assets			4.8
Interest-bearing liabilities			9.7
Gap			(4.1	)

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		Market Value as of December 31, 2005(1)
		Actual				1% Point Increase				Changes
		(In billions of Won)
Interest-earning assets		W	48,018.5			W	47,786.6			W	(231.9	)
Interest-bearing liabilities			39,890.7				39,505.8				(384.9	)
Gap			8,127.8				8,280.8				153.0

(1)	Includes interest rate swaps.

	— Net Interest Income Simulation

		Simulated Net Interest Income for 2006
		(for Nontrading Won-denominated Bank Accounts)(1)
														Change in Net								Change in Net
		Assumed Interest Rates												Interest Income								Interest Income
														Amount				% Change				Amount				% Change
						1% Point				1% Point				(1% Point				(1% Point				(1% Point				(1% Point
		No Change				Increase				Decrease				Increase)				Increase)				Decrease)				Decrease)
		(In billions of Won, except percentages)
Simulated interest income		W	3,321.8			W	3,629.2			W	3,013.1			W	307.4				9.25	%		W	(308.7	)			9.29	%
Simulated interest expense			1,763.5				1,997.8				1,546.7				234.3				13.29				(216.8	)			12.29
Net interest income			1,558.3				1,631.4				1,466.4				73.1				4.69				(91.9	)			5.90

(1)	Includes interest rate swaps.

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	— Interest Rate VaRs for Non-trading Assets and Liabilities

Ten-day VaR for the Year 2005(1)

As of

Average

Minimum

Maximum

December 31

(In billions of Won)

Interest rate — available-for-sale securities

W

35.1

W

22.4

W

52.9

W

38.6

(1)	Ten-day VaR results at a 99% confidence level.

	— Equity Risk

Trading Portfolio Ten-day VaR for the Year 2005(1)

As of

Average

Minimum

Maximum

December 31

(In billions of Won)

Equities

W

374.8

W

257.9

W

558.1

W

557.0

(1)	Ten-day VaR results at a 99% confidence level.

	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.

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			As of December 31, 2005
																							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)
Assets:			W	31,619.8			W	10,254.3			W	15,075.8			W	6,556.9			W	13,886.4			W	493.6			W	77,886.7
Liabilities:				26,801.3				6,295.7				12,878.2				8,992.7				23,625.3				—				78,593.2
For three months or less:
	Liquidity gap			4,818.5
	Liquidity ratio			117.98	%
	Limit:			105.00	%

			As of December 31, 2005
			7 Days or				7 Days-
Foreign Currencies Denominated Accounts:			Less				1 Months				3 Months				3-6 Months				6-12 Months				Over 1 Years				Total
			(In millions of US$ except percentage)
Assets:			$	2,333.9			$	3,964.0			$	5,277.3			$	3,092.6			$	3,941.6			$	3,739.9			$	22,349.3
Liabilities				2,113.4				4,165.8				4,993.5				2,763.7				4,403.0				2,798.8				21,238.2
For three months or less:
	Assets											11,575.2
	Liabilities											11,272.7
	Liquidity ratio											102.68	%
	Limit											85.00	%

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	•	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

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	•	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 our business regulations and policies, which include daily audits, monthly audits and special audits.

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	Proposed Upgrades and Integration of Risk Management

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	General

	•	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.

	•	when there is a change of its officers;
	•	when there is a change of its largest shareholder;

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	•	when there is a change of major shareholders of a bank holding company;
	•	when there is a cause for dissolution; and
	•	when it or its subsidiary ceases to control any of its respective direct and indirect subsidiaries by disposing of the shares of such direct and indirect subsidiaries.

	Capital Adequacy

	(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 between 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.

	(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);

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	(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 sheet 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 sheet assets, if any, but excluding the book value of investments in and financial supports to its direct and indirect subsidiaries, if any).

	Liquidity

	•	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%.

	Financial Exposure to Any Single Customer and Major Shareholder

	(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 5 of the Bank Act;

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	(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 most recent fiscal year and adjusted as determined by the Financial Supervisory Commission, such as the amount of increase or decrease in paid-in capital after the end of the most recent fiscal year;

	(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.

	(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 Companies 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 and outstanding 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 Companies Act) more than 4% in the aggregate of the total issued and outstanding voting shares of the financial holding company controlling national banks (other than a financial holding company controlling regional banks only), excluding shares related to the shareholding restrictions on non-financial business group companies as described below, 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 Companies Act.

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	Restrictions on Transactions Among Direct and Indirect Subsidiaries and Financial Holding Company

	(i)	For deposits and installment savings, obligations of the Korean government or The Bank of Korea, obligations guaranteed by the Korean government or The Bank of Korea, obligations secured by securities issued or guaranteed by the Korean government or The Bank of Korea: 100% of the amount of the credit extended;

	(ii)	(a) For obligations of local governments under the Local Autonomy Act, local public enterprises under the Local Public Enterprises Act, and investment institutions and other quasi-investment institutions under the Basic Act on the Management of Government-Invested Institution (hereinafter, the “public institutions and others”); (b) obligations guaranteed by the public institutions and others, and (c) obligations secured by the securities issued or guaranteed by public institutions and others: 110% of the amount of the credit extended; and

	(iii)	For any property other than those set forth in the above (i) and (ii): 130% of the amount of the credit extended.

	Disclosure of Management Performance

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	Restrictions on Shareholdings in Other Companies

	Restrictions on Shareholdings by Direct and Indirect Subsidiaries

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	Restrictions on Transactions between a Financial Holding Company and its Major Shareholder

	Restriction on Financial Holding Company Ownership

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	(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 (1) or (2) above owns more than 4% of the total shares issued and outstanding of such mutual fund.

	General

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	•	capital increases or reductions;
	•	stock cancellations or consolidations;
	•	transfers of a part or all of business;
	•	sale of assets;
	•	closures of branch offices;
	•	mergers or becoming a subsidiary under the Financial Holding Companies Act of a financial holding company;
	•	acquisition of a bank by a third party;
	•	suspensions of a part or all of business operation; or
	•	assignments of contractual rights and obligations relating to financial transactions.

	Capital Adequacy

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	Liquidity

	Financial Exposure to Any Single Customer and Major Shareholders

	•	a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential 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 and outstanding voting shares; or

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	•	a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Bank Act) more than 4% in the aggregate of the bank’s (excluding regional banks) total issued and outstanding voting shares (excluding shares relating to the shareholding restrictions on non- financial group companies, which include:

	•	any same shareholder group with the aggregate net assets of all non-financial companies belonging to such group of not less than 25% of the aggregate net assets of all members of such group;
	•	any same shareholder group with aggregate assets of all non-financial companies belonging to such group of not less than W2 trillion; or
	•	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.

	Interest Rates

	Lending to Small- and Medium-Sized Enterprises

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	Disclosure of Management Performance

	•	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;
	•	occurrence of any financial event 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), unless the bank has lost or expects to lose not more than W1 billion as a result thereof, or the Governor of the Financial Supervisory Service has made a public announcement regarding such an occurrence;
	•	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 W1 billion;
	•	any event which can cause a material change in the financial status, such as a capital increase or reduction, issuance of convertible bonds, bonds with warrants, exchangeable bonds, or depositary receipts, cancellation of shares with profit, and split or consolidation of shares;
	•	any event which can cause a material change in a bank’s management, such as knowledge of imposition of a fine (such as negligence fine, surcharges or collection charges) in an amount exceeding 1% (or 0.5% in the case of a large company whose total assets as of the end of the most recent fiscal year is W2 trillion or more (hereinafter the “Large Company”)) or more of the bank’s Tier I and Tier II capital, proposal or confirmation of a litigation that can have a material effect on the management of the bank such as litigation regarding appointment or dismissal of an officer, or a change in bank’s largest shareholder, representative director, major shareholder, affiliate company, or a business objective;
	•	any event which can cause a material change in the bank’s property, such as a natural disaster which causes damages in an amount exceeding 5% (or 2.5% in the case of a Large Company) or more of its total assets as of the end of the most recent fiscal year, or giving or receiving of a gift in excess of 1% (or 0.5% in the case of a Large Company) or more of the bank’s Tier I and Tier II capital;
	•	any event which can cause a material change in the bank’s credit or liability, such as dissolution of, or default of a bill or a check of, an unlisted company in which the bank invested 3% (or 1.5% in the case of a Large Company) or more of the bank’s Tier I and Tier II capital, or commencement or termination of any court receivership of the bank or notification from the court thereof;
	•	any event which can cause a material change in the bank’s investment, such as acquisition or sale of fixed assets in an amount exceeding 5% (or 2.5% in the case of a Large Company) of its total assets, investment in other companies in an amount exceeding 5% (or 2.5% in the case of a Large Company) or more of the bank’s Tier I and Tier II capital, becoming an oligopoly shareholder (meaning anyone owning 51% or more of the total issued and outstanding shares of a company, including the shares owned by specially related persons, as defined under the Framework Act on National Taxes) of a mutual savings bank or a change in such shareholder status;
	•	any event which can cause a material change in the bank’s profit or loss, such as an increase or decrease in profit or loss of 30% (or 15% in the case of a Large Company) or more when compared to the previous fiscal year, or profit or loss from derivative transaction representing 5% (or 2.5% in the case of a Large Company) or more of the bank’s Tier I and Tier II capital; and

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	•	any other events which can have material effects on the bank’s operation, such as payment of cash dividend, changes in accounting policy, or distribution of stock option.

	Restrictions on Lending

	•	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 legal person to buy the bank’s own shares;
	•	loans made directly or indirectly to finance political campaigns and other related activities;
	•	loans made to any of the bank’s officers or employees other than de minimis 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 legal 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 de minimis 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

	Restrictions on Shareholdings in Other Companies

	•	the company issuing such shares is engaged in category of financial businesses set forth by the Financial Supervisory Commission (including private equity funds); or
	•	the acquisition of shares by the bank is necessary for the corporate restructuring of the issuer and is approved by the Financial Supervisory Commission.

	•	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
	•	the acquisition satisfies the requirements determined by the Financial Supervisory Commission.

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	Restrictions on Bank Ownership

	•	up to 10% of a national bank’s outstanding voting shares with the approval of the Financial Supervisory Commission under the condition that such non-financial group companies will not exercise voting rights in respect of such shares in excess of the 4% limit; and
	•	in the event that a foreigner, as defined in the Foreign Investment Promotion Act, owns in excess of 4% of a national 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.

	Deposit Insurance System

	Restrictions on Foreign Exchange Position

	Trust Business

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	•	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
	•	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.

	•	prohibitions against officers, directors and employees of one particular business operation from serving as an officer, director and employee in another business operation, except where an officer or a director (1) serving in two or more business operations with no significant conflict of interest in accordance with the Presidential Decree on the Act on Business of Operating Indirect Investment and Asset or (2) serving in a trustee business or a custodian business and simultaneously serving in a general office administrator business in accordance with the Act on Business of Operating Indirect Investment and Asset;
	•	prohibitions against the joint use or sharing of computer equipment or office equipment; and
	•	prohibitions against the sharing of information by and among officers, directors and employees engaged in the different business operations.

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	•	acting as trustee of an investment trust managed by such bank;
	•	purchasing with such bank’s own funds beneficiary certificates of an investment trust managed by such bank;
	•	using in its sales activities information relating to the trust property of an investment trust managed by such bank;
	•	selling through a financial institution established under the Bank Act beneficiary certificates of an investment trust managed by such bank;
	•	establishing a short-term financial indirect investment vehicle; and
	•	establishing a mutual fund.

	Laws and Regulations Governing Other Business Activities

	General

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	Restrictions on Scope of Business

	Capital Adequacy

	Liquidity

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	Restrictions on Funding

	Restrictions on Loans to Affiliate Companies

	Restrictions on Assistance to Other Companies

	Restrictions on Investment in Real Estate

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	Restrictions on Shareholding in Other Companies

	Disclosure and Reports

	Risk of Loss due to Lost, Stolen, Forged or Altered Credit Cards

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	•	maximum limits for cash advances on credit cards;
	•	use restrictions on debit cards with respect to per day or per transaction usage; or
	•	aggregate issuance limits and maximum limits on the amount per card on pre-paid cards.

	Lending Ratio in Ancillary Business

	Issuance of New Cards and Solicitation of New Card Holders

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	Compliance Rules on Collection of Receivable Claims

	•	exerting violence or threat of violence;
	•	informing a Related Party (a guarantor of the debtor, blood relative or fiancée of the debtor, a person living in the same household as the debtor or a person working in the same workplace as the debtor) of the debtor’s liability without just cause;
	•	providing false information relating to the debtor’s obligation to the debtor or his/her Related Party;
	•	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 9:00 p.m. — 8:00 a.m.; and
	•	utilizing other uncustomary methods to collect the receivables thereby invading the privacy or the peacefulness in the workplace of the debtor or his/her Related Party.

	General

	•	capital increase or reduction;
	•	a stock cancellation or consolidation;
	•	a transfer of business;
	•	closing of branch offices;
	•	acquisition of such company by a third party;

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	•	a merger with any other entity;
	•	becoming a subsidiary (under the Financial Holding Companies Act) of a financial holding company;
	•	a suspension or assignment of a part or all of business operation;
	•	an assignment of contractual rights and obligations relating to financial transactions; or
	•	suspension of officer’s performance and appointment of a receiver.

	Scope of Business

	•	brokerage, trading, or underwriting business of equity of undisclosed association (as defined under the Korean Commercial Code) or limited partnership and certain derivative securities linked with prices, interest rates, indices and indicators relating to securities (under the Securities and Exchange Act and the Presidential Decree), foreign securities of similar character, currencies, commodities (under the Futures and Exchange Act), or linked with credit risks;
	•	trust business under the Trust Business Act or over-the-counter derivative trading linked to credit risks, price of securities, interest rate or indices based on the foregoing, or currency rate, price of goods or indices based on the foregoing, if the company obtains necessary license from the Financial Supervisory Commission. A securities company intending to engage in the business of over-the-counter derivative trading will be subject to the limit of 30% of its equity capital as the total amount of risks from over-the-counter derivative trading, and further subject to the limit of 5% of equity capital for the amount of risks from a credit-linked derivative transaction with a person or a company (including specially-related person of such person or company), with the 300% of minimum equity capital regulation rate and with the W100 billion of minimum equity capital requirement (provided that the W100 billion requirement will be applicable only until May 29, 2007) in order to conduct over-the-counter derivative trading Pursuant to the amendment of the Trust Business Act effective as of July 29, 2005, a securities company is exempted from regulations under the Trust Business Act regarding the use of the word ’trust’ in the corporate name, the qualifications of officers, restrictions on the management of the trustee’s own fund, and internal control standards; and
	•	ancillary businesses such as (1) real estate brokerage or consulting business on real estates owned by clients who are being provided with services relating to brokerage on mergers and acquisitions or business management and financing consulting, (2) selling books, reports or electronic documents containing securities-related information and (3) arranging loans to customers of securities companies based on business alliances established with such securities companies.

	Regulations on Financial Soundness — Capital Adequacy

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	Other Provisions on Financial Soundness

	•	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 (including specially-related persons of such 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.

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	Business Conduct Rules

	Disclosure and Reports

	Customer Protection

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	General

	•	capital increase or reduction;
	•	stock cancellation or consolidation;
	•	transfer of a part or all of business;
	•	sale of assets;
	•	closing of branch offices;
	•	merger with any other entity;
	•	becoming a subsidiary (under the Financial Holding Companies Act) of a financial holding company;
	•	acquisition of an insurance company by a third party;
	•	suspension or assignment of a part or all of business operation;
	•	assignment of contractual rights and obligations relating to financial transactions; or
	•	suspension of officer’s performance and appointment of a receiver.

	Capital Adequacy

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	1.	(Net premium type policy reserve — Non-amortized acquisition cost) × (Corresponding ratio of risk factor for policy reserve) (4%); and
	2.	(Net insurance benefits) × (Corresponding ratio of insurance risk factor).

	Liquidity

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	Variable Insurance

	Solicitation of Insurance Policy & Bancassurance Agents

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	Financial Exposure to Any Single Borrower and Major Shareholders

	•	with respect to the sum of credit to a single individual or legal entity, 3% of its Total Asset (as defined above);
	•	with respect to the total amount of investment in the debentures or shares issued by a single legal entity, 7% of its Total Asset;
	•	with respect to the sum of (i) credit to a single individual or legal entity and any other persons who share the credit risk of such individual or legal entity (the “similarly situated borrowers”) and (ii) the amount of investment in the debentures or shares issued by such similarly situated borrowers, 12% of its Total Asset;
	•	with respect to the sum of the large credit which is credit to a single individual or legal entity, similarly situated borrowers or major shareholders that exceeds 1% of its Total Asset, 20% of its Total Asset;
	•	with respect to the sum of credit to a single subsidiary, 10% of the Equity Capital (defined as the sum of paid-in capital, capital surplus, earned surplus and others equivalent thereto (excluding any recapitalization) that are obtained by subtracting the aggregate amount of items such as goodwill and

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		others equivalent thereto prescribed by the Presidential Decree from the aggregate amount of the items prescribed by the Presidential Decree) of such insurance company;
	•	with respect to the sum of credit to major shareholders or subsidiaries designated by the Presidential Decree, the lesser of (i) 40% of its Equity Capital and (ii) 2% of its Total Asset; and
	•	with respect to the total amount of investment in the debentures or shares issued by major shareholders or subsidiaries designated by the Presidential Decree, the lesser of (i) 60% of its Equity Capital and (ii) 3% of its Total Asset.

	Restrictions on Investment of Assets

	•	subject to certain exceptions, owning precious metals, antiques and paintings and writings;
	•	owning any real estate (excluding any real estate owned as a result of enforcing their own security interest) other than real estate for the conduct of its business as designated by the Presidential Decree. In any case, the total amount of real estate owned by an insurance company must not exceed 25% of its Total Asset;
	•	loans made for the purpose of speculation in commodities or securities;
	•	loans made directly or indirectly to enable a natural or legal person to buy their own shares;
	•	loans made directly or indirectly to finance political campaigns and other similar activities; and
	•	loans made to any of the insurance company’s officers or employees other than loans based on insurance policy or de minimis 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.

	•	with respect to holding unlisted stock, 10% of its Total Asset;
	•	with respect to holding foreign currency under the Foreign Exchange Transaction Act or owning offshore real estate, 30% of its Total Asset; and
	•	with respect to the sum of margins for a futures exchange designated by the Presidential Decree or a foreign futures exchange, 5% of its Total Asset.

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	Restrictions on Shareholdings in Other Companies

	•	the finance-related business of the financial institutions as designated under the Act on Structural Improvement of Financial Industry;
	•	The credit information business designated by the Use and Protection of Credit Information Act (excluding the credit evaluation business designated thereunder);
	•	The business of administering insurance contracts including the maintenance, rescission, amendment and reinstatement and the like; and
	•	Other businesses that do not undermine the soundness of the insurance business as prescribed under the Presidential Decree.

	Disclosure of Management Performance

	Deposit Insurance System

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				Area (Square Meters)
								Site
Type of Facility		Location		Building				(If Different)
Registered office and corporate headquarters		120, 2-Ga, Taepyung-Ro, Jung-Gu, Seoul 100-102, Korea			59,743				4,416
Good Morning Shinhan Securities		23-2, Yoido-Dong, Youngdungpo-Gu, Seoul, Korea 150-312			70,170				4,765
Shinhan Centennial Building		117, Samgak-Dong, Jung-Gu, Seoul, Korea			19,697				1,389
Shinhan Bank Gwanggyo Branch		14, 1-Ga, Namdaemun-Ro, Jung-Gu, Seoul, Korea			20,379				6,724
Shinhan Myongdong Branch		53-1, 1-Ga, Myong-Dong, Jung-Gu, Seoul, Korea			8,936				1,014
Shinhan Youngdungpo Branch		57, 4-Ga, Youngdungpo-Dong, Youngdungpo-Gu, Seoul, Korea			6,171				1,983
Shinhan IT center		781, Janghang-Dong, Ilsan-Gu, Goyang-Si, Kyunggi Province, Korea			24,496				5,856
		731, Yoksam-Dong, Kangnam-Gu, Seoul, Korea			23,374				7,964
Shinhan Cheongju IT back-up center		1704-Ga, Yongam-Dong, Sangdang-Gu, Cheongju-Si, Chungcheongbuk-Do			5,756				6,398

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ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS

	The Korean Economy

	Government Regulation and Policy

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	Market Developments

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	Interest Rates

										Certificate
		Corporate				Treasury				of Deposit
		Bond Rates(1)				Bond Rates(2)				Rates(3)
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
June 30, 2003			5.45				4.16				4.30
December 31, 2003			5.58				4.82				4.36
June 30, 2004			4.84				4.24				3.93
December 31, 2004			3.72				3.28				3.43
June 30, 2005			4.41				4.02				3.54
December 31, 2005			5.52				5.08				4.09
March 31, 2006			5.25				4.93				4.27

(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).

	Financial Holding Company Restructuring

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	Financial Impact of Acquisitions

	Acquisition of Chohung Bank

			From September 1 to
			December 31,
			2003				2003
			(In billions of Won
			and millions of US$,
			except per common
			share data)
Interest and dividend income			W	1,286			$	1,079
Interest expense				574				482
	Net interest income			712				597
Provision for loan losses				427				358
Provision for guarantees and acceptances				(19	)			(16	)
Non interest income				163				137
Non interest expense				558				468
Income tax expense				19				16
Minority interest				1				1
	Net loss		W	(111	)		$	(93	)

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Table of Contents

		As of December 31,
		2003				2003
		(In billions of Won and
		millions of US$)
Assets
Cash and cash equivalents		W	1,276			$	1,070
Restricted cash			502				421
Interest-bearing deposits			159				133
Call loans and securities purchased under resale agreements			392				329
Trading assets:
Trading securities			1,191				999
Derivatives instruments			156				131
Securities:
Available-for-sale securities			7,274				6,102
Held-to-maturity securities			—				—
Loans (net of allowance for loan losses of W2,498 billion in 2003)			41,233				34,592
Customers’ liability on acceptances			1,107				928
Premises and equipment, net			1,164				977
Goodwill and intangible assets			35				29
Security deposits			483				405
Other assets			2,138				1,796
Total assets		W	57,110			$	47,912
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Interest-bearing		W	38,917			$	32,649
Noninterest-bearing			322				270
Trading liabilities			128				107
Acceptances outstanding			1,107				928
Short-term borrowings			4,804				4,030
Secured borrowings			1,432				1,201
Long-term debt			6,504				5,456
Accrued expenses and other liabilities			2,628				2,206
Total liabilities			55,842				46,847
Minority interest			15				12
Stockholders’ equity:
Common stock			3,596				3,016
Additional paid-in capital			1,722				1,445
Accumulated deficit			(4,300	)			(3,607	)
Accumulated other comprehensive income, net of taxes			235				199
Total stockholders’ equity			1,253				1,053
Total liabilities, minority interest and stockholders’ equity		W	57,110			$	47,912

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	Acquisition of Good Morning Securities

	•	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.

	Acquisition of Jeju Bank

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	Spin-off of Shinhan Card

	Acquisition of Shinhan Life Insurance

	Liquidation of e-Shinhan

	Certain Income Tax Expenses and Provision for Other Losses

184

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	Allowance for Credit Losses

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	•	loans classified as “substandard” or below according to the asset classification guidelines of the Financial Supervisory Commission;
	•	loans that are 90 days or more past due; and
	•	loans which are “troubled debt restructuring” as defined under U.S. GAAP.

	Fair Value of Financial Instruments

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	Goodwill and Other Intangible Assets

187

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188

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	Consolidation

	Contingent Liabilities

189

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	Valuation allowance for Deferred Tax Assets

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	Average Balance Sheet and Related Interest

					Year Ended December 31,
					2003												2004												2005
									Interest												Interest												Interest
					Average				Income/				Yield/				Average				Income/				Yield/				Average				Income/				Yield/
					Balance(1)				Expense				Rate				Balance(1)				Expense				Rate				Balance(1)				Expense				Rate
					(In billions of Won, except percentages)
Assets:
Interest-bearing deposits					W	1,618			W	66				4.08	%		W	1,322			W	44				3.33	%		W	1,778			W	64				3.60	%
Call loans and securities purchased under resale agreements						1,609				48				2.98				3,012				93				3.09				2,499				85				3.40
Trading assets						1,824				102				5.59				3,666				168				4.58				3,394				111				3.27
Securities(2)						17,053				928				5.44				20,924				1,265				6.05				19,348				932				4.82
Loans:(3)
	Commercial and industrial					25,294				1,279				5.06				35,753				1,876				5.25				36,079				2,075				5.75
	Other commercial					13,434				851				6.33				21,632				1,311				6.06				20,130				1,145				5.69
	Lease financing					786				70				8.91				1,039				62				5.97				749				47				5.80
		Total corporate				39,514				2,200				5.57				58,424				3,249				5.56				56,958				3,267				5.74
	Mortgage and home equity					12,076				697				5.77				21,408				1,138				5.32				24,630				1,290				5.24
	Credit cards					3,568				495				13.87				5,575				609				10.92				4,574				589				12.88
	Other consumer					10,747				795				7.40				14,481				1,146				7.91				15,552				1,150				7.39
		Total consumer				26,391				1,987				7.53				41,464				2,893				6.98				44,756				3,029				6.77
			Total loans			65,905				4,187				6.35				99,888				6,142				6.15				101,714				6,296				6.19
Other interest-earning assets						—				—				—				—				—				—				—
Total interest-earning assets					W	88,009			W	5,331				6.06	%		W	128,812			W	7,712				5.99	%		W	128,733			W	7,488				5.82	%
Non-interest-earning assets:
	Cash and cash equivalents					2,165				—								3,467				—								3,855				—
	Other assets					5,990				—								12,507				—								16,779				—
	Total assets				W	96,164			W	5,331							W	144,786			W	7,712							W	149,367			W	7,488

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				Year Ended December 31,
				2003												2004												2005
								Interest												Interest												Interest
				Average				Income/				Yield/				Average				Income/				Yield/				Average				Income/				Yield/
				Balance(1)				Expense				Rate				Balance(1)				Expense				Rate				Balance(1)				Expense				Rate
				(In billions of Won, except percentages)
Liabilities:
Interest-bearing deposits:
	Interest-bearing demand deposits			W	2,653			W	37				1.39	%		W	7,880			W	105				1.33	%		W	6,594			W	125				1.90	%
	Savings deposits				15,922				232				1.46				21,987				272				1.24				26,100				250				0.96
	Certificates of deposit				4,955				220				4.44				6,735				275				4.08				8,838				338				3.81
	Other time deposits				27,780				1,164				4.19				41,863				1,605				3.83				39,031				1,439				3.69
	Mutual installment deposits				2,110				113				5.36				2,487				113				4.54				1,997				83				4.16
		Total interest-bearing deposits			53,420				1,766				3.31				80,952				2,370				2.93				82,560				2,235				2.71
Short-term borrowings					11,400				322				2.82				14,934				370				2.48				14,975				357				2.38
Secured borrowings					5,331				207				3.88				7,102				299				4.21				6,584				240				3.65
Long-term debt					13,736				703				5.12				20,136				1,099				5.46				22,209				1,182				5.32
Other interest-bearing liabilities					—				—				—				—				—				—				—				—				—
Total interest bearing liabilities				W	83,887			W	2,998				3.57	%		W	123,124			W	4,138				3.36	%		W	126,328			W	4,014				3.18	%
Non-interest-bearing liabilities:
	Non-interest-bearing deposits				1,002				—								2,287				—								2,393				—
	Trading liabilities				290				—								668				—								1,177				—
	Acceptance outstanding				1,416				—								1,539				—								1,944				—
	Accrued expenses and other liabilities				5,765				—								11,455				—								11,031				—
	Minority interest				428				—								324				—								73				—
	Redeemable convertible preferred stock				263				—								723				—								585				—
	Stockholders’ equity				3,113				—								4,666				—								5,836				—
		Total liabilities and stockholders’ equity		W	96,164			W	2,998							W	144,786			W	4,138							W	149,367			W	4,014
Net interest spread(4)									2.48	%											2.63	%											2.64	%
Net interest margin(5)									2.65	%											2.78	%											2.70	%
Average asset liability ratio(6)									104.91	%											104.62	%											101.90	%

(1)	Average balances are based on (a) daily balances for Shinhan Bank, Chohung Bank and Jeju 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-accruing loans is no longer recognized from the date the loan is placed on nonaccrual status. We reclassify loans as accruing when interest (including default 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.

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	Analysis of Changes in Net Interest Income — Volume and Rate Analysis

					From 2003 to 2004
					Interest Increase (Decrease)
					Due to Change in
					Volume				Rate				Change
					(In billions of Won)
Increase (decrease) in interest income
Interest-bearing deposits					W	(11	)		W	(11	)		W	(22	)
Call loans and securities purchased under resale agreements						43				2				45
Trading assets						87				(21	)			66
Securities						226				111				337
Loans:
	Commercial and industrial					547				50				597
	Other commercial					498				(38	)			460
	Lease financing					19				(27	)			(8	)
		Total corporate				1,064				(15	)			1,049
	Mortgage and home equity					500				(59	)			441
	Credit cards					235				(121	)			114
	Other consumer					292				59				351
		Total consumer				1,027				(121	)			906
			Total loans			2,091				(136	)			1,955
Other interest-earning assets						—				—				—
	Total interest income					2,436				(55	)			2,381
Increase (decrease) in interest expense
Interest bearing deposits:
	Demand deposits					70				(2	)			68
	Savings deposits					79				(39	)			40
	Certificates of deposit					74				(19	)			55
	Other time deposits					547				(106	)			441
Mutual installment deposits						19				(19	)			—
	Total interest-bearing deposits					789				(185	)			604
Short-term borrowings						91				(43	)			48
Secured borrowings						73				19				92
Long-term debt						347				49				396
Other interest-bearing liabilities						—				—				—
	Total interest expense					1,300				(160	)			1,140
Net increase (decrease) in net interest income						1,136				105				1,241

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					From 2004 to 2005
					Interest Increase (Decrease)
					Due to Change in
					Volume				Rate				Change
					(In billions of Won)
Increase (decrease) in interest income
Interest-bearing deposits					W	16			W	4			W	20
Call loans and securities purchased under resale agreements						(17	)			9				(8	)
Trading assets						(12	)			(45	)			(57	)
Securities						(90	)			(243	)			(333	)
Loans:
	Commercial and industrial					17				182				199
	Other commercial					(88	)			(78	)			(166	)
	Lease financing					(18	)			3				(15	)
		Total corporate				(89	)			107				18
	Mortgage and home equity					169				(17	)			152
	Credit cards					(119	)			99				(20	)
	Other consumer					82				(78	)			4
		Total consumer				132				4				136
			Total loans			43				111				154
Other interest-earning assets						—				—				—
		Total interest income				(60	)			(164	)			(224	)
Increase (decrease) in interest expense
Interest bearing deposits:
	Demand deposits					(19	)			39				20
	Savings deposits					46				(68	)			(22	)
	Certificates of deposit					81				(18	)			63
	Other time deposits					(106	)			(60	)			(166	)
	Mutual installment deposits					(21	)			(9	)			(30	)
		Total interest-bearing deposits				(19	)			(116	)			(135	)
	Short-term borrowings					1				(14	)			(13	)
	Secured borrowings					(21	)			(38	)			(59	)
	Long-term debt					111				(28	)			83
	Other interest-bearing liabilities					—				—				—
		Total interest expense				72				(196	)			(124	)
Net increase (decrease) in net interest income						(132	)			32				(100	)

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	2005 Compared to 2004

	Net Interest Income

				Year Ended December 31,
				2004				2005				% Change
				(In billions of Won, except
				percentages)
Interest and dividend income:
	Interest and fees on loans			W	6,142			W	6,296				2.5	%
	Interest and dividends on securities				1,265				932				(26.3	)
	Trading assets				168				111				(33.9	)
	Other interest income				137				149				8.8
		Total interest and dividend income		W	7,712			W	7,488				(2.9	)
Interest expense:
	Interest on deposits			W	2,370			W	2,234				(5.7	)%
	Interest on short-term borrowings				341				340				(0.6	)
	Interest on secured borrowings				299				240				(19.7	)
	Interest on long-term debt				1,099				1,182				7.6
	Other interest expense				29				18				(37.9	)
		Total interest expense			4,138				4,014				(3.0	)
Net interest income				W	3,574			W	3,474				(2.8	)%
Net interest margin(1)					2.78	%			2.70	%

(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.”

	•	a 10.6% increase in interest and fees on commercial and industrial loans from W1,876 billion in 2004 to W2,075 billion in 2005, which was due primarily to an increase by 50 basis points in the average yield on such loans from 5.25% in 2004 to 5.75% in 2005 and a 0.9% increase in average balance of such loans from W35,753 billion in 2004 to W36,079 billion in 2005; and

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	•	a 13.4% increase in interest and fees on mortgage and home equity loans from W1,138 billion in 2004 to W1,290 billion in 2005, which was due primarily to a 15.1% increase in average balance of mortgage and home equity loans from W21,408 billion in 2004 to W24,630 billion in 2005, which was partially offset by a decline of 8 basis points in the average yield on such loans from 5.32% in 2004 to 5.24% in 2005,

	•	a 12.7% decrease in interest and fees on other commercial loans from W1,311 billion in 2004 to W1,145 billion in 2005, which was due primarily to a 6.9% decrease in average balance of other commercial loans from W21,632 billion in 2004 to W20,130 billion in 2005 and a decrease by 37 basis points in the average yield on such loans from 6.06% in 2004 to 5.69% in 2005.

	•	mortgage and home equity loans increased by 15.1% from W21,408 billion in 2004 to W24,630 billion in 2005, which was partially offset by a decrease in the average yield on such loans by eight basis points from 5.32% in 2004 to 5.24% in 2005; and
	•	other consumer loans increased by 7.4% from W14,481 billion in 2004 to W15,552 billion in 2005, the effect of which was partially offset by a decline of 52 basis points in the average yield on such loans from 7.91% in 2004 to 7.39% in 2005.

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	Provision for credit losses

	•	changes in the asset quality of individually identified impaired corporate loans — Changes in the asset quality of individually identified impaired corporate loans are attributed to a decrease in the outstanding balance which may result from collection through the disposal of collateral or relaxing requirements for troubled debt restructurings. Such changes have a direct impact on provisioning for loan losses through individual analysis of those loans. See “Item 4. Information on the Company — Description of Assets and Liabilities — Loans individually identified for review and considered impaired”. Specific allowances are established by discounting the estimated cash flows expected to receive using the loan’s effective interest rate or by reference to the fair value of the collateral; and
	•	the improvement in asset quality classifications of loans which are not specially identified as impaired — For loans which are not specially identified as impaired, the general allowance for loan losses is determined based on loss factors taking into consideration past performance of the portfolio, previous loan loss history and charge-off information which are developed through a migration model. See “Item 4. Information on the Company — Description of Assets and Liabilities — Loans not specifically identified as impaired”. Due primarily to enhanced condition of the Korean economy, our asset quality classifications of non-impaired loans improved and the loss rates decreased in 2005 as compared to 2004. As a result, provision for loan losses against non-impaired loans decreased from 2004 to 2005.

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			As of December 31,
			2004				2005				% Change
			(In billions of Won,
			except percentages)
Total provision for loan losses(A):
	Corporate		W	(293	)		W	(402	)			37.2	%
	Mortgages and home equity			(1	)			(1	)			—
	Other consumer			130				76				(41.5	)
	Credit cards			359				72				(79.9	)
				195				(255	)			N/M
Total provision for off-balance sheet credit instruments(B):
	Guarantees and acceptances		W	(83	)		W	(39	)			(53.0	)%
	Unused portions of credit line			23				111				382.6
				(60	)			72				N/M
Total provision for credit losses (A+B)			W	135			W	(183	)			N/M

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	Noninterest Income

			As of December 31,
			2004				2005				% Change
			(In billions of Won,
			except percentages)
Commissions and fees from non-trust management:
	Brokerage fees and commissions(1)		W	232			W	345				48.7	%
	Other fees and commissions(2)			947				1,160				22.5
Net trust management fees(3)				84				100				19.0
Net trading profits				143				101				(29.3	)
Net gains (losses) on securities				(77	)			96				N/M
Gain on other investment				53				284				435.8
Net gain on foreign exchange				353				94				(73.4	)
Insurance income				—				189				N/M
Other				357				333				(6.7	)
	Total noninterest income		W	2,092			W	2,702				29.1	%

(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.

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(3)	Consists principally of fees from management of trust accounts in our banking operations.

	Noninterest Expenses

			Year Ended December 31,
			2004				2005				% Change
			(In billions of Won,
			except percentages)
Employee compensation and other benefits			W	1,217			W	1,480				21.6	%
Depreciation and amortization				429				377				(12.1	)
General and administrative expenses				543				516				(5.0	)
Credit card fees				147				134				(8.8	)
Provision for other losses				16				113				N/M
Other fees and commission expenses				364				417				14.6
Taxes (except income taxes)				92				110				19.6
Insurance operating expense				—				200				N/M
Other				344				315				(8.4	)
	Total noninterest expenses		W	3,152			W	3,662				16.2	%

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	Income Tax Expense

	Net Income Before Extraordinary Item

	2004 Compared to 2003

	Net Interest Income

				Year Ended December 31,
				2003				2004				% Change
				(In billions of Won,
				except percentages)
Interest and dividend income:
	Interest and fees on loans			W	4,187			W	6,142				46.7	%
	Interest and dividends on securities				928				1,265				36.3
	Trading assets				102				168				64.7
	Other interest expense				114				137				20.2
		Total interest and dividend income		W	5,331			W	7,712				44.7
Interest expense:
	Interest on deposits			W	1,766			W	2,370				34.2	%
	Interest on short-term borrowings				315				341				8.3
	Interest on secured borrowings				207				299				44.4
	Interest on long-term debt				703				1,099				56.3
	Other interest expense				7				29				314.3
		Total interest expense			2,998				4,138				38.0
Net interest income				W	2,333			W	3,574				53.2	%
Net interest margin(1)					2.65	%			2.78	%

(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.”

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	•	a 41.3% increase in commercial and industrial loans from W25,294 billion in 2003 to W35,753 billion in 2004, and an increase by 19 basis points in the average yield on such loans from 5.06% in 2003 to 5.25% in 2004;
	•	a 61.0% increase in other commercial loans from W13,434 billion in 2003 to W21,632 billion in 2004, partially offset by a decline of 27 basis points in the average yield on such loans from 6.33% in 2003 to 6.06% in 2004;
	•	a 77.3% increase in mortgage and home equity loans from W12,076 billion in 2003 to W21,408 billion in 2004, partially offset by a decline of 45 basis points in the average yield on such loans from 5.77% in 2003 to 5.32% in 2004; and
	•	a 34.7% increase in other consumer loans from W10,747 billion in 2003 to W14,481 billion in 2004, and an increase by 51 basis points in the average yield on such loans from 7.40% in 2003 to 7.91% in 2004.

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	Provision for credit losses

	•	changes in the asset quality of individually identified impaired corporate loans  — Changes in the asset quality of individually identified impaired corporate loans are attributed to a decrease in the outstanding balance which may result from collection through the disposal of collateral or relaxing requirements for troubled debt restructurings. Such changes have a direct impact on provisioning for loan losses through individual analysis of those loans. See “Item 4. Information on the Company — Description of Assets and Liabilities — Loans individually identified for review and considered impaired”. Specific allowances are established by discounting the estimated cash flows expected to receive using the loan’s effective interest rate or by reference to the fair value of the collateral;
	•	the improvement in asset quality classifications of loans which are not specially identified as impaired — For loans which are not specially identified as impaired, the general allowance for loan losses is determined based on loss factors taking into consideration past performance of the portfolio, previous loan loss history and charge-off information which are developed through a migration model. See “Item 4. Information on the Company — Description of Assets and Liabilities — Loans not specifically identified as impaired”. Due primarily to enhanced condition of the Korean economy, our asset quality classifications of non-impaired loans improved and the loss rates decreased in 2004 as compared to 2003. As a result, provision for loan losses against non-impaired loans decreased from 2003 to 2004; and
	•	the effect of adjustments in loss factors — We adjusted loss factors developed through a migration model with other qualitative and quantitative factors that affect the collectibility or the portfolio as of the evaluation date including prevailing economic and business conditions. See “Item 4. Information on the Company — Description of Assets and Liabilities — Loans collectively evaluated for impairment”. In 2003, we identified a sharp increase in delinquency ratios of loans to small- and medium-sized enterprises which continued to increase until early 2004. To reflect this trend of performance, we applied shorter period migration rates and recognized additional provision for loan losses in the amount of W76 billion in 2003. In 2004, however, as such analysis showed no adverse trend in the performance of this loan portfolio, the additional allowance for loan losses provided in 2003 was reversed in 2004 and resulted in the decrease in provision for loan losses of W151 billion.

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			As of December 31,
			2003				2004				% Change
			(In billions of Won,
			except percentages)
Total provision for loan losses(A):
	Corporate		W	428			W	(293	)			N/M
	Mortgages and home equity			1				(1	)			N/M
	Other consumer			63				130				106.3	%
	Credit cards			519				359				(30.8	)
				1,011				195				(80.7	)
Total provision for off-balance sheet credit instruments(B):
	Guarantees and acceptances		W	(46	)		W	(83	)			80.4	%
	Unused portions of credit line			—				23				N/M
				(46	)			(60	)			(30.4	)
Total provision for credit losses(A+B)			W	965			W	135				(86.0	)%

204

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	Noninterest Income

			As of December 31,
			2003				2004				% Change
			(In billions of Won,
			except percentages)
Commissions and fees from non-trust management:
	Brokerage fees and commissions(1)		W	260			W	232				(10.8	)%
	Other fees and commissions(2)			580				947				63.3
Net trust management fees(3)				59				84				42.4
Net trading profits				72				143				98.6
Net gains (losses) on securities				(128	)			(77	)			(39.8	)
Gain on other investment				28				53				89.3
Net gain on foreign exchange				91				353				287.9
Insurance income				—				—
Other				156				357				128.8
	Total noninterest income		W	1,118			W	2,092				87.1	%

(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.

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	Noninterest Expenses

			Year Ended December 31,
			2003				2004				% Change
			(In billions of Won,
			except percentages)
Employee compensation and other benefits			W	705			W	1,217				72.6	%
Depreciation and amortization				247				429				73.7
General and administrative expenses				392				543				38.5
Credit card fees				90				147				63.3
Provision for other losses				—				16				N/M
Other fees and commission expenses				250				364				45.6
Taxes (except income taxes)				62				92				48.4
Insurance operating expense				—				—				—
Other				191				344				80.1
	Total noninterest expenses		W	1,937			W	3,152				62.7	%

	Income Tax Expense

	Net Income Before Extraordinary Item

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207

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	•	Shinhan Bank, further consisting of the following:

	—	retail banking;
	—	corporate banking;
	—	treasury and securities investment; and
	—	other banking services;

	•	Chohung Bank, further consisting of the following:

	—	retail banking;
	—	corporate banking;
	—	treasury and international business;
	—	credit card; and
	—	other banking services;

	•	securities brokerage services of Good Morning Shinhan Securities;
	•	credit card services of Shinhan Card; and
	•	others.

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				Segment Results(1)												Total Revenues(2)
				Year Ended December 31,
				2003				2004				2005				2003				2004				2005
				(In billions of Won, except percentages)
Shinhan Bank:
	Retail banking			W	560			W	655			W	778			W	1,221			W	1,401			W	1,350
	Corporate banking				212				550				701				749				1,006				976
	Treasury and securities investment				62				82				(67	)			904				1,292				1,745
	Other banking services				(148	)			(87	)			(346	)			339				469				245
Chohung Bank:(3)
	Retail banking				30				132				307				513				1,395				1,385
	Corporate banking				(58	)			185				95				133				333				407
	Treasury and international business				(53	)			(5	)			(26	)			208				2,611				3,379
	Credit card				(89	)			(320	)			150				237				590				699
	Other banking services				(50	)			275				169				(3	)			498				573
Good Morning Shinhan Securities					69				44				121				656				697				880
Shinhan Card					(90	)			6				59				322				348				358
Other subsidiaries					36				10				39				305				355				620
		Total(4)		W	481			W	1,527			W	1,980			W	5,584			W	10,995			W	12,617

(1)	Represents income per segment before income taxes.
(2)	Represents net interest income plus noninterest income.
(3)	As we acquired Chohung Bank in August 2003, the segment results for Chohung Bank only reflect the results of operations from the date of our acquisition to December 31, 2003 and is not available on a meaningful comparative basis.
(4)	Before elimination or adjustments.

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	Shinhan Bank’s Retail Banking

			Year Ended December 31,												% Change
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	782			W	844			W	959				7.9	%			13.6	%
Noninterest income				439				557				391				26.9				(29.8	)
	Total revenues			1,221				1,401				1,350				14.7				(3.6	)
Provision for credit losses(1)				(64	)			(30	)			(11	)			(53.1	)			(63.3	)
Noninterest expense including depreciation and amortization				(597	)			(716	)			(561	)			19.9				(21.6	)
Segment results(2)			W	560			W	655			W	778				17.0	%			18.8	%

(1)	Includes provision for guarantees and acceptances. We recorded no such provision in 2003, 2004 and 2005.
(2)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

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	Comparison of 2004 to 2003

	Shinhan Bank’s Corporate Banking

			Year Ended December 31,												% Change
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	434			W	530			W	579				22.1	%			9.2	%
Noninterest income				315				476				397				51.1				(16.6	)
	Total revenues			749				1,006				976				34.3				(3.0	)
Provision for credit losses(1)				(273	)			(66	)			(12	)			(75.8	)			(81.8	)
Noninterest expense including depreciation and amortization				(264	)			(390	)			(263	)			47.7				(32.6	)
Segment results(2)			W	212			W	550			W	701				159.4	%			27.5	%

(1)	Includes provision for guarantees and acceptances. We recorded no such provision in 2003, 2004 and 2005.
(2)	Net income per segment before income taxes.

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	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

212

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	Shinhan Bank’s Treasury and Securities Investment

			Year Ended December 31,												% Change
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income (expense)			W	65			W	4			W	(272	)			(93.8	)%			N/M
Noninterest income				839				1,288				2,017				53.5				56.6	%
	Total revenues			904				1,292				1,745				42.9				35.1
Provision for credit losses				11				(8	)			—				N/M				N/M
Noninterest expense including depreciation and amortization				(853	)			(1,202	)			(1,812	)			40.9				50.7
Segment results(1)			W	62			W	82			W	(67	)			32.3	%			N/M

(1)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Shinhan Bank’s Other Banking Services

			Year Ended December 31,												% Change
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	212			W	182			W	151				(14.2	)%			(17.0	)%
Noninterest income				127				287				94				126.0				(67.2	)
	Total revenues			339				469				245				38.3				(47.8	)
Provision for credit losses(1)				(109	)			(98	)			(150	)			(10.1	)			53.1
Noninterest expense including depreciation and amortization				(378	)			(458	)			(441	)			21.2				(3.7	)
Segment results(2)			W	(148	)		W	(87	)		W	(346	)			(41.2	)%			297.7	%

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(1)	Includes provision for guarantees and acceptances of W(0.3) billion, W(1.0) billion and W21.0 billion in 2003, 2004 and 2005, respectively.
(2)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Chohung Bank’s Retail Banking

			From				Year Ended
			September 1				December 31,								% Change
			to December 31,
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	418			W	1,107			W	1,081				164.8	%			(2.3	)%
Noninterest income				95				288				304				203.2				5.6
	Total revenues			513				1,395				1,385				171.9				(0.7	)
Provision for credit losses				(150	)			(466	)			(246	)			210.7				(47.2	)
Noninterest expense including depreciation and amortization				(333	)			(797	)			(832	)			139.3				4.4
Segment results(1)			W	30			W	132			W	307				340.0	%			132.6	%

(1)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Chohung Bank’s Corporate Banking

			From				Year Ended
			September 1 to				December 31,								% Change
			December 31,
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	62			W	258			W	294				316.1	%			14.0	%
Noninterest income				71				75				113				5.6				50.7
	Total revenues			133				333				407				150.4				22.2
Provision for credit losses(1)				(145	)			12				(111	)			N/M				N/M
Noninterest expense including depreciation and amortization				(46	)			(160	)			(201	)			247.8				25.6
Segment results(2)			W	(58	)		W	185			W	95				419.0	%			(48.6	)%

(1)	Includes provision for guarantees and acceptances of W(35) billion in 2003, W(22) billion in 2004 and W(49) billion in 2005.
(2)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Chohung Bank’s Treasury and International Business

			From
			September 1 to				Year Ended December 31,								% Change
			December 31,
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Net interest income (expense)			W	(26	)		W	(1	)		W	45				(96.2	)%			N/M
Noninterest income				234				2,612				3,334				N/M				27.6	%
	Total revenues			208				2,611				3,379				N/M				29.5
Provision for credit losses				—				13				40				N/M				207.7
Noninterest expense including depreciation and amortization				(261	)			(2,629	)			(3,445	)			N/M				31.0
Segment results(1)			W	(53	)		W	(5	)		W	(26	)			(90.6	)%			N/M

(1)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Chohung Bank’s Credit Card

			From				Year Ended
			September 1 to				December 31,								% Change
			December 31,
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	237			W	588			W	599				148.1	%			1.9	%
Noninterest income				—				2				100				N/M				N/M
	Total revenues			237				590				699				148.9				18.5
Provision for credit losses				(199	)			(673	)			(392	)			238.2				(41.7	)
Noninterest expense including depreciation and amortization				(127	)			(237	)			(157	)			86.6				(33.8	)
Segment results(1)			W	(89	)		W	(320	)		W	150				259.6	%			N/M

(1)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

	Chohung Bank’s Other Banking Services

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			From				Year Ended
			September 1 to				December 31,								% Change
			December 31,
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income (expense)			W	(10	)		W	138			W	53				N/M				(61.6	)%
Noninterest income				7				360				521				N/M				44.8
	Total revenues			(3	)			498				574				N/M				15.1
Provision for credit losses				—				83				73				N/M				(12.0	)
Noninterest expense including depreciation and amortization				(47	)			(306	)			(478	)			N/M				56.2
Segment results(1)			W	(50	)		W	275			W	169				N/M				(38.9	)%

(1)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Securities Brokerage Services

			Year Ended December 31,												% Change
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	34			W	54			W	63				58.8	%			16.7	%
Noninterest income				622				643				817				3.4				27.1
	Total revenues			656				697				880				6.3				26.3
Provision for credit losses				—				5				4				N/M				(20.0	)
Noninterest expense including depreciation and amortization				(587	)			(658	)			(763	)			12.1				16.0
Segment results(1)			W	69			W	44			W	121				(36.2	)%			175.0	%

(1)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Credit Card Services of Shinhan Card

			Year Ended December 31,												% Change
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	322			W	348			W	356				8.1	%			2.3	%
Noninterest income				—				—				2				N/M				N/M
	Total revenues			322				348				358				8.1				2.9
Provision for credit losses				(236	)			(176	)			(86	)			(25.4	)			(51.1	)
Noninterest expense including depreciation and amortization				(176	)			(166	)			(213	)			(5.7	)			28.3
Segment results(1)			W	(90	)		W	6			W	59				N/M				N/M

(1)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Other

			Year Ended December 31,												% Change
			2003				2004				2005				2003/2004				2004/2005
			(In billions of Won)
Income statement data
Net interest income			W	198			W	155			W	174				(21.7	)%			12.3	%
Noninterest income				107				200				446				86.9				123.0
	Total revenues			305				355				620				16.4				74.6
Provision for credit losses				9				(33	)			(22	)			N/M				(33.3	)
Noninterest expense including depreciation and amortization				(278	)			(312	)			(559	)			12.2				79.2
Segment results(1)			W	36			W	10			W	39				(72.2	)%			290.0	%

(1)	Net income per segment before income taxes.

	Comparison of 2005 to 2004

	Comparison of 2004 to 2003

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	Assets

					As of December 31,												% Change
					2003				2004				2005				2003/2004				2004/2005
					(In billions of Won, except percentages)
Cash and cash equivalents					W	1,897			W	2,444			W	2,434				28.8	%			(0.4	)%
Restricted cash						3,662				3,301				3,644				(9.9	)			10.4
Interest-bearing deposits						409				220				627				(46.2	)			185.0
Call loans and securities purchased under resale agreements						1,898				1,591				1,499				(16.2	)			(5.8	)
Trading assets:
	Trading securities					2,857				4,639				3,573				62.4				(23.0	)
	Derivative assets					520				1,678				934				222.7				(44.3	)
Securities:
	Available-for-sale securities					18,099				18,108				22,480				0.1				24.1
	Held-to-maturity securities					3,605				3,099				2,963				(14.0	)			(4.4	)
Loans:
	Corporate					54,086				54,622				57,891				1.0				6.0
	Consumer					41,209				42,458				47,957				3.0				12.9
		Total loans, gross				95,295				97,080				105,848				1.9				9.0
		Deferred origination costs				127				99				110				(22.0	)			11.1
		Less allowance for loan losses				3,631				2,311				1,511				(36.4	)			(34.6	)
			Total loans, net			91,791				94,868				104,447				3.4				10.1
Customers’ liability on acceptances						2,365				2,012				1,879				(14.9	)			(6.6	)
Premises and equipment, net						2,003				1,848				1,876				(7.7	)			1.5
Goodwill and intangible assets						1,676				1,660				2,957				(1.0	)			78.1
Security deposits						966				968				1,078				0.2				11.4
Other assets						4,601				7,072				4,724				53.7				(33.2	)
			Total assets		W	136,349			W	143,508			W	155,115				5.3	%			8.1	%

	2005 Compared to 2004

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	2004 Compared to 2003

	Liabilities and Stockholders’ Equity

				As of December 31,												% Change
				2003				2004				2005				2003/2004				2004/2005
				(In billions of Won, except percentages)
Deposits:
	Interest bearing			W	82,161			W	79,934			W	83,278				(2.7	)%			4.2	%
	Noninterest bearing				1,328				2,746				3,143				106.8				14.5
Trading liabilities					513				1,758				1,048				242.7				(40.4	)
Acceptances outstanding					2,365				2,012				1,879				(14.9	)			(6.7	)
Short-term borrowings					11,204				10,954				11,968				(2.2	)			9.3
Secured borrowings					6,316				6,308				7,502				(0.1	)			18.9
Long-term debt					21,218				23,617				26,172				11.3				10.8
Future policy benefit					—				—				4,778				—				N/M
Accrued expenses and other liabilities					6,555				9,713				7,089				48.2				(27.0	)
	Total liabilities				131,660				137,042				146,857				4.1				7.2
Minority interest					583				66				80				(88.7	)			21.2
Redeemable convertible preferred stock					711				736				368				3.5				(50.0	)
Stockholders’ equity					3,395				5,664				7,810				66.8				37.9
		Total liabilities, minority interest and stockholders’ equity		W	136,349			W	143,508			W	155,115				5.3	%			8.1	%

225

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	2005 Compared to 2004

	2004 Compared to 2003

226

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			As of
			December 31, 2005
			(In billions of
			Won)
Deposits			W	86,421
Long-term debt(1)				26,172
Call money				994
Borrowings from the Bank of Korea				1,668
Other short-term borrowings				9,306
Asset securitizations				7,502
Redeemable convertible preferred stock				368
Stockholders’ equity				7,810
	Total		W	140,241

(1)	Long-term debt includes Redeemable Preferred Stock.

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		As of March 31,
		2006
		S&P				Moody’s
Shinhan Bank			A-				Baa1
Chohung Bank			A-				Baa1

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	•	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;
	•	asset management 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 asset management companies.

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	Contractual cash obligations

			December 31, 2005
			Payments Due by Period
			Up to				Between 1				Between 3				Beyond
			1 Year				and 3 Years				and 5 Years				5 Years				Total
			(In billions of Won)
Long-term debt(1)			W	5,663			W	13,442			W	2,600			W	4,561			W	26,266
Lease obligations				8				—				—				—				8
Secured borrowings				4,182				2,528				792				—				7,502
Provisions for accrued severance indemnities(2)				13				6				8				50				77
Deposits(3)				41,091				6,089				1,606				352				49,138
	Total		W	50,957			W	22,065			W	5,006			W	4,963			W	82,991

(1)	Long-term debt includes senior debt, subordinated debt and Redeemable Preferred Stock.
(2)	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.
(3)	Deposits include certificate of deposits, other time deposits and mutual installment deposits.

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	Commitments and Guarantees

			As of December 31, 2005
			Commitment Expiration by Period
			Up to				Between 1				Beyond
			1 Year				and 5 Years				5 Years				Total
			(In billions of Won)
Commitments to extend credit:
	Corporate		W	43,313			W	2,357			W	666			W	46,336
	Credit card lines(1)			8,430				7,507				143				16,080
	Consumer(2)			5,644				218				1				5,863
Commercial letters of credit(3)				2,759				190				11				2,960
Financial Standby letters of credit				227				29				—				256
Other Financial guarantees				697				168				2				867
Performance letters of credit and guarantees				743				111				141				995
Liquidity facilities to SPEs				522				1,765				199				2,486
Acceptances				1,879				—				—				1,879
Loans sold with recourse				—				—				14				14
Guarantee on trust accounts				315				312				2,462				3,089
	Total		W	64,529			W	12,657			W	3,639			W	80,825

(1)	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.
(2)	Excludes credit cards.
(3)	These are generally short-term and collateralized by the underlying shipments of goods to which they relate.

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	•	Trading and investment securities;
	•	Deferred taxation;
	•	Guarantees and acceptances (including allowances for losses); and
	•	Provision for loan loss allowances.

	Consolidated Income Statement Data

		Year Ended December 31,
										2003(2)				2004(2)				2005(2)				2005(2)(3)
		2001(1)				2002(2)
										Shinhan				Shinhan				Shinhan				Shinhan
		Shinhan				Shinhan				Financial				Financial				Financial				Financial
		Bank				Bank				Group				Group				Group				Group
		(In billions of Won and millions of US$, except per share data)
Interest income		W	3,607			W	3,646			W	4,996			W	7,016			W	7,885			$	7,807
Interest expense			2,542				2,352				2,997				3,986				3,842				3,804
Net interest income			1,065				1,294				1,999				3,030				4,043				4,003
Provision for credit losses			510				193				1,150				1,317				667				661
Net interest income after provision for credit losses			555				1,101				849				1,713				3,376				3,342
Noninterest revenue(4)			1,206				2,284				3,076				7,327				7,626				7,551
Noninterest expenses(5)			1,309				2,446				3,139				7,570				9,226				9,134
Operating income			452				939				786				1,470				1,776				1,759
Non-operating income (loss), net			44				(86	)			(155	)			(136	)			235				233
Net income before income tax Expense			496				853				631				1,334				2,011				1,992
Income tax expenses			149				255				254				213				264				261
Net income before consolidation Adjustment			347				598				377				1,121				1,747				1,731
Minority interest in loss (earnings) of consolidated subsidiaries			—				4				(14	)			(71	)			(16	)			(15	)
Net income		W	347			W	602			W	363			W	1,050			W	1,732			$	1,716
Per common share data (in currency unit):
Earnings per share-basic		W	1,365			W	2,294			W	1,022			W	3,197			W	4,874			$	4.83
Earnings per share-diluted			1,160				—				1,063				2,820				4,591				4.55
Cash dividends per common share			1,000				600				600				750				800				0.79

(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 periods indicated.
(3)	Won amounts are expressed in U.S. dollars at the rate of W1,010.00 per US$1.00, the noon buying rate in effect on December 31, 2005 as quoted by the Federal Reserve Bank of New York in the United States.
(4)	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.
(5)	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.

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	Consolidated Balance Sheet Data

		Year Ended December 31,
										2003(1)				2004(2)				2005(2)				2005(2)(3)
		2001(1)				2002(1)
										Shinhan				Shinhan				Shinhan				Shinhan
		Shinhan				Shinhan				Financial				Financial				Financial				Financial
		Bank				Bank				Group				Group				Group				Group
		(In billions of Won and millions of US$)
Cash and due from banks		W	2,144			W	2,817			W	6,418			W	6,713			W	8,476			$	8,392
Loans(4)			35,382				46,030				97,757				99,116				108,390				106,713
Less allowance for doubtful accounts(5)			(602	)			(786	)			(2,836	)			(1,917	)			(1,741	)			(1,724	)
Trading securities			2,042				2,076				4,877				7,065				5,496				5,441
Investment securities			13,403				13,408				23,127				20,785				24,746				24,501
Premises and equipments(6)			604				1,101				2,854				2,922				3,491				3,463
Other assets(7)			2,590				2,122				7,024				12,147				12,079				12,556
Total assets			55,563				66,768				139,221				146,831				160,937				159,342
Deposits			34,217				38,722				87,593				87,528				91,521				90,615
Borrowings(8)			9,674				11,352				17,209				14,895				15,916				15,759
Debentures			3,513				8,395				17,748				20,114				22,840				22,614
Other liabilities(9)			4,988				4,337				10,552				16,459				20,408				20,206
Total liabilities			52,392				62,806				133,102				138,996				150,685				149,194
Minority interests in consolidated subsidiaries			—				321				596				88				115				114
Stockholders’ equity			3,171				3,641				5,523				7,747				10,137				10,037
Total liabilities, minority interest and stockholders’ Equity		W	55,563			W	66,768			W	139,221			W	146,831			W	160,937			$	159,345

(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. The balance sheet as of December 31, 2003 include restatements to retroactively apply the adoption of SKAS No. 15, Equity Method of Accounting, and prior period adjustments that were not material.
(3)	Won amounts are expressed in U.S. dollars at the rate of W1,010.00 per US$1.00, noon buying rate in effect on December 31, 2005 as quoted by the Federal Reserve Bank of New York in the United States.
(4)	Loans represent the gross amount of loans, before adjustment for the allowance for loan losses. Accrued interest income is included within other assets. The amount of credit card loans was W2,093 billion, W2,796 billion, W4,931 billion, W4,248 billion and W3,861 billion in 2001, 2002, 2003, 2004 and 2005 respectively. The amount of payment in guarantees was W39 billion, W90 billion, W108 billion, W31 billion and W70 billion in 2001, 2002, 2003, 2004 and 2005, respectively. The amount of bonds purchased under the resale agreement was W7 billion , W0 billion, W470 billion, W160 billion and W140 billion in 2001, 2002, 2003, 2004 and 2005, respectively.
(5)	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.
(6)	Accumulated depreciation is recorded as a deduction from premises and equipment.

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(7)	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). Leasehold deposits are recorded as other assets on the balance sheet.
(8)	Borrowings consist mainly of borrowings from Bank of Korea, the Korean government and banking institutions.
(9)	Under Korean GAAP, 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. Previously, provisions were only applied to acceptances and guarantees classified as substandard, doubtful and estimated loss. Effective in 2005, provisions are applied to all acceptances and guarantees, including those classified as normal and precautionary as well as those classified as substandard or below. The amounts of provisions as of December 31, 2001, 2002, 2003, 2004 and 2005 were W13 billion, W4 billion, W57 billion, W37 billion and W60 billion, respectively. These amounts are included in other liabilities.

	Profitability Ratios

				Year Ended December 31,
								2002(1)				2003(2)				2004(2)				2005(2)
				2001(1)
								Shinhan				Shinhan				Shinhan				Shinhan
				Shinhan				Financial				Financial				Financial				Financial
				Bank				Group				Group				Group				Group
				(Percentages)
Net income as a percentage of:
	Average total assets(3)				0.67	%			0.91	%			0.37	%			0.72	%			1.04	%
	Average stockholders’ equity(3):
		Common shares only			11.76				17.12				9.97				14.52				20.10
		Including redeemable preferred shares(4)			11.21				N/A				8.42				14.08				19.93
Dividend payout ratio(5)					43.45				26.15				66.34				22.16				16.05
Net interest spread(6)					1.67				1.63				2.25				2.09				2.60
Net interest margin(7)					2.15				2.08				2.30				2.28				2.74
Efficiency ratio(8)					57.65				68.38				61.85				73.09				79.06
Cost-to average assets ratio(9)					2.50				3.67				3.19				5.18				5.52
Equity to average asset ratio(10):					5.91				5.27				4.38				5.10				5.20
		Common shares only			5.63				5.27				3.70				4.95				5.15
		Including redeemable preferred shares(4)			5.91				N/A				4.38				5.10				5.20

	(1)	Represents the profitability ratios of Shinhan Bank for the periods indicated.
	(2)	Represents the profitability ratios of Shinhan Financial Group for the periods indicated.
	(3)	Average balances are based on (a) daily balances for Shinhan Bank, Chohung Bank and Jeju Bank and (b) quarterly balances for other subsidiaries.
	(4)	In 2000 and 2001, Shinhan Bank had W292.5 billion of Redeemable Preferred Stock outstanding that it had issued to the Korea Deposit Insurance Corporation in connection with its acquisition of the assets

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		and liabilities of Dongwha Bank, one of the failed banks in Korea, in 1998. All of these Redeemable Preferred Stock were redeemed in 2001. As consideration for our acquisition of Chohung Bank, in August 2003, we issued to the Korea Deposit Insurance Corporation (i) 46,583,961 shares of our Redeemable Preferred Stock, with an aggregate redemption price of W842,517,518,646 and (ii) 44,720,603 shares of our Redeemable Convertible Preferred Stock, with an aggregate redemption price of W808,816,825,858, which were convertible into shares of our common stock. In November 2005, Korea Deposit Insurance Corporation converted 22,360,302 shares of our Redeemable Convertible Preferred Stock into 22,360,302 shares of our common stock, representing 6.22% of our total issued shares (or 5.86% of our total issued common stock on a fully diluted basis). In April 2006, Korea Deposit Insurance Corporation sold to BNP Paribas S.A. and other institutional investors all of our common shares held by it. As of the date hereof, Korea Deposit Insurance Corporation does not hold any share of our common stock but still holds 22,360,301 shares of Redeemable Convertible Preferred Stock, representing 6.22% of the total issued shares (or 5.86% of the total issued shares on a fully diluted basis) of our common stock. Korea Deposit Insurance Corporation is entitled to convert such shares into our common stock beginning in August 2006. 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. These Redeemable Preferred Stock are treated as debt under U.S. GAAP. Pursuant to the terms of our 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 our Redeemable Convertible Preferred Stock is convertible into one share of our common stock. The dividend ratios on our Redeemable Preferred Stock and Redeemable Convertible Preferred Stock are 4.04% and 2.02%, respectively. In August 2003, we also 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 through Strider Securitization Specialty Co., Ltd., a special purpose vehicle. These redeemable preferred shares have terms that are different from the redeemable preferred shares issued to Korea Deposit Insurance Corporation. We are required to redeem these preferred shares issued to the special purpose vehicle in three installments in 2006, 2008 and 2010. See “Item 4. Information on the Company — The Merger of Shinhan Bank and Chohung Bank — Liquidity and Capital Resources” and “Item 10. Additional Information — Articles of Incorporation — Description of Capital Stock — Description of Redeemable Preferred Stock”.
	(5)	The dividend payout ratio represents the ratio of total dividends paid on common stock as a percentage of net income attributable to common stock.
	(6)	Net interest spread represents the difference between the yield on average interest earning assets and cost of average interest bearing liabilities.
	(7)	Net interest margin represents the ratio of net interest income to average interest earning assets.

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	(8)	Efficiency ratio represents the ratio of noninterest expense to the sum of net interest income and noninterest income, a measure of efficiency for banks and financial institutions. Efficiency ratio may be reconciled to comparable line-items in our income statement for the periods indicated as follows:

			Year Ended December 31,
			2001				2002				2003				2004				2005
							Shinhan				Shinhan				Shinhan				Shinhan
			Shinhan				Financial				Financial				Financial				Financial
			Bank				Group				Group				Group				Group
			(In billions of Won, except percentages)
Non-interest expense(A)			W	1,309			W	2,446			W	3,139			W	7,570			W	9,226
Divided by
The sum of net interest income and noninterest income(B)				2,271				3,578				5,075				10,357				11,669
	Net interest income			1,065				1,294				1,999				3,030				4,043
	Noninterest revenue			1,206				2,284				3,076				7,327				7,626
Efficiency ratio ((A) as a percentage of(B))				57.64	%			68.36	%			61.85	%			73.09	%			79.06	%

	(9)	Cost-to-average-assets ratio, a measure of cost of funding used by banks and financial institutions, represents the ratio of noninterest expense to average total assets.

(10)	Equity to average asset ratio represents the ratio of average stockholders’ equity to average total assets

	Capital Ratios

			As of or for the Year Ended December 31,
			2001				2002				2003				2004				2005
			(Percentages)
Requisite capital ratio(1)				134.43	%			130.93	%			118.41	%			129.41	%			132.81	%
Total capital adequacy (BIS) ratio of Shinhan Bank(2)				11.99				10.92				10.49				11.94				12.23
	Tier I(2)			8.24				6.81				6.34				7.45				8.16
	Tier II(2)			3.75				4.11				4.15				4.49				4.07
Total capital adequacy (BIS) ratio of Chohung Bank(2)				10.43				8.66				8.87				9.40				10.94
	Tier I(2)			5.91				4.61				4.47				4.99				6.52
	Tier II(2)			4.52				4.05				4.40				4.41				4.42
Adjusted equity capital ratio of Shinhan Card(3)				N/A				10.86				13.78				16.48				17.68

(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. This computation is based on our consolidated financial statement in accordance with Korean GAAP. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Financial Holding Companies — Capital Adequacy”.

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(2)	Shinhan Bank comprised 47.83% of our total assets and Chohung Bank comprised 41.53% of our total assets as of December 31, 2005. The capital adequacy ratios of Shinhan Bank and Chohung Bank 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. For Shinhan Bank, the capital ratios as of December 31, 2001 were recalculated using these revised guidelines. For Chohung Bank, the capital ratios as of December 31, 2002 were calculated using these revised guidelines but the capital ratios as of December 31, 2001 do not reflect the revised guidelines. Under the guidelines of the Financial Supervisory Commission, each of Shinhan Bank and Chohung Bank is required to maintain a minimum capital adequacy ratio of 8%. This computation is based on consolidated financial statements prepared in accordance with Korean GAAP of Shinhan Bank and Chohung Bank, as the case may be. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Banks — Capital Adequacy.”
(3)	Represents the ratio of total adjusted stockholders’ equity to total adjusted assets and is 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.

	Asset Quality Ratios

		As of December 31,
		2001(1)				2002(1)				2003(2)				2004(2)				2005(2)
		(In billions of Won, except percentages)
Substandard and below loans(3)		W	540			W	843			W	3,207			W	1,660			W	1,195
Substandard and below loans as a percentage of total loans			1.52	%			1.83	%			3.37	%			1.70	%			1.09	%
Substandard and below loans as a percentage of total assets			0.97				1.26				2.30				1.13				0.74
Precautionary loans as a percentage of total loans(4)			2.74				1.72				3.55				3.18				2.75
Precautionary and below loans as a percentage of total loans(4)			5.17				3.55				6.92				4.88				3.84
Precautionary and below loans as a percentage of total assets(4)			3.30				2.45				4.73				3.25				2.61
Allowance for loan losses as a percentage of substandard and below loans			81.01				35.25				85.85				112.63				143.43
Allowance for loan losses as a percentage of precautionary and below loans(4)			22.51				25.38				41.80				39.21				40.75
Allowance for loan losses as a percentage of total loans			1.74				1.71				2.89				1.91				1.57
Substandard and below credits as a percentage of total credits(5)			1.44				1.00				3.57				1.66				1.07
Loans in Korean Won as a percentage of deposits in Korean Won(6)			83.36				96.35				99.37				99.30				107.79

(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 the dates indicated.

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(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). In 1999, as well as classifying credit quality into five categories, which are normal, precautionary, substandard, doubtful and estimated loss, in accordance with standards defined by the Financial Supervisory Commission, we also took into account the repayment capability of borrowers. See “Item 4. Information on the Company — Supervision and Regulation — Principal Regulations Applicable to Banks”.
(4)	As defined by the Financial Supervisory Commission.
(5)	Credits include loans provided from our 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.

	The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments

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	Share-Based Compensation

	Accounting for Exchange of Nonmonetary Assets

	Accounting Changes and Error Corrections

	Accounting for Certain Hybrid Financial Instruments

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	Accounting for Servicing of Financial Assets

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				2005
				(In millions of Won)
U.S. GAAP net income				W	1,738,768
	1. Provision for credit losses				(804,030	)
	2. Sale of loans to the Korea Asset Management Corporation				3,374
	3. Deferred loan fees and costs				(14,676	)
	4. Securities and derivatives for hedging purposes
		a. Changes in foreign exchange rates on available-for-sale securities			(28,768	)
		b. Impairment loss and reclassification of securities			(43,291	)
		c. Reversal of hedge accounting treatment for derivatives			65,813
	5. Stock based compensation				2,067
	6. Formation of Shinhan Financial Group				—
	7. Foreign currency translation				(3,623	)
	8. Derecognition and amortization and impairment of goodwill				(94,461	)
	9. Sale of Shinhan Securities				—
	10. Negative goodwill				685
	11. Amortization of intangible assets				181,583
	12. Recognition of minority interest				(565	)
	13. Reversal of asset revaluation				(37,773	)
	14. Adjustments for Redeemable (Convertible) Preferred Stock				128,606
	15. Sale-leaseback				(14,163	)
	16. Fair valuation of long-term debt and bonds				(30,363	)
	17. Conforming depreciation accounting policy				(24,589	)
	18. Measurement of common stock issued for acquisition of subsidiaries				—
	19. Others				54,083
Total of adjustments					(660,091	)
Tax effect of adjustments					653,390
Korean GAAP net income				W	1,732,067
U.S. GAAP stockholders’ equity				W	7,810,784
	1. Provision for credit losses				(1,421,664	)
	2. Sale of loans to the Korea Asset Management Corporation				(38,830	)
	3. Deferred loan fees and costs				(43,557	)
	4. Securities and derivatives for hedging purposes
		a. Changes in foreign exchange rates on available-for-sale securities			—
		b. Impairment loss and reclassification of securities			1,263,524
		c. Reversal of hedge accounting treatment for derivatives			117,079

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			2005
			(In millions of Won)
	5. Stock based compensation			(31,981	)
	6. Formation of Shinhan Financial Group			(43,053	)
	7. Foreign currency translation			(4,070	)
	8. Derecognition and amortization and impairment of goodwill			(110,190	)
	9. Sale of Shinhan Securities			(10,642	)
	10. Negative goodwill			76,615
	11. Amortization of intangible assets			462,171
	12. Recognition of minority interest			79,758
	13. Reversal of asset revaluation			76,614
	14. Adjustments for Redeemable (Convertible) Preferred Stock			1,597,957
	15. Sale-leaseback			7,356
	16. Fair valuation of long-term debt and bonds			(101,263	)
	17. Conforming depreciation accounting policy			(22,028	)
	18. Measurement of common stock issued for acquisition of subsidiaries			137,738
	19. Others			(77,806	)
Total of adjustments				1,913,728
Tax effect of adjustments				527,214
Korean GAAP stockholders’ equity			W	10,251,726

		Shinhan Bank								Chohung Bank
		Corporate				Consumer				Corporate				Consumer
		(Percentage)								(Percentage)
Normal			0.20 - 2.0				0.75				0.5				0.75
Precautionary			4.0				8.0				2.0				8.0
Substandard			20.0				20.0				20.0				20.0
Doubtful			95.0				55.0				95.0				55.0
Estimated Loss			100.0				100.0				100.0				100.0

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ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Name

Age

Position

Director Since

Date Term Ends

Eung Chan Ra

68

Chairman of the Board of Directors and Head of Board Steering Committee

September 1, 2001

March 25, 2007

In Ho Lee

63

President and Chief Executive Officer and a member of the Board Steering Committee

September 1, 2001

March 25, 2007

Young Hwi Choi

61

Executive Director

March 31, 2003

March 25, 2007

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Name

Age

Position

Director Since

Date Term Ends(1)

Young Seok Choi

77

Non-Executive Director

March 31, 2003

March 25, 2007

Yong Woong Yang

58

Non-Executive Director

March 25, 2004

March 25, 2007

Il Sup Kim

60

Outside Director

March 31, 2003

March 21, 2007

Sang Yoon Lee

64

Outside Director

March 25, 2004

March 21, 2007

Yoon Soo Yoon

61

Outside Director

March 25, 2004

March 21, 2007

Shee Yul Ryoo

67

Outside Director

March 30, 2005

March 21, 2007

Byung Hun Park

78

Outside Director

September 1, 2001

March 21, 2007

Young Hoon Choi

77

Outside Director

March 30, 2005

March 21, 2007

Si Jong Kim

69

Outside Director

March 30, 2005

March 21, 2007

Philippe Reynieix

57

Outside Director

March 25, 2004

March 21, 2007

Haeng Nam Chung

64

Outside Director

March 21, 2006

March 21, 2007

Myoung Soo Choi

48

Outside Director

March 21, 2006

March 21, 2007

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

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Name		Age				Position
Jae Woo Lee			55			Chief Operating Officer; Managing Director of General Affairs Team, Public Relations Team, Human Resources Team
Byung Jae Cho			54			Chief Financial Officer; Managing Director of Finance Planning Team, Risk Management Team, Investor Relations Team
Jin Won Suh			54			Chief Strategy Officer; Managing Director of Strategic Planning Team, Future Strategy & Management Team, Information & Technology Planning Team
Jae Woon Yoon			54			Group Synergy Officer; Managing Director of Joint Procurement Team, Synergy Management Team, Audit & Compliance Team

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	Majority of Independent Directors on the Board

	Executive Sessions

252

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	Nominating and Corporate Governance Committee

	Compensation Committee

	Establish Corporate Governance Guidelines and Adopt Code of Business Conduct and Ethics

	Shareholder Approval of Equity Compensation Plans

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	Annual Certification of Compliance

	•	the Board Steering Committee;
	•	the Risk Management Committee;
	•	the Audit Committee

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	•	the Outside Director Recommendation Committee; and
	•	the Compensation Committee.

	Board Steering Committee

	Risk Management Committee

	Audit Committee

	Outside Director Recommendation Committee

	Compensation Committee

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						Exercise Period												Number of				Percentage				Number of
														Exercise				Granted				of Shares				Exercised
Name and Position		Grant Date				From				To				Price				Options				Outstanding				Options
														(In Won)								(Percentage)
Shinhan Financial Group
Eung Chan Ra (Chairman of Board of Directors)			5/22/2002				5/23/2004				5/22/2008				W18,910				94,416				0.03	%			—
			5/15/2003				5/16/2005				5/15/2009				11,800				95,390				0.03				—
			3/25/2004				3/25/2006				3/25/2009				21,595				100,000				0.03				—
			3/30/2005				3/30/2008				3/29/2012				28,006				100,000				0.03				—
			3/21/2006				3/21/2009				3/20/2013				38,829				120,000				0.03				—
In Ho Lee (President & CEO)			5/22/2002				5/23/2004				5/22/2008				18,910				32,162				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				186,500				0.05				—
Young Hwi Choi (Executive Director)			5/22/2002				5/23/2004				5/22/2008				18,910				47,208				0.02				47,208
			5/15/2003				5/16/2005				5/15/2009				11,800				85,851				0.03				85,851
			3/25/2004				3/25/2006				3/25/2009				21,595				90,000				0.03				—
			3/30/2005				3/30/2008				3/29/2012				28,006				90,000				0.03				—
Il Sup Kim (Outside Director)			3/30/2005				3/30/2008				3/29/2012				28,006				10,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				10,000				0.00				—
Sang Yoon Lee (Outside Director)			3/30/2005				3/30/2008				3/29/2012				28,006				10,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				10,000				0.00				—
Yoon Soo Yoon (Outside Director)			3/30/2005				3/30/2008				3/29/2012				28,006				10,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				10,000				0.00				—
Shee Yul Ryoo (Outside Director)			3/30/2005				3/30/2008				3/29/2012				28,006				10,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				10,000				0.00				—
Jae Woo Lee (Chief Operating Officer)			5/22/2002				5/23/2004				5/22/2008				18,910				18,873				0.01				—
			5/15/2003				5/16/2005				5/15/2009				11,800				19,290				0.01				—
			3/25/2004				3/25/2006				3/25/2009				21,595				20,000				0.01				—
			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				24,000				0.01				—
Byung Jae Cho (Chief Financial Officer)			3/25/2004				3/25/2006				3/25/2009				21,595				20,000				0.01				—
			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				24,000				0.01				—

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						Exercise Period												Number of				Percentage				Number of
														Exercise				Granted				of Shares				Exercised
Name and Position		Grant Date				From				To				Price				Options				Outstanding				Options
														(In Won)								(Percentage)
Jin Won Suh (Chief Strategy Officer)			3/25/2004				3/25/2006				3/25/2009				21,595				20,000				0.01				—
			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Jae Woon Yoon (Group Synergy Officer)			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Shinhan Bank
Sang Hoon Shin (President & CEO)			5/22/2002				5/23/2004				5/22/2008				18,910				28,325				0.01				—
			5/15/2003				5/16/2005				5/15/2009				11,800				77,160				0.03				—
			3/25/2004				3/25/2006				3/25/2009				21,595				80,000				0.03				—
			3/30/2005				3/30/2008				3/29/2012				28,006				80,000				0.03				—
			3/21/2006				3/21/2009				3/20/2013				38,829				88,000				0.02				—
Jae Ho Cho (Director & Standing Auditor)			3/25/2004				3/25/2006				3/25/2009				21,595				20,000				0.01				—
			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Hong Hee Chae (Deputy President)			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Baek Soon Lee (Deputy President)			3/25/2004				3/25/2006				5/15/2009				21,595				20,000				0.00				—
			3/30/2005				3/30/2008				3/25/2009				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/29/2012				38,829				24,000				0.01				—
Sang Young Oh (Deputy President)			3/25/2004				3/25/2006				3/25/2009				21,595				15,000				0.01				—
			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Hyu Won Lee (Deputy President)			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Sang Woon Choi (Deputy President)			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Eun Sik Kim (Deputy President)			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Chang Sung Moon (Deputy President)			3/30/2005				3/30/2008				3/29/2012				28,006				20,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Won Suk Choi (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Shin Sung Kang (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Yoon Suk Gong (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				22,000				0.01				—
Nam Lee (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				20,000				0.01				—
Chang Ki Huh (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				20,000				0.01				—

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						Exercise Period												Number of				Percentage				Number of
														Exercise				Granted				of Shares				Exercised
Name and Position		Grant Date				From				To				Price				Options				Outstanding				Options
														(In Won)								(Percentage)
Good Morning Shinhan Securities
Woo Keun Lee (Representative Director and Vice Chairman)			3/30/2005				3/30/2008				3/29/2012				28,006				40,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				40,000				0.01				—
Dong Girl Lee (President and CEO)			5/22/2002				5/23/2004				5/22/2008				18,910				26,953				0.01
			5/15/2003				5/16/2005				5/15/2009				11,800				30,000				0.01
			3/25/2004				3/25/2006				3/25/2009				21,595				30,000				0.01
			3/30/2005				3/30/2008				3/29/2012				28,006				40,000				0.01
			3/21/2006				3/21/2009				3/20/2013				38,829				48,000				0.01				—
Sung Roh Lee (Statutory auditor)			3/30/2005				3/30/2008				3/29/2012				28,006				15,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Hyeon Jae Han			3/30/2005				3/30/2008				3/29/2012				28,006				15,000				0.00				—
(Senior Exec. Vice			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
President)
Jin Kook Lee (Senior Exec. Vice President)			3/30/2005				3/30/2008				3/29/2012				28,006				15,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Chae Young Jung (Senior Exec. Vice President)			3/30/2005				3/30/2008				3/29/2012				28,006				15,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Yoo Shin Jung (Senior Exec. Vice President)			3/30/2005				3/30/2008				3/29/2012				28,006				15,000				0.00				—
Seok Joong Kim (Senior Exec. Vice President)			3/30/2005				3/30/2008				3/29/2012				28,006				15,000				0.00				—
Shinhan Life Insurance
Dong Woo Han (CEO)			3/21/2006				3/21/2009				3/20/2013				38,829				44,000				0.01				—
Seung Choo Kang (Statutory Auditor)			3/21/2006				3/21/2009				3/20/2013				38,829				16,500				0.00				—
Young Chul Bae (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Kun Jong Lee (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Byung Chan Lee (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Ki Won Kim (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				12,000				0.00				—
Sam Seok Roh (Deputy President)			3/21/2006				3/21/2009				3/20/2013				38,829				12,000				0.00				—

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						Exercise Period												Number of				Percentage				Number of
														Exercise				Granted				of Shares				Exercised
Name and Position		Grant Date				From				To				Price				Options				Outstanding				Options
														(In Won)								(Percentage)
Shinhan Card
Sung Kyun Hong (President and CEO)			5/15/2003				5/16/2005				5/15/2009				11,800				4,984				0.00				—
			3/25/2004				3/25/2006				3/24/2009				21,595				27,484				0.01				—
			3/30/2005				3/30/2008				3/29/2012				28,006				40,000				0.01				—
			3/21/2006				3/21/2009				3/20/2013				38,829				44,000				0.01				—
Tae Gyu Lee (Standing Auditor)			5/15/2003				5/16/2005				5/15/2009				11,800				1,661				0.00				—
			3/25/2004				3/25/2006				3/24/2009				21,595				9,161				0.00				—
			3/30/2005				3/30/2008				3/29/2012				28,006				15,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				16,500				0.00				—
Sung Won Kim (Executive Deputy CEO)			5/15/2003				5/16/2005				5/15/2009				11,800				1,661				0.00				—
			3/25/2004				3/25/2006				3/24/2009				21,595				9,161				0.00				—
			3/30/2005				3/30/2008				3/29/2012				28,006				15,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Yoo Yeop Shim (Executive Deputy CEO)			5/15/2003				5/16/2005				5/15/2009				11,800				1,661				0.00				—
			3/25/2004				3/25/2006				3/24/2009				21,595				9,161				0.00				—
			3/30/2005				3/30/2008				3/29/2012				28,006				12,000				0.00				—
			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Doo Hwan Jun (Executive Deputy CEO)			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Hee Geon Kim (Executive Deputy CEO)			3/21/2006				3/21/2009				3/20/2013				38,829				15,000				0.00				—
Total																			3,026,062				0.84	%			133,059

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ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

			Number of Common				Percentage of Total
Name of Shareholder			Shares Held				Common Shares
Korea Deposit Insurance Corporation(1)				22,360,302				6.22	%
Korea National Pension Fund				14,349,146				3.99	%
BNP Paribas Luxembourg				13,557,832				3.77	%
Euro-Pacific Growth Fund				11,949,400				3.33	%
Chohung Bank(2)				8,985,567				2.50	%
Capital World Growth				6,756,300				1.88	%
NTC-GOV Spore				5,763,090				1.60	%
Daekyo				5,344,397				1.49	%
Templeton Foreign Fund				5,076,900				1.41	%
Fidelity Investment Trust				3,949,840				1.10	%
Emerging Market Growth				3,949,090				1.10	%
Others				257,165,449				71.61	%
	Total(3)			359,207,313				100.00	%

(1)	In April 2006, Korea Deposit Insurance Corporation sold 22,360,302 common shares held by it, representing 6.22% of the total issued shares (or 5.86% of the total issued shares on a fully diluted basis) of our common stock to BNP Paribas and its affiliates and other investors through an after-trading-hours block sale of which 20,124,272 shares were sold to the BNP Paribas group, making the BNP Paribas group our largest shareholder with a total of 33,682,104 common shares, or 9.38% of our total issued common shares. Currently, Korea Deposit Insurance Corporation does not own any of our common stock.
(2)	In June 2004, we acquired 108,438,628 shares of common stock of Chohung Bank that we previously did not own through a cash tender offer and a small-scale share swap pursuant to Korean laws. In connection with the share swap transaction, we issued 14,682,590 new shares of our common stock to the existing shareholders of Chohung Bank in exchange for the shares of Chohung Bank’s common stock, of which 8,985,567 shares of our common stock were issued to Chohung Bank in exchange for its treasury shares. Chohung Bank acquired these treasury shares from its shareholders who dissented to the share swap at Chohung Bank’s shareholders’ meeting pursuant to the exercise by those dissenting shareholders the right to request Chohung Bank to purchase their shares in accordance with Korean law. Following this transaction, the total number of shares of our common stock increased to 309,083,890 shares. Under the Financial Holding Companies Act of Korea, the voting rights relating to the 8,985,567 shares of our common stock currently held by Chohung Bank in treasury are restricted. The newly issued 14,682,590 shares of our common stock were listed on the Stock Market Division of the Korea Exchange in July 2004.
(3)	Includes 10,235,121 shares of our common stock issued in exchange for the equity shares (both common and preferred shares) of Good Morning Shinhan Securities in connection with our obtaining the then minority interest in Good Morning Shinhan Securities in December 2004 through a cash tender offer and a small-scale share swap pursuant to Korean laws, of which 1,444 shares of our common stock was issued to Good Morning Shinhan Securities in exchange for its treasury shares. Good Morning Shinhan Securities acquired these treasury shares from its shareholders who dissented to the share swap at Good

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Morning Shinhan Securities’ shareholders’ meeting pursuant to the exercise by those dissenting shareholders the right to request Good Morning Shinhan Securities to purchase their shares in accordance with Korean law. Good Morning Shinhan Securities sold the 1,444 shares of our common stock that it held in March 2005. Following this transaction, the total number of shares of our common stock increased to 319,319,011 shares. The newly issued 10,235,121 shares of our common stock were listed on the Stock Market Division of the Korea Exchange in January 2005.

	In November 2005, Korea Deposit Insurance Corporation converted 22,360,302 shares of Redeemable Convertible Preferred Shares into 22,360,302 shares of our common shares, representing 6.22% of the total issued shares (or 5.86% of the total issued shares on a fully diluted basis) of our common stock. This conversion increased the total number of our common shares from 319,319,011 to 341,679,313.
	In December 2005, in a series of related transactions, we acquired 100% of Shinhan Life Insurance, an insurance company, through a “small scale share exchange” mechanism provided under applicable Korean law, pursuant to which we issued 17,528,000 new shares of our common stock to the shareholders of Shinhan Life Insurance in exchange for all outstanding common stock of Shinhan Life Insurance held by them for an aggregate purchase price of W612 billion, or W15,300 per share. As part of this share exchange, Shinhan Bank exchanged 5,524,772 shares of common stock of Shinhan Life Insurance previously held by it into 2,420,955 shares of our common stock and Good Morning Shinhan Securities exchanged 464,800 shares of common stock of Shinhan Life Insurance previously held by it into 203,675 shares of our common stock. Similarly, as part of this transaction, Shinhan Life Insurance also exchanged 9,000 shares of its common stock, which Shinhan Life Insurance acquired as a result of the exercise of appraisal rights by dissenting shareholders of Shinhan Life Insurance, into 3,943 shares of our common stock. All of such shares of our common stock received by Shinhan Life Insurance were sold in the market on December 29, 2005.
	As of December 31, 2005, we had 11,610,197 treasury shares of our common stock, which were held by Chohung Bank, Shinhan Bank and Good Morning Shinhan Securities. Of such treasury shares, 1,708,050 shares were granted to the employees of the newly merged Shinhan Bank in April 2006 and 916,580 shares were sold in the market in June 2006. As of the date hereof, 8,985,567 treasury shares of our common stock are held by Shinhan Bank which must be disposed of by June 2007 in accordance with the Financial Holding Company Act of Korea. Under the Financial Holding Company Act of Korea, the voting rights on our treasury shares are subject to certain restrictions and the treasury shares must be sold within six months of acquisition with certain exceptions.

			Number of Preferred				Percentage of Total
Name of Shareholder			Shares Held				Preferred Shares
Korea Deposit Insurance Corporation				46,583,961				88.59	%
Strider Securitization Specialty Co., Ltd.				6,000,000				11.41
	Total			52,583,961				100.00	%

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ITEM 8.	FINANCIAL INFORMATION

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ITEM 9.	THE OFFER AND LISTING

			Korea Exchange												New York Stock Exchange
			Closing Price per												Closing Price per
			Common Stock												ADS
											Average Daily												Average Daily
			High				Low				Trading Volume				High				Low				Trading Volume
											(Shares)												(ADSs)
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				19,700				9,500				1,408,358				—				—				—
	First Quarter			13,650				9,500				1,504,051				—				—				—
	Second Quarter			13,900				10,100				1,592,993				—				—				—
	Third Quarter(1)			18,300				12,500				1,341,422			$	31.40			$	27.40				2,944
	Fourth Quarter			19,700				15,650				1,200,222				32.75				27.70				2,900
2004				23,400				15,200				1,372,443				45.65				26.50				6,039
	First Quarter			23,050				18,000				1,894,713				39.63				30.80				6,566
	Second Quarter			21,250				15,700				1,355,687				40.80				27.60				5,111
	Third Quarter			23,400				15,200				1,154,295				37.20				26.50				6,798
	Fourth Quarter			23,750				20,500				1,117,511				45.65				35.90				5,655
2005				43,100				24,100				1,210,054				74.31				51.78				14,419
	First Quarter			29,750				26,944				1,348,839				53.53				52.72				13,916
	Second Quarter			27,650				24,100				1,054,949				52.54				51.78				10,238
	Third Quarter			37,200				31,574				1,184,651				62.33				61.50				11,994
	Fourth Quarter			43,100				38,187				1,256,327				74.31				73.38				21,617
2006 (through June 23)				49,500				36,500				1,601,332				106.60				73.01				33,128
	January			42,300				37,700				1,164,508				86.55				76.50				34,765
	February			41,650				38,100				1,280,464				86.90				78.66				35,279
	March			43,700				36,500				1,923,926				88.50				73.01				36,643
	April			47,850				43,450				2,511,118				99.69				89.51				21,816
	May			49,500				43,000				1,417,193				106.60				88.50				35,668
	June (through June 23)			45,250				39,750				1,225,124				95.48				80.15				33,394

(1)	Trading of our American depositary shares on the New York Stock Exchange commenced on September 16, 2003.

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	The Korea Exchange

	•	Any person’s ownership of shares in the Korea Exchange is limited to 5% or less except for an investment trust company or investment company established under the Act on Business of Operating Indirect Investment and Assets, or the Korean government. However, upon prior approval from the Financial Supervisory Commission, more than 5% ownership in Korea Exchange is permitted if necessary for forming strategic alliance with a foreign stock or futures exchange;
	•	The number of outside directors on the board of directors of the Korea Exchange shall be more than half of the total number of directors;
	•	Any amendment to the Articles of Incorporation, transfer or consolidation of business, spin off, stock swap in its entirety or transfer of shares in its entirety of the Korea Exchange will receive prior approval from the Minister of the Ministry of Finance and Economy; and
	•	In the event the Minister of the Ministry of Finance and Economy determines that the chief executive officer of the Korea Exchange is not appropriate for the position, the Minister of the Ministry of Finance and Economy can request the Korea Exchange upon reasonable cause, within one month from the chief executive officer’s election, to dismiss the chief executive officer. Subsequently, the chief executive officer will be suspended from performing his duties and the Korea Exchange will elect a new chief executive officer within two months from the request.

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		Opening				High				Low				Closing
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			635.17				822.16				515.24				810.71
2004			821.26				936.06				719.59				895.92
2005			893.71				1,379.37				870.84				1,379.37
2006 (through June 23)			1,383.32				1,464.70				1,192.09				1,228.62

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		Rounded Down
Previous Day’s Closing Price		to Won
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

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						Total Market Capitalization								Average Daily Trading Volume, Value
		Number of
		Listed				(Millions of				(Thousands of				Thousands of				(Millions of				(Thousands of
Year		Companies				Won)				Dollars)(1)				Shares				Won)				Dollars)(1)
1979			355			W	2,609,414			$	5,391,351				5,382			W	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			684				355,362,626				298,121,331				542,010				2,216,636				1,859,594
2004			683				412,588,139				398,597,371				372,895				2,232,109				2,156,419
2005			702				655,074,514				648,588,628				467,629				3,157,662				3,126,398
2006 (through June 23)			717				599,889,895				627,631,194				337,652				4,111,859				4,302,007

(1)	Converted at the Market Average Exchange Rate at the end of the periods indicated.

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	Further Opening of the Korean Securities Market

	Protection of Customer’s Interest in Case of Insolvency of Securities Companies

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ITEM 10.	ADDITIONAL INFORMATION

	General

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	Dividends

274

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	Distribution of Free Shares

	Preemptive Rights and Issuance of Additional Shares

275

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	General Meeting of Shareholders

	Voting Rights

276

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	Rights of Dissenting Shareholders

277

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	Register of Shareholders and Record Dates

	Description of Redeemable Preferred Stock

	Description of Series 1/2/3/4/5 Redeemable Preferred Stock

278

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	Description of Redeemable Convertible Preferred Stock

279

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	Description of Series 6/7/8 Redeemable Preferred Stock

	Annual Report

280

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	Transfer of Shares

	Acquisition of our Shares

	Liquidation Rights

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	•	odd-lot trading of shares;
	•	acquisition of shares by foreign companies as a result of a merger;
	•	acquisition of shares (which we refer to as “Converted Shares”) by exercise of warrants, conversion rights, exchange rights or options under bonds with warrants, convertible bonds, exchangeable bonds, stock options or withdrawal rights under depositary receipts issued by a Korean company outside of Korea;
	•	acquisition of shares by exercise of rights as a shareholder;
	•	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;
	•	sale or purchase of securities through a public bidding among large number of bidders;
	•	acquisition of shares by exercising rights granted under a covered warrant;
	•	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;
	•	sale and purchase under repurchase agreements; and
	•	acquisition or disposition of shares in connection with a tender offer.

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	•	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

	Taxation of Capital Gains

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	Inheritance Tax and Gift Tax

	Securities Transaction Tax

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	(i) an individual citizen or resident of the United States;
	(ii) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or District of Columbia;
	(iii) an estate the income of which is subject to U.S. 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 U.S. persons has authority to control all substantial decisions of the trust; or
	(v) a trust that has a valid election in effect under applicable U.S. Treasury Department regulations to be treated as a U.S. person.

	•	a bank;
	•	a dealer in securities or currencies;
	•	a financial institution or an insurance company
	•	a regulated investment company;

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	•	a real estate investment trust;
	•	a tax-exempt entity;
	•	a trader in securities that has elected 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 partnership or other investor in a pass-through entity for U.S. federal income tax purposes;
	•	a person who owns 10% or more of our voting stock; or
	•	a person whose functional currency is not the U.S. dollar.

	American Depositary Receipts

	Distributions on Shares or American Depositary Receipts

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	Disposition of Shares or American Depositary Receipts

	Passive Foreign Investment Company Rules

	•	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.

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	•	the excess distribution or gain will be allocated ratably over your holding period for our shares or American depositary shares,
	•	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.

	Estate and Gift Taxation

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	Information Reporting and Backup Withholding

ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

	American Depositary Shares

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	Dividends and Distributions

	— Distributions of Cash

	— Distributions of Shares

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	— Distributions of Rights

	•	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.

	— Elective Distributions

	— Other Distributions

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	•	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.

	Changes Affecting Shares

	Issuance of ADSs upon Deposit of Shares

	•	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.

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	•	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.

	Transfer, Combination and Split Up of ADRs

	•	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.

	Withdrawal of Shares Upon Cancellation of ADSs

	•	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 Principal Regulations Applicable to ADSs or the withdrawal of securities on deposit.

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	Voting Rights

	Fees and Charges

Service		Fees
Issuance of ADSs		Up to U.S. 5¢ per ADS issued
Cancellation of ADSs		Up to U.S. 5¢ per ADS canceled
Exercise of rights to purchase additional ADSs		Up to U.S. 2¢ 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. 2¢ per ADS held
Distribution of securities other than ADSs or rights to purchase additional ADSs		Up to U.S. 5¢ per share (or share equivalent) distributed
Annual Depositary Services Fee		Annually up to U.S. 2¢ 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

	•	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.

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	Amendments and Termination

	•	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

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	Limitations on Obligations and Liabilities

	•	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 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

	Taxes

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	Foreign Currency Conversion

	•	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.

ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

ITEM 14.	MATERIAL MODIFICATION TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

ITEM 15.	CONTROLS AND PROCEDURES

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ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT

ITEM 16B.	CODE OF ETHICS

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ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

			Aggregate Fees Billed
			During the Year Ended
			December 31,
Type of Services			2004				2005				Nature of Services
			(In millions of Won)
Audit fees			W	4,451			W	4,624			Audit service for Shinhan Financial Group and its subsidiaries.
Audit-related fees				28				—			Accounting advisory service.
Tax fees				209				146			Tax return and consulting advisory service.
All other fees				—				—			All other services which do not meet the three categories above.
	Total		W	4,688			W	4,770

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ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

ITEM 16E.	PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

ITEM 17.	FINANCIAL STATEMENTS

ITEM 18.	FINANCIAL STATEMENTS

ITEM 19.	EXHIBITS

		Page
Audited consolidated financial statements of Shinhan Financial Group prepared in accordance with U.S. GAAP
Report of KPMG Samjong Accounting Corp., Independent Registered Public Accounting Firm, on the consolidated financial statements of Shinhan Financial Group			F-2
Report of Samil PricewaterhouseCoopers, Independent Registered Public Accounting Firm, on the consolidated financial statements of Shinhan Financial Group			F-3
Consolidated balance sheets as of December 31, 2004 and 2005 of Shinhan Financial Group			F-4
Consolidated statements of income for the years ended December 31, 2003, 2004 and 2005 of Shinhan Financial Group			F-6
Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2003, 2004 and 2005 of Shinhan Financial Group			F-8
Consolidated statements of cash flows for the years ended December 31, 2003, 2004 and 2005			F-10
Notes to the consolidated financial statements of Shinhan Financial Group			F-13

	1	.1		Articles of Incorporation (in English)*
	2	.1		Form of Common Stock Certificate (in English)**
	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**

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	4	.3		Agreed Terms, dated June 22, 2004, 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**
	4	.4		Merger Agreement between Shinhan Bank and Chohung Bank (in English)*
	4	.5		Split-Merger Agreement between Shinhan Card and Chohung Bank (in English)*
	8	.1		List of all Subsidiaries of Shinhan Financial Group
	12	.1		Certifications of our Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act
	12	.2		Certifications of our Chief Financial Officer required by Rule 13a-14(a) of the Exchange Act
	13	.1		Certifications of our Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350)
	13	.2		Certifications of our Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350)

	*	A fair and accurate translation from Korean into English.

	**	Incorporated by reference to the registrant’s previous filing on Form 20-F (No. 001-31798), filed on September 15, 2003.

***	Incorporated by reference to the registrant’s previous filing on Form 20-F (No. 001-31798), filed on September 15, 2003. Confidential treatment has been requested for certain portions of the Stock Purchase Agreement.

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	Shinhan Financial Group Co, Ltd.

	By:	/s/ In Ho Lee

	Name:        In Ho Lee

	Title:	President & Chief Executive Officer

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		Page
Index to financial statements			F-1
Report of KPMG Samjong Accounting Corp., Independent Registered Public Accounting Firm, on the consolidated financial statements of Shinhan Financial Group			F-2
Report of Samil PricewaterhoseCoopers, Independent Registered Public Accounting Firm, on the consolidated financial statements of Shinhan Financial Group			F-3
Consolidated balance sheets as of December 31, 2004 and 2005 of Shinhan Financial Group			F-4
Consolidated statements of income for the years ended December 31, 2003, 2004 and 2005 of Shinhan Financial Group			F-6
Consolidated statements of changes in stockholders’ equity for the years ended December 31, 2003, 2004 and 2005 of Shinhan Financial Group			F-8
Consolidated statements of cash flows for the years ended December 31, 2003, 2004 and 2005 of Shinhan Financial Group			F-10
Notes to the consolidated financial statements of Shinhan Financial Group			F-13

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F-2

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F-3

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			2004				2005				2005
											(See Note 1)
			(In millions of Korean Won,								(In thousands
			except share data)								of US$, except
											share data)
ASSETS
Cash and cash equivalents			W	2,443,900			W	2,434,382			$	2,410,279
Restricted cash (Note 4)				3,300,710				3,643,767				3,607,690
Interest-bearing deposits				220,478				626,771				620,565
Call loans and securities purchased under resale agreements (Note 5)				1,591,095				1,499,438				1,484,592
Trading assets (Note 6)				6,316,341				4,507,043				4,462,419
Securities:
	Available-for-sale securities (Note 7)			18,108,229				22,479,721				22,257,149
	Held-to-maturity securities (Note 7)			3,099,322				2,963,074				2,933,736
Loans (net of allowance for loan losses of W2,310,555 in 2004 and W1,511,503 in 2005) (Note 8)				94,868,094				104,446,954				103,412,826
Customers’ liability on acceptances				2,012,499				1,878,866				1,860,264
Premises and equipment, net (Note 9)				1,848,053				1,876,496				1,857,916
Intangible assets (Note 10)				1,043,756				1,834,881				1,816,714
Goodwill (Note 10)				615,915				1,122,605				1,111,490
Security deposits				967,783				1,077,658				1,066,988
Other assets (Note 11)				7,071,847				4,723,657				4,676,888
	Total Assets		W	143,508,022			W	155,115,313			$	153,579,516

F-4

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Table of Contents

				2004				2005				2005
												(See Note 1)
				(In millions of Korean Won,								(In thousands
				except share data)								of US$, except
												share data)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits:
	Interest-bearing (Note 12)			W	79,933,558			W	83,278,197			$	82,453,660
	Non-interest-bearing (Note 12)				2,745,925				3,143,170				3,112,050
Trading liabilities (Note 6)					1,757,577				1,048,157				1,037,779
Acceptances outstanding					2,012,499				1,878,866				1,860,264
Short-term borrowings (Note 13)					10,953,555				11,968,300				11,849,802
Secured borrowings (Note 14)					6,308,093				7,501,707				7,427,433
Long-term debt (Notes 15 and 22)					23,616,683				26,171,822				25,912,695
Future policy benefits (Note 16)					—				4,777,568				4,730,265
Accrued expenses and other liabilities (Note 17)					9,714,129				7,089,112				7,018,922
	Total Liabilities				137,042,019				146,856,899				145,402,870
Commitments and contingencies (Note 31)					—				—				—
Minority interest					65,540				79,758				78,969
Redeemable convertible preferred stock, W5,000 par value; 44,720,603 shares authorized; 44,720,603 shares issued and outstanding in 2004; 22,360,301 shares issued and outstanding in 2005 (Note 22)					735,744				367,872				364,229
Stockholders’ equity
Common stock, W5,000 par value; 1 billion shares authorized; 319,319,011 shares issued and 310,320,994 shares outstanding in 2004; 359,207,313 shares issued and 347,597,116 shares outstanding in 2005 (Note 21)					1,596,595				1,796,037				1,778,254
Additional paid-in capital					1,658,189				2,406,665				2,382,836
Retained earnings (Note 23)					2,455,893				3,953,742				3,914,596
Accumulated other comprehensive income (loss), net of taxes (Note 37)					157,873				(100,202	)			(99,210	)
Less: treasury stock, at cost, 8,998,017 shares in 2004 and 11,610,197 shares in 2005 (Note 21)					(203,831	)			(245,458	)			(243,028	)
		Total stockholders’ equity			5,664,719				7,810,784				7,733,448
	Total liabilities, minority interest, redeemable convertible preferred stock and stockholders’ equity			W	143,508,022			W	155,115,313			$	153,579,516

F-5

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Table of Contents

				2003				2004				2005				2005
																(See Note 1)
				(In millions of Korean Won,												(In thousands
				except per share data)												of US$, except
																per share data)
Interest and dividend income
	Interest and fees on loans			W	4,187,380			W	6,142,356			W	6,295,473			$	6,233,141
	Interest and dividends on securities (Note 7)				927,354				1,264,839				932,395				923,163
	Interest and dividends on trading assets				102,206				168,152				111,070				109,970
	Other interest income				114,002				136,558				148,603				147,131
		Total interest income			5,330,942				7,711,905				7,487,541				7,413,405
Interest expense Interest on deposits					1,765,509				2,369,936				2,234,689				2,212,563
	Interest on short-term borrowings				315,116				340,733				339,855				336,490
	Interest on secured borrowings				207,446				299,173				239,663				237,290
	Interest on long-term debt				702,603				1,099,175				1,182,132				1,170,428
	Other interest expense				7,379				28,976				17,564				17,390
		Total interest expense			2,998,053				4,137,993				4,013,903				3,974,161
Net interest income					2,332,889				3,573,912				3,473,638				3,439,244
Provision (reversal) for credit losses (Note 8)					965,587				135,414				(183,488	)			(181,673	)
Net interest income after provision (reversal) for credit losses					1,367,302				3,438,498				3,657,126				3,620,917
Non-interest income
	Commissions and fees (Note 18)				840,469				1,178,814				1,505,703				1,490,795
	Net trust management fees				58,985				84,496				100,216				99,224
	Net trading profits (Note 6)				72,077				142,562				100,998				99,998
	Net gains (losses) on securities (Note 7)				(127,799	)			(77,115	)			96,227				95,274
	Gain on other investment				27,528				53,356				283,619				280,811
	Net gain on foreign exchange				91,337				352,696				93,771				92,842
	Insurance income				—				—				188,722				186,853
	Other (Note 19)				155,757				357,884				332,525				329,233
		Total non-interest income			1,118,354				2,092,693				2,701,781				2,675,030
Non-interest expense
	Employee compensation and other benefits (Note 27)				704,656				1,216,625				1,480,293				1,465,636
	Depreciation and amortization				247,016				428,835				377,350				373,614
	General and administrative expenses				392,375				542,821				515,882				510,774
	Credit card fees				89,535				147,190				134,489				133,157
	Provision for other losses				—				16,037				112,944				111,826
	Other fees and commission expense				250,483				363,918				416,645				412,520
	Taxes (except income taxes)				61,844				92,096				109,918				108,830
	Insurance operating expense				—				—				199,968				197,988
	Minority interest				25,846				153,428				16,079				15,920
	Other (Note 19)				191,181				343,379				314,185				311,076
		Total non-interest expense			1,962,936				3,304,329				3,677,753				3,641,341

F-6

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Table of Contents

			2003				2004				2005				2005
															(See Note 1)
			(In millions of Korean Won,												(In thousands
			except per share data)												of US$, except
															per share data)
Income before income tax expense, extraordinary item and cumulative effect of change in accounting principle				522,720				2,226,862				2,681,154				2,654,606
Income tax expense (Note 25)				247,402				764,451				942,386				933,055
Income before extraordinary item and cumulative effect of change in accounting principle				275,318				1,462,411				1,738,768				1,721,551
Extraordinary item (Note 20)				—				27,508				—				—
Cumulative effect of change in accounting principle, net of taxes (Note 10)				—				(23,049	)			—				—
Net income			W	275,318			W	1,466,870			W	1,738,768			$	1,721,551
Net income per share of common stock (Note 26)
Basic
	Income before extraordinary item and cumulative effect of change in accounting principle		W	1,024			W	4,860			W	5,190			$	5.14
	Extraordinary item			—				94				—				—
	Cumulative effect of change in accounting principle, net of taxes			—				(79	)			—				—
	Net income per share		W	1,024			W	4,875			W	5,190			$	5.14
Diluted
	Income before extraordinary item and cumulative effect of change in accounting principle		W	984			W	4,333			W	4,882			$	4.83
	Extraordinary item			—				82				—				—
	Cumulative effect of change in accounting principle, net of taxes			—				(68	)			—				—
	Net income per share		W	984			W	4,347			W	4,882			$	4.83
Average common shares issued and outstanding				262,986,588				292,464,924				333,424,397
Average diluted common shares issued and outstanding				279,744,926				337,479,411				356,140,320

F-7

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Table of Contents

																				Accumulated
																				Other
				Common Stock								Additional								Comprehensive								Total
												Paid-In				Retained				Income (loss),				Treasury				Stockholders’
				Shares				Capital				Capital				Earnings				Net of Taxes				Stock				Equity
				(In millions of Korean Won and in thousands of US$, except share and per share data)
Balance at January 1, 2003					292,361,125			W	1,048,085			W	1,048,085			W	1,076,906			W	70,361			W	(394,551	)		W	3,262,607
Comprehensive income:
	Net income				—				—				—				275,318				—				—				275,318
	Foreign currency translation adjustments				—				—				—				—				(1,956	)			—				(1,956	)
	Net unrealized losses on available-for-sale securities				—				—				—				—				(10,309	)			—				(10,309	)
		Total comprehensive income			—				—				—				275,318				(12,265	)			—				263,053
Issuance of common stock					2,040,175				10,201				18,183				—				—				—				28,384
Cash dividends declared (W600 per share)					—				—				—				(157,493	)			—				—				(157,493	)
Dividends on redeemable convertible preferred stock					—				—				—				(6,043	)			—				—				(6,043	)
Acquisition of treasury stock					—				—				—				—				—				(2,149	)			(2,149	)
Grant of stock options					—				—				7,038				—				—				—				7,038
Other					—				—				1				—				—				—				1
Balance at December 31, 2003					294,401,300			W	1,472,007			W	1,073,307			W	1,188,688			W	58,096			W	(396,700	)		W	3,395,398
Balance at January 1, 2004					294,401,300			W	1,472,007			W	1,073,307			W	1,188,688			W	58,096			W	(396,700	)		W	3,395,398
Comprehensive income:
	Net income				—				—				—				1,466,870				—				—				1,466,870
	Foreign currency translation adjustments				—				—				—				—				(18,462	)			—				(18,462	)
	Net unrealized losses on available-for-sale securities				—				—				—				—				118,239				—				118,239
	Total comprehensive income				—				—				—				1,466,870				99,777				—				1,566,647
Issuance of common stock					24,917,711				124,588				427,305				—				—				—				551,893
Cash dividends declared (W600 per share)					—				—				—				(158,717	)			—				—				(158,717	)
Dividends and Accretion of discount on redeemable convertible preferred stock					—				—				—				(40,948	)			—				—				(40,948	)
Acquisition of treasury stock					—				—				—				—				—				(203,827	)			(203,827	)
Sale of treasury stock					—				—				158,361				—				—				396,696				555,057
Grant of stock options					—				—				(784	)			—				—				—				(784	)
Balance at December 31, 2004					319,319,011			W	1,596,595			W	1,658,189			W	2,455,893			W	157,873			W	(203,831	)		W	5,664,719

F-8

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Table of Contents

																				Accumulated
																				Other
				Common Stock								Additional								Comprehensive								Total
												Paid-In				Retained				Income (loss),				Treasury				Stockholders’
				Shares				Amount				Capital				Earnings				Net of Taxes				Stock				Equity
				(In millions of Korean Won and in thousands of US$, except share and per share data)
Balance at January 1, 2005					319,319,011			W	1,596,595			W	1,658,189			W	2,455,893			W	157,873			W	(203,831	)		W	5,664,719
Comprehensive income:					—				—				—				—				—				—				—
	Net income				—				—				—				1,738,768				—				—				1,738,768
	Foreign currency translation adjustments				—				—				—				—				(12,024	)			—				(12,024	)
	Net unrealized gains on available-for-sale securities				—				—				—				—				(246,051	)			—				(246,051	)
		Total comprehensive income			—				—				—				1,738,768				(258,075	)			—				1,480,693
Issuance of common stock					17,528,000				87,640				485,775				—				—				—				573,415
Conversion of redeemable convertible preferred stock into common stock					22,360,302				111,802				256,070				—				—				—				367,872
Cash dividends declared (W750 per share)					—				—				—				(232,749	)			—				—				(232,749	)
Dividends on redeemable convertible preferred stock					—				—				—				(8,170	)			—				—				(8,170	)
Acquisition of treasury stock					—				—				—				—				—				(42,392	)			(42,392	)
Sale of treasury stock					—				—				80				—				—				765				845
Grant of stock options					—				—				6,551				—				—				—				6,551
Balance at December 31, 2005					359,207,313			W	1,796,037			W	2,406,665			W	3,953,742			W	(100,202	)		W	(245,458	)		W	7,810,784
Balance at January 1, 2005					319,319,011			$	1,580,787			$	1,641,771			$	2,431,577			$	156,310			$	(201,813	)		$	5,608,632
Comprehensive income:
	Net income				—				—				—				1,721,553				—				—				1,721,553
	Foreign currency translation adjustments				—				—				—				—				(11,905	)			—				(11,905	)
	Net unrealized gains (losses) on available-for-sale securities				—				—				—				—				(243,615	)			—				(243,615	)
		Total comprehensive income			—				—				—				1,721,553				(255,520	)			—				1,466,033
Issuance of common stock					17,528,000				86,772				480,965				—				—				—				567,737
Conversion of redeemable convertible preferred stock into common stock					22,360,302				110,695				253,535				—				—				—				364,230
Cash dividends declared ($0.74 per share)					—				—				—				(230,446	)			—				—				(230,446	)
Dividends of discount on redeemable convertible preferred stock					—				—				—				(8,088	)			—				—				(8,088	)
Acquisition of treasury stock					—				—				—				—				—				(41,972	)			(41,972	)
Sale of treasury stock					—				—				79				—				—				757				836
Grant of stock options					—				—				6,486				—				—				—				6,486
Balance at December 31, 2005					359,207,313			$	1,778,254			$	2,382,836			$	3,914,596			$	(99,210	)		$	(243,028	)		$	7,733,448

F-9

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Table of Contents

					2003				2004				2005				2005
																	(See Note 1)
																	(In thousands
					(In millions of Korean Won)												of US$)
Cash flows from operating activities
Net income					W	275,318			W	1,466,870			W	1,738,768			$	1,721,550
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
	Provision (reversal) for credit losses					965,587				135,414				(183,488	)			(181,673	)
	Provision for future policy bebefit					—				—				58,284				57,707
	Depreciation and amortization					247,016				428,835				377,350				373,614
	Accretion of discounts on long-term debt					583,869				324,866				181,038				179,246
	Amortization on deferred loan fees and origination costs					87,820				92,399				47,071				46,605
	Amortization on investment debt securities					20,740				16,482				30,863				30,557
	Net (gain) loss on equity investments					12,992				(16,004	)			(66,526	)			(65,867	)
	Net (gain) loss on valuation of trading assets					18,680				(141,819	)			(100,936	)			(99,937	)
	Net (gain) loss on sale of available-for-sale securities					2,550				(73,786	)			(101,553	)			(100,548	)
	Impairment loss on investment securities					125,249				150,901				5,326				5,273
	Net gain on sale of premises and equipment					(13,938	)			(15,275	)			(20,318	)			(20,117	)
	Net loss on sales of subsidiaries					378				—				—				—
	Net (gain) on sales of other assets					—				(14,678	)			(79,261	)			(78,476	)
	Net unrealized foreign exchange (gain) loss					(91,337	)			(151,351	)			55,868				55,315
	Minority interest in net income of subsidiaries					25,846				153,428				16,079				15,920
	Expense on stock option					5,688				(1,604	)			45,459				45,009
	Impairment loss on intangible assets					—				1,893				—				—
	Impairment loss on other investments					39,541				15,521				20,958				20,750
	Cumulative effect of change in accounting principle					—				23,049				—				—
	Extraordinary gain					—				(27,508	)			—				—
	Net gain on sale of loans									(1,032	)			(94,411	)			(93,476	)
	Net gain on retirement of bonds					—				(10,922	)			—				—
	Net changes in:
		Restricted cash				(1,620,257	)			361,287				(338,795	)			(335,441	)
		Trading assets				71,774				(2,797,829	)			2,229,119				2,207,049
		Other assets				972,715				(2,466,414	)			3,035,963				3,005,905
		Trading liabilities				(137,904	)			1,244,516				(713,088	)			(706,028	)
		Accrued expenses and other liabilities				(767,410	)			3,030,857				(3,147,189	)			(3,116,029	)
			Net cash provided by operating activities			824,917				1,728,096				2,996,581				2,966,908

F-10

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Table of Contents

				2003				2004				2005				2005
																(See Note 1)
																(In thousands
				(In millions of Korean Won)												of US$)
Cash flows from investing activities
	Net change in interest-bearing deposits			W	(56,570	)		W	189,962			W	(13,563	)		$	(13,429	)
	Net change in call loans and securities purchased under resale agreements				317,103				295,274				66,636				65,976
	Proceeds from sales of available-for-sale securities				11,032,423				12,071,514				13,295,391				13,163,753
	Purchases of available-for-sale securities				(12,153,357	)			(11,845,324	)			(16,156,100	)			(15,996,139	)
	Proceeds from maturities, prepayments and calls of held-to-maturity securities				3,630,392				2,142,497				1,307,473				1,294,529
	Purchases of held-to-maturity securities				(2,833,074	)			(1,596,763	)			(1,178,122	)			(1,166,457	)
	Loan originations and principal collections, net				(6,030,212	)			(3,773,137	)			(8,318,374	)			(8,236,014	)
	Payments for repurchase of loans from KAMCO				(37,470	)			(24,031	)			—				—
	Proceeds from sales of premises and equipment				54,414				29,546				95,971				95,021
	Purchases of premises and equipment				(213,882	)			(222,825	)			(282,909	)			(280,108	)
	Net change in security deposits				(22,731	)			1,757				(57,195	)			(56,629	)
	Cash acquired from acquisitions, net of cash paid				1,125,128				1,553				27,225				26,955
	Sale of equity interest in subsidiaries				1,529				—				73,489				72,761
	Acquisition of equity interest in subsidiaries				(928,423	)			(99,293	)			(42,568	)			(42,147	)
	Dividends from equity investees				—				4,220				5,724				5,667
	Net change in other investments				—				10,360				(206,786	)			(204,739	)
		Net cash used in investing activities			(6,114,730	)			(2,814,690	)			(11,383,708	)			(11,271,000	)
Cash flows from financing activities
	Net increase (decrease) in interest-bearing deposits				5,338,968				(2,103,071	)			3,447,855				3,413,718
	Net increase (decrease) in non-interest-bearing Deposits				(124,905	)			1,417,722				397,246				393,313
	Net increase (decrease) in secured borrowings				266,164				(8,167	)			1,193,614				1,181,796
	Net increase (decrease) in short-term borrowings				(2,974,990	)			(230,353	)			1,059,981				1,049,486
	Proceeds from issuance of long-term debt				12,244,298				9,385,571				26,507,592				26,245,142
	Repayment of long-term debt				(7,707,107	)			(7,059,193	)			(23,942,920	)			(23,705,861	)
	Proceeds from issuance of common stock				27,504				—				—				—
	Purchases of treasury stock				(2,149	)			(204,150	)			(479	)			(473	)
	Reissuance of treasury stock				—				622,190				845				837
	Cash dividends paid				(157,493	)			(166,670	)			(260,775	)			(258,192	)
	Cash payment on capital reduction of subsidiary				—				(1,750	)			—				—
		Net cash provided by financing activities			6,910,290				1,652,129				8,402,959				8,319,766
Effect of exchange rate changes on cash					(6,004	)			(18,432	)			(25,350	)			(25,098	)
Net increase (decrease) in cash and cash equivalents					1,614,473				547,103				(9,518	)			(9,424	)
Cash and cash equivalents
Beginning of year					282,324				1,896,797				2,443,900				2,419,703
End of year				W	1,896,797			W	2,443,900			W	2,434,382			$	2,410,279

F-11

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Table of Contents

			2003				2004				2005				2005
															(See Note 1)
															(In thousands
			(In millions of Korean Won)												of US$)
Supplemental disclosure of cash flow information
Acquisitions:
	Fair value of net assets acquired		W	2,012,190			W	1,062,640			W	243,067			$	240,660
	Goodwill			341,271				(411,456	)			289,800				286,931
	Cash paid			928,423				99,293				1,405				1,391
	Consideration other than cash			1,425,038				551,893				531,462				526,200
Supplemental disclosure of non-cash investing and financing activities
Loans repurchased from KAMCO in exchange for held-to-maturity securities				1,593				—				—				—
Securities and other investments received in connection with loan restructuring				307,545				214,758				27,328				27,057
Preferred stocks acquired from Hanmaum Financial Company in exchange for non-performing loans				—				3,618				—				—
Increase (decrease) in cumulative translation adjustments, net of taxes				(1,956	)			(18,461	)			(12,024	)			(11,905	)
Increase (decrease) in unrealized gains (losses) on available-for-sale securities, net of taxes				(10,309	)			118,240				(246,051	)			(255,368	)
Account payable for contingent consideration				—				166,516				20,461				20,258

F-12

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Table of Contents

1.	General Information and Summary of Significant Accounting Policies

	Business

						Percentage of
						Ownership(1)
		Country of
		Incorporation				2003				2004				2005
Shinhan Bank			Korea				100	%			100	%			100	%
Chohung Bank			Korea				81.15	%			100	%			100	%
Good Morning Shinhan Securities Co., Ltd.			Korea				60.47	%			100	%			100	%
Shinhan Card Co., Ltd.			Korea				100	%			100	%			100	%
Shinhan Capital Co., Ltd.			Korea				100	%			100	%			100	%
Jeju Bank			Korea				62.42	%			62.42	%			62.42	%
Shinhan Credit Information Co., Ltd.			Korea				51.00	%			100	%			100	%
Shinhan Private Equity Inc.			Korea				—				100	%			100	%
Shinhan Life Insurance Co., Ltd.			Korea				12.90	%			12.90	%			100	%

(1)	Direct and indirect ownership are combined.
(2)	All holdings are in the common stock of the respective subsidiaries.

	Principles of Consolidation

F-13

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Table of Contents

	Variable Interest Entities

	Foreign Currency Translation

	Use of Estimates

	Cash and Cash Equivalents

F-14

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	Securities Purchased under Resale Agreements and Securities Sold under Repurchase Agreements

	Trading Assets and Liabilities, including derivatives

	Derivatives and Hedging Activities

F-15

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	Investment Securities

F-16

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	Non-marketable or restricted equity securities

	Loans

F-17

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	Allowance for Loan Losses

	•	Loans classified as “substandard” or below according to asset classification guidelines of the Financial Supervisory Commission (FSC) of the Republic of Korea.
	•	Loans that are 90 days or more past due; and
	•	Loans which are “troubled debt restructurings” under US Generally Accepted Accounting Principles (US GAAP)

F-18

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	Allowance for off-balance sheet credit instruments

	Foreclosed Assets

	Securitizations

F-19

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	Transfers of Financial Assets

	Premises and Equipment

Buildings			40 years
Equipment and furniture			4 – 5  years
Leasehold improvements			5 years
Operating lease assets			3 – 5  years
Capitalized software costs			4 – 5  years

F-20

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	Goodwill and Other Intangible Assets

F-21

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			Actual				Pro Forma
			(In millions of Won,
			except per share data)
2003
Income before extraordinary gain				275,318				256,972
	Basic net income per share of common stock			1,024				954
	Diluted net income per share of common stock			984				919
Net income				275,318				256,972
	Basic net income per share of common stock			1,024				954
	Diluted net income per share of common stock			984				919
2004
Income before extraordinary gain				1,462,411				1,462,411
	Basic net income per share of common stock			4,860				4,860
	Diluted net income per share of common stock			4,333				4,333
Net income				1,466,870				1,489,919
	Basic net income per share of common stock			4,875				4,954
	Diluted net income per share of common stock			4,347				4,415

	Deferred Policy Acquisition Costs (DAC)

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	Future policy benefits

	Separate account assets and liabilities.

	Insurance premium

	Impairment

F-23

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Table of Contents

	Stock-Based Compensation

	Commissions and Fees

	Net Trust Management Fees

	Co-branding Credit Card Arrangements

F-24

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	Dormant accounts

	Income Taxes

	Earnings Per Share

	Comprehensive Income

	Convenience Translation

F-25

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Table of Contents

	Reclassification

2.	Accounting Changes and Future Application of Accounting Standards

	Derivative Instruments and Hedging Activities

	Liabilities and Equity

	Consolidation of Variable Interest Entities

F-26

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	Accounting for Loan Commitments Accounted for as Derivatives

	Employers’ Disclosure about Pensions and Other Postretirement Benefits

	Accounting for Certain Loans or Debt Securities Acquired in a Transfer

	The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments

F-27

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	Share-Based Compensation

	Accounting for Exchange of Nonmonetary Assets

	Accounting for Conditional Asset Retirement Obligations

	Accounting Changes and Error Corrections

F-28

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	Accounting for Certain Hybrid Financial Instruments

	Accounting for Servicing of Financial Assets

3.	Business Changes and Developments

	Formation of Shinhan Financial Group

F-29

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Table of Contents

						Number of
						Shares of the Group’s
						Common Stock
		Exchange Ratio				Issued
Shinhan 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

	Acquisition of Jeju Bank

	Spin-off of Shinhan Card Co., Ltd

	Acquisition of Good Morning Securities Co., Ltd. (Good Morning Securities)

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	Disposal of Shinhan ITM

	Acquisition of Chohung Bank

F-31

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			(In Millions of
			Korean Won)
Cash and cash equivalents			W	900,552
Deposits				723,630
Call loans				1,322,150
Trading assets				1,617,579
Securities				6,651,839
Loans, net of allowance for loan losses				34,547,592
Premises and equipment, net				1,008,855
Other assets				4,144,543
	Total assets			50,916,740
Due to depositors				33,076,845
Borrowings and debentures				12,671,215
Other liabilities				4,285,705
Minority interest at book value				11,675
	Total liabilities			50,045,440
Fair value of net assets of Chohung Bank			W	871,300

				(In Millions of
				Korean Won)
Market value of consideration				W	2,325,038
Direct acquisition costs					28,423
		Total purchase price		W	2,353,461	(1)
Allocation of purchase price:
	Fair value of net assets of Chohung Bank (excluding effect of deferred taxes)			W	1,329,932
	Deferred tax				(458,632	)
	Core deposit intangible asset				770,705
	Court deposit intangible asset				186,093
	Credit card relationship intangible asset				184,092
	Goodwill				341,271
		Total purchase price		W	2,353,461

(1)	The total purchase price is approximately W2,353,461 million, which comprised of the following:

	1.	Cash of W900,000 million;
	2.	46,583,961 newly issued shares of the Group’s redeemable preferred stock (RPS) with an aggregate estimated fair value of W710,258 million;
	3.	44,720,603 newly issued shares of the Group’s redeemable convertible preferred stock (RCPS) with an aggregate estimated fair value of W714,780 million; and
	4.	Direct acquisition costs of W28,423 million.

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	Asset Indemnity

	General Indemnity

	Profit Earn-out

F-33

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				(In millions of
				Korean Won)
Cash				W	94,884
Stock exchange					331,263
Direct acquisition cost					565
		Total purchase price		W	426,712
Allocation of purchase price:
	Fair value of net assets of Chohung Bank			W	403,111
	Core deposit intangible asset				133,151
	Court deposit intangible asset				115,364
	Credit card relationship intangible asset				35,264
	Negative goodwill				(260,178	)
		Total purchase price		W	426,712

Premises and equipment			W	169,040
Core deposit intangible asset				89,067
Court deposit intangible asset				77,170
Credit card relationship intangible asset				23,589
Deferred tax				(98,688	)
	Total allocation		W	260,178

	Acquisition of Shinhan Credit Information Co., Ltd.

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	Incorporation of Shinhan Private Equity Inc.

	Acquisition of Shinhan Life Insurance Co., Ltd.

			(In millions of
			Korean Won)
Cash and cash equivalents			W	5,108
Deposits				389,627
Trading securities				268,980
Available-for-sale securities				1,529,922
Loans, net of allowance for loan losses				1,155,413
Premises and equipment, net				12,446
Other assets				409,067
	Total assets		W	3,770,563
Future policy benefit			W	4,012,622
Borrowings				39,962
Other liabilities				453,444
	Total liabilities		W	4,506,028
Fair value of net liabilities of Shinhan Life Insurance			W	(735,465	)

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				(In millions of
				Korean Won)
Cash				W	138
Stock exchange					531,394
Direct acquisition costs					1,335
		Total purchase price		W	532,867
Allocation of purchase price:
	Fair value of net liabilities of Shinhan Life Insurance			W	(735,465	)
	Value of business acquired				978,532
	Goodwill				289,800
		Total purchase price		W	532,867

4.	Restricted Cash

		2004				2005
		(In millions of Won)
Reserve deposits with the BOK		W	2,615,574			W	2,711,000
Cash restricted for investment activities			199,183				220,997
Other			485,953				711,770
		W	3,300,710			W	3,643,767

5.	Call Loans and Securities Purchased under Resale Agreements

		2004				2005
		(In millions of Won)
Call loans		W	1,431,095			W	1,359,738
Securities purchased under resale agreements			160,000				139,700
		W	1,591,095			W	1,499,438

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6.	Trading Activities

			2004				2005
			(In millions of Won)
Debt securities:
	Korean treasury and governmental agencies		W	1,994,688			W	492,776
	Corporations			964,837				1,307,131
	Mortgage-backed and asset-backed securities			20,003				140,052
	Financial institutions			1,322,329				1,145,210
Equity securities				311,636				464,596
Derivative instruments:
	Foreign exchange derivatives			1,435,690				681,441
	Interest rate derivatives			208,814				173,130
	Equity derivatives			29,875				68,117
	Credit derivatives			38				100
	Commodity derivatives			3,159				11,167
Other trading assets — commodity indexed deposits				25,272				23,323
			W	6,316,341			W	4,507,043

			2004				2005
			(In millions of Won)
Derivative instruments:
	Foreign exchange derivatives		W	1,493,120			W	692,923
	Interest rate derivatives			190,234				237,853
	Equity derivatives			35,888				71,884
	Credit derivatives			50				371
	Commodity derivatives			3,154				11,120
Other trading liabilities — commodity indexed deposits				35,131				34,006
			W	1,757,577			W	1,048,157

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			2003				2004				2005
			(In millions of Won)
Debt securities			W	(2,292	)		W	97,844			W	66,716
Equity securities				35,025				14,703				116,353
Derivative instruments				38,905				29,272				(82,133	)
Other trading activities — commodity indexed deposits				439				743				62
	Net trading profits		W	72,077			W	142,562			W	100,998

7.	Securities

			2004																2005
							Gross				Gross												Gross				Gross
			Amortized				Unrealized				Unrealized								Amortize				Unrealized				Unrealized
			Cost				Gains				Losses				Fair Value				Cost				Gains				Losses				Fair Value
			(In millions of Won)
Available-for-sale securities
Debt securities:
	Korean treasury and governmental agencies		W	8,724,892			W	128,443			W	18,318			W	8,835,017			W	8,442,283			W	13,176			W	156,942			W	8,298,517
	Corporations			1,275,621				17,979				848				1,292,752				1,971,273				6,878				25,871				1,952,280
	Financial institutions			5,644,618				30,419				326				5,674,711				9,322,309				2,767				70,542				9,254,534
	Foreign governments			56,599				—				99				56,500				51,615				39				1,956				49,698
	Mortgage-backed and asset-backed securities			1,733,939				8,643				3				1,742,579				946,843				1,892				2,479				946,256
Marketable equity securities				442,232				67,936				3,498				506,670				1,818,040				173,951				13,555				1,978,436
			W	17,877,901			W	253,420			W	23,092			W	18,108,229			W	22,552,363			W	198,703			W	271,345			W	22,479,721
Held-to-maturity securities
Debt securities:
	Korean treasury and governmental agencies		W	1,661,777			W	152,210			W	59			W	1,813,928			W	1,686,368			W	28,218			W	8,349			W	1,706,237
	Corporations			218,424				7,092				416				225,100				65,818				649				147				66,320
	Financial institutions			1,219,121				49,188				52				1,268,257				1,210,888				1,809				5,085				1,207,612
	Mortgage-backed and asset-backed securities			—				—				—				—				—				—				—				—
			W	3,099,322			W	208,490			W	527			W	3,307,285			W	2,963,074			W	30,676			W	13,581			W	2,980,169

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			2003				2004				2005
			(In millions of Won)
Available-for-sale securities			W	125,249			W	150,901			W	5,326
	Total other-than-temporary impairment losses		W	125,249			W	150,901			W	5,326

			Less Than 12 Months								12 Months or Longer								Total
							Gross								Gross								Gross
			Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
			Value				Losses				Value				Losses				Value				Losses
			(In millions of Won)
Available-for-sale securities
Debt securities:
	Korean treasury and governmental agencies		W	4,467,601			W	(144,152	)		W	613,385			W	(12,790	)		W	5,080,986			W	(156,942	)
	Corporations			1,207,968				(25,594	)			19,723				(277	)			1,227,691				(25,871	)
	Financial institutions			6,426,158				(70,140	)			82,073				(402	)			6,508,231				(70,542	)
	Foreign governments			45,310				(1,880	)			988				(76	)			46,298				(1,956	)
	Mortgage-backed and asset-backed securities			203,024				(1,670	)			26,691				(809	)			229,715				(2,479	)
Marketable equity securities				146,641				(13,520	)			174				(35	)			146,815				(13,555	)
				12,496,702				(256,956	)			743,034				(14,389	)			13,239,736				(271,345	)
Held-to-maturity securities
Debt securities:
	Korean treasury and governmental agencies			420,891				(8,349	)			—				—				420,891				(8,349	)
	Corporations			19,835				(147	)			—				—				19,835				(147	)
	Financial institutions			851,331				(5,085	)			—				—				851,331				(5,085	)
				1,292,057				(13,581	)			—				—				1,292,057				(13,581	)
Total temporarily impaired securities			W	13,788,759			W	(270,537	)		W	743,034			W	(14,389	)		W	14,531,793			W	(284,926	)

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	•	Identification and evaluation of investments that have indications of possible impairment
	•	Analysis of individual investments that have fair values less than 80% of amortized cost, including consideration of the length of time the investment has been in an unrealized loss position
	•	Discussion of evidential matter, including an evaluation of factors or triggers that would or could cause individual investments to qualify as having other-than-temporary impairments and those that would not support other-than-temporary impairment
	•	Documentation of the results of these analyses as required under business policies

		2003				2004				2005
		(In millions of Won)
Interest income		W	923,222			W	1,200,356			W	911,417
Dividends			4,132				64,483				20,978
		W	927,354			W	1,264,839			W	932,395

		Available-for-sale								Held-to-maturity
		Debt Securities								Debt Securities
		Amortized Cost				Fair Value				Amortized Cost				Fair Value
		(In millions of Won)
Within 1 year		W	8,108,840			W	8,096,892			W	721,317			W	724,469
Over 1 year through 5 years			9,711,477				9,542,554				2,194,415				2,211,904
Over 5 years through 10 years			980,114				933,651				47,147				43,597
Over 10 years			94,331				92,795				—				—
Securities not due at a single maturity date			1,839,561				1,835,393				195				199
		W	20,734,323			W	20,501,285			W	2,963,074			W	2,980,169

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8.	Loans

				2004				2005
				(In millions of Won)
Commercial:
	Commercial and industrial			W	35,653,127			W	35,728,132
	Other commercial				17,988,288				21,408,703
	Lease financing				981,002				754,473
Consumer:
	Mortgage and home equity				22,180,112				25,840,334
	Credit cards				4,731,913				4,241,562
	Other consumer				15,545,796				17,874,852
		Total loans, gross			97,080,238				105,848,056
		Deferred loan origination costs			98,411				110,401
					97,178,649				105,958,457
		Less: Allowance for loan losses			2,310,555				1,511,503
		Total loans, net		W	94,868,094			W	104,446,954

		2003				2004				2005
		(In millions of Won)
Impaired loans with an allowance		W	3,113,325			W	2,268,924			W	1,794,283
Impaired loans without an allowance			374,711				376,606				490,913
		W	3,488,036			W	2,645,530			W	2,285,196
Allowance for impaired loans		W	1,349,272			W	885,332			W	703,529
Average balance of impaired loans during the year			2,867,370				2,057,663				2,039,445
Interest income recognized on impaired loans			51,986				90,548				70,116

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																Allowance for Off-balance Sheet
				Allowance for Loan Losses												Credit Instrument(1)
				2003				2004				2005				2003				2004				2005
				(In millions of Won)
Balance at beginning of the year				W	995,725			W	3,630,728			W	2,310,555			W	81,512			W	176,653			W	115,616
Provision (reversal) for loan losses					1,011,366				195,446				(255,146	)			—				—				—
Provision (reversal) for off balance sheet credit commitment					—				—				—				(45,779	)			(60,032	)			71,658
Allowance relating to:
	Acquisition of Shinhan Life Insurance				—				—				2,792				—				—				—
	Acquisition of Chohung Bank				2,739,297				—				—				140,920				—				—
	Loans reacquired from
		KAMCO subject to recourse			31,831				1,900				—				—				—				—
	Reclassification to other liabilities				—				—				—				—				(1,005	)			—
					2,771,128				1,900				2,792				140,920				(1,005	)			—
Charge-offs					(1,395,907	)			(1,824,897	)			(946,022	)			—				—				—
Recoveries					248,416				307,378				399,324				—				—				—
Balance at end of the year				W	3,630,728			W	2,310,555			W	1,511,503			W	176,653			W	115,616			W	187,274

(1)	The allowance for off-balance sheet credit instruments is included in other liabilities.

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		2004				2005
		(In millions of Won)
Gross lease payments receivable		W	1,056,681			W	807,291
Estimated unguaranteed residual values			31,125				24,030
Unearned income			(106,804	)			(76,848	)
		W	981,002			W	754,473

		(In millions of
Years Ending		Won)
2006		W	285,995
2007			193,234
2008			115,689
2009			63,606
2010			44,350
Thereafter			51,599
		W	754,473

9.	Premises and Equipment

			2004				2005
			(In millions of Won)
Lands			W	942,717			W	937,711
Buildings				697,075				730,675
Equipment and furniture				594,132				631,264
Capitalized software costs				106,320				195,063
Leasehold improvements				108,312				134,368
Construction in progress				2,781				10,164
Operating lease assets				173,634				116,859
	Total premises and equipment, gross			2,624,971				2,756,104
	Less: Accumulated depreciation and amortization			(776,918	)			(879,608	)
	Total premises and equipment, net		W	1,848,053			W	1,876,496

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10.	Goodwill and Intangible Assets

						Good Morning
		Chohung				Shinhan				Shinhan				Shinhan
		Bank				Securities				Capital				Life Insurance				Total
		(In millions of Won)
Balance at January 1, 2004		W	355,409			W	145,364			W	1,616			W	—			W	502,389
Acquisition			—				—				—				—				—
Disposition			—				—				—				—				—
Impairment loss			—				—				—				—				—
Other			113,526				—				—				—				113,526
Balance at December 31, 2004			468,935				145,364				1,616				—				615,915
Acquisition			—				—				—				289,800				289,800
Disposition			—				—				—				—				—
Impairment loss			—				—				—				—				—
Other			216,890				—				—				—				216,890
Balance at December 31, 2005		W	685,825			W	145,364			W	1,616			W	289,800			W	1,122,605

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										Treasury &								Other				Securities
		Retail				Corporate				International				Credit				Banking				Brokerage
		Banking				Banking				Business				Card				Services				Services				Other(1)				Total
Balance at January 1, 2004		W	223,200			W	32,345			W	20,489			W	51,500			W	5,439			W	129,285			W	40,131			W	502,389
Acquisition			—				—				—				—				—				—				—				—
Disposition			—				—				—				—				—				—				—				—
Impairment loss			—				—				—				—				—				—				—				—
Other			71,295				1,072				6,545				16,450				1,737				—				16,427				113,526
Balance at December 31, 2004			294,495				33,417				27,034				67,950				7,176				129,285				56,558				615,915
Acquisition			—				—				—				—				—				—				289,800				289,800
Disposition			—				—				—				—				—				—				—				—
Impairment loss			—				—				—				—				—				—				—				—
Other			136,209				15,456				12,503				31,428				3,319				—				17,975				216,890
Balance at December 31, 2005		W	430,704			W	48,873			W	39,537			W	99,378			W	10,495			W	129,285			W	364,333			W	1,122,605

(1)	Includes goodwill relating to Shinhan Life Insurance.

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			2004												2005
			Gross Carrying				Accumulated				Net Carrying				Gross Carrying				Accumulated				Net Carrying
			Amount				Amortization				Amount				Amount				Amortization				Amount
											(In millions of Won)
Core deposit of Jeju Bank			W	2,508			W	(2,508	)		W	—			W	2,508			W	(2,508	)		W	—
Brokerage customer relationship				68,266				(64,551	)			3,715				68,266				(66,207	)			2,059
KSFC deposit				10,941				(10,415	)			526				10,941				(10,649	)			292
Core deposit of Chohung Bank				825,477				(156,342	)			669,135				825,477				(284,041	)			541,436
Credit card relationship of Chohung Bank				198,320				(54,693	)			143,627				198,320				(106,688	)			91,632
VOBA				—				—				—				978,532				(5,822	)			972,710
	Total intangible assets subject to amortization			1,105,512				(288,509	)			817,003				2,084,044				(475,915	)			1,608,129
KSFC borrowing				400				—				400				400				—				400
Court deposit of Chohung Bank				226,353				—				226,353				226,353				—				226,353
	Total indefinite-lived intangible assets			226,753				—				226,753				226,753				—				226,753
			W	1,332,265			W	(288,509	)		W	1,043,756			W	2,310,797			W	(475,915	)		W	1,834,882

		(In millions of
Years Ending		Won)
2006		W	263,481
2007			262,807
2008			215,837
2009			170,691
2010			135,244
Thereafter			560,069
		W	1,608,129

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11.	Other Assets

		2004				2005
		(In millions of Won)
Accrued interest and dividends receivable		W	455,262			W	555,193
Receivables for foreign exchange spot contracts			2,463,992				512,457
Accounts receivable			2,042,601				1,512,779
Accrued interest income			64,358				83,916
Deferred tax assets			829,276				183,604
Other investments(1)			1,076,326				1,419,128
Prepaid expenses			56,183				82,009
Separate account assets			—				124,249
Others			83,849				250,322
		W	7,071,847			W	4,723,657

(1)	Other investments include unlisted equity securities, securities with sales restriction, and investments accounted for by the equity method.

12.	Deposits

			2004								2005
							Weighted-								Weighted-
							Average								Average
			Balance				Interest Rate				Balance				Interest Rate
			(In millions of Won, except percentages)
Interest-bearing deposits
	Demand deposits		W	5,620,644				1.33	%		W	6,997,857				1.90	%
	Savings deposits			24,427,179				1.24	%			27,142,438				0.96	%
	Certificate of deposits			8,051,525				4.08	%			10,649,687				3.81	%
	Other time deposits			39,449,288				3.83	%			36,901,099				3.69	%
	Mutual installment deposits			2,384,922				4.54	%			1,587,116				4.16	%
				79,933,558				2.93	%			83,278,197				2.71	%
Non-interest-bearing deposits
	Demand deposits			2,745,925				—				3,143,170				—
			W	82,679,483				2.85	%		W	86,421,367				2.63	%

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		(In millions of
Years Ending		Won)
2006		W	41,090,629
2007			4,964,700
2008			1,124,837
2009			516,644
2010			1,089,384
Thereafter			351,708
		W	49,137,902

13.	Short-Term Borrowings

		2004								2005
						Weighted-								Weighted-
						Average								Average
		Balance				Interest Rate				Balance				Interest Rate
		(In millions of Won, except percentages)
Borrowings from BOK		W	1,567,708				2.32	%		W	1,668,335				1.85	%
Borrowings in foreign currencies			3,999,173				1.09	%			4,473,370				1.57	%
Borrowings from trust accounts			706,578				3.84	%			877,858				3.15	%
Call money			1,155,569				3.30	%			994,121				3.24	%
Other borrowings(1)			3,524,527				3.41	%			3,954,616				3.48	%
		W	10,953,555							W	11,968,300

(1)	The majority of other borrowings relate to borrowings from other financial institutions.

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14.	Secured Borrowings

							2004												2005
											Collateral												Collateral
							Secured												Secured
			Maturity				Borrowings				Loans(1)				Securities				Borrowings				Loans(1)				Securities
			(In millions of Won)
Shinhan 2nd Securitization Specialty L.L.C.				2011			W	10,737			W	19,303			W	7,549			W	—			W	—			W	—
	7.85% collateralized bond obligation
Shinhan 4th Securitization Specialty L.L.C.				2011				250				19,074				3,371				—				—				—
	20.00% collateralized bond obligation
Sprout I ABS Specialty Co., Ltd.				2013				407,186				791,405				—				385,859				731,038				—
	1M Libor+0.60% collateralized bond obligation
Shinhan Fun and Joy 2nd Securitization Specialty L.L.C.				2006				27,953				9				—				—				—				—
	5.20%-5.69% collateralized bond obligation
Good & Secure Co., Ltd.				2005				81,522				—				73,142				—				—				—
	3.68%-7.00% Asset-Backed Commercial Papers
Goldwing Co., Ltd.				2006				383,167				94,140				320,023				328,000				39,256				346,681
	4.30%-5.47% Asset-Backed Commercial Papers
Shinhan Card 2003-1 Securitization Specialty L.L.C.				2009				406,086				801,694				—				406,086				701,366				—
	4.65% Type 1 beneficiary certificate
CSC 1st Securitization Specialty L.L.C.				2005				59,700				—				100,576				—				—				—
	CD+1.57% Asset-Backed Commercial Papers
Shinhan 5th Securitization Specialty L.L.C.				2006				44,888				131,287				—				44,999				65,490				—
	3.75%-3.86% collateralized bond obligation
CHB NPL 2004-1 ABS Specialty Co., Ltd.				2007				89,759				197,116				—				79,904				98,897				1,474
	3.91%-4.49% collateralized bond obligation
CHB NPL 2004-2 ABS Specialty Co., Ltd.				2007				104,679				276,813				556				84,865				141,239				2,541
	3.54%-3.85% collateralized bond obligation
Auto 1st ABS Specialty Co., Ltd.				2008				72,500				—				71,000				—				—				—
	CD+0.70%-7.00% ABCP and collateralized bond obligation
KTF 3rd ABS Specialty Co., Ltd.				2007				199,740				—				200,000				199,853				—				200,000
	5.67% collateralized bond obligation
Dongbu Hannong Chemical 1st ABS Specialty Co.				2005				96,980				—				97,000				—				—				—
	3.65%-6.75% ABCP and collateralized bond Obligation
Dogong 1st ABS Specialty Co., Ltd.				2006				326,499				—				326,500				143,500				—				152,500
	3.94%-7.00% ABCP and collateralized bond Obligation
Enclean 3rd ABS Specialty Co., Ltd.				2007				155,498				—				200,433				150,500				—				200,233
	4.05%-30% ABCP and collateralized bond obligation
Miraedon Co., Ltd.				2005				120,000				—				157,776				407,200				—				616,761
	4.22%-4.68% Asset-Backed Commercial Papers
Work and Joy 2004-1 ABS Specialty Co., Ltd.				2007				149,592				—				150,000				149,765				—				150,000
	3.75% collateralized bond obligation
Shinhan 6th Securitization Specialty L.L.C.				2007				—				—				—				124,668				144,677				—
	3.94%-6.40% collateralized bond obligation
HiBrand ABCP Ltd.				2008				—				—				—				48,050				47,191				—
	3.95%-7.00% ABCP and collateralized bond obligation
SamsungShinhan 4th ABS Specialty Co. Ltd				2009				—				—				—				250,346				—				250,500
	4.13%-7.00% ABCP and collateralized bond obligation

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							2004												2005
											Collateral												Collateral
							Secured												Secured
			Maturity				Borrowings				Loans(1)				Securities				Borrowings				Loans(1)				Securities
			(In millions of Won)
Dongbu Steel 2nd ABS Specialty Co. Ltd				2008				—				—				—				74,649				—				85,000
	4.07% collateralized bond obligation
Auto 2nd ABS Specialty Co., Ltd				2008				—				—				—				196,050				—				195,000
	4.22%-7.00% ABCP and collateralized bond obligation
Blooming 2nd ABS Specialty Co., Ltd				2006				—				—				—				20,000				—				38,000
	4.13% Asset-Backed Commercial Papers
CHB NPL 2005-1 ABS Specialty Co., Ltd				2007				—				—				—				55,829				124,146				63
	4.19%-4.52% collateralized bond obligation
CHB NPL 2005-2 ABS Specialty Co., Ltd				2007				—				—				—				40,805				102,392				—
	5.13%-5.78% collateralized bond obligation
Cheongge ABS Specialty Co., Ltd				2008				—				—				—				96,712				—				97,307
	4.11%-6.00% collateralized bond obligation
Humax 1st ABS Specialty Co., Ltd				2006				—				—				—				40,000				—				62,328
	4.36% Asset-Backed Commercial Papers
Other secured borrowings				2008				40,182				3,904				21,187				12,861				3,840				2,745
	5.85%-25% collateralized bond obligation
Securities sold under repurchase agreements				2006				3,531,175				—				7,094,006				4,161,206				—				7,257,244
	2.50%-15.6%
							W	6,308,093			W	2,334,745			W	8,823,119			W	7,501,707			W	2,199,532			W	9,658,377

(1)	Represents the carrying amounts, exclusive of the related specific allowance for loan losses.

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15.	Long-Term Debt

				Interest
				Rates (%)				Maturity				2004				2005
												(In millions of Won)
Senior
Won-denominated
	Notes payable to the Small Business Corporation				2.00-4.90				2006-2015			W	703,641			W	492,543
	Notes payable to the Industrial Bank of Korea				1.00-4.25				2006-2013				22,501				190,558
	Notes payable to the Institute of Information Technology Assessment				0.62-5.00				2006-2010				233,091				150,821
	Notes payable to the Korea Energy Management Corporation				1.50-6.00				2006-2020				225,641				265,740
	Notes payable to other Korean Government Funds				0.63-5.50				2006-2020				177,610				255,685
	Fixed and floating rate debentures(1)(2)				0.50-11.95				2006-2015				14,229,164				15,281,503
	Other notes payable				2.00-8.12				2006-2014				388,063				1,684,662
		Subtotal											15,979,711				18,321,512
Foreign currency-denominated
	Floating rate debentures(1)				5.23-5.43				2006-2008				599,386				714,384
	Other floating rate notes payable				1.95-6.83				2006-2035				1,400,962				701,598
		Subtotal											2,000,348				1,415,982
		Total senior debt											17,980,059				19,737,494
Subordinated
Won-denominated
	Hybrid bonds(3)				5.70-7.80				2033-2034				495,033				495,033
	Other fixed rate notes payable(4)				4.56-14.45				2006-2014				3,325,202				3,640,192
		Subtotal											3,820,235				4,135,225
Foreign currency-denominated
	Floating rate debentures(1)				5.94				2014				52,190				50,650
	Other fixed rate notes payable				5.12-6.25				2013-2015				260,950				607,800
		Subtotal											313,140				658,450
		Total subordinated debt											4,133,375				4,793,675

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				Interest
				Rates (%)				Maturity				2004				2005
												(In millions of Won)
Redeemable preferred stock(5)
	Series 1 Redeemable preferred stock				4.04				2006				168,503				168,503
	Series 2 Redeemable preferred stock				4.04				2007				168,503				168,503
	Series 3 Redeemable preferred stock				4.04				2008				168,504				168,504
	Series 4 Redeemable preferred stock				4.04				2009				168,504				168,504
	Series 5 Redeemable preferred stock				4.04				2010				168,504				168,504
	Series 6 Redeemable preferred stock				7.00				2006				525,000				525,000
	Series 7 Redeemable preferred stock				7.46				2008				365,000				365,000
	Series 8 Redeemable preferred stock				7.86				2010				10,000				10,000
		Total redeemable preferred stock											1,742,518				1,742,518
Long-term debt, gross													23,855,952				26,273,687
Less: Unamortized discounts													(239,269	)			(101,865	)
Long-term debt, net												W	23,616,683			W	26,171,822

(1)		Interest rates on floating rate debt were those rates in effect at December 31, 2005.
(2)		Majority of these debentures related to miscellaneous bank borrowings from individual lenders.
(3)		Chohung Bank and Shinhan Bank have a call option that can be exercised five years after the issuance date, or earlier with the approval of the Financial Supervisory Service. The call options mature in 30 years from the issuance date, but may be extended by Chohung Bank and Shinhan Bank at any time.
(4)		Majority of these debentures related to miscellaneous bank borrowings from corporate lenders and Korean governmental entities.
(5)		See Note 22 for the terms of the RPS.

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		(In millions of
Years Ending		Won)
2006		W	5,670,958
2007			6,108,247
2008			7,333,576
2009			1,429,343
2010			1,170,510
Thereafter			4,561,053
Long-term debt, gross			26,273,687
Less: Unamortized discount			(101,865	)
Long-term debt, net		W	26,171,822

16.	Future Policy Benefits

		2005
		(In millions of
		Won)
Life insurance		W	2,590,044
Annuity contracts			1,388,679
Other contract liabilities			603,333
Unpaid claims and claim adjustment expenses			195,512
		W	4,777,568

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17.	Accrued Expenses and Other Liabilities

		2004				2005
		(In millions of Won)
Accrued interest and dividend payables		W	1,778,560			W	1,901,498
Payables for foreign exchange spot contracts			2,606,201				750,144
Accrued severance benefits			74,835				181,767
Accrued expenses			85,491				157,453
Accounts payable			2,280,240				1,096,240
Unearned income			157,192				147,502
Income tax payable			277,818				221,993
Withholding value-added tax and other taxes			43,114				88,221
Deferred tax liabilities			525,407				302,339
Guarantee deposits received			305,649				299,814
Due to agencies			938,465				1,118,606
Allowance for losses on off-balance sheet credit instruments			115,616				187,273
Utility bill payments received on behalf of government			108,035				59,112
Separate account liabilities			—				124,249
Other			417,506				452,901
		W	9,714,129			W	7,089,112

18.	Commissions and Fees

				2003				2004				2005
				(In millions of Won)
Brokerage fees and commissions				W	260,412			W	231,520			W	345,265
Other fees and commissions:
	Credit card fees				255,775				360,624				421,249
	Commissions received on remittance				59,685				78,657				72,626
	Commissions received on import and export letters of credit				51,166				80,528				70,625
	Financial guarantee fees				9,102				24,916				21,358
	Commissions received in foreign exchange activities				30,273				68,391				70,325
	Commission received as agency				5,987				49,132				71,032
	Commission received as electronic charge receipt				42,583				74,232				69,962
	Commission received as early repayment				36,350				33,958				35,245
	Other fees				89,136				176,856				328,016
		Total other fees and commissions			580,057				947,294				1,160,438
				W	840,469			W	1,178,814			W	1,505,703

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19.	Other Non-interest Income and Other Non-interest Expenses

		2003				2004				2005
		(In millions of Won)
Gain on sale of premises and equipment		W	22,609			W	30,408			W	74,868
Income from operating leases			39,922				52,787				42,227
Rental income			11,924				15,199				15,870
Extinguished prescription of deposits			16,053				13,353				1,383
Other			65,249				246,137				198,177
		W	155,757			W	357,884			W	332,525

		2003				2004				2005
		(In millions of Won)
Impairment loss on intangible assets		W	—			W	1,893			W	—
Impairment loss on other investments			39,541				15,521				20,958
Loss on sale of premises and equipment			8,670				15,134				54,550
Loss on sale of other real estate			3,199				1,448				6,758
Other			139,771				309,383				231,919
		W	191,181			W	343,379			W	314,185

20.	Extraordinary Gain

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			(In millions of
			Won)
Fair value of net assets of Good Morning Shinhan Securities			W	301,334
KSFC deposit intangible asset				6,276
Brokerage customer relationship intangible asset				50,956
KSFC borrowing intangible asset				262
Negative goodwill				(149,791	)
	Total purchase price		W	209,037

			(In millions of
			Won)
Premises and equipment			W	111,172
KSFC deposit intangible asset				6,276
Brokerage customer relationship intangible asset				50,956
KSFC borrowing intangible asset				262
Deferred tax asset				(46,383	)
Extraordinary gain				27,508
	Total allocation		W	149,791

21.	Common Stock

	Issuances of common stock

	Treasury stock

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22.	Redeemable Preferred Stock and Redeemable Convertible Preferred Stock

RPS issued to KDIC (Series 1 to 5)				4.04	%
RPS issued to Strider:
	Series 6			7.00	%
	Series 7			7.46	%
	Series 8			7.86	%

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		(In millions of
Years Ending		Won)
2006		W	—
2007			—
2008			404,408
Discount on RCPS			(36,536	)
		W	367,872

23.	Retained Earnings

		2004				2005
		(In millions of Won)
Appropriated retained earnings for legal reserves under Korean GAAP		W	118,692			W	223,722
Unappropriated retained earnings under US GAAP			2,337,201				3,730,020
		W	2,455,893			W	3,953,742

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24.	Regulatory Requirements

		2004				2005
		(In millions of Won,
		except capital ratio)
Equity Capital		W	9,867,854			W	11,434,801
Requisite Capital			7,625,261				8,609,121
Requisite Capital Ratio			129.41	%			132.81	%

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				Shinhan Bank								Chohung Bank
				2004				2005				2004				2005
				(In millions of Won, except capital ratio)
Tier 1 capital				W	3,618,254			W	4,381,101			W	2,023,051			W	2,968,489
Tier 2 capital					2,183,527				2,287,736				2,023,051				2,172,639
Less: Treasury stock, etc					(257	)			(100,712	)			(230,373	)			(157,383	)
		Total risk-adjusted capital		W	5,801,524			W	6,568,125			W	3,815,729			W	4,983,745
Risk-weighted assets
	On-balance sheet assets			W	44,603,127			W	49,216,505			W	38,841,232			W	43,258,274
	Off-balance sheet assets				3,886,979				4,305,776				1,796,797				2,292,389
		Total risk-weighted assets		W	48,490,106			W	53,522,281			W	40,638,029			W	45,550,663
Capital adequacy ratio					11.96	%			12.27	%			9.39	%			10.94	%
	Tier 1 capital ratio				7.46	%			8.19	%			4.98	%			6.52	%
	Tier 2 capital ratio				4.50	%			4.27	%			4.98	%			4.77	%

				Shinhan Bank								Chohung Bank
				2004				2005				2004				2005
				(In millions of Won, except capital ratio)
Tier 1 capital				W	3,618,254			W	4,381,101			W	2,023,051			W	2,968,489
Tier 2 capital					2,183,270				2,187,024				1,792,678				2,015,256
		Total risk-adjusted capital		W	5,801,524			W	6,568,125			W	3,815,729			W	4,983,745
		Total risk-weighted assets		W	48,578,597			W	53,708,592			W	40,580,874			W	45,546,697
Capital adequacy ratio					11.94	%			12.23	%			9.40	%			10.94	%
	Tier 1 capital ratio				7.45	%			8.16	%			4.99	%			6.52	%
	Tier 2 capital ratio				4.49	%			4.07	%			4.41	%			4.42	%

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25.	Income Taxes

				2003				2004				2005
				(In millions of Won)
Current tax expense
	National			W	218,340			W	392,306			W	414,073
	Local				21,834				39,231				41,408
		Total current tax expense			240,174				431,537				455,481
Deferred tax expense
	National				6,571				302,649				442,641
	Local				657				30,265				44,264
		Total deferred tax expense			7,228				332,914				486,905
		Total tax expense		W	247,402			W	764,451			W	942,386

		2003				2004				2005
		(In millions of Won, except tax rates)
Statutory tax rate			29.7	%			29.7	%			27.5	%
Income before income tax expense, minority interest, extraordinary item and cumulative effect of a change in accounting principle		W	548,566			W	2,380,290			W	2,697,233
Income tax calculated at the statutory tax rate			162,924				706,946				741,739
Income not assessable for tax purposes			(8,939	)			(75,926	)			(25,519	)
Expenses not deductible for tax purposes			19,880				171,556				205,402
Foreign tax rate differentials			(359	)			(205	)			(429	)
Adjustment of deferred tax liability on investment in subsidiaries and associates			291				13,502				(7,670	)
Change in statutory tax rate(1)			56,462				(33,688	)			—
Change in valuation allowance			15,507				(18,125	)			27,374
Other			1,636				391				1,489
Income tax expense		W	247,402			W	764,451			W	942,386

(1)	In December 2003, the Korean government reduced the corporate income tax rate from 29.7% to 27.5%, effective from January 1, 2005.

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			2004				2005
			(In millions of Won)
Deferred income tax assets
	Allowance for loan losses		W	276,859			W	14,078
	Other allowances			51,376				172,768
	Valuation of trading assets			15,733				12,588
	Premises and equipment			58,942				40,349
	Available-for-sale securities			233,868				323,181
	Other assets			26,906				118,976
	Future policy benefits			—				144,833
	Long-term debt			33,492				35,763
	Other temporary differences			9,819				5,704
	Net operating loss carry forwards			177,905				32,520
				884,900				900,760
	Less: Valuation allowance			(55,624	)			(79,173	)
	Deferred income tax assets			829,276				821,587
Deferred income tax liabilities
	Valuation of trading assets			(1,701	)			(8,006	)
	Foreign exchange contracts and derivative instruments			(566	)			(22,956	)
	Allowance for loan losses			(78,424	)			(191,901	)
	Accrued interest and dividend receivable			(73,952	)			(52,393	)
	Other assets			(354,922	)			(660,365	)
	Long-term debt			(8,594	)			(294	)
	Other temporary differences			(7,248	)			(4,407	)
	Deferred income tax liabilities			(525,407	)			(940,322	)
Net deferred income tax assets/ (liabilities)			W	303,869			W	(118,735	)

			2004				2005
			(In millions of Won)
Deferred tax assets			W	829,276			W	183,604
Deferred tax liabilities				(525,407	)			(302,339	)
	Total net deferred tax assets/ (liabilities)		W	303,869			W	(118,735	)

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		(In millions of
Years Ending		Won)
2006		W	97,823
2007			—
2008			1,118
2009			437
2010			18,876
		W	118,254

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26.	Earnings Per Share

				2003				2004				2005
				(In millions of Won, except per share data)
Basic EPS
Net income before extraordinary gain and cumulative effect of a change in accounting principle				W	275,318			W	1,462,411			W	1,738,768
	Extraordinary gain, net of taxes				—				27,508				—
	Cumulative effect of a change in accounting principle, net of taxes				—				(23,049	)			—
	Accretion and dividends on redeemable convertible preferred stock				(6,043	)			(40,948	)			(8,169	)
	Net income attributable to common stock shareholders			W	269,275			W	1,425,922			W	1,730,599
	Weighted-average number of common stocks outstanding (in thousands)				262,987				292,465				333,424
Net earnings per share
	Net income before extraordinary gain and cumulative effect of a change in accounting principle			W	1,024			W	4,860			W	5,190
	Extraordinary gain				—				94				—
	Cumulative effect of a change in accounting principle				—				(79	)			—
		Basic net income per share		W	1,024			W	4,875			W	5,190
Diluted EPS
Net income before extraordinary gain and cumulative effect of a change in accounting principle for purposes of computing diluted net income per share				W	275,318			W	1,462,411			W	1,738,768
	Extraordinary gain, net of taxes				—				27,508				—
	Cumulative effect of a change in accounting principle, net of taxes				—				(23,049	)			—
	Net income attributable to common stock shareholders			W	275,318			W	1,466,870			W	1,738,768
	Weighted-average number of common stocks outstanding (in thousands)				262,987				292,465				333,424
	Diluted effect of redeemable convertible preferred stock (in thousands)				16,540				44,721				22,360
	Diluted effect of bond with warrants (in thousands)				212				—				—
	Diluted effect of stock options (in thousands)				6				294				356
	Weighted-average number of common stock outstanding, Assuming dilution (in thousands)				279,745				337,480				356,140

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				2003				2004				2005
				(In millions of Won, except per share data)
Net earnings per share
	Net income before extraordinary gain and cumulative effect of a change in accounting principle			W	984			W	4,333			W	4,882
	Extraordinary gain				—				82				—
	Cumulative effect of a change in accounting principle				—				(68	)			—
		Diluted net income per share		W	984			W	4,347			W	4,882

27.	Employee Severance Plans

		2004				2005
		(In millions of Won)
Balance at beginning of the year		W	348,264			W	175,861
Severance benefits			94,914				181,603
Balance from the acquisition of subsidiaries			—				2,784
Plan payments			(267,317	)			(105,530	)
			175,861				254,718
Less: Balance of payments remaining with National Pension Fund and severance insurance deposit			(101,026	)			(72,951	)
Balance at end of the year		W	74,835			W	181,767

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		(In millions of
Years Ending		Won)
2006		W	21,494
2007			12,096
2008			11,026
2009			12,773
2010			14,771
2011-2015		W	124,163

28.	Employee Stock Option Plans

		Shinhan Financial Group
		2004				2005
Risk-free interest rate			4.39	%			4.07	%
Expected lives			3.50 years				5.00 years
Expected volatility			42.26	%			42.31	%
Expected dividend rate			2.82	%			2.79	%

	Shinhan Financial Group Plan

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	Shinhan Bank Plan

	Chohung Bank Plan

		Shinhan Financial Group								Shinhan Bank
						Weighted-								Weighted-
						Average								Average
						Exercise								Exercise
		Number of				Price Per				Number of				Price Per
		Shares				Share				Shares				Share
						(In Won)								(In Won)
Outstanding at January 1, 2003			1,004,200			W	18,910				472,543			W	12,686
Granted			1,156,300				11,800				—				—
Forfeited			(113,955	)			16,483				—				—
Outstanding at December 31, 2003			2,046,545				15,028				472,543				12,686
Granted			1,301,600				21,595				—				—
Exercised			(3,500	)			18,910				(469,043	)			12,693
Forfeited			(247,703	)			16,219				—				—
Outstanding at December 31, 2004			3,096,942				17,698				3,500				11,700
Granted			2,695,200				28,006				—				—
Exercised			(363,665	)			15,054				(1,750	)			11,700
Forfeited			(101,684	)			26,360				—				—
Outstanding at December 31, 2005			5,326,793			W	22,848				1,750			W	11,700
Exercisable at December 31, 2005			1,506,227			W	15,079				1,750			W	11,700

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		Chohung Bank
						Weighted-
						Average
						Exercise
		Number of				Price Per
		Shares				Share
		(In Won)
Outstanding at September 1, 2003			934,286			W	5,033
Granted			—				—
Forfeited			(365,580	)			4,856
Outstanding at December 31, 2003			568,706				5,147
Granted			340,000				5,000
Forfeited			(5,316	)			5,000
Outstanding at December 31, 2004			903,390				5,093
Granted			—				—
Forfeited			(19,739	)			5,000
Outstanding at December 31, 2005			883,651			W	5,093
Exercisable at December 31, 2005			581,301			W	5,264

		Shinhan Financial Group
		Options Outstanding
														Options Exercisable
						Weighted-
						Average				Weighted-								Weighted-
						Remaining				Average								Average
		Number				Contractual				Exercise				Number				Exercise
Exercise Price		Outstanding				Life(1)				Price				Exercisable				Price
										(In Won)								(In Won)
W18,910			694,643				2.39				18,910				694,643				18,910
11,800			811,584				3.38				11,800				811,584				11,800
21,595			1,248,605				3.24				21,595				—				—
28,006			2,571,961				6.25				28,006				—				—
			5,326,793				4.60				22,848				1,506,227				15,079

Shinhan Bank

Options Outstanding

Options Exercisable

Weighted-

Average

Weighted-

Weighted-

Remaining

Average

Average

Number

Contractual

Exercise

Number

Exercise

Exercise Price

Outstanding

Life(1)

Price

Exercisable

Price

(In Won)

(In Won)

W11,700

1,750

0.24

11,700

1,750

11,700

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		Chohung Bank
		Options Outstanding
														Options Exercisable
						Weighted-
						Average				Weighted-								Weighted-
						Remaining				Average								Average
		Number				Contractual				Exercise				Number				Exercise
Exercise Prices		Outstanding				Life(1)				Price				Exercisable				Price
										(In Won)								(In Won)
W5,260			99,054				2.24				5,260				99,054				5,260
5,000			579,301				0.24-3.23				5,000				276,951				5,000
5,598			187,200				1.24				5,598				187,200				5,598
5,860			18,096				1.24				5,860				18,096				5,860
			883,651				1.83				5,097				581,301				5,264

(1)	Contractual life indicates the sum of service (vesting) period and exercisable period.

	Employee Stock Ownership Association

29.	Fair Value of Financial Instruments

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			2004								2005
			Carrying								Carrying
			Amount				Fair Value				Amount				Fair Value
			(In millions of Won)
Financial assets:
	Financial assets for which carrying value approximates fair value		W	8,758,750			W	8,758,750			W	9,210,439			W	9,210,439
	Interest-bearing deposits in banks			220,478				220,478				626,771				626,771
	Trading assets			6,316,341				6,316,341				4,508,435				4,508,435
	Securities			21,207,551				21,415,514				25,442,795				25,459,890
	Loans			94,868,094				95,261,537				104,446,954				104,569,756
	Non-marketable equity investments included in other assets			1,076,326				1,217,285				1,419,127				2,603,441
Financial liabilities:
	Financial liabilities for which carrying value approximates fair value			2,934,129				2,934,129				1,901,498				1,901,498
	Deposits			82,679,483				83,034,668				86,421,367				87,043,877
	Trading liabilities			1,757,577				1,757,577				1,061,289				1,061,289
	Short-term borrowings			10,935,555				10,935,555				11,968,300				11,968,300
	Secured borrowings			6,308,093				6,388,404				7,501,707				7,547,573
	Long-term debt			23,616,683				25,398,145				26,171,822				25,423,632
Redeemable convertible preferred stock			W	735,744			W	1,046,462			W	367,871			W	917,890

30.	Derivative Instruments and Hedging Activities

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31.	Commitments and Contingencies

	Legal and Tax Contingencies

	Lease Commitments

		(In millions of
Years Ending		Won)
2006		W	29,725
2007			13,981
2008			7,910
2009			4,578
2010			1,485
Thereafter			135
		W	57,814

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	Credit Commitments and Guarantees

			2004				2005
			(In millions of Won)
Commitments to extend credit:
	Corporate		W	39,322,638			W	46,335,824
	Credit card lines			23,605,859				16,080,414
	Consumer(1)			5,960,613				5,862,898
Commercial letters of credit				3,364,005				2,960,190
			W	72,253,115			W	71,239,326

(1)	excluding credit card

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																						Maximum
										Total				Current				Amount of				Potential
										Notional				Carrying				Recourse or				Amount of
		Expire within				Expire after				Amount				Liability				Collateral				Future
		One Year				One Year				Outstanding				Amount(1)				Held				Payments
		(In millions of Won)
Financial stand-by letters of credit		W	227,385			W	28,630			W	256,015			W	3,357			W	67,972			W	256,015
Other financial guarantees			696,860				170,073				866,933				9,930				177,329				866,933
Performance letters of credit and guarantees			743,770				251,690				995,460				10,974				113,275				995,460
Liquidity facilities to SPEs			521,524				1,963,778				2,485,302				31,781				—				2,485,302
Loans sold with recourse			—				14,225				14,225				4,069				11,527				14,225
Guarantees on trust accounts			314,728				2,773,884				3,088,612				—				—				3,088,612
Credit derivatives			25,325				40,520				65,845				371				—				65,845
		W	2,529,592			W	5,242,800			W	7,772,392			W	60,482			W	370,103			W	7,772,392

(1)	Includes allowance for guarantees and acceptances, allowance for unfunded loan commitment and liabilities recorded under FIN. 45.

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	Pledged Assets

		2004				2005
		(In millions of Won)
Short-term and long-term deposits		W	21,314			W	64
Trading securities			423,243				663,229
Available-for-sale securities			12,683,355				11,473,807
Held-to-maturity securities			758,446				1,546,167
Loans			2,975,468				2,430,559
Real estate			29,326				31,361
Other assets			31,362				29,910
		W	16,922,514			W	16,175,097

32.	Concentrations of Geographic and Credit Risks

	Geographic Risk

	Credit Risk

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		2004												2005
						On-Balance				Off-Balance								On-Balance				Off-Balance
		Credit Exposure				Sheet				Sheet				Credit Exposure				Sheet				Sheet
		(In millions of Won)
Commercial and industrial		W	58,789,035			W	35,653,127			W	23,135,908			W	66,211,349			W	35,728,132			W	30,483,217
Other commercial			40,946,060				17,988,288				22,957,772				44,825,210				21,408,703				23,416,507
Lease financing			981,002				981,002				—				754,473				754,473				—
Mortgage and home equity			22,439,050				22,180,112				258,938				26,142,838				25,840,334				302,504
Credit cards			28,337,772				4,731,913				23,605,859				33,955,266				17,874,852				16,080,414
Other consumer			21,247,470				15,545,796				5,701,674				9,801,956				4,241,562				5,560,394
		W	172,740,389			W	97,080,238			W	75,660,151			W	181,691,092			W	105,848,056			W	75,843,036

33.	Related Party Transactions

	Trust Accounts

	Loans to Executives, Directors and Affiliated Parties

		2004				2005
		(In millions of Won)
Loans at beginning of the year		W	132,410			W	213,270
New loans			108,893				26,660
Repayments			(28,033	)			(59,233	)
Loans at end of the year		W	213,270			W	180,697

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		2003								2004								2005
						Executives,								Executives,								Executives,
						Directors and								Directors and								Directors and
		Trust				Affiliated				Trust				Affiliated				Trust				Affiliated
		Accounts				Parties				Accounts				Parties				Accounts				Parties
		(In millions of Won)
Loans		W	—			W	132,410			W	—			W	213,270			W	—			W	180,697
Accrued expenses and other assets			27,659				—				91,624				—				65,795				—
Short-term borrowings			859,974				—				600,924				—				669,427				—
Other liabilities			—				—				669				—				354				—
Other interest income			—				—				768				—				—				—
Net trust management fees			50,177				—				115,711				—				104,955				—
Interest expense on short-term borrowings			10,910				—				16,985				—				17,714				—
Interest on loans			—				5,526				—				6,828				—				3,538

34.	Segment Reporting

	•	Retail banking — Activities within this segment include savings and demand deposits, consumer loans and mortgages of individual customers and sole proprietors who borrowed W1,000 million 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 W1 billion.
	•	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 Good Morning Shinhan Securities.
	•	Credit card — Activities within this segment include processing domestic as well as overseas credit and debit card operations conducted through Shinhan Card and Chohung Bank. The credit card segment’s assets and liabilities are mainly from transactions with individual or corporate cardholders and card merchants.

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	•	Treasury and securities investment — Activities within this segment include Shinhan Bank’s internal asset and liability management, proprietary trading in securities and derivatives, and proprietary investment in security portfolios using Shinhan Bank’s capital.
	•	Treasury and international business — Activities within this segment include Chohung Bank’s internal asset and liability management, proprietary trading in securities and derivatives, proprietary investment in security portfolios using Chohung Bank’s capital, and operation of Chohung Bank’s overseas branches.
	•	Other banking services — Activities within this segment include Shinhan Bank’s impaired loan management, administration of Shinhan Bank and Chohung Bank operations, and operation of Shinhan Bank’s overseas branches.

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			2003
			Shinhan Bank																								Chohung Bank
											Treasury &				Other				Securities																Treasury &								Other								Subtotal
			Retail				Corporate				Securities				Banking				Brokerage				Credit				Retail				Corporate				International				Credit				Banking								before				US GAAP				Inter-Segment
			Banking				Banking				Investment				Services				Services(1)				Card(2)				Banking				Banking				Business				Card				Services				Other				Elimination				Adjustments				Transactions(3)				Total
			(In millions of Won)
Net interest income			W	781,600			W	433,993			W	64,630			W	211,695			W	34,272			W	321,686			W	418,054			W	62,404			W	(26,154	)		W	236,974			W	(10,425	)		W	197,907			W	2,726,636			W	(401,139	)		W	7,392			W	2,332,889
Non-interest income				439,446				314,895				839,330				127,300				621,902				636				94,601				70,855				234,214				577				7,317				495,552				3,246,625				(103,211	)			(2,025,060	)			1,118,354
	Total revenues			1,221,046				748,888				903,960				338,995				656,174				322,322				512,655				133,259				208,060				237,551				(3,108	)			693,459				5,973,261				(504,350	)			(2,017,668	)			3,451,243
Provision for credit losses				63,765				272,639				(10,841	)			109,488				(26	)			235,936				150,000				145,037				—				199,454				300				(8,797	)			1,156,955				(179,065	)			(12,303	)			965,587
Non-interest expense				562,619				261,096				851,750				344,475				564,012				176,449				296,062				33,330				249,639				120,378				39,686				234,475				3,733,971				(6,667	)			(2,011,384	)			1,715,920
Depreciation and amortization				34,971				3,194				592				33,385				23,575				—				36,962				13,385				11,106				6,785				7,119				42,074				213,148				33,653				215				247,016
	Net income (loss) before tax			559,691				211,959				62,459				(148,353	)			68,613				(90,063	)			29,631				(58,493	)			(52,685	)			(89,066	)			(50,213	)			425,707				869,187				(352,271	)			5,804				522,720
Income tax expense (benefit)				166,228				62,952				18,550				(37,997	)			32,801				(239	)			26,883				711				2,436				(8,370	)			3,171				3,042				270,168				11,040				(33,806	)			247,402
	Net income (loss)			393,463				149,007				43,909				(110,356	)			35,812				(89,824	)			2,748				(59,204	)			(55,121	)			(80,696	)			(53,384	)			422,665				599,019				(363,311	)			39,610				275,318
US GAAP adjustments				32,708				57,164				(37,207	)			(8,013	)			(2,633	)			62,440				156,506				141,382				(116,432	)			(22,170	)			(45,687	)			(581,369	)			(363,311	)			—				—				—
Intersegment transactions				(141,024	)			(181,445	)			9,971				209,100				15,387				114,660				—				(4,135	)			20,345				—				—				(3,249	)			39,610				—				—				—
	Consolidated net income (loss)		W	285,147			W	24,726			W	16,673			W	90,731			W	48,566			W	87,276			W	159,254			W	78,043			W	(151,208	)		W	(102,866	)		W	(99,071	)		W	(161,953	)		W	275,318				—				—			W	275,318
Segments’ total assets			W	24,851,188			W	21,757,503			W	18,421,101			W	5,041,401			W	2,928,017			W	1,778,191			W	23,837,861			W	14,938,062			W	11,308,167			W	3,569,073			W	3,111,520			W	14,979,278			W	146,521,362			W	(1,358,680	)		W	(8,813,351	)		W	136,349,331

(1)	Securities brokerage business is conducted through Good Morning Shinhan Securities.
(2)	Credit card business is conducted through Shinhan Card.
(3)	Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management reporting system.

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			2004
			Shinhan Bank																								Chohung Bank
											Treasury &				Other				Securities																Treasury &								Other								Subtotal
			Retail				Corporate				Securities				Banking				Brokerage				Credit				Retail				Corporate				International				Credit				Banking								before				US GAAP				Inter-Segment
			Banking				Banking				Investment				Services				Services(1)				Card(2)				Banking				Banking				Business				Card				Services				Other				Elimination				Adjustments				Transactions(3)				Total
																															(In millions of Won)
Net interest income			W	844,382			W	529,838			W	3,662			W	182,097			W	54,043			W	347,968			W	1,107,296			W	257,782			W	(718	)		W	587,550			W	137,663			W	(2,607	)		W	4,048,956			W	(541,271	)		W	66,227			W	3,573,912
Non-interest income(4)				557,114				475,536				1,288,449				286,953				643,209				—				287,694				74,997				2,612,061				2,350				360,342				1,710,856				8,299,561				(5,974,088	)			(205,272	)			2,120,201
	Total revenues			1,401,496				1,005,374				1,292,111				469,050				697,252				347,968				1,394,990				332,779				2,611,343				589,900				498,005				1,708,249				12,348,517				(6,515,359	)			(139,045	)			5,694,113
Provision for credit losses				29,712				65,943				7,820				97,605				(4,696	)			175,799				465,565				(12,176	)			(12,631	)			672,851				(83,472	)			23,977				1,426,297				(1,257,428	)			(33,454	)			135,415
Non-interest expense(5)				684,550				386,902				1,201,264				422,726				642,572				160,998				744,102				158,775				2,627,917				235,565				266,068				508,387				8,039,826				(4,921,411	)			(219,872	)			2,898,543
Depreciation and amortization				30,981				2,832				632				35,126				15,560				5,348				53,215				1,489				768				1,263				39,982				46,458				233,654				195,181				—				428,835
	Net income (loss) before tax			656,253				549,697				82,395				(86,407	)			43,816				5,823				132,108				184,691				(4,711	)			(319,779	)			275,427				1,129,427				2,648,740				(531,701	)			114,281				2,231,320
Income tax expense(benefit)				194,907				163,260				24,471				(24,813	)			240				—				1,233				1,723				(44	)			(2,984	)			2,570				32,202				392,765				300,093				71,593				764,451
	Net income (loss)			461,346				386,437				57,924				(61,594	)			43,576				5,823				130,875				182,968				(4,667	)			(316,795	)			272,857				1,097,225				2,255,975				(831,793	)			42,688				1,466,870
US GAAP adjustments				(54,683	)			159,677				(43,514	)			(6,867	)			15,784				35,602				(48,736	)			423,706				(83,376	)			199,194				(176,632	)			(1,251,948	)			(831,793	)			—				—				—
Intersegment transactions				(1,185	)			(93,011	)			(622	)			(239	)			9,849				110,954				(5,893	)			57,452				(3,871	)			(576	)			(2,114	)			(28,056	)			42,688				—				—				—
	Consolidated net income (loss)		W	405,478			W	453,103			W	13,788			W	(68,700	)		W	69,209			W	152,379			W	76,246			W	664,126			W	(91,914	)		W	(118,177	)		W	94,111			W	(182,779	)		W	1,466,870				—				—			W	1,466,870
Segments’ total assets			W	28,076,926			W	21,648,284			W	14,734,042			W	5,666,668			W	2,956,183			W	1,469,925			W	25,363,826			W	11,894,605			W	16,584,883			W	2,486,816			W	9,058,969			W	18,816,473			W	158,757,600			W	(4,932,814	)		W	(10,316,764	)		W	143,508,022

	(1)	Securities brokerage business is conducted through Good Morning Shinhan Securities.
	(2)	Credit card business is conducted through Shinhan Card.
	(3)	Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management reporting system.
	(4)	Includes extraordinary gain of W27,507 million.
	(5)	Includes cumulative effect of change in accounting principle of W23,049 million.

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			2005
			Shinhan Bank																								Chohung Bank
											Treasury &				Other				Securities																Treasury &								Other								Subtotal
			Retail				Corporate				Securities				Banking				Brokerage				Credit				Retail				Corporate				International				Credit				Banking								before				US GAAP				Inter-Segment
			Banking				Banking				Investment				Services				Services(1)				Card(2)				Banking				Banking				Business				Card				Services				Other(3)				Elimination				Adjustments				Transactions(4)				Total
			(In millions of Won)
Net interest income			W	958,715			W	578,981			W	(272,097	)		W	151,058			W	63,580			W	355,238			W	1,080,661			W	293,639			W	45,288			W	598,671			W	52,994			W	271,882			W	4,178,610			W	(706,977	)		W	2,005			W	3,473,638
Non-interest income				391,467				397,438				2,016,760				93,845				816,703				2,292				303,767				113,550				3,334,388				99,738				521,428				2,135,598				10,226,974				(7,191,557	)			(333,636	)			2,701,781
	Total revenues			1,350,182				976,419				1,744,663				244,903				880,283				357,530				1,384,428				407,189				3,379,676				698,409				574,422				2,407,480				14,405,584				(7,898,534	)			(331,631	)			6,175,419
Provision for credit losses				11,364				12,287				—				149,952				(3,550	)			86,177				246,092				111,330				(40,352	)			392,147				(73,443	)			23,714				915,718				(1,094,656	)			(4,550	)			(183,488	)
Non-interest expense				530,567				260,034				1,811,618				405,600				747,699				207,459				777,890				198,521				3,443,661				155,436				442,205				343,776				9,324,466				(5,623,340	)			(400,723	)			3,300,403
Depreciation and amortization				30,130				3,316				326				34,995				15,082				5,478				53,611				2,660				1,174				1,073				36,057				40,869				224,771				152,579				0				377,350
	Net income (loss) before tax			778,121				700,782				(67,281	)			(345,644	)			121,052				58,416				306,835				94,678				(24,807	)			149,753				169,603				1,999,121				3,940,629				(1,333,117	)			73,642				2,681,154
Income tax expense (benefit)				212,824				191,671				(18,402	)			(94,537	)			33,812				4,175				(19,257	)			(5,942	)			(15,200	)			(9,399	)			(10,645	)			29,945				299,045				543,082				100,259				942,386
	Net income (loss)			565,297				509,111				(48,879	)			(251,107	)			87,240				54,241				326,092				100,620				(9,607	)			159,152				180,248				1,969,176				3,641,584				(1,876,199	)			(26,617	)			1,738,768
US GAAP adjustments				(43,949	)			180,345				(56,282	)			152				(11,575	)			35,521				15,784				(186,138	)			(146,123	)			241,033				(89,241	)			(1,815,726	)			(1,876,199	)			—				—				—
Intersegment transactions				(15,544	)			(88,837	)			(6,012	)			(1,485	)			6,572				84,727				(39,039	)			82,496				(18,467	)			(3,049	)			(15,860	)			(12,119	)			(26,617	)			—				—				—
	Consolidated net income (loss)		W	505,804			W	600,619			W	(111,173	)		W	(252,440	)			82,237				174,489				302,837				(3,022	)			(174,197	)			397,136				75,147				141,331				1,738,768				—				—				1,738,768
Segments’ total assets			W	31,194,906			W	23,571,673			W	17,347,719			W	3,527,670			W	3,882,713			W	1,532,291			W	27,755,451			W	11,985,147			W	13,342,010			W	2,156,188			W	11,370,730			W	27,281,908			W	174,948,406			W	(10,200,361	)		W	(9,632,732	)		W	155,115,313

(1)	Securities brokerage business is conducted through Good Morning Shinhan Securities.
(2)	Credit card business is conducted through Shinhan Card.
(3)	Includes, among others, the life insurance business conducted through Shinhan Life Insurance.
(4)	Includes eliminations for consolidation, intersegment transactions and certain differences in classification under management reporting system.

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			2004				2005
			(In millions of Won)
Segments’ total assets			W	158,757,600			W	174,948,406
US GAAP adjustments				(4,932,814	)			(10,200,361	)
Intersegment transactions				(10,316,764	)			(9,632,732	)
	Consolidated total assets		W	143,508,022			W	155,115,313

			2003				2004				2005
			(In millions of Won)
Segments’ total revenues			W	5,973,261			W	12,348,517			W	14,405,584
US GAAP adjustments				(504,350	)			(6,515,359	)			(7,898,534	)
Intersegment transactions				(2,017,668	)			(139,045	)			(331,631	)
	Consolidated total revenues		W	3,451,243			W	5,694,113			W	6,175,419

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		2004				2005
		(In millions of Won)
Loans		W	2,527,651			W	2,008,800
Securities			4,115,372				4,710,614
Other assets			416,940				529,467
		W	7,059,963			W	7,248,881

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			2004								2005
							Maximum								Maximum
			Total Assets				Exposure				Total Assets				Exposure
			(In millions of Won)
SPEs created for structured financing			W	2,946,962			W	1,514,870			W	4,302,822			W	2,743,489
Credit enhancement provided to SPEs				2,880,693				1,123,710				13,554,109				3,055,887
Collateralized loan obligation				10,117				—				13,342				—
Guaranteed principal money trusts				3,199,292				3,124,430				3,160,917				3,060,652
	Total		W	9,037,064			W	5,763,010			W	21,031,190			W	8,860,028

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		Foreign				Net Unrealized				Accumulated
		Currency				Gain on				Other
		Translation				Available-for-				Comprehensive
		Adjustments				Sale Securities(1)				Income
		(In millions of Won)
Balance at January 1, 2003		W	7,995			W	62,366			W	70,361
Foreign currency translation adjustment, net of tax effect of W742			(1,956	)			—				(1,956	)
Unrealized gain on available-for-sale securities, net of tax effect of W5,518			—				14,549				14,549
Less: Reclassification adjustment for net realized gain included in income, net of tax effect W9,428			—				24,858				24,858
Balance at December 31, 2003			6,039				52,057				58,096
Foreign currency translation adjustment, net of tax effect of W7,003			(18,462	)			—				(18,462	)
Unrealized gain on available-for-sale securities, net of tax effect of W47,851			—				128,195				128,195
Less: Reclassification adjustment for net realized gain included in income, net of tax effect W3,776			—				9,956				9,956
Balance at December 31, 2004			(12,423	)			170,296				157,873
Foreign currency translation adjustment, net of tax effect of W4,561			(12,024	)			—				(12,024	)
Unrealized gain on available-for-sale securities, net of tax effect of W81,975			—				(220,975	)			(220,975	)
Less: Reclassification adjustment for net realized gain included in income, net of tax effect W9,512			—				25,076				25,076
Balance at December 31, 2005		W	(24,447	)		W	(75,755	)		W	(100,202	)

(1)	Equity method investments included.

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			2003				2004				2005
			(In millions of Won)
Cash dividends paid by:
	Consolidated subsidiaries		W	185,896			W	252,807			W	—
	Equity method investees			1,000				3,730				4,846
			W	186,896			W	256,537			W	4,846

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				2004				2005
				(In millions of Korean Won)
Assets
Deposits with banking subsidiary				W	31,145			W	64,374
Advances to, and receivables from, subsidiaries:
	Banking subsidiaries				73,140				93,140
	Non-banking subsidiaries				1,685,609				1,390,910
Investment (at equity) in subsidiaries:
	Banking subsidiaries				7,546,185				8,729,742
	Non-banking subsidiaries				1,064,808				1,848,179
Premises and equipment					2,165				2,290
Other assets					63,559				159,698
		Total assets		W	10,466,611			W	12,288,333
Liabilities and Stockholders’ Equity
Short-term debt				W	50,000			W	85,188
Long-term debt					3,688,841				3,860,573
Accrued expenses and other liabilities					327,307				163,917
		Total liabilities			4,066,148				4,109,678
Redeemable convertible preferred stock					735,744				367,872
Stockholders’ equity					5,664,719				7,810,784
		Total liabilities, redeemable convertible preferred stock and stockholders’ equity		W	10,466,611			W	12,288,333

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				2003				2004				2005
				(In millions of Korean Won)
Income
	Dividends from banking subsidiaries			W	185,896			W	244,807			W	367,210
	Dividends from non banking subsidiaries				1,000				11,730				16,846
	Interest income from banking subsidiaries				6,007				6,111				7,189
	Interest income from non banking subsidiaries				91,819				108,153				88,622
	Other interest income				961				—				—
	Other income				735				19,253				4,749
		Total income			286,418				390,054				484,616
Expenses
	Interest expense				136,889				247,711				240,609
	Salaries and employee benefits				9,998				15,328				23,163
	Other expense				16,712				32,490				14,400
		Total expenses			163,599				295,529				278,172
Income before income tax expense and undistributed net income (loss) of subsidiaries					122,819				94,525				206,444
Income tax expense (benefits)					5,682				46,480				(2,879	)
Income before undistributed net income (loss) of subsidiaries					117,137				48,045				209,323
Equity in undistributed net income (loss) of subsidiaries:
	Banking subsidiaries				252,766				1,259,134				1,320,723
	Non-banking subsidiaries				(94,585	)			159,691				208,722
Net income				W	275,318			W	1,466,870			W	1,738,768

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					2003				2004				2005
					(In millions of Korean Won)
Cash flows from operating activities
	Net income				W	275,318			W	1,466,870			W	1,738,768
	Less: Net income of subsidiaries					(345,077	)			(1,675,362	)			(1,913,501	)
	Parent Company net income (loss)					(69,759	)			(208,492	)			(174,733	)
	Depreciation on premises and equipment					696				763				767
	Grant of stock options					6,802				1,988				7,087
	Cash dividends from subsidiaries					186,896				256,537				384,056
	Loss on sale of investment (at equity) in subsidiaries					378				—				—
	Loss on sale of available-for-sales securities					1,755				—				—
	Interest expense					42,936				42,919				29,487
	Unrealized foreign exchange gain					(231	)			(18,141	)			(2,156	)
	Unrealized foreign exchange loss					231				18,132				2,156
	Other assets, net					(35,921	)			53,937				(34,905	)
	Accrued expenses and other liabilities, net					166,385				94,656				82,011
			Net cash provided by operating activities			300,168				242,299				293,770
Cash flows from investing activities
	Repayments (Advances) from subsidiaries					(1,176,009	)			168,024				272,543
	Purchases of investment (at equity) in subsidiaries					(1,128,423	)			(111,894	)			(368,104	)
	Disposition of investment (at equity) in subsidiaries					1,529				—				2,912
	Net change in premises and equipment					—				(1,706	)			—
	Available-for-sales securities:
		Purchases				—				—				—
		Proceeds from sales				1				—				—
			Net cash provided by (used in) investing activities			(2,302,902	)			54,424				(92,649	)
Cash flows from financing activities
	Net change in short-term debt					—				(44,000	)			35,188
	Proceeds from issuance of long-term debt					2,146,129				246,036				780,000
	Repayments of long-term debt					(18,666	)			(230,921	)			(635,600	)
	Proceeds from issuance of common stock and stock related awards					27,504				—				—
	Net change in treasury stock					—				59				62
	Cash dividends paid					(157,493	)			(242,105	)			(347,542	)
			Net cash provided by (used in) financing activities			1,997,474				(270,931	)			(167,892	)
Net increase (decrease) in cash and due from banks						(5,260	)			25,792				33,229
Cash and due from banks, beginning of the year						10,613				5,353				31,145
Cash and due from banks, end of the year					W	5,353			W	31,145			W	64,374
Cash paid for interest					W	93,952			W	204,791			W	211,122

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	1	.1		Articles of Incorporation (in English)*
	2	.1		Form of Common Stock Certificate (in English)**
	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, 2004, 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**
	4	.4		Merger Agreement between Shinhan Bank and Chohung Bank (in English)*
	4	.5		Split-Merger Agreement between Shinhan Card and Chohung Bank (in English)*
	8	.1		List of all Subsidiaries of Shinhan Financial Group
	12	.1		Certifications of our Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act
	12	.2		Certifications of our Chief Financial Officer required by Rule 13a-14(a) of the Exchange Act
	13	.1		Certifications of our Chief Executive Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350)
	13	.2		Certifications of our Chief Financial Officer required by Rule 13a-14(b) and Section 1350 of Chapter 63 of the United States Code (18 U.S.C. 1350)

*	A fair and accurate translation from Korean into English.

**	Incorporated by reference to the registrant’s previous filing on Form 20-F (No. 001-31798), filed on September 15, 2003.

***	Incorporated by reference to the registrant’s previous filing on Form 20-F (No. 001-31798), filed on September 15, 2003. Confidential treatment has been requested for certain portions of the Stock Purchase Agreement.

E-1