WF

Business Context and Reporting Period

Company: Woori Finance Holdings Co., Ltd. (Woori Financial Group)

Filing Type: Form 6-K (Report of Foreign Private Issuer)

Reporting Period: Fiscal Year Ended December 31, 2006 (Filed March 30, 2007)

Business Overview: The Company is a financial holding company established under the Financial Holding Company Act. Its primary business is the acquisition and ownership of shares in financial service companies and the governance of such subsidiaries. The Group's operations are primarily driven by its three major banking subsidiaries (Woori Bank, Kyongnam Bank, Kwangju Bank), along with subsidiaries in securities, asset management, and finance. The Company's main income source consists of dividends received from these subsidiaries.

Key Financial Metrics (Consolidated)

Material Changes vs. Prior Period

• Profitability Growth: Consolidated Net Income increased by approximately 20.2% to KRW 2.03 trillion, driven by a 34.8% increase in Operating Revenue to KRW 19.23 trillion.
• Asset Expansion: Total Assets grew by 28.8% to KRW 212.0 trillion, primarily due to a 31.7% increase in Loans (from KRW 106.9 trillion to KRW 140.9 trillion) and a 22.9% increase in Securities.
• Accounting Adjustments: The 2006 figures include significant non-operating income adjustments totaling KRW 143.6 billion. This includes KRW 117.0 billion from the reclassification of prior period unrealized gains on available-for-sale securities and KRW 26.6 billion from changes in consolidation scope regarding private equity funds.
• Dividend Payout: Total cash dividends increased to KRW 483.6 billion (KRW 600 per share), representing a 23.83% payout ratio, up from 19.10% in 2005.
• Capital Structure: The Debt Ratio (Non-Consolidated) improved significantly from 23.8% in 2005 to 15.6% in 2006, reflecting a stronger equity base relative to liabilities.

Guidance, Outlook, and Risks

Management Commentary: The filing does not contain explicit forward-looking guidance or numerical forecasts for future periods. Management highlights the successful implementation of management improvement plans with the Korea Deposit Insurance Corporation (KDIC) and the integration of subsidiaries.

Risks and Contingencies:

• Accounting Standards: Financial statements are prepared under Korean GAAP, which differs from US GAAP. The filing notes that certain accounting principles may not conform to US standards.
• Regulatory Agreements: The Company and its three major bank subsidiaries are subject to agreements with the KDIC regarding management improvement plans. Failure to meet specific financial ratio targets (e.g., BIS capital ratio, ROA, NPL rate) could result in KDIC mandates to increase/decrease capital, pursue mergers, or close business units.
• Asset Quality: While the allowance for loan losses increased to KRW 2.12 trillion, the ratio of allowance to loans subject to allowance decreased slightly to 1.50% from 1.60% in 2005. The Group holds significant exposure to corporate and household loans.
• Related Party Transactions: Significant transactions exist with subsidiaries, including loans to Woori F&I and Woori Finance Information System, and inter-company deposits.

Key Facts for Investor Verification

• Major Shareholder: The Korea Deposit Insurance Corporation (KDIC) owns 77.97% of the Company's common stock (628,458,609 shares).
• Subsidiary Performance: Woori Bank contributed 81.8% of the Group's net income in 2006. Verification of Woori Bank's standalone asset quality and NPL ratios is critical.
• Accounting Adjustments: Verify the impact of the KRW 117 billion reclassification of unrealized gains and the KRW 26.6 billion private equity fund consolidation change on the reported net income.
• Convertible Bonds: All issued convertible bonds were converted into common shares as of the report date; no dilution from these instruments remains.
• Stock Options: The Company has a stock option program for directors and employees, with 317,750 exercisable options outstanding as of December 31, 2006.