Daishin Securities Co., Ltd.
Annual Report for the year ended on
31 March 2010 as filed with the UK Listing
Authority on 30 September 2010
Annual Report
(49th
Fiscal year)
Fiscal year: From April 1, 2009 to March 31, 2010
To: Financial Supervisory Service of Korea
Stock Market Division of the Korea Exchange
Daishin Securities Co., Ltd. herewith submits its annual report to the Financial Services Authority of the United
Kingdom. This annual report is the summary and translation of the annual report of Daishin Securities Co., Ltd.
submitted to the Financial Supervisory Service of the Republic of Korea pursuant to Financial Investment
Service and Capital Markets Act
September 30, 2010
Company Name : Daishin Securities Co., Ltd.
CEO : Chung Nam Roh
Head Office : 34-1, Youido-dong, Youngdungpo-ku, Seoul, 150-884, Korea
(Tel) 82-2-769-2000
Prepared by : (Position) Gneral Manager Strategic Planning & Coordination Dept.
(Name) Ho-Joon Kim
(Tel) 82-2-769-2215
0
Table of Contents
I. Business Report ........................................................................................................................................ 1
1. Corporate History ………….…………………………………………………………………………. 1
2. Chairwoman’s Message………………………………………………………………………………. 3
3. CEO’s Interview……………………………………………………………………………………… 4
4. General Corporate Information ………………………………………………………………………. 5
A. Business Objectives……………………………………………………………………………….. 5
B. Total Employee Status…………………………………………………………………………….. 7
C. Status of Domestic Branches and Overseas Representative Offices……………………………… 7
D.Organization Chart…………………………………………………………………………………. 8
E. Stock Information………………………………………………………………………………….. 9
5. Parent Company, Subsidiary Company and Consolidated Circumstances, etc……………………… 10
A. Parent Company Status……………………………………………………………………………. 10
B. Subsidiary………………………………………………………………………………………….. 10
C. Director’s Concurrent Office Position at Parent Company & Subsidiaries……………………….. 10
6. Management’s Discussion and Analysis……………………………………………………………. 11
A. Executive Summary……………………………………………………………………………….. 11
B. Operating Results…………………………………………………………………………………. 12
C. Financial Condition………………………………………………………………………………… 14
D. Business Outlook………………………………………………………………………………….. 16
7. Business Overview…………………………………………………………………………………… 17
A. New Concept Retail Service……………………………………………………………………… 17
B. Rebuilding Business Model on Based Core Competency………………………………………... 18
C. Sustainable Management System and Fulfilling CSR…………………………………………… 19
8. Major Shareholder Structure………………………………………………………………………… 20
9. Board of Directors and Audit Committee Member…………………………………………………... 20
II. Financial Report (Non-consolidated)……………………….………………………………………… 21
1. Balance Sheet…………………………………………………………………………………………. 21
2. Statement of Income………………………………………………………………………………….. 23
3. Statement of Appropriations of Retained Earnings…………………………………………………... 25
4. Statement of Changes in Shareholder’s Equity………………………………………………………. 26
5. Statement of Cash Flows……………………………………………………………………………... 27
III. Audit Report……………………………….…………………………………………………………... 30
1. Audit Report by the Audit Committee………………………………………………………………... 30
2. Report of Independent Auditors (Non-consolidated Financial Statements)………………………….. 31
V. Consolidated Financial Statements………..…………………………………………………………… 34
1
I. Business Report
1. Corporate History
1962 Jul. 27 Established as Sam-Lark Securities
1968 Jul. 08 Renamed Chung-Bo Securities
1975 Apr. 22
Oct. 01
Renamed Daishin Securities
Listed on Korea Stock Exchange (now Korea Exchange)
1984 Aug. 25
Sep. 22
Established Tokyo Representative Office
Established Daishin Economic Research Institute
1985 Mar. 06
Apr. 12
May 28
Forged capital alliance with W.I.C.O., Hong Kong
Forged capital alliance with Yamaichi Securities, Japan
Relocated headquarters to Yeoido, Seoul
1988 Mar. 24 Established Daishin Investment Consulting Co
1990 Jul. 20 Established Daishin Songchon Cultural Foundation
1996 Jul. 01
Nov. 23
Changed the name of Daishin Investment Consulting Co. to
Daishin Investment Trust Management Co.
Introduced Korea’s first “One Card System”
1997 Apr. 12
Launched home trading system (CYBOS DOS version)
1998 Jun. 09
Introduced Internet trading, the first among large brokers
1999 Aug. 31
Nov. 03
Capital increase (new share issue via third party placement) -
strategic alliance with Sumitomo Life Insurance, Japan
Capital increase (rights offering)
2002 Sep. 16
Retired 200,000 common shares of treasury stock
2003 Jul. 21
Sep. 04
Dec. 01
Selected as a component of KODI (Korea Dividend Stock Price Index,
an index of 50 component stocks)
Registered as insurance sales agent financial institution
Selected as a component of KOGI (Korea Corporate Governance Stock
Price Index)
2004 Mar. 10
Jun. 03
Jun. 23
Received Good Compliance Member Award given by Korea Exchange
Recognized for outstanding corporate governance by Korea Exchange
Registered to engage in investment advisory business
2005 Feb. 25
Sep. 26
Dec. 09
Dec. 09
Dec. 17
Received approval to deal in OTC derivatives products
Road shows (major US cities including New York)
Received approval to engage in trust business
Registered to engage in retirement pension business
Capital increase (new share issue via third party placement) -
strategic alliance with SPARX Asset Management, Japan
2006 Aug. 21
Aug. 29
Oct. 16
Launched next generation ARS system
Forged strategic alliance with Nikko Cordial Group of Japan
Forged capital alliance with Nikko Cordial Group
2007 Nov. 03
Listed 20 million GDS on London Stock Exchange (capital increase by
KRW 50 billion)
2
2008 Feb. 13
May. 26
Sep. 12
Established Daishin Securities Asia Limited, Hong Kong (overseas subsidiary)
Established Shanghai Representative Office in China
Added an affiliate with the establishment of private equity fund,
Daishin Pegasus No.1
2009 Feb. 04
Feb. 05
Apr. 22
May.04
Aug. 19
Oct. 20
Dec. 18
Shift to financial investment business with the implementation of Financial
Investment Services and Capital Markets Act
Daishin Securities Asia Limited, Hong Kong, launches operation
Participation in Korea Financial Telecommunications and Clearings Institute project
for fund transfer (Retail payment)
Opened next-generation financial system
Addition of a subsidiary after creation of Daishin MSB Private Equity Fund (PEF)
Selected as a component of the Dow Jones Sustainability Korea Index (DJSI Korea)
Addition to financial investment license: approval for trading/brokerage (domestic)
of exchange-traded derivatives
2010 Apr. 12 Addition of a subsidiary after creation of Daishin-Heungkuk Private Equity Fund No.
1 (PEF)
3
2. Chairwoman’s Message
Dear Sharehoders of Daishin Securiries,
Uncertainty continued to shadow the global economy in fiscal year 2009. As governments worldwide made concerted
efforts to resolve the economic crisis, ensuring growth and survival amid the turbulence posed a major challenge for
the corporate sector. As the year progressed, stimulus measures and low interest rates helped spark a gradual
improvement in economic indicators and confidence slowly returned to the financial markets.
In Korea, introduction of the Financial Investment Services and Capital Markets Act is changing the landscape of the
securities industry. The collapse of prominent global investment banks also led to a paradigm shift in the outlook for
financial institutions.
All of us at Daishin Securities combined our efforts to strengthen the company’s position in the market and prepare
for a new take-off in the midst of the changing environment.
To spearhead new market trends while maintaining priority on the customer, we launched an innovative hybrid
financial product called “Believe” service. In view of heightened emphasis on managing risks following the global
financial meltdown, we adopted more stringent risk management practices to ensure stable asset
structure and earnings.
Along with prudent risk management, we took steps to promote transparent corporate governance and mutual growth
with customers. As a result, Daishin Securities received a credit rating upgrade, was selected as a component of the
Dow Jones Sustainability Korea Index (DJSI Korea), and named the top-ranked well-being and premium brand
securities company by Japan Management Association Consultants (JMAC).
With the support of our shareholders, everyone at Daishin Securities spared no effort in trying to produce solid
operating results for fiscal 2009. Let’s take a closer look at the numbers.
Daishin Securities recorded total operating revenue of KRW 3,273.7billion. The amount includes KRW 361.6 billion
in commission income, KRW 1,876.0 billion in gains on valuation and disposal of marketable securities, and KRW
763.1 billion in gains on derivative transactions.
Operating expense was KRW 3,100.9 billion and operating income was KRW 172.8 billion. Non-operating income
totaled KRW 20.1 billion and non-operating expense reached KRW 43.8 billion. Pre-tax income was KRW 149.0
billion and net income amounted to KRW 91.4 billion.
We distributed cash dividends of KRW 1,000 per share for common stock and Class 2 preferred stock and KRW
1,050 for Class 1 preferred stock. With the dividend distribution, we maintained our commitment to enhancing
shareholder value and became the only major securities firm to pay out cash dividends for 12 consecutive years.
Daishin Securities will continue to uphold its profit-oriented approach in the fiscal year 2010 and strive to meet the
expectations of our valued shareholders.
Another difficult year lies ahead given fears that the European debt crisis will spill over into other regions, in addition
to expectations for revaluation of the Chinese yuan and implementation of exit strategies. While we anticipate a tough
environment, we will pursue a differentiated strategy and utilize our strengths to advance to the next level.
Our vision is to shape Daishin Securities into a trusted company that serves its customers with sincerity as a “financial
doctor”. To achieve this vision, we will implement a strategy based on the three themes of “financial growth,”
“enhanced operating efficiency” and “stronger relationship management.” We will expand and upgrade the “financial
health” service that was introduced last year and promote a new
financial culture.
Daishin Securities has unveiled a new CI (corporate identity) which upholds its management philosophy and tradition
shaped over the past five decades while embodying the company’s aspirations and values
for the future. We reaffirm our pledge to do our utmost to build a company that grows together with its customers and
shareholders.
In closing, I would like to thank our shareholders for their wholehearted support for Daishin Securities. We ask for
your continued trust and encouragement as we strive for new advances.
Daishin Securities Co., Ltd.
Chairwoman Auh-Ryung Lee
4
3. CEO’s Interview
Q. Please tell us about your performance in fiscal 2009 and business plans for fiscal 2010.
Despite a difficult environment created by the global financial crisis, we formulated a new strategy and prepared
various mechanisms to establish Daishin Securities as a specialized financial services provider
while pursuing change and innovation in 2009.
Daishin Securities’ operating income in fiscal 2009 grew by 72.6% year-on-year to KRW 172.8 billion. The growth
was largely attributable to an increase in commission received from brokerage operations, our
area of strength, and increased proprietary trading income due to rising stock prices and low interest rates. Earnings
were also boosted by new growth drivers from the wholesale segment including investment banking, wealth
management and retirement pension.
Over the past few years, we have been carrying out a major overhaul of our earnings structure. The percentage of
income from wealth management, principal investment, investment banking, and
proprietary trading is steadily climbing. This shift implies greater earnings diversification and stability.
We will achieve our business targets in fiscal 2010 by reinforcing our brokerage operation and new growth drivers,
namely investment banking, wealth management and retirement pension.
In addition to financial results, we plan to maximize management efficiency through the balanced scorecard. Under
this management system, we will check whether goals and strategies are achieved and
action plans are correctly implemented.
We will pay particular attention to promoting the “financial health” service which was launched last year. We will
provide differentiated services that allow us to satisfy customers and win their trust amid fierce competition.
Q. Tell us about the changes that have occurred since the FSCMA took effect and how things stand at this
point.
The Financial Investment Services and Capital Markets Act (FSCMA) greatly strengthened the customer protection
mechanism. Bearing that in mind, Daishin Securities has focused on increasing customers’ value. While competition
has heightened, we are upholding customer-oriented management to deliver services that protect and satisfy
customers rather than concentrating on short-term results.
It is vital to grow and generate profits. But at Daishin Securities, we believe it is more important to help our customers
enjoy true financial happiness. On that note, we will tighten risk management to protect customers’ assets and provide
reliable financial services based on expertise, integrity and consideration for the customer.
Daishin Securities has built an innovative retail business model. At the core of this model is the “financial health”
service designed to deliver value that meets customers’ demands. The service combines
brokerage and wealth management to offer unrivaled financial consulting. It encompasses all aspects of investment
and wealth management so that customers can enjoy financial happiness.
We will pursue triple-win value for customers, employees and the company to create happiness and ultimately
become a globally trusted company promoting harmony with customers.
Q. Daishin Securities has been included in DJSI Korea. What is the significance of this inclusion?
Daishin Securities was selected as a component of Dow Jones Sustainability Korea Index in October 2009. This
indicates that Daishin Securities has received external recognition for maintaining stable and efficient processes and
fulfilling its social and environmental responsibility.
Daishin Securities is a standalone securities company which is rare in Korea. We have grown over the past 48 years
through the ups and downs of the financial markets by turning crisis into opportunity based on preemptive and
strategic risk management. Stringent risk management is behind our reputation as a securities firm that shines brighter
in times of crisis.
We have presented diverse growth models for sustained growth and practice socially responsible management. We
are also taking the lead in environmental management with the launch of products to spearhead green finance such as
the “Global Warming Fund” while carrying out social contribution activities through Daishin Songchon Cultural
Foundation. These endeavors played a major role in our inclusion in DJSI Korea.
Daishin Securities Co., Ltd.
President & CEO Chung-Nam Roh
5
4. General Corporate Information
A. Business Objective
(1) The purposes of the Company shall be to engage in the following businesses:
1. Buying and selling securities;
2. Securities brokerage;
3. Acting as an intermediary or agent for sale or purchase of securities;
4. Acting as an intermediary, arranger or agent with respect to entrustment of a sale or purchase
transaction to be executed on the Stock Market Division or KOSDAQ Market Division of the Korea
Exchange or an exchange located in a foreign country which is similar to the Korea Exchange;
5. Securities underwriting;
6. Public offering of outstanding securities;
7. Arranging for a public offering of newly issued or outstanding securities;
8. Extending credit in relation to sale or purchase of securities;
9. Securities savings business;
10. Margin lending;
11. Securities lending and acting as an intermediary for securities lending or borrowing;
12. Securities business in foreign countries;
13. Engaging in business activities described in Items 1 through 4 above with respect to securities indexes;
14. Evaluating or appraising securities and equity securities;
15. Acting as an intermediary, arranger or agent for corporate mergers and acquisitions;
16. Buying and selling certificates of deposit and acting as an intermediary for sale or purchase of
certificates of deposit;
17. Trustee business for a public offering of bonds;
18. Acting as an agent in relation to securities transactions;
19. Providing advice or assistance in connection with management, restructuring and/or finance of
companies;
20. Acting as an intermediary or providing advisory services for lease, sale or purchase of real
properties owned by customers or clients during the course of conducting the business activities set out
in Item 15 or 19 above;
21. Leasing real properties to others;
22. Renting safe deposit boxes to others;
23. Lending its own securities to institutional investors;
24. Selling lottery tickets and admission tickets as an agent;
6
25. Providing training regarding securities;
26. Publishing publications and books;
27. Commuter service business, and leasing and selling computer systems or software related to the
securities business;
28. Securities lending and acting as an intermediary, arranger or agent for securities lending
transactions;
29. Underwriting business for securities issued in a manner other than through public offering of new
shares, and acting as an intermediary, arranger or agent for such business;
30. Selling and purchasing claims arising from loans, other transactions related thereto, and acting as
an intermediary, arranger or agent therefor;
31. Safe-keeping securities;
32. Acting as an asset manager or a servicer of a special purpose vehicle under the Act on Asset-
Backed Securitization;
33. Buying and selling foreign payment instruments for customers’ or clients’ exchange of investment
funds, and trading futures to hedge against foreign exchange risks;
34. Exchanging foreign currencies, etc.;
35. Acting as an intermediary for selling, buying, exchanging or lending foreign currencies or
conducting derivatives transactions, and other related businesses;
36. Over-the-counter derivatives transactions, and acting as an intermediary, arranger or agent for such
transactions;
37. Payment guarantee of principal and interest of corporate bonds;
38. Acting as an agent for holding in custody deposits for shares to be publicly offered;
39. Futures business;
40. Investment advisory business, discretionary investment management business, investment
management business, and selling various types of investment information;
41. Public offering or sale of shares of indirect investment companies;
42. Selling indirect investment securities;
43. Acting as an agent or intermediary for selling insurance products;
44. Retirement pension business;
45.Selling information on appraisal of securities, etc. to the public through publications, books,
electronic documents, etc.;
46. Acting as an intermediary, arranger or agent to cause financial institutions that formed a business
alliance to lend money to customers or clients;
47. Acting as an advertisement agent through publications, books, electronic documents, etc.;
7
48. Businesses set out as securities firms’ areas of business in the Securities and Exchange Act
(“SEA”) and other relevant laws and regulations;
49. Any and all activities incidental to any of the foregoing.
(2)The Company shall conduct the following businesses after obtaining approvals and authorizations from the
relevant agencies and authorities, including the government:
1. Conducting or providing credit investigation and services;
2. Forming an alliance with credit card companies, insurance companies and other financial institutions;
3. Foreign exchange businesses other than those set out in Items 33 through 35 of Paragraph (1) above;
4. Selling, purchasing, and acting as an intermediary or agent for selling or purchasing, derivatives products;
5. Any and all activities related to investment in venture companies;
6. Electronic finance business;
7. Trust business pursuant to the Trust Business Act;
8. Internet broadcasting business; and
9. Any and all activities incidental to any of the foregoing.
(3) In addition to the businesses set out in Paragraphs (1) and (2) above, the Company may concurrently engage in
other businesses after obtaining approvals and authorizations from the relevant agencies and authorities, including the
government.
B. Total Employee Status
(As of March 31st 2010)
Management Sales Others Total
Male 431 859 38 1,328
Female 673 172 8 853
Total 1,104 1,031 46 2,182
C. Status of Domestic Branches and Overseas Representative Offices
(As of March 31st 2010)
HQ Branches Rep. Offices Sales Office Total
Domestic 1 116 - - 117
Overseas - - 2* - 2
Total 1 116 3 - 119
* Overseas Offices
- Tokyo Representative Office
8/F, NAX Bldg., 1-3-2 Shinkawa, Chuo-ku, Tokyo, Japan
Tel : 81-3-3551-8088, Fax : 81-3-3551-5533
- Shanghai Representative Office
Office 1209-A07, 12/F Shui On Plaza Centre, 333 Huai Hai Zhong Road, Lu Wan District,
Shanghai 200021, P.R. China
Tel : 86-21-5116-0740, Fax : 86-21-5116-0742
8
D. Organization Chart
9
E. Stock information
(1) Type of stocks & total issuance
Types of shares Amount of
shares Capital
(Thousand won) Percentage Note
Registered
common shares 50,773,400 253,867,000 58.51%
200,000 stock cancellation through
profit
Registered
preferred shares 36,000,000 180,000,000 41.49%
Total 86,773,400 433,867,000 100%
(2) Change in capital
Date Types of shares Amount of
shares
Amount of capital
increase
(Thousand won)
Capital after
increase
(Thousand won)
Note
1987.7.19 Registered
common shares 8,800,000 44,000,000 Reverse stock split
1988.3.24 Registered
common shares 4,400,000 22,000,000 66,000,000
Paid-in capital
increase
1988.8.4 Registered
preferred shares 6,600,000 33,000,000 99,000,000
Paid-in capital
increase
1989.3.30 Registered
preferred shares 6,600,000 33,000,000 132,000,000
Paid-in capital
increase
1989.3.31
Registered
common shares 3,300,000 16,500,000 148,500,000 Stock issue
Registered
preferred shares 3,300,000 16,500,000 165,000,000
Capitalization of
excess reserves
1989.5.30 Registered
common shares 3,166,493 15,832,465 180,832,465 Stock dividend
1989.12.9
Registered
common shares 1,129,240 5,646,200 186,478,665
Paid-in capital
increase
Registered
preferred shares 4,295,733 21,478,665 207,957,330
1989.12.12
Registered
common shares 5,204,267 26,021,335 233,978,665 Stock issue
Registered
preferred shares 5,204,267 26,021,335 260,000,000
Capitalization of
excess reserves
1990.5.26 Registered
common shares 2,048,410 10,242,050 270,242,050 Stock dividend
1994.5.28 Registered
common shares 1,080,966 5,404,830 275,646,880 Stock dividend
1995.5.27 Registered
common shares 1,270,624 6,353,120 282,000,000 Stock dividend
1999.8.31 Registered
common shares 1,128,000 5,640,000 287,640,000
Paid-in capital
increase
1999.11.3 Registered
common shares 17,258,400 86,292,000 373,932,000
Paid-in capital
increase
2005.12.17 Registered
common shares 2,187,000 10,935,000 384,867,000
Paid-in capital
increase
2007.11.3 Registered
preferred shares 10,000,000 50,000,000 434,867,000
Paid-in capital
increase
10
5. Parent Company, Subsidiary Company and Consolidated Circumstances.
A. Parent Company Status
- none
B. Subsidiary
Subsidiary Relations
Company Address Book Value
(billion KRW) Main business Stake %
Daishin Economic
Research Institute
34-8 Youido-dong
Youngdungpo-ku,
Seoul, 150-884, Korea
4.95 Service 495,000 99% Research
Daishin Investment
Trust Management
34-8 Youido-dong
Youngdungpo-ku,
Seoul, 150-884, Korea
39.46
Securities
investment trust
& advisory
6,000,000 100% -
Daishin Securities
Asia Limited,
Hong Kong
28/F, Queen's Road
Central 8, Central,
Hong Kong
12.91 Brokerage,
advisory 10,000,000 100% -
Pegasus PEF - 3.49 PEF - 26.1%
Daishin MSB PEF - - PEF - 0.9%
C. Director’s Concurrent Office Position in Parent Company & Subsidiaries
Position Name Concurrent office Notes
Risk Management
Group Yong-Hyun Cho
Daishin Investment Trust Management Independent
Auditor
11
6. Management’s Discussion and Analysis
A. Executive Summary
As the credit crisis swept the globe in 2009, governments worldwide introduced fiscal and monetary policies to
revive the ailing economy and restore stability in the financial markets. In addition to implementing a USD
787.9 billion fiscal stimulus package, the US authorities announced a rescue plan to bail out distressed financial
institutions and kept the benchmark interest rate at virtually zero. China unveiled a RMB 4 trillion (USD 580
billion, equivalent to 14% of China’s GDP) stimulus plan and subsidies for home appliance and automobile
purchases to boost domestic consumption. Consequently, most of the developed economies passed the trough
while emerging countries maintained growth.
Low interest rates and massive stimulus injections sparked a global economic recovery. The international capital
markets displayed huge advances spurred by a sense of relief that the worst was over and abundant liquidity.
The Korean stock market recovered at a fast pace with average daily turnover increasing by 14.0% for the
KOSPI market and 82.8% for the KOSDAQ market in FY2009. As a percentage of overall trading, trading by
retail investors climbed by 7.4%p to 67.3%, another indication of a market rally.
Average Daily Turnover (KRW billion)
FY08 FY09 % YoY
Stock KOSPI 5,113.0 5,823.2 14.0
KOSDAQ 1,272.7 2,326.3 82.8
Future 26,074.3 35,520.8 36.2
Option 1,167.4 1,048.0 -10.2
After tumbling below the 1,000 mark in October 2008, the KOSPI bounced back to 1,722 in January 2010.
Although recent jitters caused by debt woes in Europe led to a market correction, the KOSPI closed at 1,692.85
on March 31, 2010, up by 40.3% from a year earlier. The KOSDAQ rebounded from 421.44 at end-March 2009
to 562.57 in May 2009. It closed at 515.74 on March 31, 2010, to post an annual gain of 22.4%.
On the back of the market run-up, Daishin Securities recorded KRW 330.4 billion, up 21.1% in commission
income in FY2009 including KRW 286.6billion from stocks and KRW 43.0 billion from derivatives. Promotion
of the newly introduced “Believe” service and growth in trust management fees raised revenue from wealth
management by 17.9%. Low interest rates increased bond valuation gains, resulting in a 78.2% jump in revenue
from capital market operations. Investment banking commission surged 155.9% as IPO underwriting and private
equity funds gave a boost to underwriting and advisory fees received. With enhanced stability and
diversification in earnings, operating income grew by 72.6% to KRW 172.8 billion and pre-tax income by
19.3% to KRW 149.0 billion. However, equity method valuation losses were not recognized as losses for tax
purposes, which in turn raised the effective tax rate from 17.4% in the prior year to 38.7% in FY2009. As a
result, net income decreased by 11.5% to KRW 91.4 billion.
Total assets in FY2009 grew by 23.4% to KRW 8,003.2 billion. The holding of marketable securities expanded,
primarily in low-risk assets such as government bonds and monetary stabilization bonds. Loans receivable also
increased due to the widening spread between the funding rate and lending rate. The Company put particular
emphasis on preemptive risk management, securing liquidity through early recovery of principal investments
and making full recovery of investments related to real estate project financing. Accordingly, the net capital
ratio and the assets-toliabilities ratio respectively stood at 733.6% and 120.9% at the end of March 2010. Both
figures exceed the minimum required by the Financial Supervisory Service. Reflective of the Company’s
commitment to enhancing shareholder value, Daishin Securities became the first major securities company in
Korea to distribute cash dividends for 12 consecutive years and had the industry’s highest dividend yield of
5.9% for common stock
12
B. Operating Results
Net Operating Revenue
In FY2009, Daishin Securities made further strides in earnings diversification to establish a stable base of
operations. The Company displayed growth in brokerage commission fueled by a rising stock market, in
addition to solid growth in wealth management, capital market operations and investment banking. Daishin
realigned its business structure to upgrade and differentiate retail services while simultaneously reinforcing
wholesale operations. For the year, net operating revenue grew by 31.3% to KRW 520.3 billion. Net revenue
from brokerage rose by 14.4% to KRW 332.3 billion underpinned by an increase in average daily turnover and
stronger presence of retail investors in the stock market. Based on commissions received, Daishin Securities’
share of the stock brokerage market went up 0.2%p to 5.9%.
Revenue from capital markets grew by 78.2% to KRW 121.0 billion. The Company reduced its exposure to
stocks and focused on low-risk assets such as government bonds and monetary stabilization bonds, and the
government’s low interest rate policy led to a surge in bond valuation gains.
In line with the emphasis on liquidity and risk management, the Company has zero exposure to real estate
project financing and is concentrating on early recovery of principal investments.
Net Operating Revenue (KRW billion)
FY08 FY09 % YoY
Brokerage
Financial service (loan service)
Wealth management
Capital markets (proprietary trading income)
Investment Banking
Others
290.5
36.6
14.5
67.9
4.8
(18.1)
332.3
35.2
17.1
121.0
12.3
2.5
14.4
-3.9
17.9
78.2
155.9
-
Net operating revenues 396.1 520.3 31.3
Breakdown of Net Operating Revenues (%)
FY08 FY09
Brokerage
Financial service (loan service)
Wealth management
Capital markets (proprietary trading income)
Investment Banking
Others
70.1
8.8
3.5
16.4
1.2
-
63.9
6.8
3.3
23.3
2.4
0.5
Total 100.0 100.0
Owing to heightened uncertainty in the stock market in the wake of the global financial crisis, the domestic
equity-type fund market contracted by 12% to KRW 123 trillion. In contrast, Daishin Securities recorded a 3.3%
increase in equity-type funds to KRW 398.7 billion following the launch of its comprehensive tailored solution,
“Believe.” Growing investor preference for safe assets pushed up demand for MMF and bond-type beneficiary
certificates (BCs). As a result, the balance of BCs swelled by 24.8% to KRW 3,403.1 billion and revenue from
wealth management grew by 17.9% to KRW 17.1 billion
Commission Income from Wealth Management (KRW billion)
FY08 FY09 % YoY
Collective investment securities
Derivatives-combined securities
Other
8.0
5.9
0.6
8.2
7.5
1.4
2.7
26.6
135.7
Commission from wealth management 14.5 17.1 17.9
13
Balance of Beneficiary Certificates (KRW billion)
FY08 FY09 % YoY
Beneficiary certificates (year-end)
MMF
Bond-type
Hybrid-type
Equity-type
Others*
2,726.9
1,076.6
312.5
287.1
385.9
664.9
3,403.1
1,388.8
609.8
317.6
398.7
688.2
24.8
29.0
95.1
10.6
3.3
3.5
BC Commission income 8.0 8.2 2.5
* Others = overseas fund + derivatives fund + others
Interest-earning assets are primarily composed of bonds and broker loans which offer stability and sound returns.
Despite falling market interest rates, net interest income rose by 53.4% to KRW 120.3 billion, with an asset
portfolio comprising mainly low-risk assets such as government bonds, monetary stabilization bonds and loans
receivable. Broker loans are generating stable interest income with the spread exceeding 400bp because of a
decline in the funding rate. As part of risk management, the Company carries out real-time stock price
monitoring and requires a loan to collateral ratio of at least 140%.
Net Interest Income (KRW billion)
FY08 FY09 % YoY
Interest income
Interest on bonds
Interest on loans
Interest on deposits
Others
Interest expenses
209.1
128.5
45.7
26.7
8.2
130.7
230.5
153.5
46.3
16.7
14.0
110.2
10.2
19.5
1.1
-37.6
71.9
-15.7
Net interest income 78.4 120.3 53.4
General and Administrative Expenses
General and administrative (G&A) expenses rose by 17.4% to KRW 347.4 billion. The increase is attributable to
growth in commission income and launch of “Believe” service which respectively raised performance bonus
and advertising expenses, along with amortization. However, the growth in wages, which account for the largest
portion of G&A expenses, was limited to 9.6% and wages amounted to KRW 197.4 billion. Although
commission income increased at a double-digit rate, the Company exercised appropriate control over the
performance bonus. Depreciation jumped by 54.4% to KRW 36.1 billion due to recognition of amortization
expenses of KRW 9.0 billion related to development of the next-generation IT system and payment system
G&A Expenses (KRW billion)
FY08 FY09 % YoY
Salaries & employee benefits
IT operating expenses
Rental expenses
Miscellaneous commissions
Advertising expenses
Depreciation & amortisation expenses
Others
180.0
22.5
6.9
20.7
5.6
23.4
36.9
197.4
23.1
7.1
23.0
21.6
36.1
39.1
9.6
2.6
3.6
11.1
287.5
54.5
5.9
G&A expenses 296.0 347.4 17.4
Breakdown of G&A Expenses (%)
FY08 FY09
Salaries & employee benefits
IT operating expenses
Rental expenses
Miscellaneous commissions
Advertising expenses
Depreciation & amortisation expenses
Others
60.8
7.6
2.3
7.0
1.9
7.9
12.5
56.8
6.7
2.1
6.6
6.2
10.47
11.3
Total 100.0 100.0
14
Profitability and Shareholder Value
As globally concerted policy efforts and massive stimulus plans to tackle the global financial crisis helped to
revive the stock market, Daishin Securities’ operating income soared 72.6% to KRW 172.8 billion and the
operating income margin improved by 1.7%p to 5.3%. The improvements mainly stemmed from a boost in
commission income from brokerage, the Company’s area of strength, and a surge in proprietary trading income
driven by appreciating share prices and falling interest rates. Sound results from the wholesale business,
encompassing investment banking, wealth management and retirement pension, also contributed to enhancing
profitability.
Operating Profitability (KRW billion, %)
FY08 FY09 % YoY
Operating revenues
Operating income
2,823.7
100.1
3,273.7
172.8
15.9
72.6
G&A expenses 3.5 5.3 1.7%p
Non-operating income fell from the previous year to KRW 20.1 billion whereas non-operating expenses
increased to KRW 43.8 billion which included equity method losses from Daishin Asset Management. On the
whole, the Company recorded net non-operating expenses. For this reason, pre-tax income amounted to KRW
149.0 billion. The figure represents a year-on-year growth rate of 19.3% which is lower than the growth in
operating income.
Non-operating Balance (KRW billion, %)
FY08 FY09 % YoY
Non-operating income
Non-operating expenses
27.1
2.3
20.1
43.8
-25.9
1,824.7
G&A expenses 24.8 (23.8) -
Net income in FY2009 dropped by 11.5% to KRW 91.4 billion. The main culprit behind the decrease is that
equity method losses of KRW 39.8 billion were not recognized as losses for tax purposes. Consequently, the
effective tax rate climbed from 17.4% in FY2008 to 38.7% in FY2009.
Net Income (KRW billion, %)
FY08 FY09 % YoY
Net income
Net income margin
103.3
3.7
91.4
2.8
-11.5
-0.9%p
ROE 6.2 5.4 -0.8%p
Daishin Securities maintains an aggressive dividend policy as a way of enhancing shareholder value. Over the
past several years, the Company has upgraded its business model and diversified its income structure. This, in
turn, has strengthened its ability to distribute dividends and allowed Daishin to become the only major securities
firm in Korea to pay out cash dividends for the 12th straight year in FY2009. Akin to FY2008, the Company
distributed cash dividends of KRW 1,000 per share for common stock and Class 2 preferred stock and KRW
1,050 for Class 1 preferred stock. Moreover, Daishin had the industry’s highest dividend yields with 5.9% for
common stock, 9.8% for Class 1 preferred stock, and 10.6% for Class 2 preferred stock. Total dividends
amounted to KRW 79.0 billion and the payout ratio was 86.5%. Daishin Securities has continued to uphold
shareholder-oriented management and will pursue sustainable growth to maximize value for shareholders.
C. Financial Condition
Assets
In step with enactment of the Financial Investment Services and Capital Markets Act in February 2009, Daishin
Securities is looking beyond top-line growth and focusing on integrated and preemptive risk management and
comprehensive wealth management service to grow into a world-class financial service provider.
As of the end of March 2010, total assets stood at KRW 8,003.2 billion, up by 23.4% compared to a year earlier.
The Company’s asset portfolio is mostly composed of low-risk assets such as cash and deposits, government
bonds and monetary stabilization bonds. Cash and deposits increased by 14.4% to KRW 1,579.4 billion.
Marketable securities, mainly comprising safe and liquid bonds such as government and monetary stabilization
15
bonds, swelled by 30.4% to KRW 4,342.6 billion. A favorable stock market helped to boost derivatives and
loans receivable by 21.2% and 32.9% respectively to KRW 444.0 billion and KRW 837.3 billion. Assets Portfolio (KRW billion)
FY08 FY09 % YoY
Cash & deposits
Securities
Derivative assets
Loans receivable, net
Property & equipment, net
Other assets
1,381.1
3,329.7
366.3
630.2
547.3
232.7
1,579.4
4,342.6
444.0
837.3
521.7
278.2
14.4
30.4
21.2
32.9
-4.7
19.5
Total asssets 6,487.4 8,003.2 23.4
Assets Breakdown (%)
FY08 FY09
Cash & deposits
Securities
Derivative assets
Loans receivable, net
Property & equipment, net
Other assets
21.3
51.3
5.6
9.7
8.4
3.6
19.7
54.3
5.5
10.5
6.5
3.5
Total 100.0 100.0
Liabilities and Shareholders’ Equity
In tandem with asset expansion, total liabilities grew by 31.0% to reach KRW 6,325.4 billion as of the end of
March 2010. Customer deposits were largely unchanged from a year earlier, but borrowings expanded by 39.8%
to KRW 4,948.0 billion as the government’s low interest rate policy lowered the funding rate. In particular,
CMA holders increased as investors flocked to short-term vehicles and securities sold under repurchase
agreements rose by 56.0% to KRW 2,715.4 billion. Liabilities (KRW billion)
FY08 FY09 % YoY
Deposits from customers
Borrowings & securities sold
Other liabilities
1,134.3
3,538.1
157.3
1,092.9
4,948.0
284.5
-3.7
39.8
80.9
Total liabilities 4,829.8 6,325.4 31.0
Liabilities Breakdown (%)
FY08 FY09
Deposits from customers
Borrowings & securities sold
Other liabilities
23.5
73.3
3.3
17.3
78.2
4.5
Total 100.0 100.0
Although net income in FY2009 reached KRW 91.4 billion, total shareholders’ equity inched up just 1.2% to
KRW 1,677.8 billion due to cash dividends and share buyback. Daishin Securities has continued to distribute
dividends as a means of returning wealth to shareholders. With the distribution in FY2009, the Company
became the sole major securities firm in Korea to pay out cash dividends for 12 years in a row. In addition, the
Company spent KRW 13.4 billion to repurchase 1,500,000 shares of preferred stock in FY2009. Shareholders' Equity (KRW billion)
FY08 FY09 % YoY
Capital stock
Capital surplus
Capital adjustments
Accumulated other comprehensive income
Retained earnings
434.9
715.8
(139.0)
61.1
584.9
434.9
713.1
(1,41.2)
74.7
596.2
0.0
-0.4
-
22.4
1.9
Total shareholders' equity 1657.6 1677.8 1.2
16
Financial Soundness and Risk Management
At the end of March 2010, the Company’s net capital ratio stood at 733.6%, falling by 110.7%p from a year
earlier. But the figure was far above the 300% limit set by the Financial Supervisory Service (FSS) for
companies that deal with OTC derivatives. Conversion of KRW 16.6 billion in corporatebonds issued by
Kumho Industrial to equity reduced substandard or below loans and the coverage ratio for such loans improved
by 2.6%p to 96.6%. The assets-to-liabilities ratio was 120.9%, exceeding the requirement set by FSS.
Korea’s leading credit rating agencies (Korea Ratings, NICE Investors Service) upgraded the rating on corporate
bonds issued by Daishin Securities by one notch from A+ to AA- in 2009. The agencies gave the Company high
marks for asset quality and liquidity, market position and profit generation ability from brokerage, and capital
buffer. In October 2009, Daishin Securities was included as a component of the Dow Jones Sustainability Index
Korea (DJSI Korea). This indicates that Daishin Securities has received external recognition for maintaining
stable and efficient processes and fulfilling its social and environmental responsibility.
AssetQuality (%)
FY08 FY09 % YoY
Net capital ratio
Coverage ratio
844.3
94.0
733.6
96.6
-110.7%p
2.6%p
Assets-to-liabilities ratio 127.8 120.9 -6.9%p
Daishin Securities is bolstering financial stability based on ERM (Enterprise Risk Management). In addition, the
Company has adopted systems to manage risks related to derivatives and operational risks to prepare for greater
volatility in the financial markets. In 2009, the Credit Analysis Department was created by separating the review
function from the Risk Management Department for greater specialization of the review and risk management
functions. Then in 2010, the Settlement Department was placed under the Risk Management Group to
strengthen checks and balances on the ever diversifying front office operations.
D. Business Outlook
Competitive pressure is likely to intensify in FY2010. The possibility of Europe’s debt crisis spilling over into
other regions, yuan appreciation and implementation of exit strategies are expected to increase volatility in
global financial markets. Domestic concerns include further deterioration in inter-Korean relations, interest rate
hike, and the emergence of new small- to mid-size securities firms.
In spite of the anticipated hardships, Daishin Securities will pursue a differentiated strategy and focus on its core
competencies to develop into Korea’s premier financial and investment service company. The Company will
reinforce its brokerage operations while honing its capabilities in investment banking, wealth management and
retirement pension. In addition to financial results, Daishin plans to maximize management efficiency through
the balanced scorecard. Under this management system, the Company will check whether goals and strategies
are achieved and action plans are correctly implemented.
Furthermore, Daishin will upgrade and expand the “financial health service” service launched in FY2009 to
realize the vision of a trusted company that serves its customers with sincerity as a “financial doctor.” To
achieve this vision, the Company will implement a strategy based on the three themes of “financial growth,”
“enhanced operating efficiency” and “stronger relationship management” to emerge as an admired company
pursuing development with customers and shareholders.
17
7. Business Overview
A. New Concept Retail Service
Daishin Securities is committed to becoming a trusted company that serves customers with sincerity as their
financial doctor. We are making every effort to deliver financial happiness to customers by protecting their
assets through rigorous risk management. Our objective is to provide reliable financial services based on
expertise, integrity and consideration for the customer.
“Financial Health” Service
To reach our objective, Daishin Securities has built an innovative retail business model. At the coreof this model
is the “financial health” service. This is not a one-time service limited to recommendation of certain stocks or
products. Rather, it offers a total solution starting with identifying customers’ needs and providing thorough
follow-up care for comprehensive management of a customer’s assets.
We revamped various systems over a two-year period to prepare the “financial health” service and created a
service manual. The Logic & Portfolio Center was set up to provide sales personnel with various scenarios and
portfolios depending on market conditions. This, in turn, enables sales personnel to offer consulting tailored to
the needs of individual customers. Moreover, a wide range of courses have been introduced to train sales staff as
financial doctors, sharpen their skills, and instill in them the principles and mindset to best serve the customer.
In February 2010, a ceremony was held in which sales personnel pledged their oath as financial doctors. The
financial health service serves as the cornerstone of our goal of developing into a globally trusted company
promoting harmony with customers.
“Believe” Service
Daishin Securities launched the “Believe” service in October 2009. Rooted in the customer-oriented philosophy,
this service was designed to prepare for the scheme allowing investors to transfer funds between fund
distributors and to support the “financial health” service. “Believe” service is available to new fund subscribers
and customers who transfer funds from other securities firms. It provides distinctive benefits including CMA
with interest rates of up to 9% per annum and loans secured by funds with interest rates as low as 1% per annum.
Additionally, the “fund investment health” service provides customers with reviews of funds they currently hold
along with financial advice. Instead of just receiving transaction reports, customers are given an assessment of
investment products they hold as well as recommendations and follow-up service.
“Believe” service has gained much popularity. Daishin Securities captured 10% of market share based on inflow
from fund transfers since the fund transfer scheme noted above went into effect. That is the second largest
market share in the industry. Despite massive fund redemptions in Korea, Daishin Securities’ fund assets have
actually increased.
Customer Satisfation
Daishin Securities revised its customer satisfaction strategy for successful execution of the “financial health”
service.
To enhance customer service quality, we conduct a monthly customer satisfaction survey. Through the survey,
we gauge satisfaction levels and hear the views of about 700 customers. The survey results are communicated to
domestic branches on a half-yearly basis to encourage voluntary efforts to improve service quality.
To deliver unique customer satisfaction (CS) service and promote a customer-oriented culture, diverse CS
activities will be carried out during the current fiscal year. We are conducting CS activities to boost employee
unity and morale as well as activities to raise the CS mindset among customers, employees and the company.
We also foster CS consultants to enhance the CS training scheme and customer satisfaction.
VOC (Voice of Customer) personnel have been designated at all 116 branches in Korea and the head office
departments to enable responsible and swift response to customers’ requests. Regulations stipulate that all VOC
requests be handled within 24 hours after they are submitted. We also operate other channels including the
company website, telephone, postcard and email to address issues related to customers’ complaints without
delay.
In recognition of high levels of customer satisfaction, Daishin Securities was ranked first in the GCSI (Global
Customer Satisfaction Competency Index) by Japan Management Association Consultants (JMAC) for four
years in a row.
18
B. Rebuilding Business Model Based On Core Competency
Based on our solid financial strength and effective risk management system, we will pursue our unique growth
strategy of “growth amid stability“ by strengthening areas in which we have a competitive edge and increasing
investment in areas with high growth potential.
Reinforcing New Growth Drivers
Daishin Securities is rebuilding its business model. The goal is to sophisticate and differentiate our retail service
and strengthen the headquarters’ sales edge.
For the past two years, our focus has been on providing differentiated retail service via the “financial health”
service and online service. We plan to further concentrate our resources on successful implementation of the
“financial health” service. To reinforce the headquarters’ sales capability, we expanded the wholesale,
retirement pension, investment banking and capital market organizations. We will continue to make investments
to develop these businesses as our new growth drivers.
Based on our solid financial strength and effective risk management system, we will pursue our unique growth
strategy of “growth amid stability” by strengthening areas in which we have a competitive edge and increasing
investment in areas with high growth potential.
For the past few years, Daishin has been proceeding with a major shift in the profit structure. Our plan is to
gradually reduce the proportion of revenue from brokerage while slowly increasing the proportion of wealth
management, investment banking, retirement pension and proprietary trading.
Expantion of Headquarters Business
At Daishin, our mid-to-long term investment banking strategy is growth based on differentiation. On the back of
our core strength in traditional investment banking activities, we will further hone our competitive edge in such
high value-added operations as private equity funds (PEF), corporate restructuring and M&A, special purpose
acquisition companies (SPAC) and structured finance.
Since the introduction of the Financial Investment Services and Capital Markets Act, Daishin Securities has
adopted an aggressive approach to expand the scope of its securities business. This has led to Daishin’s
obtaining licenses to engage in the payment settlement and futures operations.
Our PEF business started with the launch of Daishin Pegasus PEF in 2008. Our other achievements in this area
include the creation of a KRW 200 billion national pension PEF (Daishin-Heungkuk No.1 PEF) and acquisition
of Korea Asset In Trust by MSB PEF.
The retirement pension business requires a long-term approach. This means we have to look beyond top-line
growth in the near time and focus on maximizing profitability to satisfy customers and receive their trust. Long
tradition, insightful management knowhow and ability to design optimal products will help us generate greater
profits as long as we take a prudent and constructive approach to our business. Daishin had the highest return
among all retirement pension providers last year in the defined benefit category, demonstrating our exceptional
skills in product design and management. This year, we will further improve performance of the defined
contribution plan which has been the traditional core strength of securities companies. To this end, we intend to
rely on the research center’s asset allocation ability and management strategy.
Our research center is rated the best in the industry, garnering top honors in analyst polls conducted by Korea’s
major economic publications for the past two years. Harnessing our superior research capability, we are working
to increase institutional clients’ returns via IR activities, non-deal roadshows and company visits.
Extending Our Global Business
Daishin Securities has been pursuing overseas business for the past several years. Our focus is on building a
tangible sales base rather than top-line growth.
Our mid-to-long term goal is to transform into Asia’s representative regional investment bank. We are seeking
business opportunities in regions of Asia with high growth potential and our sales efforts are being concentrated
in areas where we can excel.
To minimize risks and generate stable returns, we are forging alliances with leading regional partners well
versed in the local financial landscape when entering a new market. Recently, we have been building our
financial network by teaming up with China Merchants Securities and Shenzhen Capital Group in China as well
as other local financial firms in Asian countries with promising growth prospects such as Taiwan, Vietnam,
Cambodia and Laos.
19
In entering China, emerging as the world’s largest financial market, we have partnered with China Merchants
Securities to seek diverse business opportunities. Our Hong Kong subsidiary is taking the lead as we pursue
expansion in Asia.
We have extended our brokerage service to enable trading of stocks listed in Japan, Hong Kong and China. We
will continue to expand the service to US stocks, foreign derivative products and FX margin trading.
C. Sustainable Management System And Fulfilling CSR
Inclusion in Korea Dividend Stock Price Index (KODI) in 2003
Inclusion in Korea Corporate Governance Stock Price Index (KOGI) in 2004
Inclusion in Dow Jones Sustainability Korea Index (DJSI Korea) in 2009
Daishin Securities is continuing to grow into a sustainable company by fulfilling its corporate social
responsibility.
Corporate Governance
At Daishin Securities, we are securing stakeholder trust through transparent and faithful business operations and
building a BOD-centered management system of accountability under the supervision of independent outside
directors.
According to 2008 corporate governance evaluation results revealed by Korea Corporate Governance Service,
Daishin was ranked 11th among 685 listed companies and received the rating of “Very Good”.
Daishin Securities received high scores exceeding stock market and securities industry averages across all
categories including protection of shareholder interests, board of directors, disclosure, auditing body, and
distribution of the proceeds of operation.
We were incorporated into Dow Jones Sustainability Korea Index in October 2009. DJSI is the world’s most
recognized index tracking the financial performance of the leading sustainability-driven companies worldwide.
It conducts in-depth assessment on companies’ economic, environmental and social aspects with a focus on the
long-term development of corporate value.
The current composition of DJSI (Dow Jones Sustainability Korea Index) which tracks Korea’s 200 largest
companies includes 41 companies in 24 industries. Among the 16 listed securities firms, only Daishin Securities
and two others are included in the index. Daishin’s inclusion in the index signifies a major step forward in
becoming a sustainability driven company.
Enhancing Shareholder Value
In FY2009, Daishin Securities maintained one of the industry’s highest dividend yields to enhance shareholder
value. Our efforts to develop more sophisticated business models and diversify earnings for the past several
years have greatly enhanced company profits and payout ratio.
Accordingly, we became the first major securities firm in Korea to pay out cash dividends for twelve years in a
row.
Daishin Securities distributed the same level of per share cash dividends in FY2009 as the previous year. We
paid out KRW 1,000 for common stock, KRW 1,050 for Class 1 preferred stock, and KRW 1,000 for Class 2
preferred stock. We had the industry’s highest dividend yields with 5.9% for common stock, 9.8% for Class 1
preferred stock, and 10.6% for Class 2 preferred stock. Total dividends amounted to KRW 79 billion and the
payout ratio was 86.5%.
At Daishin, we have always put our clients’ needs first and strived to maximize shareholder value.
We will continue to work towards creating greater value for our shareholders through sustained growth.
Stringent Risk Management
Daishin Securities’ risk management aims to concentrate and professionalize systems and organizations under
the mission of supporting sustainable management and financial stability based on enterprise risk management
(ERM).
Although we demonstrated exceptional risk management capability as we emerged from the subprime loan
crisis virtually unscathed, we tightened monitoring of derivatives-related risks to take timely action in a rapidly
changing financial market. We have also introduced a system to deal with the possibility of increased
operational risks due to financial uncertainties.
20
In terms of the organization, we separated the inspection function from the Risk Management Department to
create the Credit Analysis Department to boost expertise and work efficiency. Subsequently in 2010, the
Settlement Service Department was incorporated into the Risk Management Group to further strengthen the
system of checks and balances of the front office function which is becoming more diverse and specialized.
In 2009, Korea’s leading credit rating agencies (Korea Ratings, NICE Investors Service) gave Daishin high
marks for asset quality and liquidity, market position and profit generation ability from brokerage, and capital
buffer. Accordingly, they raised our credit rating from A+ to AA-, which attests to confidence in Daishin’s
financial stability and risk management capability.
Social Responsibility – Admire Companionship
Since its inception, Daishin Securities has firmly believed in giving back to society. Our CSR (corporate social
responsibility) initiatives focus on reaching out to our local communities and neighbors in need through
donations and sponsorships.
The Daishin Songchon Cultural Foundation, established in 1990, is at the forefront of spearheading our
philanthropic endeavors. The foundation is involved in such programs as annual scholarships to discover and
nurture local talent and support for healthcare, arts and culture, and academia. We expect 2010 to be the year in
which we integrate our CSR initiatives into more effective and efficient system in order to build a sustainable
management system by fulfilling our corporate social obligations.
To this end, we plan to promote the volunteer corps and carry out a wide range of community involvement
programs.
We will also encourage employees to voluntarily engage in philanthropic efforts and instill the spirit of
corporate citizenship across the company as we strive to build a foundation for a sustainable company.
8. Major Shareholder Structure
(as of March 31st, 2010, Common shares basis)
Stakeholder Number of shares Percentage(%) Relation with
Daishin Remark
Hong-Seok Yang and 5
relatives 3,512,964 shares 6.92%
Major
Shareholder
Daishin ESOP 3,719,636 shares 7.33% ESOP
Treasury stock 4,888,808 shares 9.63% Treasury stock
9. Board of Directors and Audit Committee Member
Sort Name Position Duty Remark
Full-time Auh-Ryung Lee Chairwoman
Full-time Chung-Nam Roh President & CEO
Full-time Ki-Hoon Kim Audit committee
member
Auditing Dept, Legal Support
Dept.
Part-time Young-Ill Koh Outside Director Audit Committee chairman
Part-time Ki-Bae Lee Outside Director
Part-time Sung-Ho Kim Outside Director
Part-time In-Tae Hwang Outside Director Audit Committee member
21
II. Financial Report
1. Balance Sheet
Daishin Securities Co., Ltd. Non-Consolidated Balance Sheets March 31, 2010 and 2009
(in thousands of Korean won)
2010 2009
Assets
Cash and cash equivalents (Note 3) ₩ 525,636,306 ₩ 409,021,538
Deposits segregated under regulation
(Note 3) 1,053,730,288 972,109,855
Trading securities (Note 4) 3,777,114,437 2,697,372,812
Available-for-sale securities (Note 6) 193,926,550 138,440,063
Equity-method investments (Note 7) 48,122,534 60,713,594
Derivatives-combined securities (Note 5) 323,438,263 433,176,449
Derivative assets 443,969,688 366,332,382
Loans receivable, net (Note 8) 837,278,686 630,169,682
Property and equipment, net (Note 9) 521,748,425 547,306,131
Intangible assets, net (Note 10) 50,306,489 30,314,940
Accounts receivable, net (Note 8) 54,654,973 34,313,048
Accrued revenue, net (Note 8) 41,078,070 40,931,852
Advanced payments 17,576,942 11,966,612
Guarantee deposits 63,671,446 63,555,539
Collective fund for default loss (Note 3) 6,229,887 5,403,190
Others 44,688,724 46,261,577
Total assets ₩ 8,003,171,708 ₩ 6,487,389,264
22
(in thousands of Korean won)
2010 2009
Liabilities and Shareholders' Equity
Liabilities
Deposits from customers (Note 12) ₩1,092,887,769 ₩1,134,342,861
Borrowings (Note 13) 777,876,183 409,583,235
Securities sold under repurchase
agreements (Note 4) 2,715,353,102 1,740,559,485
Securities sold 34,394,428 2,579,222
Derivatives-combined securities
sold (Note 5) 1,314,770,477 1,165,433,853
Derivative liabilities 45,812,760 160,310,563
Debentures, net (Note 14) 59,780,240 59,679,998
Accrued severance benefits, net (Note 15) 1,467,700 1,759,474
Income tax payable 59,870,235 -
Other accounts payable 103,869,209 29,443,514
Accrued expenses 20,423,725 15,898,095
Guarantee deposits received 56,571,735 65,937,175
Deferred income tax liabilities (Note 20) 35,576,132 40,093,889
Withholdings 5,135,025 2,633,876
Others 1,613,499 1,515,071
Total liabilities 6,325,402,219 4,829,770,311
Commitments and contingencies (Note 11)
Shareholders' equity
Capital stock (Note 17)
Common stock 254,867,000 254,867,000
Preferred stock 180,000,000 180,000,000
Capital surplus 713,145,971 715,771,296
Capital adjustments (Note 19) (141,203,280) (139,041,646)
Accumulated other comprehensive
income (Note 19) 74,737,527 61,081,074
Retained earnings (Note 18) 596,222,271 584,941,229
Total shareholders' equity 1,677,769,489 1,657,618,953
Total liabilities and
shareholders' equity ₩ 8,003,171,708 ₩ 6,487,389,264
The accompanying notes are an integral part of these non-consolidated financial statements.
23
2. Statement of Income Daishin Securities Co., Ltd.
Non-Consolidated Statements of Income
For the years ended March 31, 2010 and 2009
(in thousands of Korean won except per share amounts)
2010 2009
Operating revenues
Commissions received (Note 21) ₩ 361,643,566 ₩ 293,114,678
Gain on sale of trading securities 106,405,009 104,083,162
Gain on valuation of trading securities 35,713,517 33,372,056
Gain on sale of available-for-sale securities 1,403,156
2,308,481
Recovery on impairment loss on available-for-sale securities 49,773
-
Gain on valuation of securities sold 436,222 -
Gain on derivatives-combined securities Transactions 212,463,187
38,755,058
Gain on derivatives-combined securities sold transactions 1,519,515,420
1,676,233,143
Gain on derivative transactions 763,148,244 410,669,648
Interest income 230,503,021 209,107,414
Reversal of allowance for doubtful accounts 4,457,195
4,166,517
Dividend income 5,068,088 4,322,427
Gain on valuation of deposits segregated under regulation 27,868,047
39,746,681
Others 5,033,563 7,790,979
3,273,708,008 2,823,670,244
Operating expenses
Commissions expense 21,939,676 19,685,357
Loss on sale of trading securities 91,942,871 138,521,575
Loss on valuation of trading securities 6,675,763 4,420,568
Loss on sale of available-for-sale Securities 766,050 802,286
Loss on impairment of available-for-sale securities (Note 6) 1,044,882 6,029,315
Loss on valuation of securities sold 1,543,677 263,882
Loss on derivatives-combined securities transactions 5,493,740 225,828,176
Loss on derivatives-combined securities sold transactions 871,868,037 200,001,803
Loss on derivatives transactions 1,634,661,714 1,681,569,405
Interest expense 110,235,309 130,728,212
General and administrative expenses (Note 22) 347,432,851 296,013,906
Bad debts expense - 19,270,143
Others 7,274,773 406,482
3,100,879,343 2,723,541,110
Operating income 172,828,665 100,129,134
2009 2008
24
(in thousands of Korean won, except per share amounts)
2010 2009
Non-operating income
Gain on disposal of property and
equipment ₩ 3,389,229 ₩ 7,330
Office rental income 12,494,467 13,479,206
Gain on valuation of equity-method
investments (Note 7) 1,094,309 298,097
Others 3,079,134 13,277,757
20,057,139 27,062,390
Non-operating expenses
Loss on disposal of property and
equipment 2,428,847 253,963
Loss on valuation of equity-method
investments (Note 7) 39,787,899 793,021
Donation 1,234,624 1,221,943
Others 393,586 9,009
43,844,956 2,277,936
Net income before income taxes 149,040,848 124,913,588
Income tax expense (Note 20) 57,685,317 21,662,244
Net income ₩ 91,355,531 ₩ 103,251,344
Basic earnings per share (in Korean won)
(Note 23) ₩ 1,190 ₩ 1,317
Diluted earnings per share (in Korean won)
(Note 23) ₩ 1,190 ₩ 1,317
The accompanying notes are an integral part of these non-consolidated financial statements.
25
3. Statement of Appropriations of Retained Earnings
Daishin Securities Co., Ltd. Non-Consolidated Statements of Appropriations of Retained Earnings For the years ended March 31, 2010 and 2009 (Dates of appropriations: May 28, 2010 and May 29, 2009 For the years ended March 31, 2010 and 2009, respectively)
(in thousands of Korean won) 2010 2009
Retained earnings before appropriations
Unappropriated retained earnings
carried over from prior year ₩ 28,993,286 ₩ 23,703,252
Net income 91,355,531 103,251,344
120,348,817 126,954,596
Transfer from reserve for loss on futures
transactions - 120,628
Appropriations (Note 18)
Legal reserves 7,901,448 8,007,449
Dividends 79,014,483 80,074,489
Voluntary reserves 10,000,000 10,000,000
96,915,931 98,081,938
Unappropriated retained earnings
carried forward to the subsequent year ₩ 23,432,886 ₩ 28,993,286
.
The accompanying notes are an integral part of these non-consolidated financial statements
26
4. Statement of Changes in Shareholder’s Equity Daishin Securities Co., Ltd. Non-Consolidated Statements of Changes in Shareholders' Equity For the years ended March 31, 2010 and 2009
The accompanying notes are an integral part of these non-consolidated financial statements.
27
5. Statement of Cash Flows
Daishin Securities Co., Ltd.
Non-Consolidated Statements of Cash Flows
For the years ended March 31, 2010 and 2009 (in thousands of Korean won) 2010 2009
Cash flows from operating activities
Net income ₩ 91,355,531 ₩ 103,251,344
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Loss (Gain) on disposal of trading securities,
net (14,462,138) 34,438,413
Gain on valuation of trading securities, net (29,037,754) (28,951,488)
Gain on sales of available-for-sale securities,
net (637,106) (1,627,229)
Loss (Gain) on derivatives-combined securities
transactions, net (206,969,446) 187,073,118
Gain on derivatives-combined securities sold
transactions, net (647,647,383) (1,476,231,340)
Loss on derivatives transactions, net 871,513,470 1,270,899,757
Loss on valuation of securities sold, net 1,107,455 263,882
Bad debts expense - 19,270,143
Depreciation 27,109,571 23,395,755
Amortization 9,022,903 -
Loss (Gain) on disposal of property and
equipment, net (960,382) 246,633
Loss on impairment of available-for-sale
securities 1,044,882 6,029,315
Provision for severance benefits 932,207 1,578,846
Loss on valuation of equity-method
investments, net 38,693,589 494,924
Reversal of allowance for doubtful accounts (4,517,844) (4,166,517)
Gain on valuation of deposits segregated
under regulation (27,868,047) (39,746,681)
Others, net 12,072,499 7,733,317
120,752,007 103,952,192
28
(in thousands of Korean won)
2010 2009
Changes in operating assets and liabilities
Deposits segregated under regulation ₩ (53,793,368) ₩ (283,476,325)
Trading securities (1,036,242,005) (726,795,259)
Derivatives-combined securities 316,707,633 131,773,660
Loans receivable (206,408,364) 215,059,768
Accounts receivable (20,279,722) (24,727,539)
Accrued revenue (148,222) (10,177,190)
Advanced payments (5,610,330) (4,371,987)
Collective fund for default loss (826,697) 1,162,720
Derivative assets and liabilities (1,063,648,579) (986,815,110)
Deposits from customers (41,473,708) 322,951,998
Securities sold 30,707,752 (10,692,527)
Derivatives-combined securities sold 796,984,008 1,258,913,721
Income tax payable 60,610,712 (45,479,882)
Other accounts payable 57,844,830 14,286,058
Accrued expenses 4,525,630 (4,034,973)
Withholdings 2,501,149 (6,623,770)
Deferred income tax (8,369,576) 13,575,909
Decrease in severance insurance
plan deposits - 2,811,582
Payment of retirement trust - 55,093
Payment of severance benefits (1,469,907) (318,787)
Securities sold under repurchase agreements 501,912,568 516,838,827
Others, net 4,272,253 (12,363,412)
(662,203,943) 361,552,575
Net cash provided by (used in) operating activities (541,451,936) 465,504,767
Cash flows from investing activities
Decrease in time deposits, net - 1,000,000
Decrease (Increase) in guarantee deposits, net (115,908) 1,731,910
Disposal of property and equipment 8,647,211 14,270
Acquisition of property and equipment (12,278,176) (32,112,969)
Acquisition of intangible assets (9,394,103) (17,962,035)
Disposal of available-for-sale securities 5,739,209 38,054,397
Acquisition of available-for-sale securities (42,033,323) (72,320,670)
Decrease in equity-method investments - 9,440,900
Increase in equity-method investments (28,397,426) (3,491,723)
Others (2,331,985) (8,021,261)
Net cash used in investing activities (80,164,501) (83,667,181)
29
(in thousands of Korean won)
2010 2009
Cash flows from financing activities
Increase (Decrease) in borrowings, net ₩ 368,292,948 ₩ (203,914,947)
Acquisition of treasury stock (13,480,247) (77,503,777)
Decrease in guarantee deposits received, net (9,365,440) (5,102,877)
Issuance of debentures - 59,678,900
Retirement of debentures - (10,000)
Payments of dividends (80,097,105) (106,147,158)
Increase in securities sold under
repurchase agreements 472,881,049 -
Net cash provided by (used in)
financing activities 738,231,205 (332,999,859)
Net increase in cash and cash
equivalents 116,614,768 48,837,727
Cash and cash equivalents (Note 27)
Beginning of year 409,021,538 360,183,811
End of year ₩ 525,636,306 ₩ 409,021,538
The accompanying notes are an integral part of these non-consolidated financial statements.
30
III. Audit Report
1. Audit Report by the Audit Committee
The Audit Committee has reviewed and audited the accounting principles and operations for 49th
fiscal year (1st April 2009 ~ 31
st March 2010), and it has made the audit report as follows.
(1) Audit method summary
The Audit Committee has reviewed the accounting books and related documents, as well as the
financial statements and other detailed documents for the accounting audit, and the committee has
made comparison check, on-the-spot inspection, witness, reference check and other appropriate
auditing measures if it was found necessary.
In regards to the operations audit, the Audit Committee has received management report from the
Directors and it has reviewed the related documents and details in an appropriate manner when the
committee found it necessary for attending the Board of Directors meeting or other important
meetings,
(2) Details on the balance sheet & income statement
The balance sheet and income statement fairly represents the Company’s assets and profit/loss
conditions appropriately in accordance to the Korean regulations and the Company’s statute.
(3) Details on the statement of appropriations of retained earnings
The Company’s statement of appropriations of retained earnings has been prepared appropriately
in accordance to the Korean regulations and the Company’s statute.
(4) Details on the business report
The Company’s business report accurately represents the Company’s condition.
13th May 2010
Daishin Securities Co.,Ltd.
Chairman of Audit Committee Young-Ill Koh
31
2. Report of Independent Auditors (Non-consolidated Financial Statements)
To the Board of Directors and Shareholders of
Daishin Securities Co., Ltd.
We have audited the accompanying non-consolidated statements of financial position of Daishin Securities Co.,
Ltd. (the “Company”) as of March 31, 2010 and 2009, and the related non-consolidated statements of income,
appropriations of retained earnings, changes in shareholders’ equity and cash flows for the years then ended,
expressed in Korean won. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects,
the financial position of Daishin Securities Co., Ltd. as of March 31, 2010 and 2009, and the results of its
operations, the changes in its retained earnings, the changes in its shareholders’ equity and its cash flows for the
years then ended in conformity with accounting principles generally accepted in the Republic of Korea.
Accounting principles and auditing standards and their application in practice vary among countries. The
accompanying non-consolidated financial statements are not intended to present the financial position, results of
operations, changes in shareholders’ equity and cash flows in conformity with accounting principles and
practices generally accepted in countries and jurisdictions other than the Republic of Korea. In addition, the
procedures and practices used in the Republic of Korea to audit such financial statements may differ from those
generally accepted and applied in other countries. Accordingly, this report and the accompanying non-
consolidated financial statements are for use by those who are informed about Korean accounting principles or
auditing standards and their application in practice.
Seoul, Korea
May 17, 2010
This report is effective as of May 17, 2010, the audit report date. Certain subsequent events or circumstances,
which may occur between the audit report date and the time of reading this report, could have a material impact
on the accompanying non-consolidated financial statements and notes thereto. Accordingly, the readers of the
audit report should understand that there is a possibility that the above audit report may have to be revised to
reflect the impact of such subsequent events or circumstances, if any.
32
3. Report on Internal Accounting Control System
A. Report of independent accounts review of internal accounting control system
To the President of
Daishin Securities Co., Ltd.
We have reviewed the accompanying management’s report on the operations of the Internal Accounting Control
System (“IACS”) of Daishin Securities Co., Ltd. (the “Company”) as of March 31, 2010. The Company’s
management is responsible for designing and operating IACS and for its assessment of the effectiveness of
IACS. Our responsibility is to review the management’s report on the operations of the IACS and issue a report
based on our review. The management’s report on the operations of the IACS of the Company states that “based
on its assessment of the operations of the IACS as of March 31, 2010, the Company’s IACS has been designed
and is operating effectively as of March 31, 2010 in all material respects, in accordance with the IACS standards
established by the Internal Accounting Control System Operations Committee (IACSOC) of the Korea Listed
Companies Association.”
Our review was conducted in accordance with the IACS review standards established by the Korean Institute of
Certified Public Accountants. Those standards require that we plan and perform, in all material respects, the
review of management’s report on the operations of the IACS to obtain a lower level of assurance than an audit.
A review is to obtain an understanding of a company’s IACS and consists principally of inquiries of
management and, when deemed necessary, a limited inspection of underlying documents, which is substantially
less in scope than an audit.
A company’s IACS is a system to monitor and operate those policies and procedures designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles generally accepted in the Republic of Korea.
Because of its inherent limitations, IACS may not prevent or detect a material misstatement of the financial
statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Based on our review, nothing has come to our attention that causes us to believe that management’s report on
the operations of the IACS, referred to above, is not presented fairly, in all material respects, in accordance with
the IACS standards established by IACSOC.
Our review is based on the Company’s IACS as of March 31, 2010, and we did not review management’s
assessment of its IACS subsequent to March 31, 2010. This report has been prepared pursuant to the Acts on
External Audit for Stock Companies in Korea and may not be appropriate for other purposes or for other users.
May 17, 2010
V. Consolidated Financial Statements
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Financial Statements March 31, 2010 and 2009
34
Daishin Securities Co., Ltd. and Subsidiaries Index March 31, 2010 and 2009
Pages
Report of Independent Auditors .................................................................... 1 - 2
Consolidated Financial Statements
Statements of Financial Position ........................................................................ 3 - 4
Statements of Income ....................................................................................... 5 - 6
Statements of Changes in Shareholders’ Equity .............................................. 7 - 8
Statements of Cash Flows ................................................................................ 9 - 11
Notes to the Consolidated Financial Statements .............................................. 12 - 58
Samil PricewaterhouseCoopers is the Korean member firm of PricewaterhouseCoopers. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity
1
Report of Independent Auditors
To the Board of Directors and Shareholders of
Daishin Securities Co., Ltd.
We have audited the accompanying consolidated statements of financial position of
Daishin Securities Co., Ltd. and its subsidiaries (collectively referred to as the
“Company”) as of March 31, 2010 and 2009, and the related consolidated statements
of income, changes in shareholders’ equity and cash flows for the years then ended,
expressed in Korean won. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of Daishin
Investment Trust Management Co., Ltd. and Daishin Securities Asia Ltd., whose
financial statements reflect combined total assets representing 0.72% and 0.81%,
respectively, of the consolidated total assets as of March 31, 2010 and 2009,
respectively, and combined total revenues representing 0.24% and 0.25%, respectively,
of the consolidated total revenues for the years then ended, respectively. Those
statements were audited by other auditors whose reports thereon have been furnished
us, and our opinion expressed herein, insofar as it relates to the amounts included for
Daishin Investment Trust Management Co., Ltd. and Daishin Securities Asia Ltd., is
based solely on the reports of the other auditors.
We conducted our audits in accordance with auditing standards generally accepted in
the Republic of Korea. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We
believe that our audits and the reports of the other auditors provide a reasonable basis
for our opinion.
2
In our opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements as of and for the year ended March 31, 2010 and
2009, referred to above present fairly, in all material respects, the financial position of
Daishin Securities Co., Ltd. and its subsidiaries as of March 31, 2010 and 2009, and
the results of their operations, the changes in its shareholders’ equity and their cash
flows for the years then ended in conformity with accounting principles generally
accepted in the Republic of Korea.
Accounting principles and auditing standards and their application in practice vary
among countries. The accompanying consolidated financial statements are not
intended to present the financial position, results of operations, changes in
shareholders’ equity and cash flows in conformity with accounting principles and
practices generally accepted in countries and jurisdictions other than the Republic of
Korea. In addition, the procedures and practices used in the Republic of Korea to audit
such financial statements may differ from those generally accepted and applied in other
countries. Accordingly, this report and the accompanying consolidated financial
statements are for use by those who are informed about Korean accounting principles
or auditing standards and their application in practice.
Seoul, Korea
June 22, 2010
This report is effective as of June 22, 2010, the audit report date. Certain subsequent
events or circumstances, which may occur between the audit report date and the time of
reading this report, could have a material impact on the accompanying consolidated
financial statements and notes thereto. Accordingly, the readers of the audit report
should understand that there is a possibility that the above audit report may have to be
revised to reflect the impact of such subsequent events or circumstances, if any.
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Financial Position March 31, 2010 and 2009
3
(in thousands of Korean won) 2010 2009
Assets
Cash and cash equivalents (Note 3) ₩ 536,378,601 ₩ 433,495,752
Deposits segregated under regulation (Note 3) 1,090,333,288 972,112,855
Trading securities (Note 4) 3,777,114,437 2,697,372,812
Available-for-sale securities (Note 6) 193,926,550 138,440,063
Equity-method investments (Note 7) 22,042,296 8,343,250
Derivative-combined securities (Note 5) 323,438,263 433,176,449
Derivative assets 443,969,688 366,332,382
Loans receivable, net (Note 8) 837,494,537 630,319,927
Property and equipment, net (Note 9) 521,950,512 547,541,264
Intangible assets, net (Note 10) 50,306,489 30,465,021
Accounts receivable, net (Note 8) 54,778,042 34,313,048
Accrued revenue, net (Note 8) 42,380,253 42,117,858
Advanced payments 19,036,692 11,967,424
Guarantee deposits 64,108,489 64,022,028
Collective fund for default loss (Note 3) 6,229,887 5,403,190
Deferred income tax assets (Note 20) 2,437,265 2,008
Others 46,545,565 49,203,839
Total assets ₩8,032,470,854 ₩6,464,629,170
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Financial Position March 31, 2010 and 2009
4
(in thousands of Korean won) 2010 2009
Liabilities and Shareholders' Equity
Liabilities
Deposits from customers (Note 12) ₩ 1,092,887,769 ₩1,134,342,809
Borrowings (Note 13) 777,876,183 409,583,235
Securities sold under repurchase agreements (Note 4) 2,715,275,985 1,719,443,051
Securities sold 34,394,428 2,579,222
Derivative-combined securities sold (Note 5) 1,314,770,477 1,165,433,853
Derivative liabilities 45,812,760 160,310,563
Debentures, net (Note 14) 59,780,240 59,679,998
Accrued severance benefits, net (Note 15) 1,526,680 1,824,318
Income tax payable 59,870,235 97,801
Other accounts payable 103,869,209 29,443,514
Accrued expenses 20,434,798 15,993,581
Guarantee deposits received 55,625,779 63,988,019
Deferred income tax liabilities (Note 20) 35,576,132 40,093,889
Withholdings 5,167,789 2,653,823
Others 19,292,138 1,542,541
Total liabilities 6,342,160,602 4,807,010,217
Commitments and contingencies (Note 11)
Shareholders' equity
Capital stock (Note 17)
Common stock 254,867,000 254,867,000
Preferred stock 180,000,000 180,000,000
Capital surplus 713,145,971 715,771,296
Capital adjustments (Note 19) (141,203,280) (139,041,646)
Accumulated other comprehensive income (Note 19) 74,737,527 61,081,074
Retained earnings (Note 18) 596,222,271 584,941,229
Minority interests 12,540,763 -
Total shareholders' equity 1,690,310,252 1,657,618,953
Total liabilities and shareholders' equity ₩ 8,032,470,854 ₩ 6,464,629,170
The accompanying notes are an integral part of these consolidated financial statements.
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Income
For the years ended March 31, 2010 and 2009
5
(in thousands of Korean won, except per share amounts)
2010 2009
Operating revenues
Commissions received (Note 21) ₩ 366,864,892 ₩ 297,493,590
Gain on sales of trading securities 106,405,009 104,131,639
Gain on valuation of trading securities 35,713,517 33,372,056
Gain on sale of available-for-sale securities 1,403,156 2,308,481
Recovery on impairment loss on
available-for-sale securities 49,773 -
Gain on valuation of securities sold 436,222 -
Gain on derivative-combined securities transactions 212,463,187 38,755,058
Gain on derivative-combined securities
sold transactions 1,519,515,420 1,676,233,143
Gain on derivatives transactions 763,148,244 410,669,648
Interest income 231,179,223 211,675,093
Reversal of allowance for doubtful accounts 4,457,195 4,166,517
Dividend income 5,068,088 4,322,427
Gain on valuation of deposits
segregated under regulation 27,868,047 39,746,681
Others 5,033,735 7,794,879
3,279,605,708 2,830,669,212
Operating expenses
Commissions expenses 21,371,894 19,812,902
Loss on sale of trading securities 92,100,686 138,523,886
Loss on valuation of trading securities 6,675,763 4,420,568
Loss on sale of available-for-sale securities 766,050 804,869
Loss on impairment of available-for-sale securities (Note 6) 1,044,882 6,029,315
Loss on valuation of securities sold 1,543,677 263,882
Loss on derivative-combined securities transactions 5,493,740 225,828,176
Loss on derivative-combined
securities sold transactions 871,868,037 200,001,803
Loss on derivatives transactions 1,634,661,714 1,681,569,405
Interest expense 109,162,946 130,696,558
General and administrative expenses (Note 22) 355,457,744 303,017,236
Bad debts expense 174,784 19,270,143
Others 7,276,335 408,629
3,107,598,252 2,730,647,372
Operating income 172,007,456 100,021,840
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Income
For the years ended March 31, 2010 and 2009
6
(in thousands of Korean won, except per share amounts)
2010 2009
Non-operating income
Gain on disposal of property and equipment ₩ 3,389,229 ₩ 7,330
Office rental income 12,361,570 13,346,309
Gain on valuation of equity-method
Investments (Note 7) 3,765,394 -
Others 3,279,093 13,278,491
22,795,286 26,632,130
Non-operating expenses
Loss on disposal of property and equipment 2,428,847 253,963
Loss on equity method valuation 164 98,473
Loss on sale of equity-method investments (Note 7) 2,071 -
Donation 1,234,624 1,221,943
Compensation loss 41,723,815 -
Others 422,815 9,009
45,812,336 1,583,388
Net income before income taxes 148,990,406 125,070,582
Income tax expense (Note 20) 55,250,060 21,819,237
Net income ₩ 93,740,346 ₩ 103,251,345
Parent interest in net income ₩ 91,355,531 ₩ 103,251,345
Minority interest in net income 2,384,815 -
Basic earnings per share (in Korean won) (Note 23) ₩ 1,190 ₩ 1,317
Diluted earnings per share (in Korean won) (Note 23) ₩ 1,190 ₩ 1,317
The accompanying notes are an integral part of these consolidated financial statements.
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Changes in Shareholders' Equity For the years ended March 31, 2010 and 2009
7
(in thousands of Korean won)
Capital stock Capital surplus
Capital
adjustments
Accumulated
other
comprehensive
Income
Retained
earnings
Minority
interest Total
Balance as of
April 1, 2009 ₩ 434,867,000 ₩ 715,771,296 ₩ (139,041,646) ₩ 61,081,074 ₩ 584,941,229 ₩ - ₩ 1,657,618,953
Cash dividends - - - - (80,074,489) - (80,074,489)
Retain earnings
after appropriations - - - - 504,866,740 - 1,577,544,464
Net income - - - - 91,355,531 2,384,815 93,740,346
Loss on sale of
treasury stock - (2,625,325) (2,089,445) - - - (4,714,770)
Gain on valuation of
available-for-sale
securities
- - - 15,390,165 - - 15,390,165
Paid in capital increase
of Subsidiaries - - (72,189) - - - (72,189)
Gain and loss on
translation of foreign
operations
-
-
-
(1,820,655)
-
-
(1,820,655)
Changes in equity-
method investments - - - 86,943 - 340,505 427,448
Change in consolidated
entity - - - - - 9,815,443 9,815,443
Balance as of
March 31, 2010 ₩ 434,867,000 ₩ 713,145,971 ₩ (141,203,280) ₩ 74,737,527 ₩ 596,222,271 ₩ 12,540,763 ₩ 1,690,310,252
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Changes in Shareholders' Equity For the years ended March 31, 2010 and 2009
8
(in thousands of Korean won)
Capital stock Capital surplus
Capital
adjustments
Accumulated
other
comprehensive
Income
Retained
earnings Total
Balance as of
April 1, 2008 ₩ 434,867,000 ₩ 717,846,169 ₩ (78,044,740) ₩ 62,538,914 ₩ 593,081,721
₩ 1,730,289,064
Other appropriation - - 5,229,977 - (5,229,977) -
Cash dividends - - - - (106,161,860) (106,161,860)
Retain earnings
after appropriations - - - - 481,689,884
1,624,127,204
Net income - - - - 103,251,345 103,251,345
Changes in
treasury stock - (2,074,873) (66,226,883) - -
(68,301,756)
Gain and loss on
valuation of available-
for-sale securities
- - - (4,052,870) -
(4,052,870)
Gain and loss on
translation of foreign
operations
- - - 2,595,030 -
2,595,030
Balance as of
March 31, 2009 ₩ 434,867,000 ₩ 715,771,296 ₩ (139,041,646) ₩ 61,081,074 ₩ 584,941,229
₩ 1,657,618,953
The accompanying notes are an integral part of these consolidated financial statements.
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Cash Flows
For the years ended March 31, 2010 and 2009
9
(in thousands of Korean won) 2010 2009
Cash flows from operating activities
Net income ₩ 93,740,346 ₩ 103,251,345
Adjustments to reconcile net income
to net cash provided by (used in) operating activities
Loss(Gain) on disposal of trading securities, net (14,304,322) 34,392,247
Gain on valuation of trading securities, net (29,037,754) (28,951,488)
Gain on disposal of available-for-sale securities, net (637,106) (1,624,645)
Loss(Gain) on derivatives-combined securities
transactions, net (206,969,446) 187,073,118
Gain on derivatives-combined securities sold
transactions, net (647,647,383) (1,476,231,340)
Loss on derivatives transactions, net 871,513,470 1,270,899,757
Loss on valuation of securities sold, net 1,107,455 263,882
Bad debts expense 174,784 19,270,143
Depreciation 27,204,299 23,500,357
Amortization 9,172,985 60,695
Loss(Gain) on disposal of property and equipment, net (960,382) 246,633
Loss on impairment of available-for-sale
securities, net 1,044,882 6,029,315
Provision for severance benefits 1,354,090 1,672,857
Loss(Gain) on valuation of
equity-method investments, net (3,765,229) 98,473
Reversal of allowance for doubtful accounts (4,517,956) (4,166,517)
Gain on valuation of deposits segregated under
regulation (27,868,047) (39,746,681)
Compensation loss 17,707,439 -
Others, net 11,693,436 7,433,315
99,005,561 103,471,466
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Cash Flows
For the years ended March 31, 2010 and 2009
10
(in thousands of Korean won) 2010 2009
Changes in operating assets and liabilities
Deposits segregated under regulation ₩ (90,393,368) ₩ (283,476,325)
Trading securities (1,036,399,820) (726,735,444)
Derivatives-combined securities 316,707,633 131,773,660
Loans receivables (206,473,970) 216,111,312
Accounts receivable (20,408,696) (24,727,539)
Accrued revenue (314,927) (10,334,110)
Advanced payments (7,069,541) (4,163,967)
Collective fund for default loss (826,697) 1,162,720
Derivative assets and liabilities (1,063,648,579) (986,815,109)
Deposits from customers (41,473,655) 322,955,786
Securities sold 30,707,752 (10,692,527)
Derivatives-combined securities sold 796,984,008 1,258,913,721
Income tax payable 60,512,910 (45,407,065)
Other accounts payable 57,844,830 14,257,001
Accrued expenses 4,500,933 (3,994,113)
Withholdings 2,486,298 (6,623,770)
Deferred income tax (10,804,834) 13,539,556
Decrease in severance insurance plan deposit - 3,264,241
Payment of retirement trust - 55,093
Payment of serverance benefits (1,750,816) (908,414)
Securities sold under repurchase agreements 522,951,885 496,636,842
Others, net 4,125,415 (12,484,290)
(682,743,239) 342,307,259
Net cash provided by (used in) operating activities (583,737,678) 445,778,725
Daishin Securities Co., Ltd. and Subsidiaries Consolidated Statements of Cash Flows
For the years ended March 31, 2010 and 2009
11
(in thousands of Korean won) 2010 2009
Cash flows from investing activities
Decrease in time deposits, net ₩ - ₩ 1,000,000
Decrease(Increase) in guarantee deposits, net 858,692 1,554,714
Disposal of property and equipment 8,647,211 14,812
Acquisition of property and equipment (12,357,478) (32,261,298)
Increase in intangible assets (9,394,103) (18,012,148)
Acquisition of available-for-sale securities (42,033,323) (72,320,670)
Disposal of available-for-sale securities 5,739,209 38,151,814
Increase in equity-method investments (260,000) (3,491,723)
Others, net (874,324) (8,021,261)
Net cash used in investing activities (49,674,116) (93,385,760)
Cash flows from financing activities
Increase(Decrease) in borrowings, net 368,292,948 (203,914,948)
Issuance of debentures - 59,678,900
Retirement of debentures - (10,000)
Decrease in guarantee deposits received, net (9,365,440) (5,102,877)
Issuance of new shares 317,385 -
Payment of dividends (80,097,105) (106,147,158)
Acquisition of treasury shares (13,480,247) (77,503,777)
Increase in securities sold under repurchase agreements 472,881,049
Others, net - (2,588,100)
Net cash provided by(used in) financing activities 738,548,590 (335,587,960)
Effect of exchange rate changes on cash and
cash equivalents (2,287,028) 5,746,047
Effect of consolidated entity's scope changes
on cash and cash equivalents 33,081 -
Net increase in cash and cash equivalents 102,882,849 22,551,052
Cash and cash equivalents (Note 26)
Beginning of year 433,495,752 410,944,700
End of year ₩ 536,378,601 ₩ 433,495,752
The accompanying notes are an integral part of these consolidated financial statements.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
12
1. The Company
Daishin Securities Co., Ltd. (the Controlling Company) was incorporated as Samrak
Securities Co., Ltd. on July 27, 1962, under the Commercial Code of the Republic of
Korea, to engage in the securities business operations, including brokerage
transactions, trading and underwriting of securities and other related business
activities. The Company changed its corporate name to Daishin Securities Co., Ltd.
on April 22, 1975, and has been listed on the Korea Exchange since October 1,
1975. The Company has issued global depositary receipts (“GDR”), representing 10
million shares of preferred stock at the London Stock Exchange’s Professional
Securities Market since November 2, 2007. The head office of the Company is in
Seoul, and the Company has 115 domestic branches and two representative
overseas offices.
Consolidated Subsidiaries
The consolidated financial statements include the accounts of Daishin Securities Co.,
Ltd. and its controlled subsidiaries (collectively referred to as “the Company”).
Consolidated subsidiaries include majority-owned entities and entities in which
Daishin Securities Co., Ltd. owns more than 30% of the total outstanding voting
stock and is the largest shareholder.
The following table sets forth certain information with regard to consolidated
subsidiaries as of March 31, 2010:
Subsidiary Capital
Percentage of
Ownership (%) Location
Daishin Investment
Trust Management Co., Ltd. ₩ 27,597 million 100 Korea
Daishin Securities Asia Ltd. ₩ 10,892 million 100 Hong Kong
Daishin-Pegasus I PEF ₩ 16,964 million 26.08 Korea
Daishin-Pegasus I PEF whose financial statements were adjusted to reconcile its
accounting policies with those of the Controlling Company’s.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
13
Subsidiaries excluded from the consolidated financial statements as of March 31, 2010,
are as follows:
Subsidiary Capital
Percentage of
Ownership (%) Location
Daishin Economic Research
Institute ₩ 4,995 million 99.00 Korea
Daishin Champs Elysees Hwit ₩ 82 million 100 Korea
Daishin Factoring Co., Ltd. ₩ - 33.25 Korea
In accordance with consolidation accounting standards generally accepted in the
Republic of Korea, the financial statements of the above subsidiaries are excluded
from the consolidated financial statements either because their total assets at the end
of the prior fiscal year end were less than ₩10,000 million, or were in the process of
being liquidated.
Equity method investees of the Company as of March 31, 2010, are as follows:
Number of
Shares Owned
Percentage of
Ownership
Daishin-MSB I PEF - 0.90
Daishin Securities Growth Alpha SPAC 10,000 1.04
The Jeonbuk Bank Ltd. 2,600,000 4.87
Daishin-Pegasus I PEF is included in the consolidated financial statements because
of the increase of its net assets as of March 31, 2010.
2. Summary of Significant Accounting Policies
The significant accounting policies followed by the Company in the preparation of
the accompanying consolidated financial statements are summarized below.
Basis of Financial Statement Presentation
The Company maintains its accounting records in Korean won and prepares
statutory consolidated financial statements in the Korean language in conformity with
accounting principles generally accepted in the Republic of Korea. Certain
accounting principles applied by the Company that conform with financial accounting
standards and accounting principles in the Republic of Korea may not conform with
generally accepted accounting principles in other countries. Accordingly, these
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
14
consolidated financial statements are intended for use by those who are informed
about Korean accounting principles and practices. The accompanying consolidated
financial statements have been condensed, restructured and translated into English
from the Korean language consolidated financial statements.
Certain information attached to the Korean language financial statements, but not
required for a fair presentation of the Company's financial position, results of
operations or cash flows, is not presented in the accompanying consolidated
financial statements.
Accounting Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported therein. Although these estimates are
based on management's best knowledge of current events and actions that the
Company may undertake in the future, actual results may differ from those estimates.
Application of the Statements of Korean Financial Accounting Standards
The Company’s non-consolidated financial statements were prepared in conformity
with accounting principles generally accepted in Korea.
In accordance with the Enforcement Decree on Financial Investment Services, the
Company has changed the method of account classification and certain amounts in
the financial statements as of and for the year ended March 31, 2009, have been
reclassified to conform to the March 31, 2010 financial statement presentation.
These reclassifications had no effect on previously reported net income or
shareholders' equity.
Principles of Consolidation
The Company records differences between the investment account and
corresponding capital account of subsidiaries as goodwill or negative goodwill, and
such differences are amortized over five years using the straight-line method.
However, differences which occur from additional investments acquired in
consolidated subsidiaries are reported in a separate component of shareholders'
equity, and are not included in the determination of the results of operations. In
accordance with accounting principles generally accepted in the Republic of Korea,
minority interests in consolidated subsidiaries are presented as a component of
shareholders' equity in the consolidated statements of financial position.
All significant intercompany transactions and balances have been eliminated during
consolidation.
Unrealized profits, arising from sales by the Controlling Company to consolidated
subsidiaries, or equity-method investees, are fully eliminated and charged to the
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
15
equity of the Controlling Company. Unrealized profits, arising from sales by the
consolidated subsidiaries, or equity-method investees, are fully eliminated, and
charged to the equity of the controlling Company and minority interest, based on the
percentage of ownership.
Daishin Securities Co., Ltd. and its consolidated subsidiaries follow the same fiscal
year end.
Revenue Recognition
The Company recognizes commissions, trading gains and losses on the contract
date.
Marketable Securities
The Company accounts for equity and debt securities under the provision of SKAS
No. 8, Investments in Securities. This statement requires investments in equity and
debt securities to be classified into three categories: trading, available-for-sale and
held-to-maturity.
Securities are initially carried at cost, including incidental expenses, with cost being
determined using the moving average method. Debt securities, which the Company
has the intent and ability to hold to maturity, are generally carried at cost, adjusted
for the amortization of discounts or premiums. Premiums and discounts on debt
securities are amortized over the term of the debt using the effective interest method.
Trading and available-for-sale securities are carried at fair value, except for non-
marketable securities, classified as available-for-sale securities, which are carried at
cost.
Unrealized valuation gains or losses on trading securities are charged to operations
and those resulting from available-for-sale securities are charged to accumulated
other comprehensive income and expense, the accumulated amount of which shall
be charged to operations when the related securities are sold, or when an
impairment loss on the securities is recognized. Impairment losses are recognized in
the statement of income when the recoverable amounts are less than the acquisition
cost of securities or adjusted cost of debt securities for the amortization of discounts
or premiums.
If the realizable value subsequently recovers, in case of a security stated at fair
value, the increase in value is recorded in current operations, up to the amount of
the previously recognized impairment loss, while for the security stated at amortized
cost or acquisition cost, the increase in value is recorded in current operations, so
that its recovered value does not exceed what its amortized cost would have been
as of the recovery date if there had been no impairment loss.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
16
Privately placed funds among collective investment securities are accounted for as if
the assets included were actually owned by the Company. When these funds are not
managed by a guideline set by the Company and are substantially different from the
assets actually owned by the Company, the funds are accounted for as non-specific
investment funds managed by third parties.
Equity-Method Investments
In the consolidated financial statements of the Company, investments in business
entities in which the Company has control or the ability to exercise significant
influence over the operating and financial policies are accounted for using the equity
method of accounting. Under the equity method, the original investment is recorded
at cost and adjusted by the Company's share in the net book value of the investee
with a corresponding charge to current operations, a separate component of
shareholders ́equity, or retained earnings, depending on the nature of the
underlying change in the net book value. All significant unrealized profits resulting
from intercompany transactions of property and equipment have been eliminated.
After computing the difference between the cost of the investment and the share of
investee's net value of the identifiable assets and liabilities at the date of acquisition,
any residual cost over (under) fair value of the net identifiable assets and liabilities is
assigned to the unidentifiable asset, goodwill (or the unidentifiable liabilities,
negative goodwill), which are recorded as part of investments and are amortized
over five years using the straight-line method. However, differences which occur
from additional investments or investment of associates made after the Company
has control in its subsidiaries are recognized as capital surplus or capital
adjustments.
Assets and liabilities of the Company’s foreign investees are translated at current
exchange rates, while income and expense are translated at average rates for the
period. Adjustments resulting from the translation process are reported in a separate
component of shareholders’ equity, and are not included in the determination of the
results of operations.
Derivatives-combined securities and Derivatives-combined securities sold
Equity-linked securities are recorded as assets at the purchase price, and equity -
linked securities sold are recorded as a liability at the issuance price. Gains or
losses upon redemption are recorded as a gain or loss on the redemption, and the
difference with the estimated value and the book value at the end of the reporting
period is recorded as a gain or loss on valuation.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
17
Derivative Instruments
Derivative instruments for trading or hedging purpose are recorded as assets and
liabilities at a fair value. And unrealized gain and loss resulting from changes in the
market or fair value of such instruments are reported as current operations except
for the effective portion of derivative transactions entered into for the purpose of
cash-flow hedges, recorded as accumulated other comprehensive income under
shareholders’ equity.
Allowance for Doubtful Accounts
The Regulation on Financial Investment Business prescribed by the Financial
Investment Business and Capital Market Act provides guidelines for calculating the
allowance for doubtful accounts. These guidelines require the minimum level of
allowances that securities firms should maintain. These guidelines require that all
loans and receivables should be classified based on a number of factors including
the financial position of the debtors, the repayment history, the Company’s past
relationship and dealings with the debtors and the value of any security interest. In
accordance with these guidelines, loans and receivables have been classified as
normal, precautionary, substandard, doubtful and estimated loss.
Loans which are modified during the court receivership, court mediation or
restructuring of customers are revalued at the present value discounted by the
effective interest rate at the inception of the debt. The difference between the book
value and the readjusted value is offset against the provision for possible loan
losses, and the remaining difference is recognized as bad debts expense in the year
incurred. The difference between the book value (nominal value) and the present
value is amortized using the effective interest rate method and is recorded as
interest income.
Property and Equipment, and Intangible assets
Property and equipment are stated at cost, except for certain assets subject to
upward revaluation in accordance with the Asset Revaluation Law of Korea. The
revaluation presents production facilities and other buildings at their depreciated
replacement cost, and land at the prevailing market price, as of the effective date of
revaluation.
Depreciation is computed using the straight-line method based on the estimated
useful lives of the assets as follows:
Assets Estimated useful lives
(years)
Buildings 40
Vehicles 4~5
Furniture and equipment 4~5
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
18
Intangible assets are stated at cost, net of amortization calculated using the straight-
line method based on the estimated useful lives of the assets.
Maintenance and Repairs
Routine maintenance and repairs are charged to expense as incurred. Expenditures
which enhance the value or extend the useful life of the related asset are capitalized.
Securities Sold under Repurchase Agreements
Under the repurchase agreements, the Company records securities sold under
repurchase agreements at the amount of securities sold. Also the Company records
the difference between the repurchase price and the price of the securities sold as
interest expense.
Meanwhile under the resale agreements, the securities purchased under resale
agreements are stated at acquisition cost. The Company records the difference
between the securities resale price and acquisition cost as interest income.
Securities Sold
If securities are borrowed from Korea Securities Finance Corporation, the Company
presents the borrowed securities in the statement of financial position. In addition, if
the related securities are sold, the Company recognizes securities sold as liability in
the statement of financial position.
Discounts and Premiums on Debentures
The difference between the face value and the proceeds on issuance of the
debenture is treated as either a discount or premium on the debenture, which is
amortized over the term of the debenture using the effective interest rate method.
The discount or premium is reported as a direct deduction from or addition to the
face value of the debenture in the statement of financial position. Amortization of the
discount or premium is treated as part of interest expense.
Accrued Severance Benefits
Employees and directors with at least one year of service are entitled to receive a
lump-sum payment upon termination of their employment with the Company based
on their length of service and rate of pay at the time of termination. Accrued
severance benefits represent the amount which would be payable assuming all
eligible employees and directors were to terminate their employment as of the end
of the reporting period.
For defined contribution pension plan, the Company recognizes as expense the
severance benefits provided for the period.
The Company has a defined benefit pension plan, and accrues severance benefits
for current employees and pension payables for retired employees.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
19
Pension plan assets are presented as a deduction from the total accrued severance
benefits and pension payables. The excess of pension plan assets over pension
plan liabilities is recorded as investment assets.
Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are translated into Korean
won at the rate of exchange in effect as of the end of the reporting period. Gains and
losses resulting from the translation are reflected as either income or expense for
the period.
Translation of Foreign Operations
Accounts of foreign subsidiaries are maintained in the currencies of the countries in
which they operate. In translating the foreign currency financial statements of these
subsidiaries into Korean won, income and expenses are translated at the average
rate for the year, while assets and liabilities are translated at the rate prevailing on
the end of the reporting period. Resulting translation gains or losses are recorded as
a cumulative translation adjustment presented as part of shareholders’ equity.
Treasury Stock
Treasury stock is stated at cost. Gain on disposal of treasury stock is charged to
capital surplus. Loss on disposal of treasury stock is first offset against gain on
disposal of treasury stock, if any, and the remainder is charged to capital adjustment,
a component of shareholders’ equity.
Deferred Income Tax Assets and Liabilities
The Company recognizes deferred income taxes for anticipated future tax
consequences resulting from temporary differences between amounts reported for
financial reporting and income tax purposes. Deferred tax assets and liabilities are
computed on such temporary differences, including available net operating loss
carry forwards and tax credits, by applying enacted statutory tax rates applicable to
the years when such differences are expected to reverse. Deferred tax assets are
recognized when it is more likely that such deferred tax assets will be realized. The
total income tax provision includes the current tax expense under applicable tax
regulations and the change in the balances of deferred tax assets and liabilities
during the year.
Trust Account
The Company accounts for the trust assets separately from other assets. In terms of
operating, managing and disposing of the trust assets among the trust accounts, the
Company records as operating revenues the fees it earns from trust accounts.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
20
Provisions and Contingent Liabilities
When there is a probability that an outflow of economic benefits will occur due to a
present obligation resulting from a past event, and whose amount is reasonably
estimable, a corresponding amount of provision is recognized in the consolidated
financial statements. However, when such outflow is dependent upon a future event,
is not certain to occur, or cannot be reliably estimated, a disclosure regarding the
contingent liability is made in the notes to the consolidated financial statements.
Earnings Per Share
Earnings per share are computed based on earnings available to common
shareholders, using the weighted average number of common shares outstanding
during the year.
3. Restricted Deposits and Others
Restricted deposits and others as of March 31, 2010 and 2009, consist of the
following:
(in thousands of Korean won) 2010 2009
Cash and cash equivalents ₩ 22,900,000 ₩ -
Deposits segregated under regulations
Reserve for claims of customers' deposits ₩ 15,210,000 ₩ 2,410,000
Reserve for claims of customers' deposits (trust) 1,023,728,943 933,637,400
Securities borrowed - 73,955
Deposits for exchange-traded derivatives 1,251,845 -
Restricted due from financial institutions 42,500 41,500
Long-term due from financial institutions 2,000,000 25,980,000
₩1,042,233,288 ₩ 962,142,855
Guarantee deposits (surety guarantee) ₩ 1,000 ₩ 1,000
Collective fund for default loss ₩ 6,229,887 ₩ 5,403,190
According to the Regulation on Financial Investment Business (“RFIB”), the
Company is required to deposit with the Korea Securities Finance Corporation
(“KSFC”) or other banks the amount of deposits from customers for the customers’
claims.
Pursuant to the Financial Investment Business and Capital Market Act, the collective
fund for default loss is reserved to compensate losses resulting from breaching
securities in the Korea Exchange.
As of March 31, 2010, ₩22,900 million of cash and cash equivalents is pledged as
collaterals for derivative transactions with SC First Bank and others.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
21
As of March 31, 2010, cash and bank deposits related to maintain checking
accounts are subject to withdrawal restrictions.
As of March 31, 2010, long-term due from financial institutions is pledged as
collateral for the Korea Financial Telecommunications & Clearings Institute’s
services.
4. Trading Securities
Trading securities as of March 31, 2010 and 2009, consist of the following:
(in thousands of Korean won) 2010 2009
Stocks ₩ 75,186,253 ₩ 58,699,808
State and Local government bonds 859,726,545 707,818,374
Special bonds 2,129,549,357 1,791,842,686
Corporate bonds 551,680,366 106,966,879
Collective investment securities 33,529,733 32,045,065
Foreign currency certificates 127,442,183 -
₩3,777,114,437 ₩2,697,372,812
Debt securities as of March 31, 2010 and 2009, consist of the following:
2010 2009
(in millions of Par Acquisition Fair Book Book
Korean won) Value Cost Value Value Value
State and Local
government bonds ₩ 845,596,082 ₩ 851,538,079 ₩ 859,726,545 ₩ 859,726,545 ₩ 707,818,374
Special bonds 2,116,524,693 2,117,660,928 2,129,549,357 2,129,549,357 1,791,842,686
Corporate bonds 541,196,774 545,627,442 551,680,366 551,680,366 106,966,879
₩3,503,317,549 ₩3,514,826,449 ₩3,540,956,268 ₩3,540,956,268 ₩2,606,627,939
As of March 31, 2010, ₩2,754,890 million (March 31, 2009: ₩1,845,479 million) of
the above state and local government bonds, special bonds and corporate bonds is
pledged as collaterals against securities sold under repurchase agreements.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
22
Collective investment securities among trading securities as of March 31, 2010 and
2009, consist of the following:
2010
Unsold Collective Other Collective
(in thousands of Korean won) Investment Securities Investment Securities Total
Book value
before valuation
₩ 30
₩ 32,879,324
₩ 32,879,354
Gain(Loss) on valuation - 650,379 650,379
Book value
after valuation
₩ 30 ₩ 33,529,703 ₩ 33,529,733
2009
Unsold Collective Other Collective
(in thousands of Korean won) Investment Securities Investment Securities Total
Book value
before valuation
₩ 7,226,065
₩ 24,157,368
₩ 31,383,433
Gain(Loss) on valuation 214,250 447,382 661,632
Book value
after valuation
₩ 7,440,315 ₩ 24,604,750 ₩ 32,045,065
Interest income from trading securities for the year ended March 31, 2010, was
₩148,840 million (March 31, 2009: \123,287 million).
The Company has provided state and local government bonds, and others with a
total face value of ₩244,600 million as collaterals for reserve for futures transactions
with Korea Exchange and others, and for debt and credit transactions with Korea
Securities Depository and others with a total face value of ₩45,000 million. It also
provided securities with a total face value of ₩134,600 million to Korea Securities
Finance Corporation and others as a margin to customers from KSFC, securities with
a total face value of ₩525 million to a court as performance guarantee in the trust
business, and securities with a total face value of ₩316,100 million to Societe
Generale and others for its derivative transactions.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
23
5. Derivatives-combined Securities, Derivatives-combined Securities Sold
and Derivative Instruments
Derivatives-combined securities and Derivatives-combined securities sold as of
March 31, 2010 and 2009, are as follows:
2010 2009
Fair Gain on Loss on Fair
(in thousands of Korean won) Value Valuation Valuation Value
Derivatives-combined
securities
Equity-linked securities ₩ 323,153,951 ₩ 74,283,287 ₩ 791,769 ₩ 431,928,767
Others 284,312 - 358,659 1,247,682
₩ 323,438,263 ₩ 74,283,287 ₩ 1,150,428 ₩ 433,176,449
Derivatives-combined
securities sold
Equity-linked securities sold ₩ 705,566,675 ₩ 1,552,426 ₩ 101,574,213 ₩ 806,110,145
Equity-linked warrants sold 417,795,998 615,202,957 33,023,088 357,581,930
Others 191,407,804 8,292,368 4,274,776 1,741,778
₩1,314,770,477 ₩ 625,047,751 ₩ 138,872,077 ₩ 1,165,433,853
Interest and redemption price on maturity date of equity-linked securities are
affected by the fluctuation of the stock index. The redemption price on maturity date
of warrants is also affected by the fluctuation of stock index. The principal of warrant
is not guaranteed, however, and only option premiums will be received. The above
derivatives combined securities and derivatives combined securities sold are carried
at fair value and unrealized valuation gains or losses are recognized in the current
operations.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
24
Credit-linked securities among derivatives-combined securities sold as of March 31,
2010, consist of the following :
(in thousands of Korean won) Face amount Date of issue Date of maturity
Standard
company
DLS20 sold
₩ 50,000,000
July 3,
2009
September 20,
2011
Hyndai Heavy
Industries Co.,Ltd
DLS21 sold
25,000,000
July 23,
2009
September 20,
2011
Hyndai Heavy
Industries Co.,Ltd
DLS22 sold
2,800,000
July 29,
2009
September 20,
2011
Hyndai Heavy
Industries Co.,Ltd
DLS23 sold
10,000,000
September 2,
2009
May 19,
2012 LG Display Co., Ltd.
DLS24 sold
1,000,000
September 9,
2009
March 21,
2011
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS25 sold
111,000
September 17,
2009
September 24,
2010
Samsung Heavy
Industries Co.,Ltd
DLS26 sold
2,300,000
September 11,
2009
May 19,
2012 LG Display Co., Ltd.
DLS27 sold
10,000,000
September 15,
2009
December 20,
2010
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS28 sold
300,000
September 18,
2009
March 21,
2011
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS29 sold
2,900,000
September 25,
2009
September 20,
2010
Samsung Heavy
Industries Co.,Ltd
DLS30 sold
588,810
September 30,
2009
March 21,
2011
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS31 sold
2,000,000
October 8,
2009
September 20,
2010
Samsung Heavy
Industries Co.,Ltd
DLS32 sold
7,040,000
October 9,
2009
September 20,
2010
Samsung Heavy
Industries Co.,Ltd
DLS33 sold
3,650,000
October 28,
2009
March 22,
2011
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS35 sold
1,190,000
November 4,
2009
March 22,
2011
Daewoo Shipbuilding &
Marine Engineering
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
25
Co., Ltd.
DLS36 sold
1,050,000
November 20,
2009
March 22,
2011
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS38 sold
1,000,000
December 29,
2009
March 22,
2011
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS39 sold
5,330,000
January 15,
2010
March 22,
2011
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS40 sold
300,000
January 20,
2010
March 22,
2011
Daewoo Shipbuilding &
Marine Engineering
Co., Ltd.
DLS41 sold
2,420,000
February 24,
2010
March 22,
2013
Hyundai Motor Co
GS-Caltex
POSCO
LG Electronics Inc.
DLS43 sold
1,000,000
March 8,
2010
March 22,
2013
Hyundai Motor Co
GS-Caltex
POSCO
LG Electronics Inc.
DLS44 sold
2,000
March 17,
2010
March 22,
2013
Hyundai Motor Co
GS-Caltex
POSCO
LG Electronics Inc.
DLS45 sold
3,520,000
March 12
2010
March 22,
2013
Hyundai Motor Co
GS-Caltex
POSCO
LG Electronics Inc.
DLS47 sold
1,700,000
March 16,
2010
March 22,
2013
Hyundai Motor Co
GS-Caltex
POSCO
LG Electronics Inc.
DLS48 sold
10,000,000
March 19,
2010
March 22,
2013
Hyundai Motor Co
GS-Caltex
POSCO
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
26
Derivative instrument contracts outstanding as of March 31, 2010 and 2009, are as
follows:
2010 2009
(in thousands of Korean won)
Outstanding
Contract
Amount
Gain on
Valuation
Loss on
Valuation
Outstanding
Contract
Amount
Purpose of
Transaction
Interest rate swaps ₩1,002,900,000 ₩ 632,751 ₩12,500,704 ₩ - Hedging
Interest rate futures sold 520,150,050 962,980 162,930 391,619,418 Hedging
Currency swaps 330,647,620 6,058,627 2,957,350 65,688,000 Hedging
Currency futures 11,776,438 3,709 30,005 - Hedging
Currency forwards sold 3,323,895 20,022 - 198,704 Hedging
Stock index futures
purchased (domestic) 39,873,769 202,269 21,445 19,371,850 Trading
Stock index futures
sold (domestic) 11,190,019 100,649 265,682 24,671,575 Trading
Long position on stock
index options purchased
(domestic) - - - 611,145 Trading
Long position on stock
index options sold
(domestic) 216,800 94,800 - - Trading
Stock and stock index
options purchased 1 8,791,987,938 37,682,990 614,977,031 3,178,806,680 Hedging
Stock and stock index
options sold 2 121,237,907 1,059,643 1,479,831 81,584,989 Hedging
Credit swap(CDS) 239,535,600 4,285,187 140,864 - Hedging
Other options purchased 1 75,126,361 4,139,306 457,019 - Hedging
Other options sold 2 126,307,362 7,891,896 181,818 441,634,591 Hedging
₩11,274,273,759 ₩ 63,134,829 ₩633,174,679 ₩4,204,186,952
1 The Company purchased these instruments to hedge against fluctuations in
maturity amounts of equity-linked securities sold and recorded them as derivative
instrument assets. Since the above option transaction does not meet the
condition of hedge accounting, the Company does not apply hedge accounting.
2 The Company sold these instruments to hedge against fluctuations in maturity
amounts of derivative instrument assets and recorded them as derivative
instrument liabilities. Since the above option transaction does not meet the
condition of hedge accounting, the Company does not apply hedge accounting.
The Company provided time deposits and trading securities to Korea Exchange
as collateral for derivative instrument transactions (Note 11).
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
27
6. Available-for-sale Securities
Available-for-sale securities as of March 31, 2010 and 2009, consist of the following:
(in thousands of Korean won) 2010 2009
Stocks ₩ 135,940,076 ₩ 108,321,385
Investments in partnerships 2,001,200 2,001,200
Collective investment securities 30,348,878 26,806,454
Foreign currency certificates 18,911,949 839,763
Others 6,724,447 471,261
₩ 193,926,550 ₩ 138,440,063
Stocks among available-for-sale securities as of March 31, 2010 and 2009, consist
of the following:
(in thousands of Korean won, except for the number of shares owned and percentage of ownership)
2010 2009
Number
of
Shares
Owned
Percentage
of
Ownership
Acquisition
Cost
Market or
Net Asset
Value
Book
Value
Book
Value
Stocks in listed companies
Namsun Aluminum Co. - - ₩ - ₩ - ₩ - ₩ 15
Daishin Information &
Communication Co., Ltd. 1,713,700 4.46 6,433,185 993,946 993,946 762,596
Kumho Industrial
Co.,Ltd. 3,405,731 0.67 12,400,267 12,400,267 12,400,267 -
18,833,452 13,394,213 13,394,213 762,611
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
28
(in thousands of Korean won, except for the number of shares owned and percentage of ownership)
2010 2009
Number
of
Shares
Owned
Percentage
of
Ownership
Acquisition
Cost
Market or
Net Asset
Value
Book
Value
Book
Value
Stocks in unlisted companies
Songchon Construction
Co., Ltd. 77,603 - ₩ 4,834,712 ₩ - ₩ - ₩ -
Micro Science Tech
Co., Ltd. 221,157 11.06 675,000 294,207 247,382 247,382
Ecomaister Co. 100,000 1.47 1,250,000 293,603 258,957 258,957
IGLOO Security, Inc. 300,000 5.00 3,000,000 754,475 301,577 301,577
K.S.F.C. 2,944,130 4.33 14,780,423 28,634,608 28,634,608 22,610,918
Korea Securities
Depository 122,556 1.95 1,026,605 11,707,775 11,707,775 10,260,143
KIDB Co., Ltd. 76,000 6.06 380,000 531,020 380,000 380,000
Korea Securities
Computer Corp. 58,117 1.09 290,585 2,973,847 2,973,847 1,810,345
Korea Exchange 644,885 3.22 3,209,846 76,578,804 76,578,804 68,273,330
K.M.B. Co. 10,000 0.50 50,000 278,770 278,770 229,980
Others 4,373,184 1,023,532 1,184,143 3,186,142
33,870,355 123,070,641 122,545,863 107,558,774
₩ 52,703,807 ₩136,464,854 ₩135,940,076 ₩108,321,385
The shares in Kumho Industrial Co.,Ltd. were acquired upon the conversion of the
receivables from Kumho Industrial Co.,Ltd. of ₩16,571 million into equity on March
31, 2010. The Company performed a valuation on these stocks, by using rational
valuation model and proper estimation based on the professional judgment from an
independent valuation institution. As of March 31, 2010, these stocks are subject to
disposal restrictions.
The fair values of the available-for-sale non-marketable equity securities, such as
Korea Exchange and five others, were reliably measured by an independent appraisal
institute using reasonable judgment. The fair values ware determined based on
several valuation models such as discounted cash flow (DCF), and market approach
model depending on the equity securities.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
29
Collective investment securities among available-for-sale securities as of March 31,
2010 and 2009, consist of the following:
2010 2009
(in thousands of Korean won)
Acquisition Fair Book Book
Cost Value Value Value
Stock-type ₩ 21,342,028 ₩14,066,016 ₩14,066,016 ₩ 9,876,952
Bond-type 8,500,000 9,083,440 9,083,440 8,577,520
Real estate-type 8,199,500 7,199,422 7,199,422 8,351,982
₩ 38,041,528 ₩30,348,878 ₩30,348,878 ₩ 26,806,454
Foreign currency certificates among available-for-sale securities as of March 31,
2010 and 2009, consist of the following:
2010 2009
(in thousands of
Korean won )
Acquisition Book Book
Cost Value Value
Bonds ₩ 19,092,265 ₩ 18,513,768 ₩ -
Others 701,196 398,181 839,763
₩ 19,793,461 ₩ 18,911,949 ₩ 839,763
Maturities of available-for-sale debt securities as of March 31, 2010 and 2009, are as
follows:
(in thousands of Korean won) 2010 2009
Maturity
Acquisition Fair Book Book
Cost Value Value Value
1 ~ 5 years ₩ 19,092,265 ₩ 18,513,768 ₩ 18,513,768 ₩ -
The Company recognized ₩1,021 million (₩16,791 million prior to the current year)
as losses on impairment of available-for-sale securities and recognized ₩24 million
(₩745 million prior to the current year) as losses on impairment of other available-
for-sale securities.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
30
Changes in unrealized gains and losses on valuation of available-for-sale securities for
the years ended March 31, 2010 and 2009, are as follows:
2010
Beginning
Balance
Valuation
amount
Realized
amount
Deferred Tax
Assets
(Liabilities)
Ending
Balance (in thousands of Korean won)
Unrealized gains
Stocks ₩65,385,260 ₩ 17,220,437 ₩ - ₩ (3,788,496) ₩78,817,201
Collective investment securities (7,983,357) 3,595,313 - (790,969) (5,179,013)
Foreign currency certificates 394,893 (578,496) (506,273) 238,649 (451,227)
₩57,796,796 ₩ 20,237,254 ₩ (506,273) ₩ (4,340,816) ₩73,186,961
2009
Beginning
Balance
Valuation
amount
Realized
amount
Deferred Tax
Assets
(Liabilities)
Ending
Balance (in thousands of Korean won)
Unrealized gains
Stocks ₩64,615,441 ₩ (6,837,856) ₩ 1,540,367 ₩ 6,067,308 ₩65,385,260
Collective investment securities (2,878,005) (5,749,112) (516,300) 1,160,060 (7,983,357)
Foreign currency certificates 112,230 506,273 (154,800) (68,810) 394,893
₩61,849,666 ₩(12,080,695) ₩ 869,267 ₩ 7,158,558 ₩57,796,796
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
31
7. Equity-Method Investments
Equity-method investments as of March 31, 2010 and 2009, consist of the following:
(in thousands of Korean won, except for the number of shares owned and percentage of ownership)
2010
Investee
Number of
Shares
Owned
Percentage of
Ownership
Acquisition
Cost
Net Asset
Value
Book
Value
Daishin Factoring Co., Ltd. 1 3,990,000 33.25 \20,804,920 \ - \ -
Daishin Economic
Research Institute 2 495,000 99.00 4,950,000 4,945,128 4,950,000
Daishin-MSB I PEF 3 - 0.90 250,000 249,836 249,836
Daishin Securities
Growth Alpha SPAC3 10,000 1.04 10,000 17,956 10,000
The Jeonbuk Bank Ltd.3 2,600,000 4.87 13,000,000 21,576,311 16,832,460
\39,014,920 \26,789,231 \22,042,296
(in thousands of Korean won, except for the number of shares owned and percentage of ownership)
2009
Investee
Number of
Shares
Owned
Percentage of
Ownership
Acquisition
Cost
Net Asset
Value
Book
Value
Daishin Factoring Co., Ltd. 1 3,990,000 33.25 ₩20,804,920 ₩ - ₩ -
Daishin Economic
Research Institute 2 495,000 99.00 4,950,000 4,991,725 4,950,000
Daishin-Pegasus I PEF 3 - 26.08 3,491,723 3,393,250 3,393,250
₩29,246,643 ₩ 8,384,975 ₩ 8,343,250
1 The Company discontinued applying the equity method to account for this
investment as the Company’s share in the accumulated losses exceeded the cost
of the investment. The Company recognized impairment loss of ₩20,805 million
for this investee prior to the year ended March 31, 2010. This investee is now
non-operational.
2 This investment was excluded from the application of equity-method of
accounting due to its immateriality to the financial statements. This investment is
measured at its original cost due to the absence of an active market price to
determine its fair value.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
32
3 Despite ownerships of the Company of less than 20%, the equity method was
applied to Daishin-MSB I PEF and Daishin Securities Growth Alpha SPAC as the
Company can exert influence in the investee through its seat in these investees’
respective board of directors.
Changes in goodwill and negative goodwill for the year ended March 31, 2010,
is as follows:
2010
(in thousands of Beginning Increase Amortization Other Ending
Korean won) balance (decrease) (reversal) Increase balance
The Jeonbuk Bank
Ltd. ₩ - ₩ - ₩ (1,185,963)
₩ 5,929,814
₩ 4,743,851
Changes in equity-method investments for years ended March 31, 2010 and 2009,
are as follows:
2010
(in thousands
of Korean won)
Beginning
Acquisition
Gain(loss)
on
Valuation
Increase
(Decrease) Ending
Balance in Others Balance
Investee
Daishin
Economic
Research
Institute \ 4,950,000
\ -
\ -
\ - \ 4,950,000
Daishin-MSB I
PEF - 250,000 (164) - 249,836
Daishin
Securities
Growth Alpha
SPAC - 10,000 - - 10,000
The Jeonbuk
Bank Ltd. - - 3,765,394 13,067,066 16,832,460
\ 4,950,000 \ 260,000 \ 3,765,230 \13,067,066 \ 22,042,296
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
33
2009
(in thousands
of Korean
won)
Beginning
Acquisition
Gain(loss)
on
Valuation
Increase
(Decrease) Ending
Balance in Others Balance
Investee
Daishin
Economic
Research
Institute \ 4,950,000
\ -
\ -
\ - \ 4,950,000
Daishin-
Pegasus I PEF - 3,491,723 (98,473) - 3,393,250
\ 4,950,000 \ 3,491,723
\ (98,473)
\ - \ 8,343,250
Changes in unrealized holding gains on the equity-method investments for the year
ended March 31, 2010, are as follows:
2010
(in thousands of Beginning Increase Realization Deferred Ending
Korean won) balance (decrease) (disposal) income tax balance
The Jeonbuk Bank Ltd \ - \ 111,466 \ - \ (24,523) \ 86,943
The marketable equity-method investment as of March 31, 2010, follows:
Investee
Fair value
(in thousands of Korean won)
Book value
(in thousands of Korean won)
The Jeonbuk Bank Ltd. \ 18,278,000 \ 16,832,460
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
34
Financial information of investees as of and for the years ended March 31, 2010 and
2009, follows:
(in thousands of Korean won) 2010
Investee Assets Liabilities Sales
Net
Income(Loss)
Daishin Economic Research
Institute ₩ 6,848,592 ₩ 1,853,513 ₩ 3,092,234 ₩ 39,934
Daishin-MSB I PEF 27,634,036 2,210 20,291 (18,174)
Daishin Securities Growth
Alpha SPAC 4,091,394 2,364,825 - (21,781)
The Jeonbuk Bank Ltd. 7,230,911,293 6,787,865,893 503,028,716 52,916,764
(in thousands of Korean won) 2009
Investee Assets Liabilities Sales
Net
Income(Loss)
Daishin Economic Research
Institute ₩ 6,352,700 ₩ 1,310,553 ₩ 2,603,905 ₩ (362,065)
Daishin-Pegasus I PEF 13,033,081 20,655 54 (377,574)
8. Loans Receivables and Allowance for Doubtful Accounts
Loans receivables as of March 31, 2010 and 2009, consist of the following:
(in thousands of Korean won) 2010 2009
Call loans ₩ 270,000 ₩ -
Broker's loans 637,717,166 434,814,887
Bonds purchased under
repurchased agreements 143,170,000 74,800,000
Loans 7,630,920 6,631,182
Dishonored loans 41,728,633 42,788,804
Private placement bonds 46,329,426 118,850,176
Others 73,116,977 73,756,357
949,963,122 751,641,406
Less: Allowance for losses (112,468,585) (121,321,479)
₩ 837,494,537 ₩ 630,319,927
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
35
Loans receivable and other accounts as of March 31, 2010 and 2009, by risk
classification applied in order to determine the allowance for doubtful accounts, are
as follows:
(in thousands of Korean won) 2010
Description Normal Precautionary Substandard Doubtful Estimated Loss Total
Loan Receivables
Broker's loans ₩ 637,710,709 ₩ 6,457 ₩ - ₩ - ₩ - ₩ 637,717,166
Loans 6,797,999 - - - 832,921 7,630,920
Loans receivable
purchased 1,222,279 - - - - 1,222,279
Replaced payment - - 6,583,195 - 41,830,204 48,413,399
Dishonored loans 1 - - 2,724,018 4,000,000 35,004,615 41,728,633
Troubled loans - - - - 23,481,300 23,481,300
Private placement
bonds2 16,087,311 28,242,115 - - 2,000,000 46,329,426
Other Assets
Accounts receivable 3 8,247,142 - - 1,849,061 4,518,681 14,614,884
Accrued revenue 42,540,334 - - 200,000 1,896,980 44,637,314
Others - - 20,292 - - 20,292
₩ 712,605,774 ₩ 28,248,572 ₩ 9,327,505 ₩ 6,049,061 ₩ 109,564,701 ₩ 865,795,613
(in thousands of Korean won) 2009
Description Normal Precautionary Substandard Doubtful Estimated Loss Total
Loan Receivables
Broker's loans ₩434,757,562 ₩ 57,123 ₩ 202 ₩ - ₩ - ₩ 434,814,887
Loans 5,798,270 - - - 832,913 6,631,183
Loans receivable
purchased 1,834,368 - - - - 1,834,368
Replaced payment - - 5,917,386 - 42,431,566 48,348,952
Dishonored loans 1 - - 2,090,910 5,342,743 35,355,151 42,788,804
Troubled loans 91,333 - - - 23,481,704 23,573,037
Private placement
bonds 2 105,019,857 - - 11,830,319 2,000,000 118,850,176
Other Assets
Accounts receivable 3 8,004,660 - - 1,849,061 5,398,016 15,251,737
Accrued revenue 41,985,692 - - 1,092,438 1,590,219 44,668,349
Others - - 22,547 - - 22,547
₩597,491,742 ₩ 57,123 ₩ 8,031,045 ₩20,114,561 ₩111,089,569 ₩ 736,784,040
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
36
1 Includes present value discounts of ₩96 million and ₩303 million as of March 31,
2010 and 2009, respectively. 2 Includes present value discounts of ₩510 million as of March 31, 2010. 3 The balance does not include accounts receivable of ₩46,041 million (March 31,
2009: ₩25,886 million) for which allowances were not provided as of March 31,
2010.
.
The ratios of allowance for doubtful accounts as of March 31, 2010, 2009 and 2008,
are as follows:
(in millions of Korean won) 2010 2009 2008
Amount of receivables ₩ 865,795 ₩ 736,784 ₩ 931,820
Allowance for doubtful accounts 120,769 130,770 115,990
Ratio(%) 13.95 17.75 12.45
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
37
The book values and the present values of restructured loans as of March 31, 2010 and March 31, 2009, are as follows:
(in thousands of Korean won)
2010
Account Company Type Date of
Restructuring
Final Repayment
Date Discount Rate (%)
Nominal Value
Present Value Difference
Corporate bonds
Namsun Aluminium Co., Ltd.
Work-out April 3, 2006 Dec. 31, 2012 10.5 ₩ 1,556,350
₩1,492,542 ₩ 63,808
Corporate bonds
Pantech Co., Ltd. Conversion to Equity Aug. 10, 2007 Dec. 31, 2011 5.70-6.90 1,167,668 1,135,508 32,160
Corporate bonds
Kumho Industrial Co.,Ltd.
Work-out March 30, 2010 Dec. 31, 2014 11.24 2,387,498 1,877,683 509,815
₩ 5,111,516 ₩4,505,733 ₩ 605,783
(in thousands of Korean won)
2009
Account Company Type Date of
Restructuring
Final Repayment
Date Discount Rate (%)
Nominal Value
Present Value Difference
Corporate bonds
Namsun Aluminium Co., Ltd.
Work-out April 3, 2006 Dec. 31, 2010 10.5 ₩ 1,556,350 ₩1,350,717 ₩ 205,633
Corporate bonds
Pantech Co., Ltd. Conversion to Equity Aug. 10, 2007 Dec. 31, 2011 6.9 1,672,731 1,593,661 79,070
Corporate bonds
Pantech & Curitel Communications, Inc.
Conversion to Equity
Aug.10, 2007 Dec. 31, 2011 5.70-6.45 515,302 497,249 18,053 ₩ 3,744,383 ₩3,441,627 ₩ 302,756
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
38
As of March 31, 2010, uncollectible loans whose legal expiration dates have not
fallen due or claims to guarantor were still effective, amounted to ₩108,959 million.
9. Property and Equipment, and Real Estate Investment
Property and equipment as of March 31, 2010 and 2009, consist of:
(in thousands of Korean won) 2010 2009
Buildings ₩ 278,414,360 ₩ 282,370,054
Vehicles 912,343 927,956
Furniture and equipment 204,541,218 192,598,700
483,867,921 475,896,710
Less: Accumulated depreciation (224,401,399) (205,607,358)
259,466,522 270,289,352
Land 260,906,810 264,574,945
Construction-in progress 1,577,180 12,676,967
₩ 521,950,512 ₩ 547,541,264
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
39
Changes in property and equipment for the years ended March 31, 2010 and 2009,
consist of the following:
2010
(In thousands of
Land Buildings Vehicles
Furniture
Total
Korean won) and Construction-
Equipment In-Progress
Beginning
₩264,574,945 ₩216,972,369 ₩ 305,222 ₩53,011,762 ₩ 12,676,966 ₩547,541,264 balance
Acquisition/
- - 303,533 5,326,777 6,727,168 12,357,478 Capitalized
Replacement - - - 17,826,954 (17,826,954) -
Disposal (3,668,135) (2,848,902) (36,194) (4,173,081) - (10,726,312)
Depreciation - (7,033,858) (148,780) (20,021,662) - (27,204,300)
Translation
adjustment - - - (17,618) - (17,618)
Ending balance ₩260,906,810 ₩207,089,609 ₩ 423,781 ₩51,953,132 ₩ 1,577,180 ₩521,950,512
2009
(In thousands of
Land Buildings Vehicles
Furniture
Total
Korean won) and Construction-
Equipment In-Progress
Beginning
₩264,574,945 ₩224,031,620 ₩ 397,959 ₩49,875,457 ₩ 146,840 ₩539,026,821 balance
Acquisition/
- - 58,788 6,866,936 25,335,574 32,261,298 Capitalized
Replacement - - - 12,805,448 (12,805,448) -
Disposal - - (6,579) (254,866) - (261,445)
Depreciation - (7,059,251) (144,946) (16,296,159) - (23,500,356)
Translation
adjustment - - - 14,946 - 14,946
Ending balance ₩264,574,945 ₩216,972,369 ₩ 305,222 ₩53,011,762 ₩ 12,676,966 ₩547,541,264
As of March 31, 2010, the government-appraised value of land is ₩238,928 million
(2009: ₩248,040 million).
As of March 31, 2010, depreciable assets are insured against fire and other
casualty losses for up to approximately ₩198,941 million.
As of March 31, 2010, the real estate investment mainly represents land with the
government-appraised value of ₩5,783 million (2009: ₩6,013 million).
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
40
10. Intangible Assets
Changes in intangible assets for the years ended March 31, 2010 and 2009, are as
follows:
2010
(in thousands of
Korean won )
Development
costs
Others
Total
Beginning balance ₩ 30,314,940 ₩ 150,081 ₩ 30,465,021
Acquisition 7,593,587 21,420,865 29,014,452
Amortization (6,880,817) (2,292,167) (9,172,984)
Ending balance ₩ 31,027,710 ₩ 19,278,779 ₩ 50,306,489
The acquisition amount under others represents participation fee for the retail
payment system.
2009
(in thousands of
Korean won )
Development
costs
Others
Total
Beginning balance ₩ 12,352,905 ₩ 160,664 ₩ 12,513,569
Acquisition 17,962,035 50,113 18,012,148
Amortization - (60,696) (60,696)
Ending balance ₩ 30,314,940 ₩ 150,081 ₩ 30,465,021
The Company recognizes amortization as a general and administrative expense.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
41
11. Commitments and Contingencies
(A) As of March 31, 2010, legal actions involving the Company include eight cases
as the defendant with total claims amounting to ₩1,000 million, and six cases
as the plaintiff with total claims amounting to ₩1,065 million, including a
cautionary obligation action. Considering these legal cases and various other
claims and proceedings pending as of March 31, 2010, the Company's
management believes that, although the outcome of these matters is uncertain,
the conclusion of these matters will not have a material adverse effect on the
operations or financial position of the Company.
A fund manager, employed by Daishin Investment Trust Management Co., Ltd.,
a subsidiary of the Company, withdrew ₩16.4 billion from certain funds,
transferred a portion into other funds and misappropriated the rest. Daishin
Investment Trust Management Co., Ltd.’s management estimated ₩39.1 billion
to compensate for the damages and made a provision for damages for ₩17.7
billion, excluding the reimbursed funds, as of March 31, 2010.
The litigation amount the Company may have to pay could depend on the
settlement of the funds, the suits by investors and the outcome of the discussion
with the investors. As of March 31, 2010, in relation to current provision amount,
there are seven cases pending, involving ₩14.84 billion in damages.
As of March 31, 2010, there is a pending litigation involving a subsidiary,
Daishin Investment Trust Management Co. Ltd., which filed a case against My
Asset Investment Management on June 18, 2009, for encouraging illegal activity.
The amount of damages claimed is ₩9,208.7 million plus interest. As of report
date, the effect of the outcome of litigation on the Company’s consolidated
financial statements cannot be reasonably determined.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
42
(B) As of March 31, 2010, the contractual obligations and maximum amounts with
financial institutions as of March 31, 2009, are as follows :
(in thousands of Korean won) Financial Institutions Maximum Limit
Bank overdraft agreements Shinhan Bank and
other banks
₩258,000,000
Short-term borrowing agreements Kookmin Bank ₩100,000,000
Margin finance borrowings Korea Securities Finance
Corporation
₩400,000,000
Margin finance borrowings Korea Securities Finance
Corporation
Limited to amounts
deposited
Working capital borrowings
Korea Securities Finance
Corporation
₩200,000,000
Working capital borrowings Korea Securities Finance
Corporation
Limited to amounts
deposited
Discounted notes Korea Securities Finance
Corporation
₩200,000,000
Discounted notes (subscription) Korea Securities Finance
Corporation
Limited to amounts
subscribed
(C) The Company has provided government and public bonds, and others with a
total face value of \244,600 million as collaterals for reserve for futures
transactions with Korea Exchange and others, and for debt and credit
transactions with Korea Securities Depository and others with a total face value
of \45,000 million. It also provided securities with a total face value of
\134,600 million to Korea Securities Finance Corporation and others as a
margin to customers from KSFC, securities with a total face value of \525
million to a court as performance guarantee in the trust business, and
securities with a total face value of ₩316,100 million to Societe Generale and
others for its derivative transactions.
The Company has provided ₩22,900 million of the time deposits as collateral
for derivative transactions with SC First Bank and others.
(D) As of March 31, 2010, the Company entered into contracts for management
services. Also the Company offered a sales guarantee, amounting to ₩45,200
million, for corporate bonds issued by Bigtrust Salacia Ltd. but not sold on the
date of issue.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
43
12. Deposits from Customers
Deposits from customers as of March 31, 2010 and 2009, are as follows:
(in thousands of Korean won) 2010 2009
Customers’ deposits for brokerage ₩ 825,737,510 ₩ 912,948,663
Customers’ deposits for futures and options
trading 241,863,205 208,052,023
Customers’ deposits for savings 7,536,831 9,107,744
Customers’ deposits for Repo 2,625,978 1,807,051
Customers’ deposits for beneficiary 15,095,997 2,413,290
Others 28,248 14,038
₩1,092,887,769 ₩ 1,134,342,809
13. Borrowings
Borrowings as of March 31, 2010 and 2009, consist of the following:
(in thousands of Korean won)
Annual Interest
Rates (%)
2010 2010 2009
Call money 2.10 ~ 2.19 ₩ 485,000,000 ₩ 280,000,000
Korea Securities Finance
Corporation
4.55 ~ 6.75 292,876,183
129,583,235
₩ 777,876,183 ₩ 409,583,235
14. Debentures
Debentures as of March 31, 2010 and 2009, consist of the following:
(in thousands of
Korean won) Date of issue
Date of
maturity
Annual
Interest
Rates(%) 2010 2009
9-1st Non -
guaranteed
debenture (public) March 27,2009 March 27,2012 6.50 ₩60,000,000 ₩60,000,000
Less : Discount (219,760) (320,002)
₩59,780,240 ₩59,679,998
Debentures are to be redeemed at maturity.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
44
15. Accrued Severance Benefits
Changes in accrued severance benefits for the year ended March 31, 2010, are as
follows:
(in thousands of
Korean won)
Beginning
Balance Increase
Decrease
Ending
Balance
Provision for
severance benefits ₩ 5,647,077 ₩ 1,354,091 ₩ 1,750,816
₩ 5,250,352
Pension plan assets (3,822,759) (869,658) (968,745) (3,723,672)
₩ 1,824,318 ₩ 484,433 ₩ 782,071 ₩ 1,526,680
As of March 31, 2010, 70.9% of the accrued severance benefits of the Company
are funded under defined benefit plans with two financial companies.
Pension plan assets as of March 31, 2010, consist of cash and bank deposits,
securities and others.
16. Monetary assets and liabilities denominated in foreign currencies
Monetary assets and liabilities denominated in foreign currencies as of March 31,
2010 and 2009, and the related gains and losses on foreign exchange translation
for the year ended March 31, 2010, are as follows:
(in thousands of Korean won and foreign currencies)
Foreign Companies Domestic Companies
2010 2009 2010 2009
Account
Foreign
Currency
Foreign
Currency
Amount
Korean Won
Equivalent
Korean Won
Equivalent
Foreign
Currency
Amount
Korean Won
Equivalent
Korean Won
Equivalent
Cash and
cash equivalents
JPY - ₩ - ₩ - 22,107 ₩ 269,191 ₩ 201,331
HKD - - - 2,121 308,957 -
USD 9,436,218 10,670,476 12,654,222 108 121,937 -
Deposits
segregated
under regulation
USD - - - 834 943,061
JPY - - - 1,580 19,236 -
Bonds in
foreign currency
USD
-
-
-
10,346
11,699,813
-
Accounts receivable USD 60,980 68,956 - - - -
Accrued revenue USD 2,976 3,365 51,291 - - -
Guarantee deposits USD 118,619 134,134 163,581 - - -
Deposits from
Customers
JPY - - - 5,022 61,155 4,736
HKD - - - 68 9,944 -
USD - - - 20 22,348 -
Accrued expenses USD 44,044 49,805 68,931 - - -
₩10,926,736 ₩12,938,025 ₩ 13,455,642 ₩ 206,067
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
45
The monetary assets and liabilities of an overseas subsidiary after eliminating
intercompany transactions are translated at the foreign exchange rate in effect as of
the end of the reporting period.
Foreign currency translation gains and losses for the year ended March 31, 2010,
amounted to ₩2 million and ₩321 million, respectively.
17. Shareholders’ Equity
The Controlling Company is authorized to issue 600 million shares of capital stock.
As of March 31, 2010, 50,773,400 shares of common stock, excluding retired
stocks, and 36,000,000 shares of preferred stock have been issued. The capital
stock amounts to ₩434,867 million, including preferred stock of ₩180,000 million.
On September 16, 2002, the Company retired 200,000 treasury shares. Due to the
retirement of its treasury stock, the book value per share of issued shares is
₩5,020 as of March 31, 2010.
As of March 31, 2010, the Company holds 4,888,808 common shares and
4,000,000 preferred shares as treasury stock recorded as a capital adjustment.
18. Retained Earnings and Dividends
Retained earnings as of March 31, 2010 and 2009, consist of:
(in thousands of Korean won) 2010 2009
Appropriated
Legal reserve ₩ 105,873,454 ₩ 97,866,005
Reserve for loss on futures transactions - 120,628
Voluntary reserves 370,000,000 360,000,000
Unappropriated 120,348,817 126,954,596
₩ 596,222,271 ₩ 584,941,229
The Commercial Code of the Republic of Korea requires the Company to
appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash
dividends paid, until such reserve equals 50% of its issued capital stock. The
reserve is not available for the payment of cash dividends, but may be transferred
to capital stock, or used to reduce accumulated deficit, if any, with the ratification of
the Company’s majority shareholders.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
46
Details of year-end dividends are as follows:
(in thousands of Korean won, 2010 2009
except for number of shares)
Number of shares eligible
for dividends
Common stock 45,884,487 45,384,494
Preferred stock 22,599,998 23,799,999
2nd Preferred stock 9,399,998 9,699,996
Dividend amount Common stock ₩ 45,884,487 ₩45,384,494
Preferred stock 23,729,998 24,989,999
2nd Preferred stock 9,399,998 9,699,996
Dividend rate Common stock 20% 20%
Preferred stock 21% 21%
2nd Preferred stock 20% 20%
Dividend payout ratio 86.49% 77.55%
Dividend yield rate Common stock 6.35% 5.88%
Preferred stock 11.01% 14.83%
2nd Preferred stock 11.72% 15.34%
19. Capital Adjustments and Accumulated Other Comprehensive Income
Capital adjustments and accumulated other comprehensive income as of March 31,
2010 and 2009, are as follows:
(in thousands of Korean won) 2010 2009
Capital Adjustments
Treasury stock ₩ (141,131,091) ₩ (139,041,646)
Others (72,189) -
₩ (141,203,280) ₩ (139,041,646)
Accumulated Other
Comprehensive Income
Unrealized gain and loss on
valuation of available-for-sale
securities ₩ 73,186,961 ₩ 57,796,796
Gain and loss on translation of
foreign operations 1,463,623 3,284,278
Unrealized gain on valuation of
equity –method investments 86,943 -
₩ 74,737,527 ₩ 61,081,074
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
47
20. Income Tax
Income tax expense for the years ended March 31, 2010 and 2009, consists of:
(in thousands of Korean won) 2010 2009
Current income tax ₩ 65,314,418 ₩ 7,492,661
Changes in deferred income tax (6,953,013) 7,045,893
Income taxes allocated directly to shareholders’ equity (3,111,345) 7,280,683
Income tax expense ₩ 55,250,060 ₩ 21,819,237
Deferred income taxes allocated directly to the shareholders’ equity are as follows:
(in thousands of Korean won) 2010 2009
Gain and loss on disposal of
the treasury securities ₩ 740,476 ₩ 787,021
Gain and loss on valuation of
available-for-sale securities (4,340,816) 7,158,558
Gain and loss on translation of
foreign operations 513,518 (664,896)
Capital adjustments (others) (24,523) -
₩ (3,111,345) ₩ 7,280,683
The following table reconciles the expected amounts of income tax expense based
on statutory rates to the actual amount of taxes recorded by the Company for the
years ended March 31, 2010 and 2009:
(in thousands of Korean won) 2010 2009
Income before taxes ₩ 148,990,406 ₩ 125,070,582
Income tax based on statutory tax rate ₩ 40,945,962 ₩ 34,368,010
Non-temporary differences (571,077) (246,606)
Additional income taxes for prior years
(Income tax refund) 12,293,493 (4,695,065)
Effect of changes in the statutory tax rate - (3,117,576)
Tax credit for the current year - (5,403,400)
Others 2,581,682 913,874
Income tax expense ₩ 55,250,060 ₩ 21,819,237
Effective tax rate 37.1% 17.4%
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
48
Changes in temporary differences and deferred tax assets (liabilities) for the year ended March 31, 2010, are as follows:
Temporary Differences Deferred Tax Assets (Liabilities)
(in thousands of Korean won)
Beginning Balance
Increase (Decrease)
Ending Balance
Beginning Balance
Increase (Decrease)
Ending Balance
Deferred tax liabilities arising from temporary differences
Accrued income ₩ (16,182,864) ₩ 16,182,864 ₩ - ₩ (3,916,253) ₩ 3,916,253 ₩ -
Gain and loss on valuation of derivatives-combined securities
- (7,725,708) (7,725,708) - (1,869,621) (1,869,621)
Gain and loss on valuation of derivatives-combined securities sold
(733,936,395) 162,341,295 (571,595,100) (177,612,608) 39,286,594 (138,326,014)
Gain and loss on valuation of trading securities (25,375,352) (4,574,635) (29,949,987) (6,140,835) (1,107,062) (7,247,897)
Assets revaluation reserves (69,230,864) - (69,230,864) (16,753,869) - (16,753,869)
(844,725,475) 166,223,816 (678,501,659) (204,423,565) 40,226,164 (164,197,401) Deferred tax assets arising from temporary differences
Loss on impairment of securities 17,495,102 (745,146) 16,749,956 4,233,815 (180,326) 4,053,489 Equity-method investments 14,880,030 45,907,350 60,787,380 3,253,381 9,473,380 12,726,761 Gain and loss on valuation of securities sold 263,882 1,510,400 1,774,282 63,859 365,517 429,376
Allowance for doubtful accounts 28,235 87,645 115,880 6,833 19,385 26,218 Gain and loss on valuation of derivatives-combined securities 225,333,136 (225,333,136) - 54,530,619 (54,530,619) -
Gain and loss on valuation of derivatives 485,460,171 93,714,823 579,174,994 117,481,361 22,678,988 140,160,349
Others 25,735 42,349,575 42,375,310 6,028 2,490,508 2,496,536
743,486,291 (42,508,489) 700,977,802 179,575,896 (19,683,167) 159,892,729
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
49
Deferred tax charged directly to shareholders' equity
Available-for-sale securities (74,098,456) (19,730,982) (93,829,438) (16,301,660) (4,340,816) (20,642,476) Valuation of equity-method investments 7,213,762 (39,277) 7,174,485 1,983,784 (8,641) 1,975,143
Gain and loss on translation of foreign operations (4,210,612) 2,334,173 (1,876,439) (926,335) 513,518 (412,817)
(71,095,306) (17,436,086) (88,531,392) (15,244,211) (3,835,939) (19,080,150)
₩ (172,334,490) ₩106,279,241 ₩ (66,055,249) (40,091,880) 16,707,058 (23,384,822)
Portion not certain to be realized - (9,754,045) (9,754,045)
₩ (40,091,880) ₩ 6,953,013 ₩ (33,138,867)
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
50
Realization of the future tax benefits related to the deferred tax assets is dependent on
many factors, including the Company’s ability to generate taxable income within the
period during which the temporary differences reverse, the outlook of the Korean
economic environment, and the overall future industry outlook. Management periodically
considers these factors in reaching its conclusion and recognized the deferred income
tax asset since all the future (deductible) tax benefits are determined to be realizable as
of March 31, 2010, except for the deferred income tax effects from cumulative temporary
differences of ₩40,313 million, which were related to the valuation of equity-method
investments.
Deferred tax assets and liabilities are computed based the on the difference between the
financial statement carrying amounts and tax bases of assets and liabilities by applying
enacted tax rates in effect in the years in which the differences are expected to reverse.
The enacted income tax rates are 24.2% for the year ended March 31, 2010 and 2011,
and 22% for the year ended March 31, 2012 and thereafter.
As of March 31, 2010, income tax payable and tax refund receivable are ₩65,607
million and ₩5,737 million, respectively.
21. Commissions received
Commissions received for the years ended March 31, 2010 and 2009, are as follows:
(in thousands of Korean won) 2010 2009
Brokerage commissions ₩ 331,473,983 ₩ 272,870,832
Underwriting commissions 9,108,912 3,694,850
Brokerage commissions on collective
investment securities
8,199,198
7,986,865
Commissions on mergers & acquisitions 3,328,832 1,104,455
Sales commissions on derivatives
combined securities
7,455,460
5,888,979
Operating fees 3,370,139 -
Trust fees and commissions received
from trust account
1,180,080
4,277,346
Others 2,748,288 1,670,263
₩ 366,864,892 ₩ 297,493,590
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
51
22. General and Administrative Expenses
General and administrative expenses for the years ended March 31, 2010 and 2009, are
as follows:
(in thousands of Korean won) 2010 2009
Wages and salaries ₩ 93,804,500 ₩ 91,529,112
Severance benefits 9,979,470 10,132,184
Employee fringe benefits 99,081,228 83,081,044
Computer system operation
expenses
23,271,239 22,691,545
Rental expense 7,790,523 7,434,407
Commission expense 23,444,879 20,822,877
Entertainment expense 3,613,589 3,302,623
Advertising expense 21,633,744 5,607,331
Depreciation 27,204,299 23,500,357
Amortization 9,172,985 60,695
Research and study expense - 6,799
Training expense 882,137 1,426,744
Taxes and dues 14,088,125 9,573,947
Business consignment commission 1,142,975 936,792
Sales promotion expenses 18,400 -
Others 20,329,651 22,910,779
₩ 355,457,744 ₩ 303,017,236
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
52
23. Earnings per Share
Earnings per share is computed by dividing net income by the weighted-average number
of common shares outstanding during the year.
Basic earnings per share for the years ended March 31, 2010 and 2009, is calculated as
follows:
(in thousands of Korean won, except for
per share amounts) 2010 2009
Parent interest in net income as reported
on the statements of income ₩ 91,355,531 ₩ 103,251,345
Adjustments
Dividends for preferred stock (38,200,492) (44,532,492)
Difference between the repurchase
amount and carrying amount of the
preferred shares 871,032 1,590,526
Net income available for common stock 54,026,071 60,309,379
Weighted-average number of common
shares outstanding 45,383,222 45,791,649
Basic earnings per share(in Korean won) ₩ 1,190 ₩ 1,317
Diluted earnings per share is identical to the basic earnings per share since there are no
diluted securities outstanding as of March 31, 2010 and 2009.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
53
24. Consolidated Comprehensive Income
Consolidated comprehensive income for the years ended March 31, 2010 and 2009,
consists of:
(in thousands of Korean won) 2010 2009
Consolidated net income ₩ 91,355,531 ₩ 103,251,345
Other comprehensive income
Gain on valuation of available-for-sale
securities, net of related income taxes of
₩4,340,816 thousand
(2009: ₩(7,158,558) thousand) 15,390,165 (4,052,870)
Changes in equity-method investments, net
of related income taxes of ₩24,523
thousand (2009: Nil) 86,943 -
Gain and loss on translation of foreign
operations, net of related income taxes
₩(513,518) thousand (2009: ₩664,896
thousand) (1,820,655) 2,595,030
Consolidated comprehensive income ₩ 105,011,984 ₩ 101,793,505
Parent interest in comprehensive income ₩ 104,671,479 ₩ 101,793,505
Minority interest in comprehensive income ₩ 340,505 ₩ -
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
54
25. Related Party Transactions
Significant transactions with consolidated subsidiary, which have been eliminated during
consolidation, for the years ended March 31, 2010 and 2009, and the related receivables
and payables as of March 31, 2010 and 2009, are as follows:
(in thousands of Korean won) Revenues Expense
2010 2009 2010 2009
Subsidiary
Daishin Investment Trust Management Co., Ltd. ₩ 175,433 ₩ 432,897 ₩1,072,363 ₩ 32,573
Daishin Securities Asia Ltd. 1,795,379 - 1,013,133 -
Daishin-Pegasus I PEF 198,000 118,258 - -
₩ 2,168,812 ₩ 551,155 ₩2,085,496 ₩ 32,573
(in thousands of Korean won) Receivables Payables
2010 2009 2010 2009
Subsidiary
Daishin Investment Trust Management Co., Ltd. ₩ - ₩ - ₩ 1,051,873 ₩23,065,842
Daishin Securities Asia Ltd. - - 68,420 -
₩ - ₩ - ₩ 1,120,293 ₩23,065,842
With the exception of the above, as of March 31, 2010, the Company has ₩572 million
of fee receivables under trust assets, which were accounted separately from the assets
of Daishin Investment Trust Management Co., Ltd. For the year ended March 31, 2010,
the commission income amounted to ₩2,652 million.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
55
Significant transactions with related parties for the years ended March 31, 2010 and 2009,
and the related receivables and payables as of March 31, 2010 and 2009, are as follows :
(in thousands of
Korean won) Revenues Expense
2010 2009 2010 2009
Subsidiary
Daishin Economic
Research Institute ₩ 66,450 ₩ 66,450 ₩ 3,398,560 ₩ 2,862,565
Daishin Champs Elysees Hwit 558,000 558,000 - -
Equity-method Investees
Daishin-MSB I PEF 3 30,608 - - -
Daishin Securities Growth
Alpha SPAC3 1,949 - - -
Others
Daishin Information &
Communication Co., Ltd. 10,899 10,899 3,043,417 3,887,436
Daishin Songchon Culture
Foundation - - 1,000,000 1,000,000
₩ 667,906 ₩ 635,349 ₩ 7,441,977 ₩ 7,750,001
(in thousands of
Korean won) Receivables Payables
2010 2009 2010 2009
Subsidiary
Daishin Factoring Co., Ltd. ₩33,481,704 ₩33,481,704 ₩ - ₩ -
Daishin Economic
Research Institute - - 1,375,660 1,184,905
Daishin Champs Elysees Hwit - - 800,000 800,000
Equity-method Investees
Daishin Securities Growth
Alpha SPAC3 2,000,000 - - -
Others
Daishin Information &
Communication Co., Ltd. - - 231,560 2,343
₩35,481,704 ₩33,481,704 ₩ 2,407,220 ₩ 1,987,248
Number of shares owned, percentage of ownership, acquisition cost, market value or net
book value of the non-marketable investments to related parties are disclosed in Note 6,
Available-for-sale Securities, and Note 7, Equity-Method Investments.
With regard to the above receivables, the Company provided allowances for doubtful
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
56
accounts amounting to ₩33,482 million.
Key Management Compensation
For the year ended March 31, 2010, the Company recognized short-term benefits of
₩3,485 million and severance benefits of ₩235 million as key management
compensation. Key management consists of registered executive officers who have the
authority and responsibility in the planning, directing and controlling of the Company’s
operations.
26. Supplemental Cash Flow Information
Significant transactions not affecting cash flows for the years ended March 31, 2010 and
2009, are as follows:
(in thousands of Korean won) 2010 2009
Unrealized gain and loss on valuation of
available-for-sale securities ₩ 15,390,165 ₩ 4,052,870
Gain and loss on translation of foreign
operations 1,733,712 2,595,030
Reclassification of construction-in-
progress to other accounts 17,826,954 12,805,448
Acquisition of intangible assets 19,620,348 -
Tax effects applicable to gain
on sale of treasury stock 740,476 787,021
Write-off of accounts receivable 816,190 116,342
Write-off of accrued income 362,424 13,707
In accordance with the new Interpretations & Opinions of the Financial Supervisory
Service, the Company reclassified cash flows from available-for-sale securities
transactions as cash flows from investing activities, instead of cash flows from operating
activities, while cash flows from collective fund for default loss was reclassified from cash
flows from investing activities to cash flows from operating activities. The Company’s
statement of cash flows for the year ended March 31, 2009, has been restated to reflect
above changes.
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
57
27. Supplementary Information for Computation of Value Added
The accounts and amounts, included in general and administrative expenses and
development costs, needed for computation of value added for the years ended March
31, 2010 and 2009, are as follows:
General and administrative
expenses Development Costs
Total
(in thousands of
Korean won) 2010 2009 2010 2009 2010 2009
Wages and salaries ₩93,804,500 ₩91,529,112 ₩ 428,710 ₩1,022,009 ₩94,233,210 ₩92,551,121
Severance benefits 9,979,470 10,132,184 - 136,579 9,979,470 10,268,763
Employee fringe benefits 99,081,228 83,081,044 - - 99,081,228 83,081,044
Rental expenses 7,790,523 7,434,407 - 93,642 7,790,523 7,528,049
Depreciation 27,204,299 23,500,357 - - 27,204,299 23,500,357
Taxes and dues 14,088,125 9,573,947 - 8 14,088,125 9,573,955
28. Securities in Custody and Borrowing Securities
As of March 31, 2010 and 2009, the securities in custody which are owned by the
customers are as follows:
(in millions of Korean won) 2010 2009
Trustor securities in custody ₩ 14,780,728 ₩ 12,795,081
Saver securities in custody 34,341 43,545
Beneficiary securities in custody 3,388,862 2,496,553
Others - 5,162
₩ 18,203,931 ₩ 15,340,341
As of March 31, 2010 and 2009, borrowing securities are as follows:
(in thousands of Korean won) 2010 2009
Borrowing securities ₩ 37,086,360 ₩ 256,900
The Company has provided government and public bonds and others as collaterals for
the borrowing securities to Korea Securities Depository and others.
29. Preparation for the adoption of K-IFRS
Daishin Securities Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2010 and 2009
58
(1) Preparation and implementation of IFRS adoption
The Company is required to prepare its financial statements in accordance with the
Korean International Financial Reporting Standards (K-IFRS) starting 2011, based on the
roadmap on the adoption of International Financial Reporting Standard announced in
March 2007. In this regard, the Company has appointed an advisory organization for the
preliminary analysis and impact assessments over the Company’s current accounting
policies and financial reporting processes.
At the end of September 2009, during the second phase, the Company updated the
accounting infrastructure and the related process for the system implementation. At the
end of March 2010, the Company completed the system implementation after three
months of testing. The Company expects to prepare its financial statements under the K-
IFRS after April 2010. The significant developments in the adoption of K-IFRS are
reported to the Company management.
(2) Significant differences in accounting policies
If the Company prepares financial statements in accordance with K-IFRS, certain areas
such as consolidation scope, hybrid instruments, bad debts allowance, revenue
recognition, employee benefits, and fair value of financial instruments will be significantly
different from the financial statements in accordance with the current Korean GAAP. The
reconciliation of the effects is subject to change following any subsequent GAAP
difference analysis.