HYUNDAI SECURITIES ANNUAL REPORT 2009 · HYUNDAI SECURITIES ANNUAL REPORT 2009. 04 Major...

HYUNDAI SECURITIES ANNUAL REPORT 2009

04 Major Achievements

05 Hyundai Securities Awards

06 Message from CEO

08 Board of Directors

10 Innovative Pathfinder for all QnAs

12 Renovative one on one C&C

14 Glocalization over Globalization

16 Vision and Strategy

17 Review of Operations

26 Financial Section

114 Organization Structure

116 International Locations

CONTENTS

The Power of Hyundai Securities… the Pride that has led the

history of Korea’s securities market over the past 47 years.

The world can witness the power of Korea through the

insights and thrust of Hyundai Securities, which broke

through the crisis of the IMF period. Backed by such efforts,

Korea has continued on its path of growth even as advanced

economies faced difficulties during the global financial crisis.

Now, the Pride of Hyundai Securities looks even further

beyond. Not content to modestly remain Korea’s leading

securities company, Hyundai Securities will embark on a

journey to become global Hyundai Securities.

‘Korea’s representative investment bank

competing with global investment banks’

Hyundai Securities set the vision of establishing the No. 1

Financial Brand in Korea by 2020 and Joining the Top 10 in

Asia and Emerging Markets. Hyundai Securities will grow into

a company that competes with global investment banks, by

lining up top talent both in and out of Korea for customers

around the world in each and every business sector, as it

leaps forward to become a most capable investment bank in

terms of both scale and internal stability. ‘Korea’s

representative investment bank competing with global

investment banks’is the pride that hyundai securities will

boast.

03

Major Achievements

04

2006

2006.04 “Hyundai Hero Deposit-type RP”won

the marketing excellence award of the

Korea Economic Daily.

2006.11 Won Korea Stock Excellence Award,

an industry excellence award

2006.12 2006 Korea Internet Excellence Award

2007.01 Hyundai Securities opened more than

100,000 CMA accounts, worth

1 trillion won.

2007.02 Credit rating on Hyundai Securities

was lifted to A+

2007

2007.05 Hyundai Securities IB signs ＼1.7 trillion

MOU for composite complex development

2007.07 Hyundai Securities issues ＼150 million in

ABS for small and medium businesses

2007.07 Hyundai Securities invests in Japanese

commercial real estate

2007.10 Hyundai Securities signs general business

partnership MOU with Chinese firm

Goutai Junan Securities

2007.11 Hyundai Securities opens office in

Ho Chi Minh City, Vietnam

2007.12 Hyundai Securities exceeds 0.3 million

CMA accounts and balance of ＼3 trillion

2007.12 Hyundai Securities advances into Kazakhstan.

First among Korean securities companies,

received approval for a representative office

2008

2008.04 Hyundai Securities opens office

in Almaty, Kazakhstan

2008.06 Hyundai Securities customer

satisfaction center selected best call center

2008.06 Launched overseas

Home-Trading-System(HTS)

2008.09 Ho Chi Minh office plays lead

manager for the first time

200809 MOU Signed with RFCA in Kazakhstan

2008.10 Hyundai Securities’

“fund fundamental index”first in industry

2008.12 Sharing warmth activities regarding

corporate social responsibity

2009

2009.07 No 1. In 1st Half IPO Underwriting

Performance

2009.07 Hyundai Asset Management was Launched

2009.09 Hyundai Securities donated 700 Computers

to Elementary and Middle Schools

in the Philippines.

2009.11 Hyundai Securities formed a real-time

foreign exchange service business tie-up

with the Korea Exchange Bank.

2009.11 Hyundai Securities opened a real-time loan

transaction system available for sales.

2009.12 Hyundai newcomers,“We’ve learned the

corporate culture of sharing!”

2009.12 Hyundai Securities started exchange-traded

derivatives sales in the domestic market.

05

2006 YouFirst Award

8th Hankyung Marketing Grand Prize

Korea Economic Daily

Korea Internet Grand Prize

Korea Internet & Security Agency

2006 Money Today Advertisement Grand Prize

Money Today

Ranked 1st in Online Trading Service

Stockpia

Customer Satisfaction Mgrnt Grand Prize


2007 YouFirst Award

Korea Quality Brand Grand Prize


Internet Marketing Grand Prize

Hangyeore

Money Today Advertisement Grand Prize

Money Today


Stockpia

Ranked 1st Securities Company in

corporate image

University News Network

2008 YouFirst Award

Customer Satisfaction Management Grand Prize


2008 Internet Marketing Grand Prize

Donga.com

Best IPO Grand Prize

Korea Herald

Grand Prize in Social Contribution

University News Network

2009 YouFirst Award

Customer Satisfaction Management Grand Prize


Grand Prize in financial products service

innovation (by Financial Supervisory Service)

Money Today


Stockpia

Hyundai Securities Awards

Dear shareholders and investors,

In fiscal year 2009, the global financial crisis, triggered by the

subprime mortgage in the U.S. and the bankruptcy of a global

investment bank, was gradually stabilized through liquidity

supply from central banks all over the world and various

governments’aggressive public stimulus packages. The

domestic economy and stock market also showed signs of

recovery, and the KOSPI index, which started the year at

1,214.06, increased by 39.4% year-over-year to end the year at

1,692.85. Backed by this recovery in the securities market, our

net operating revenue in 2009 rose by 20% year-over-year to

KRW618.4bn, and earnings before tax increased by 24% year-

over-year to KRW250.5bn. Earnings before tax, which had us

ranked sixth in the securities industry in fiscal year 2007, were

fourth-best in the industry in 2008, a position we continued to

hold during the difficult year of 2009. By business sector,

brokerage marked No. 2 and wealth management ranked No. 3

in the industry, proving our powerful competitiveness in the

brokerage and capital market businesses.

In terms of profit structure, in fiscal year 2008, the

composition of brokerage vs. non-brokerage was 49.8%:

50.2%. The 2009 composition of brokerage slightly rose to

54.5% : 45.5%, leaving profit structure diversification as an

unresolved task during the year.

Dear respected shareholders and investors,

In fiscal year 2010, it is expected that exports will increase and

company performance will improve as the global economy

gradually enters the recovery stage. Furthermore, as the

domestic economy recovers and the KOSPI is pushed forward

to be included in advanced indices such as the MSCI and WGBI,

further bases are expected to be formed for the additional

influx of global investment funds in the domestic capital

market.

On the other hand, it is expected that competition within the

financial investment industry will only become fiercer against

the following backdrops: if exit strategies start to be executed

in full swing all over the world, it is still possible that capital

market funds may get out of the market; in just one year after

the enforcement of the Capital Market Act, securities

companies are working hard to reach breakeven points in new

businesses such as FX margins, domestic, international

futures business, payment settlement services, etc. which they

started last year; and newly established bank-based and

industrial fund-based securities companies are also pushing

forward with their sales more aggressively.

Most of all, as large securities companies, which have been in

oligopolistic competition arrangements in the brokerage

market, enter the low-commission market, the downward

rigidity of commissions has started to collapse, and the

profitability of the wealth management market has become

aggravated with the introduction of the movement system of

fund sales companies and the upper-limit system of sales

commission, etc., ultimately bringing the financial investment

industry into the turmoil of excessive competition.

Amid such competition and change, Hyundai Securities will

prepare the grounds for sustainable growth by further

cementing our competitiveness in the existing business areas

in which we retain a competitive edge, advancing our profit

structures by complementing weaker sectors, and realizing

considerable business performance in new businesses and

global sectors. To achieve these goals, we will push forward

with the following priority tasks in fiscal year 2010.

First, we have set our management goal of making this

year the original year of diversifying profit sources. To

achieve this goal, we will reassess our business model

from the beginning from the point view of company as a

whole, enhance the organizational structure of the core

businesses that possess both profitability and growth

potential to double our competitiveness, and reorganize

the structure of future business areas with strong growth

potential, so that capacity can be focused on a company-

wide scale. We will also focus our resources on more

profitable future business areas while maintaining

06

Message from CEO

07

competitiveness by reviewing the business avenues from

the aspects of profitability and growth. In addition, based on

this business reassessment, the company-wide business

support system will be reshuffled in terms of resource

allocation, with changes made to organizational structure,

budget, manpower, and the establishment of IT

infrastructure, etc.

Second, we will innovate in all policies and systems by

putting first priority on the smooth communication between

sales and sales operations. Operating revenue of a financial

company is the main source of profit, as it is directly related

with operating profits. Such operating revenue is first

generated at the sales sites. Therefore, I will exert my

utmost this year to make Hyundai Securities “a Securities

Company with Strong Sales Power”by putting more

emphasis on the sales sites, the forefronts of profit

generation. All executives, including myself as the CEO, will

undertake a range of initiatives by working at the forefront

of sales. Managerial employees will innovate all policies and

systems by closely listening to voices from the sales sites.

Based on this, all sales-related employees will endeavor to

focus on sales by working hard. We will do our best to

realize a sales-oriented corporate structure by reflecting

the voices of sales employees in all management sales

support systems, such as budget allocation, performance

compensation, sales model development, customer

management, product development, advertisement, and IT

infrastructure establishment, etc.

Third, each business will set new goals and work hard to

secure competitiveness and capabilities. The brokerage

business shall strongly push forward with sales by

harmonizing sales propulsion, customer strategy, and

content development, etc. emerging as the unparalleled

leader in the industry. The wealth management business

will innovate all systems and infrastructure to become more

customer-based, growing to become the powerhouse of

wealth management, incorporating fund sales company

movement and a payment settlement service. The Capital

Market business, including equity and bond proprietary

trading, and derivatives, etc. is a major profit source for the

company, as it was in the previous year. Therefore, this

year, the capital market business will flexibly hedge

depending on the market situation to maintain a certain

level of return on shareholders’equity for the company.

The investment banking business will exert its efforts in

sales to achieve better performance levels than in the

previous year by actively advancing into new markets such

as overseas initial public offering(IPO) and special purpose

acquisition company(SPAC).

Fourth, we will support all our executives and employees so

that they can grow as top specialists with clear goal-

oriented minds in their respective fields. Despite repetitive

everyday sales and other work tasks, employees with clear

goals and those without them will be set further and further

apart in terms of leading and absorbing work. Consequently,

their attitudes will affect the professionalism of employees,

not to mention of the performance of the company. For

employees themselves as well as the company, we will do

our best to implant a goal-oriented consciousness and to

bring motivation to make them top specialists in their

respective fields. Through these efforts, our company will

eventually sit at the top of the financial investment industry.

Dear respected shareholders and investors,

Although the global economy and the Korean economy are

forecast to see more or less positive growth, the forecast of

our management environment seems more opaque than in

any other year, given the movement of securities market

funds caused by a decrease in foreign exchange, and an

increase of interest, money movements among banking-

securities-insurance industries, competition expansion

following policy changes and deregulation, and cut-throat

competition in the financial investment industry. Having

shown an ability to overcome crises, Hyundai Securities

promises that all of our employees and executives will make

fiscal year 2010 a successful year in which Hyundai

Securities becomes a company that is loved and respected

by all of its investors, clients, and employees, growing as

Korea’s leading financial investment company by leading

the change, not just adapting to it. I wish happiness, good

health, and achievement to all the shareholders, clients, and

their families in 2009. Thank you.

Kyung-soo ChoiChief Executive Officer

08

Board of Directors

Hyundai Securities strives for responsible, ethical, and transparent management based

on an advanced corporate governance system implemented by the board of directors.

The board of directors consists of five outside directors and four corporate directors

with extensive experience and expertise in finance, economics, management, legal

affairs, and international practical experience. They provide guidance for righteous

management in the internal decision making of Hyundai Securities and suggest strategic

directions for its business operations.

Providing

Guidance

for Righteous

Management

Hyun, Jeong EunDirector | Chairman of the Board

Choi, Kyung SooDirector | President and Chief Executive Officer

01

Chung, Hang kiDirector | Managing Director

Lim, Seung Cheol Director | Auditor

0302

Lee, Chul SongCorporate Director | Auditor

Kim, Byung BaeCorporate Director

0504

01

02 03

09

The board of directors is making concerted efforts to maximize corporate value and

shareholder value through rational decision-making, while being mindful of the benefits

and interests of its shareholders, in order to achieve its vision of becoming ‘Korea’s

representative investment bank competing with global investment banks.’ In addition,

the board shall put its best efforts into bringing the future of Hyundai Securities as a

financial leader with advanced financial services on step closer.

Ahn, Jong Bum Corporate Director

Cho, Jin WanCorporate Director | Auditor

0706

08Park, Kwang Chul Corporate Director

04 05 06

07 08

10

11

INNOVATIVE PATHFINDER FOR ALL QNASHyundai Securities has not stopped exploring growth engines

with new concepts that change crisis into opportunities in a

financial environment where crises and opportunities coexist.

The industry’s first attempts made under the name of

Hyundai Securities, far-reaching insight for the future and

flexible handling, and various product line-ups that optimize

the wealth management of clients all prove the strong pride

of Hyundai Securities, pursuing the ‘Best.’Hyundai

Securities continues to take these powerful steps by

practicing sustainable management with unchallengeable

creation and innovation.

12

13

RENOVATIVE ONE ON ONE

The power of predicting the future, accurate judgment of situations,

and the ability to deal swiftly with change are core energies that

make Hyundai Securities strong. Inexorable truth can be provided by

any company, not only by Hyundai Securities. However, greeting

today differently from yesterday, Hyundai Securities prepares for a

tomorrow that is different from today. Renovate your wealth

management through the customer tailored one-to-one C&C

(Choice & Care) service of Hyundai Securities that represents the

best in customer satisfaction.

14

15

GLOCALIZATION OVERGLOBALIZATIONHyundai Securities meets the varied financial needs of global clients

through glocalization, beyond the globalization. Having advanced to

the major international financial hubs of New York, London, Hong

Kong, Tokyo, and Shanghai, Hyundai Securities has secured global

profit sources by fostering bases of overseas local corporations, and

is now striving to create synergy in various business areas by linking

with headquarters. On par with global level services by hiring global

talent as well as developing individual products that conform to the

characteristics of each region, Hyundai Securities is not far from

emerging as one of leading securities companies in the world.

16

Korea’s Representative Investment

Bank Competing with Global

Investment Banks

Establishing the No. 1Financial Brand in Korea

Global Top 10 in Asia∙Emerging Markets

Vision and Strategy

● Enhance brokerage profitability through expanding off-line sales capabilities

● Develop new products such as Wrap, pension, and increase the asset - client base through the

differentiation of wealth management services

● Maximize principal investment (PI) profits through both elastic market response and risk management

● Expand bond business scope, including overseas bond brokerage, sales of underwriting bonds,

and retail bonds

● Secure a new IB growth engine by expanding Cross-border initial public offerings

Vision 2020

Strategy

Action Plan by Business

REVIEW OF OPERATIONS

17

- Leading Player in Korea

- Diversified Revenue Structure with Sustainability

- Competitiveness in Brokerage

- Strengthening Wealth Management business

- Enhancing Revenue Structure by Proprietary Trading performance

- IB business Expansion over Asia and Emerging Market

- Step forward to the leading Investment Bank

18

A large Securities Company creating top-class profits, with

the largest scale of shareholder equity, largest sales

network, and largest number of employees in the industry

Hyundai Securities is Korea’s representative large securities company with

KRW 2.4tr in shareholder equity, KRW 11.8tr in assets, 146 sales network

in and out of Korea, and 2500 employees. Hyundai Securities has firmly

maintained its position as a total investment bank, possessing

competitiveness in each of the business areas of brokerage, which

traditionally has been strong, wealth management, trading, investment

banking, etc. To note, we ranked 4th in the industry in the major

profitability indicators in fiscal year 2009, with KRW 251.4bn in earnings

before tax and KRW178.9bn in net income. In sales, we are currently

ranked 2nd in the industry with a retail market share of 6%. While

maintaining the top spot in the industry in scale, profitability, and sales,

Hyundai Securities strives to become a Top 3 investment bank in 2010

based on our strong sales-oriented policies.

LEADING PLAYER IN KOREA

19

Establishing a Sustainable Management System by

Advancing the Revenue Structure with the Expansion of the

Revenue Portion of Commodity Management, Wealth

Management, Investmant Banking

Hyundai Securities has been maintaining a stable growth trend for three

consecutive fiscal years, recording KRW 699.4bn in net operating revenue

in fiscal year 2009, a 20% year-over-year increase. Considering the

composition trend of net operating revenue, that represented by brokerage

decreased to a low level of 50%, while commodity management increased

almost up to the 30% level, showing our improving business structure

centered on brokerage, where profits fluctuated following the market

situation in the past. Going forward, we will establish a sustainable

management system by continuously advancing Hyundai Securities’

revenue structure by raising the revenue proportion of investment

banking and wealth management up to the 10% levels, respectively,

along with commodity management.

DIVERSIFIEDREVENUE STRUCTURE WITHSUSTAINABILITY

20

Possessing a Brokerage Competitive Edge Based on

Solid Customer Base and Top-of-the-Industry On/Off-

line Sales Capabilities

With a solid customer base and a top-level offline sales capacity,

Hyundai Securities has traditionally been regarded as a powerhouse in

brokerage. Hyundai Securities maintained the 2nd spot in the industry in

retail market share, online and offline channel market share in fiscal

year 2009, and average commission rates easily surpassed the industry

average. As such, Hyundai Securities is leading the industry in both

quantitative and qualitative terms. Based on our IT capabilities with top-

notch technology, we provide an optimum online investment

environment to our customers. Furthermore, we will firmly maintain

our top position in the industry and earn the trust of investors of all ages

by maintaining our service competitiveness in brokerage and set new

trends in areas such as the establishment of a sales environment

through smart phones and the provision of investment consulting by top

specialists.

COMPETITIVENESS

IN BROKERAGE

21

Expanding the Brokerage Sales Base through

Customer Asset Increases by enhancing the sales of

wrap account, retirement pension, equity linked

securities, collective investment securities, etc.

QnA is the wealth management brand of Hyundai Securities that was

launched with great passion. Hyundai Securities’customized financial

solution, which can be represented by the C&C (Choice & Care) service,

offers a model that is optimized for the customers’investment styles and

asset bases among funds, WRAP, bonds, ELS/DLS, retirement funds, and

collective investment securities. By reproducing the honor of the past in

the Buy Korea era, Hyundai Securities will emerge as a wealth

management powerhouse.

STRENGTHENING

WEALTHMANAGEMENT

BUSINESS

22

With KRW 2.3tr in principal, Hyundai Securities is expanding trading as amajor revenue source along with commission revenue to improve arevenue structure mainly centered on commissions. We activelyadvance our revenue structure while enhancing profitability based onour management know-how, combined with Hyundai Securities’globalfinancial infrastructure, specialists in each product areas, and the top-class risk management system in the industry.

ENHANCINGREVENUE STRUCTURE BYPROPRIETARY TRADING

PERFORMANCE

23

Possessing a worldwide branch network even in emerging markets,including in Ho Chi Minh and Almaty, not to mention global financialhubs such as New York, London, Hong Kong, Tokyo, and Shanghai,Hyundai Securities has accumulated a proven track record ininvestment banking, especially in areas of funding, initial publicofferings, and mergers and acquisitions. This is based on a wide globalcustomer base and deep trust in the company both in and out of Korea.By utilizing our international investment banking know-howaccumulated for decades, Hyundai Securities will raise the stature ofHyundai Securities investment banking in Asia and emerging markets.

IB BUSINESSEXPANSION OVER ASIA ANDEMERGINGMARKET

24

Underpinned by the market dominance of

brokerage sales, Hyundai Securities is

growing as a large investment bank that

possesses the capabilities of the top

three in the industry in all our business

areas, including principal investments,

wealth management, investment

banking, derivatives, retirement pension,

overseas business, and new business. To

reproduce the honor of the unparalleled

No. 1 era in the past, Hyundai Securities

fosters and invites top talent and

executes strategies to change its

organizational structure so that it can

harmonize profitability, growth, and risk

management. In the brokerage business,

our major revenue source, we will

continue to enhance the competitiveness

of our offline channel through the

expansion of superior customer service

and efficient branch operation, while

maintaining our loyal customer base. In

addition, as the proportion of the online

channel of young people grows, Hyundai

Securities is working to secure new

customers and expand its mid- to long-

term sales base by developing online

services tailored to the tastes of

customers in a range of age groups. In

the wealth management business, which

has become our major revenue source

along with brokerage, we flexibly adjust

the management scale of equities and

bonds by responding to financial market

indicators and reshuffling the

management system to outperform the

market. We actively practice portfolio-

diversified investment by expanding our

investments in low-value, sound assets

and also practice alternative investments

such as real assets, as well as equities

and bonds. Furthermore, we will

prioritize our list management through

monitoring and hedges in the fast-

changing financial market, and we will

maximize the profitability of the principal

investment and do our utmost to achieve

the highest-level return on

shareholders’equity in the industry.

In terms of revenue source

diversification, Hyundai Securities will

actively foster wealth management and

investment banking businesses. In

wealth management, we are enhancing

our wealth management capabilities

through best program education offered

through cooperation with a foreign

STEP FORWARD TO THE LEADING INVESTMENT BANK

25

consulting company. We continue to

secure our potential wealth management

customers by applying our proudly

launched QnA and Choice & Care wealth

management services to customers of our

competitors. In addition, we will

considerably expand our wealth

management assets by enhancing the

productability of cash management

account, accumulative funds, etc. and

providing new wrap services such as high-

profit wrap products. In the investment

banking business, we continue to enhance

our underwriting capabilities by practicing

total financial consulting in our areas of

strength, such as corporate bonds,

structured bonds, capital increases, initial

public offerings, etc. We plan to foster the

overseas investment banking sector by

strengthening sales and inviting promising

companies in China, Japan, and Southeast

Asia to list on the Korea Stock Exchange.

Furthermore, we will work hard to secure

a solid track record to participate in large-

scale mergers and acquisition deals by

actively exploring mid- to large-size

mergers and acquisition deals and

practicing private equity fund (PEF)

operations. To secure the mid- to long-

term growth engine of Hyundai Securities,

we are actively expanding various new

business areas and increasing the

proportion of overseas business. We strive

to capture early markets by advancing into

the futures business, including foreign

exchange (FX) margin trading, and

enhancing the business synergy between

securities and asset management

companies with the establishment of a

separate asset management company. In

addition, we deal with the demands of

various institutional investors by

expanding our prime brokerage services,

such as stock rental services. We will also

actively foster a next-generation growth

engine in the retail sector by expanding

cash management account (CMA) linked

products and services, such as small cash

settlements, credit cards, etc.

Having entered into seven advanced

countries and emerging markets,

including New York, London, Hong Kong,

Tokyo, Shanghai, Ho Chi Mimh, and

Almaty, Hyundai Securities will become

equipped with a structure that can fully

compete with global investment banks by

focally growing each overseas branch

through differentiated strategies by base.

We plan to make our Hong Kong

corporation our global business frontier

base for Hyundai Securities for all

overseas principal investment and

investment banking investments,

specializing in Asia ∙ emerging markets.

Along with the strategies of each business,

Hyundai is dedicated to fostering talent

and securing top-class manpower. We

strive to enhance our specialties and

cultivate a core talent pool by developing

employee careers through a systematic

education system that supports domestic

and overseas MBA programs and 600-plus

on/offline education programs. In addition,

we will place our priorities on wholesale

and retail sales by raising our research

poll ranking and enhancing brand value,

securing industry-best research

capabilities. We will provide the best in

differentiated services to our customers,

based on the best in information

technology (IT) credibility, by continuously

pushing forward with system

sophistication for complex financial

business areas.

26

FINANCIALSECTION● MANAGEMENT’S DISCUSSION & ANALYSIS

● INDEPENDENT AUDITORS’REPORT

● NON-CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

● NON-CONSOLIDATED STATEMENTS OF INCOME

● NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF RETAINED EARNINGS

● NON-CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

● NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

27

2,863

2,608

255

24

28

251

179

11,845

9,406

2,439

7.6%

578%

170,000,000

15,074

1,052

400

13,600

2,496

140(7)

As of the year ended March

Operating Results

Operating revenues

Operating expenses

Operating income

Non-operating income

Non-operating expenses

Pretax income

Net income

Financial Condition

Total assets

Total liabilities

Shareholders' equity

Return on average common shareholders' equity

Net Capital Ratio

Common Share Data

Number of outstanding shares

Book value per share (KRW in Won)

Earnings per share (KRW in Won)

Dividends declared and paid per common share (KRW in Won)

Fiscal year end stock price

Selected Data

Total Employees

Branches(overseas)

(KRW in billions)

2,934

2,736

198

12

7

203

149

10,644

8,364

2,279

6.6%

648%

170,000,000

14,089

878

250

11,400

2,505

141(7)

2,967

2,705

187

13

18

257

187

8,900

6,641

2,259

9.9%

616%

170,000,000

13,677

1,338

450

15,450

2,545

140(7)

FY2008 FY2007FY2009

Financial Highlights

BrokerageBuoyed by increases in turnover and market share, brokerage

revenue increased by 31% year-over-year and market share

increased by 3.4%p and 1.2%p based on stock brokerage and

commission income, respectively.

Wealth ManagementDespite a poor indirect investment market environment and the

fund redemption trend, the balance of collective investment

securities, trusts, and WRAPS of Hyundai Securities continued to

rise. Revenue from wealth management rose by 2% year-over-

year due to increases in commissions from collective investment

securities and trusts.

Investment BankingBacked by the favorable performance of initial public offering

(IPO) and debt capital markets (DCM) sectors, revenues from

the investment banking (IB) business improved by 35% year-

over-year, continuously increasing its contribution to the

company.

Proprietary TradingProprietary trading revenue hiked by 30% as equity and bond

management realized favorable results through the

simultaneous application of management scale adjustments

depending on the market situation, and the composition of

appropriate portfolio and list management. The proprietary

trading business continues to grow as a major revenue source

for Hyundai Securities, along with the brokerage business.

Total

699.4

381.1

26.6

24.4

195.7

69.1

2.6

4Q

181.1

80.1

6.8

4.2

72.9

16.1

1.0

3Q

126.9

70.6

6.4

5.4

25.1

18.0

1.4

2Q

176.9

108.3

6.8

4.7

40.1

17.0

0.0

1Q

214.6

122.1

6.6

10.0

57.6

18.0

0.3

Total

584.7

291.0

26.2

18.0

150.0

99.5

-0.2

4Q

158.5

75.2

4.5

5.8

52.4

20.8

-0.1

3Q

205.0

78.6

4.7

4.1

92.5

26.4

-1.3

2Q

86.0

60.1

7.0

1.7

-9.8

25.8

1.2

1Q

135.2

77.1

10.0

6.3

14.9

26.5

0.3

43%

13%

6%

-22%

190%

-11%

-21%

20%

31%

2%

35%

30%

-31%

흑전

NOI

BK

WM

IB

Prop.Tr.

Finance

Others

(KRW in bn)

FY2009 FY2008QoQ YoY

Management’s Discussion & Analysis

28

1. Major Results of Operations

With the revenue increases of brokerage and proprietary

trading, our major revenue sources and favorable results

in wealth management and the investment banking

business, Hyundai Securities’operating income recorded

KRW 255.2bn in fiscal year 2009, up by 29% from KRW

198.4bn in the previous year. Earnings before tax rose by

24% year-over-year to KRW 251.4bn.

Selling and administrative expenses edged up 25% year-

over-year, mainly because of the expansion of information

technology investment for new business enhancement,

which includes advertising expenses for sales

enhancement, the introduction of the small cash

settlement system, and the promotion of effective budget

management from companywide total cost reduction

(TCR) enhancement.

Net Operating Revenue

753 1,984

340 38

929

688 2,552

1,049

650164

YoY +29%

QoQ +319%

(KRW in 100mil)Operating income

FY2008 FY2009

1Q 2Q 3Q 4Q FY08

1,585 5,847

1,352

860

2,050

1Q 2Q 3Q 4Q FY09

1,811 6,994

2,146

1,7691,269

YoY +20%

QoQ +43%

(KRW in 100mil)Net Operating income

Brokerage

3,811

2,911

Wealth Mgmt.

266262

IB

244180

Prop. Trading

1,957

1,500

Finance

691995

(KRW in 100mil)NOI by businesses

784 2,027

359 38

922

722 2,514

1,056

589147

YoY +24%

QoQ +391%

(KRW in 100mil)Pre-tax income

832 3,863

1,012

898

1,121

1,123 4,442

1,096

1,119

1,104

YoY +15%

QoQ +2%

(KRW in 100mil)SG & A

1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q FY09

1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q FY09

1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q FY09


29

Net operating revenue increased by 20% year-over-year to KRW 699.4bn in fiscal year 2009. Net operating revenue can be

broken down as follows: investment banking, brokerage, proprietary trading businesses all showed excellent performances,

with increases of 35%, 31%, and 39%, respectively. However, interest income decreased by 31% compared with last year,

mainly due to the interest rate drop.

In terms of net operating revenue composition ratios,

brokerage rose by 4% to 54%, mainly due to increases in

trading value and brokerage commission rates. As a result

of our continuous efforts in business diversification and

revenue structure, the composition ratio of brokerage slid

by 14%, however, that of proprietary trading further

expanded to 28%, up by 20% compared with that of fiscal

year 2005 (8%), through active proprietary trading and

rigorous risk management. Such revenue source

diversification efforts of Hyundai Securities will continue to

create stable revenues in the future and eventually form an

advanced business structure as the revenue contributions

of wealth management, investment banking, and principal

investment business areas continue to rise.

FY05 FY06 FY07 FY08 FY09

(KRW in 100mil)NOI breakdown

68%

5%2%

16%

8%

59%

8%2%

25%

62%

7%2%

18%

11%

50%

4%3%

17%

26%

54%

4%3%

10%

28%

2. Operating Results by Business

Brokerage

752 2,910

771

601

786

801 3,811

1,221

1,083

706

YoY +31%

QoQ +13%

(KRW in 100mil)Brokerage income

1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q FY09

The daily average turnover was KRW 8.4tr in fiscal year

2009, up 27% from KRW 6.4tn year-over-year. The

brokerage revenue of Hyundai Securities rose by 31%,

backed by the market share increase that outperformed the

increase rate of turnover.

Brokerage Wealth Mgmt. IB

Interest Prop. Trading

4%


30

The market share based on brokerage commission income

inched up in fiscal year 2009 by 1.2% (17%) to 8.17%, from

6.97% in the previous year. This is second in the industry

and was mainly achieved by the fact that Hyundai Securities

maintained relatively high commission rates based on our

brokerage competitiveness amid the overall descending

trend of brokerage commission rates.

FY06 FY07 FY08 FY09 1Q 2Q 3Q 4Q

(KRW in tr)Market share (turnover)

7.21% 7.47%6.97%

8.07% 8.14% 8.15% 8.17%

YoY +1.2%P

Market share(commissions)

FY06

‘08.1 3 6 9 ‘08.12 ‘09.3 6 9 12 ‘10.3

FY07 FY08 FY09 1Q 2Q 3Q 4Q(E)

5.25% 5.12%5.00% 4.33%

5.37%5.64%

6.18% 6.74%7.62%

8.52%

12

10

8

6

4

2

-

The brokerage market share in fiscal year 2009 was 8.52%,

up 2.88% (51%) year-over-year from the 5.64% in the

previous year. This was made possible with the increase of

turnover. Equity-linked-warrants market share increase

with the recovery of the stock market. The monthly market

share as of end-March 2010 was 8.52% after a sharp

increase backed by active trading of individual customers,

since recording 5.64% at end-April 2009. With the explosive

growth of the equity-linked-warrants market, we expanded

our equity-linked-warrants market dominance based on

our information technology infrastructure and sales power,

greatly contributing to the market share expansion.

Brokerage income

Turnover(on) Turnover(off) Commissions(on) Commissions(off)

Market share(turnover)

5%

10%

85%

5%

9%

87%

4%

10%

86%

3%

8%

89%

3%

7%

90%

2%

6%

91%

3%

4%

94%

Overseas Domestic Retail

FY06 FY07 FY08 FY09 1Q 2Q 3Q 4Q FY06 FY07 FY08 FY09 1Q 2Q 3Q 4Q

Avg. daily turnover Hyundai Market share


62%

38%

63%

37%

65%

35%

69%

31%

70%

30%

76%

24%

80%

20%

44%

56%

41%

59%

46%

54%

47%

53%

48%

52%

48%

52%

51%

49%

31

Looking at the proportions of online/offline channels, both

the proportions of online channel brokerage and

commission rose by 15%, 5% each year-over-year with the

primary market recovery from the first quarter of fiscal

year 2009. The portion of equity-linked-warrants individual

investors increased. Despite the decrease of offline channel

brokerage following the increase of online brokerage, the

commission proportion of the offline channel was

maintained at the 50% level, with a slight drop due to our

relatively high average commission rates. However, it is

expected that the proportion of online brokerage and

commission will increase, so we will continue in our efforts

to increase our brokerage by enhancing our online service

competitiveness and profitability with the strengthening of

VIP sales through offline channels at the same time.

By proportion of investor type, the proportion of individual investors sharply rose and the proportions of brokerage and

commission in retail climbed by 8% and 1%, to 94% and 91%, respectively. The primary competitiveness of Hyundai

Securities’brokerage is based on the retail investor. Therefore, if the investment culture centered on the individual investor

expands, this will substantially help our profitability and competitiveness.

FY06 FY07 FY08 FY09 1Q 2Q 3Q 4Q

Market share(commissions)

6%

5%

89%

5%

4%

90%

5%

5%

90%

3%4%

93%

4%

4%

92%

4%

5%

91%

5%

3%

91%

Overseas Domestic Retail

Client Assets

Hyundai Securities’brokerage assets under management consist of equity valuation gains/losses for clients and their

deposits for equities, futures, and options. Our financial assets include collective investment securities, wrap accounts, equity

linked securities, cash management accounts (CMA), trusts, and bonds. In fiscal year 2009, assets under management surged

by 35% year-over-year at KRW 6.2tr. The balance of financial assets gained 30% year-over-year to KRW 3.0tr, with the

increase in balances of collective investment securities, retail general bonds, and trusts. The balances of client assets rose by

KRW 9.1tr to a record KRW 32.2tr.

FY07

(KRW in tr)Retail

6.8

29.8

FY08

9.5

17.5

FY09 1Q

9.5

20.6

2Q

9.8

23.5

3Q

10.2

23.4

4Q

12.3

36.6

27.030.1

33.3 33.6 35.3

23.0

Financial products Brokerage deposits

Retail 57.0%

FY07

(KRW in tr)Institutions

8.9

14.1

FY08

13.5

5.5

FY09 1Q

13.9

5.9

2Q

14.4

7.1

3Q

14.1

8.8

4Q

17.5

23.0

19.019.8

21.5 22.9

26.6

9.1

Financial products Brokerage depositsInstitutions 43.0%


32

Wealth Management

Revenue from wealth management inched up 2% year-over-year to KRW26.6bn with the surge in collective investment

securities, wrap commissions and trust commissions, etc. By revenue composition, as the balances of collective investment

securities, wrap, and trusts increased, the commission income of wealth management gained 5%, 16%, and 213%,

respectively.

FY07

(KRW in tr)Financial products breakdown

5.3

FY08 FY09 1Q 2Q 3Q 4Q

15.7

23.0 23.4 24.2 24.4

29.8

Collective investment securities Wrap ELS RP�Fixed Income

Trust CMAYoY +30%

1.73.12.31.12.2

5.9

3.72.9

5.1

2.52.2

5.8

2.72.6

6.9

2.52.9

5.8

2.4

2.3

7.7

3.32.8

6.0

2.41.8

7.6

3.72.8

6.6

3.11.9

11.8

3.7

2.8

By financial asset type, repurchase agreement (RP) bonds

account for 39%, collective investment securities 22%,

trusts 12%, wrap 10%, cash management accounts (CMA)

9%, and equity-linked securities 6%. Bonds and collective

investment securities account for 61%, the largest portion.

repurchase agreement∙bonds soared by 131% with the

increased demand for the relatively safe retail bonds.

Collective investment assets rose by 11% despite the

overall fund-run trend in the stock market.

45 262

100

70

47

68 266

66

68

64

YoY +2%

QoQ +6%

(KRW in 100mil)WM income

1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q FY09 FY08 3Q 4Q FY09 1Q 2Q 3Q 4Q

(KRW in 100mil)WM income breakdown

47

33

10

22 45

31

9

23

66

36

17

7

5

68

41

11

9

7

10

5

64

7

42

11

7

68

8

42

Collective Investment securities Wrap ELS Trust


33

(KRW in tr)

The trust balance rose by KRW 1.2tn to KRW 3.7tn as the

balances of money market trust, treasury stocks, and term

deposits surged by 8%, 15%, and 1068%, respectively.

3QFY08 4Q 1QFY09 2Q 3Q 4Q

Trust balance breakdown

1.6

0.9

0.40.10.1

2.5

1.9

0.40.10.1

2.5

1.8

0.30.00.4

3.3

2.4

0.30.20.4

0.30.1

3.7

0.4

2.8

0.5

0.8

3.7

0.4

2.1

MMT Treasury Others

FY07

(KRW in tr)Collective investment securities

FY08 FY09 1Q 2Q 3Q 4Q

6.66.05.85.85.9

5.3

Equity Bond Hybrid MMF Others

0.96

1.55

0.41

2.71

0.94

0.99

1.37

0.62

2.01

1.01

1.02

1.21

0.48

1.86

1.25

1.02

1.10

0.62

1.96

1.06

1.0

0.9

0.7

2.2

1.1

1.0

1.4

0.9

1.0

1.0

(KRW in tr)CMA balance & accounts

FY07 1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q FY09 1Q 2Q 3Q 4Q

1.5

2.7 2.52.2

2.5

2.12.3

2.9 2.92.8 2.8 2.8

168

241305

335 379

468488 503 518

555 569 555CMA balance

No. of accounts

(KRW in 100mil) (accumulated)Retirement pension

FY08 1Q 2Q 3Q 4Q FY09 1Q 2Q 3Q 4Q

232

6,687

7,328

12,745

13,619

18,345 19,02420,165

22,813

264

441 497593

631

893

1,371

Reserve

Accounts(accumulated)

In fiscal year 2009, the balance of collective investment

securities increased by 11% to KRW 6.6tn as the balances of

short-term products such as money market trust (MMT)

and money market fund (MMF) sharply surged with the

continued trend of interest rate cuts. Cash management

account (CMA) balance stagnated at around KRW 2.8tn,

however, the number of accounts was 555,000, up 10%

year-over-year, backed by increases of issuances through

activated cross sales and the enforcement of credit card

issuance work. Retirement pensions gained KRW 87.4bn in

accumulation funds, with 9,194 more customers through

continuous sales efforts. All in all, as the scale of our

wealth management business continues to expand, its

revenue contribution is expected to increase further in the

future.

Fixed deposit


34

Investment Banking

Revenue from Hyundai Securities’investment banking business climbed by 35% year-over-year to KRW 24.4bn, as all the

performances of representative underwritten initial public offering (IPO), debt capital market (DCM), and capital increases

rose. The initial public offering business soared by 267% year-over-year, as we lead the underwriting of eight companies,

including Hyundai Food System, China Ocean Resources, HNK Machine Tool, Moreens, etc. with a total underwriting value of

KRW 263.8bn. Hyundai Securities’initial public offering deals had us ranked 5th in accumulative ranking in the 2009

Bloomberg initial public offering leading and underwriting list. We are proud to boast having successfully listed China Ocean

Resources on the Korea Stock Exchange. At present, we are further enhancing our sales capabilities for sound companies in

the Asian market, such as China and Japan, so as to expand our initial public offering capacity. We expect that the initial public

offering performance in those regions will further expand in the future.

Debt capital market (DCM) performance soared by 85% year-over-year with KRW 648.1bn in asset-backed-securities (ABS),

KRW 1.5tr in card and capital, and KRW 1.4tr in mortgage-backed-securities (MBS). All in all, investment banking performance

gained 59% year-over-year to KRW 6.3tr in fiscal year 2009.

58 180

6317

41

42 244

100

47

54

YoY +35%

QoQ -23%

(KRW in 100mil)Investment banking income

1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q FY09

Deals

Hyundai Food KRW59.7bn China Ocean ResourcesKRW53.3bn

HNK Machine Tool KRW50.5bn MoreensKRW26.6bn

Vitzro CellKRW17.6bn Kangwon B&EKRW 6.6bn

QoQFY08 YoY4Q

4,420

7,603

734

98

12,855

3Q

3,743

8,693

540

327

13,303

2Q

4,350

15,992

226

2,978

12,115

1Q

7,350

3,600

1,097

960

13,007

Underwriting

Total

19,863

35,888

2,637

4,363

62,751

10,900

19,358

718

1,312

32,288

18%

-13%

36%

-70%

-3%

82%

85%

267%

233%

59%

Type

Corporatebond

ABS/MBS

IPO

Capitalincrease

Total

(KRW in 100mil)

FY2009


35

(KRW in 100mil) (KRW in tr)

(KRW in 100mil) (KRW in 100mil)

Proprietary Trading

In the case of the bond proprietary trading, as the proportion of the company’s revenue continues to rise, management

policies are set to create conservative and stable performance through appropriate hedging and risk management, depending

on the market interest rate trends. Based on the know-how of our in-house management specialists, our bond management

business continuously outperforms the market.

The average annual equity and RP bond balances of Hyundai Securities’proprietary trading accounts were KRW 85.2bn and

KRW 4.5tr, respectively, in fiscal year 2009. Going forward, we will actively operate our proprietary trading system by flexibly

adjusting our management scale depending on the stock market environment. Such active expansion plans for proprietary

trading are part of our strategy for diversifying our business portfolio and enhancing profitability.

Gains on trading in structured securities are reflected in various kinds of transactions, including the trading/valuation of

stocks and bonds, the trading/valuation/redemption of structured securities and structured securities old, the

trading/settlement of futures, and over-the-counter derivatives trading/valuation. Hyundai Securities’bond holdings stood at

KRW6.59bn, of which low-risk bonds, such as financial bonds, national bonds, municipal bonds, special bonds, monetary

stabilization bonds, and industrial financial bonds account for over 83%.

KRW 258.4bn is invested in principal investment (PI) in total, among which collective investments account for the largest

portion with 39%. Through an 11% level principal investment (PI) investment of principal, we pursue revenue source

diversification and mid- to long-term principal efficiency.

As of 2010. 3. 31

1Q 2Q 3Q 4Q FY08

524 1,500

149 98

925

1Q 2Q 3Q 4Q FY09

729 1,957

576

401

251

YOY +30%

QoQ +190%

Proprietary trading income Fixed income type & position

In fiscal year 2009, gains on proprietary trading increased

by 30% to KRW 195.7bn, backed by our excellent

performance in equity and bond management.

In equity proprietary trading, we have earned a superb

track record through our own management philosophy

and continuous portfolio management by adjusting

management scale elastically as we predict the market

situation and fostering proven top management talent. In

addition, we achieve our core goals of profitability and

stability as we establish the infrastructure to create stable

revenue streams through our organic monitoring system

and sound risk management.

Types

State

Local government

Special (Incl. Finance special)

Corporate (Incl. Finance corporate)

Total

1.77

0.06

3.07(0.47)

1.69(1.13)

6.59

27%

1%

47%(7%)

26%(17%)

100%

Carrying value Proportions

Avg. balance

Prop. trading vol

1Q

2Q

3Q

4Q

1.106

1.178

528

596

44,907

47,385

43,646

43,008

Equity RP

As of ’10.3.31

Principal Inv.

Investment types

Equity

Fixed income

Collective invest. sec.

Loans purchased

Total

581

884

1,019

100

2,584

PI


36

Interest Income

Hyundai Securities interest income consists of interest on margin loans, interest on loans, and gains on valuations of reserves

for claims of customer deposits. Interest on bonds, repurchase agreements (RPs), and other instruments are classified as

gains on proprietary trading. Interest income declined by 31% year-over-year in fiscal year 2009, due to a decrease in gains on

the valuation of reserves for claims of customer deposits, caused by interest rate decreases. The reserves for claims of

customer deposits averaged KRW 1.22tr in fiscal year 2009, up by 14% compared with an average of KRW 1.07tr in fiscal year

2008. However, the valuation gains decreased by 39% year-over-year due to a decrease of interest rates under management

caused by the interest rate fall. The average balance of call money was KRW 284.5bn in fiscal year 2009, up 5% from KRW

269.8bn in fiscal year 2008. However, interest on call money decreased by 75% year-over-year, mainly due to the interest rate

decline.

208 995

265

258

264161 691

180

170

180

YOY -31%

QoQ -10%

(KRW in 100mil)

(KRW in 100mil)(Avg. balance)

(KRW in tr, 100mil) (Avg. balance)Finance income

125

104

1.34

1.12

150

0.94

137

1.01

155

1.28

79 7985

1.11 1.16

Customers’deposits, gains on valuation

1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q FY09 FY08 1Q 2Q 3Q 4Q FY09 1Q 2Q 3Q 4Q

Reserve for claims for

customers’deposits (avg. balance)

Gain on valuation of reserve

for claims of customers’

deposits(trust)

1.20

6 7

2,5053,800

3,788

2,357

19

1,751

3

7

12

3,336

3,787

Call money

FY08 1Q 2Q 3Q 4Q FY09 1Q 2Q 3Q 4Q

Call money(balance) Interest on call money

847

4445


37

Hyundai Securities Risk Management

Risk management policy

Hyundai Securities aims to systematically control and

manage various risks (all possible losses that can be

incurred) pertaining to our business activities, and

realize a stable financial structure and management

system through the efficient allocation of resources.

For this purpose, we endeavor to achieve

comprehensive risk management and optimum capital

allocation by establishing a company-wide risk

management structure, setting up comprehensive risk-

management processes, building a comprehensive risk-

management system [ERMS, Enterprise risk-

management system], and developing a firm-wide risk-

conscious culture.

Risk management structure

Risk management committee

We have in place a risk management committee,

(hereinafter referred to as “the committee”), a final

decision-making body for risk management. The

committee is responsible for: 1) discussing and deciding

on important matters that might affect the

company’s financial health; and 2) establishing and

supervising asset-management structures, (including

total investment limits), and risk management

strategies. The committee convenes more than once a

quarter. It includes directors,

including the CEO and external directors, as its

members.

Risk management council

We established a risk management council, (hereinafter

referred to as “the council”), which discusses working-

level agenda items (investment deliberations, etc.)

entrusted by the committee, and establishes detailed

plans related to risk management policy.

The council convenes more than once a month and

consists of senior members of the company, including

the Chief Risk Officer

Subcommittees under the council

For the sake of reasonable decision-making, the council

has subcommittees that provide professional advice and

deliberation on each agenda. The council efficiently

manages risks by convening a subcommittee for each

operating activity, including investment products,

marketable securities, over-the-counter derivatives,

credit grants, and trusts.

Risk management department

We have a risk management department that

implements the risk management principles and

strategies set up by the committee and the council. The

organization is represented by the CRO (Chief Risk

Officer), the executive responsible for risk management

affairs; the risk management department (to detect,

measure, and control risks); and the risk review

department (investment deliberations and post-

investment follow-up).

- The risk management department, as a , is run

independent of the , engaged in sales activities, and of

the , a support unit in charge of financial and settlement

issues.

Risk management process

Recognition of risks

Risks are classified into the following categories:

market risk, credit risk, operational risk, liquidity risk,

legal risk, reputational risk, strategic risk, and

systematic risk.

Risk measurement

The risk management department establishes methods

for the measurement of each risk type, and reflects the

results in the risk measurement system before

periodically measuring and analyzing risks. The

department documents all matters related to

measurement models, such as the process and method

of deciding variables used in measuring risk, the source

of data, basic assumptions, and the conditions for

system design. The details of risk measurement are

stipulated in the risk management rules for each

business.

Risk control

The risk management department regularly monitors

activities to ensure 1) investment positions are

maintained at appropriate levels within investment

limits, 2) those positions are effectively handled in

response to changing risk levels during market

fluctuations, and 3) that risks are controlled

accordingly. If a position exceeds the investment limit,

each sales department looks into the causes, draws up

measures, and either reports or refers to the

committee, and then takes measures according to the

outcome.

Investment limit management is set and managed by

reflecting the business strategy and risk appetite. We

actively manage the investment limit to minimize

interference with other departments in decision-making

discretion, while maintaining the company’s estimated

losses within a tolerable scope.

Figure

Investment limit management covers all trading

products and manages the limits of investment, losses,

sensitivity, and credit risk. Hyundai Securities controls

and manages risk through the “ Enterprise risk

management system”on a daily, monthly, and quarterly

basis.

Risk report

The risk management department monitors risk and

limits utilization rates throughout the company, and

reports its findings to management on a daily basis. The

department also reports the overall risk-management

status to the council and the committee on a regular

basis, and risk management progress to the board of

directors twice a year.

Risk Categories

Market risk

Market risk refers to risks associated with declines in

the value of Hyundai Securities’investment positions

due to changes in market factors, such as share prices,

interest rates, and FX rates. We use VaR as the main

tool to assess market risk. We use other indexes also,

including the limit of sensitivity by risk factor and stress

test analysis.

Limit distribution plan recognition

�Business strategy

�Risk appetite - capital

Limit distribution plan framing

�Business planning

�Previous year actual results

Limit application

�Limit application form

�Asset management planning form

Limit monitoring

�Daily/monthly/quarterly basis

�Volume, loss, VaR, sensitivity, etc.

RAPM

�Department/period/products basis

�Risk adjustment performance measure

Feedback

Risk management

committee/council

Risk management

department

Front office

38

VaR is a statistical index used to estimate maximum

losses in a confidence interval during a certain period of

time under normal market conditions. Our company

applies a 99% confidence interval and 10-day VaR in

accordance with risk assessment standards

recommended by regulations on the financial

investment industry, and Financial Supervisory Service

(FSS) guidelines.

Liquidity risk

Liquidity risk is the risk that liabilities cannot be met by

trading assets. By law, the asset-to-liability ratio must

exceed 100%, and ours stood at as of the end of fiscal

year 2009. In addition, we established contingency plans

to brace for liquidity risk following any sudden shock in

the market.

Credit risk

Credit risk refers to the risk of asset value declines

associated with trading partners’defaults, bankruptcy,

and credit rating changes. We set single name

concentration ratios according to the corresponding

trader’s credit rating, and manage credit risk in

accordance with FSS standards. Furthermore, we use

credit VaR, our internal model index.

Operational risk

Operational risk refers to the risk of losses resulting

from inadequate internal processes, personnel, or

systems, or from external events. All branches and

departments conduct risk management activities, such

as identifying operational risks, risk and control self-

assessment (RCSA), reporting losses, and monitoring

key risk indicators (KRIs). The risk management

department verifies and manages related data, analyzes

KRIs, and quantifies operational risks to control and

mitigate enterprise-wide operational risks.

Capital Adequacy

Net capital ratio system

Capital market laws regulate the capital of financial

investment companies in order to protect investors and

ensure the sustainable operation of companies in a

rapidly changing market environment. The law

stipulates that financial investment companies’net

capital ratio must exceed 150% to maintain capital

adequacy under the PCA (Prompt Corrective Action)

framework. Hyundai Securities aims to maintain a net

capital ratio of more than 300%.

- The net capital ratio is the minimum level of capital

required to liquidate the company in case of bankruptcy,

without incurring losses for customers and creditors.

The ratio shows whether capital is kept at an adequate

level against asset holding risks (market, credit, and

operational risks), and is calculated based on the

following equation:

Net capital × 100% = × 100%

Total exposure

Asset on B/S - Liabilities on B/S - Subtracted items + Added items

Market risk + Credit risk + Operational risk

39

Others

Building an “Enterprise Risk Management System”

We have been developing a comprehensive risk-

management system, the ERMS, since April 2009 in

response to changes in the regulatory environment;

more specifically, possible structural changes and

greater fluctuations resulting from the Capital Market

and Financial Investment Services Act. We seek to seize

opportunities afforded by market changes to launch

new products.

After the establishment of the system, we have

improved it to act as a true decision-making system for

firm-wide performance measurement and resource

distribution from to.

With the goal of establishing the best risk management

system in the industry, we developed the system over a

14-month-long effort to incorporate market risk, credit

risk, operational risk, capital adequacy, and a risk

database within our risk management framework.

<Figure 2> below shows the key components of the

system

Hyundai Securities’net capital ratio

Hyundai Securities aims to maintain a net capital ratio

of more than 300%. Our net capital ratio surged YoY to

as of end-Mar 2010, far in excess of our risk-

management target of over 300%. This clearly indicates

that we are fulfilling the requirements of financial

soundness and capital adequacy. Our most recent net

capital adequacy ratio figures are as follows:

Developing a firm-wide Risk-Conscious Culture

We have continuously conducted risk management

education for all employees to create an enterprise-

wide culture of risk management.

To this end, Hyundai Securities holds risk management

seminars for management to seek further

improvements in risk management. We have

employees in charge of risk management in all

branches and departments for risk prevention activities.

We also conduct risk-management-related education

for all employees, both online and offline, more than

once a year to minimize risk-related losses.

Market risk

Comprehensive risk management system: Linked to the International Financial Reporting Standards (IFRS) projects,Establish the best risk management system in the industry.

Credit risk

�Use of an internal

credit rating model

→Establish a credit

risk management

system

Liquidity risk

�Elaborate liquidity

ratio computation

→Strengthen liquidity

management

Operational risk

�Introduce operational

risk management

→Efficient

improvement in

internal controls

Comprehensive risk

�Capital adequacy,investment limitmanagement, emergency plans forcrises→Establish risk management at anadvanced level

FY 2009 2008 2007

Net capital 1,88,726 1,688,707 1,544,254

Total exposure 313,290 263,411 250,872

Net capital adequacy ratio 578.29 641.09 615.55

(Unit: KRW mil)Net capital adequacy ratio trend

Figure

40

�In-house development

of a process engine

for OTC derivatives

→Verifying new

products’fair prices

quickly

Deloitte Anjin LLC

14Fl., Hanwha Securities Bldg., 23-5 Yoido-dong,

Youngdeungpo-gu, Seoul 150-717, Korea

Tel +82 (2) 6676 1000 ㅣ Fax +82 (2) 6674 2114

www.deloitteanjin.co.kr

English Translation of a Report Originally Issued in Korean

To the Shareholders and Board of Directors of

Hyundai Securities Co., Ltd.

We have audited the accompanying non-consolidated statement of financial position of Hyundai Securities Co., Ltd. (the

“Company”) as of March 31, 2010, and the related non-consolidated statements of income, appropriations of retained earnings,

changes in shareholders' equity and cash flows for the years then ended, all 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. The financial statements of the Company for the yer ended March 31, 2009, which are

presented for comparative purposes, were audited by Samil PricewaterhouseCoopers whose report dated May 21, 2009,

expressed an unqualified opinion on those stastements.

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 audits 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 2010 financial statements referred to above present fairly, in all material respects, the financial position of

the Company as of March 31, 2010, and the results of its operations, changes in its retained earnings and its shareholders’

equity, and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the Republic

of Korea (See Note 2).

Accounting principles and auditing standards and their application in practice vary among countries. The accompanying

financial statements are not intended to present the financial position, results of operations, changes in shareholders’equity

and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic

of Korea. In addition, the procedures and practices utilized 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 financial

statements are for use by those knowledgeable about Korean accounting procedures and auditing standards and their

application in practice.

INDEPENDENT AUDITORS’REPORT

May 18, 2010

Notice to Readers

This report is effective as of May 18, 2010, the audit report date. Certain subsequent events or circumstances may have occurred between the auditors’

report date and the time the auditors’ report is read. Such events or circumstances could significanrly affect the accompanying financial statements and

may result in modifications to the auditors’ report.

41

42

NON-CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF MARCH 31, 2010 AND 2009

2010 2009

ASSETS

CASH AND DEPOSITS:

Cash and cash equivalents (Notes 9 and 25) ＼ 272,573,600 ＼ 153,511,496

Deposits (Notes 3 and 9) 1,329,936,255 1,594,012,743

1,602,509,855 1,747,524,239

SECURITIES:

Trading securities (Notes 4 and 6) 6,151,288,738 5,880,954,384

Available-for-sale securities (Notes 2, 6 and 7) 1,416,293,935 324,044,284

Investment securities using the equity method (Note 8) 170,772,855 185,555,070

Derivatives linked securities (Note 5) 577,104,016 1,023,217,774

8,315,459,544 7,413,771,512

DERIVATIVES INSTRUMENTS ASSETS:

Derivatives instruments assets (Note 24) 29,896,123 127,512,007

LOANS:

Loans, less allowance for doubtful accounts of

＼37,436,522 thousand in 2010 and ＼29,921,564

thousand in 2009 (Notes 2, 10, 11, 12 and 21) 1,245,578,303 750,117,182

TANGIBLE ASSETS:

Property and equipment, net of accumulated depreciation

of ＼169,535,873 thousand in 2010 and

＼151,043,950 thousand in 2009 (Note 13) 259,746,725 266,828,232

OTHER ASSETS

Receivables, less allowance for doubtful accounts of

＼1,234,997 thousand in 2010 and ＼744,116 thousand

in 2009 (Note 12) 111,935,636 79,209,405

Accrued income, less allowance for doubtful accounts of

＼417,804 thousand in 2010 and ＼419,540 thousand

in 2009 (Note 12) 61,446,329 58,378,174

Advanced payments (Note 21) 37,544,959 27,553,201

Prepaid expenses 2,388,205 1,984,326

Refundable income tax (Note 20) - 13,769,171

Prepaid value added tax 63,531 -

Guarantee deposits (Note 9) 82,277,535 78,538,840

Collective fund for default loss (Note 3) 6,534,196 6,745,876

Intangible assets (Note 14) 46,868,918 30,880,431

Others 42,235,685 40,897,207

391,294,994 337,956,631

TOTAL ASSETS ＼ 11,844,485,544 ＼ 10,643,709,803

Korean won (In thousands)

(Continued)

43

2010 2009

LIABILITIES AND SHAREHOLDERS’ EQUITY

DEPOSITS:

Customers’ deposits ＼ 1,359,811,865 ＼ 1,412,859,771

Others 4,622,903 -

1,364,434,768 1,412,859,771

BORROWINGS:

Call money (Note 15) 326,000,000 60,000,000

Borrowings (Note 15) 603,287,038 228,518,254

Bonds sold under repurchase agreements (Note 21) 4,744,101,975 3,829,191,416

Securities sold (Note 2) 18,673,973 7,613,682

Derivatives linked securities sold (Note 5) 1,710,640,510 2,049,621,429

Derivatives instruments liabilities (Note 24) 63,411,878 336,533,327

Debentures (Note 16) 200,349,130 200,875,290

7,666,464,504 6,712,353,398

OTHER LIABILITIES:

Accrued severance benefits, net of National Pension Fund for

severance and retirement benefits of ＼128,869 thousand

in 2010 and ＼142,236 thousand in 2009, and individual

severance insurance deposits of ＼68,590,584 thousand in

2010 and ＼45,306,387 thousand in 2009, and retirement

pension assets of ＼1,980,413 thousand in 2010 (Note 2) 22,351,486 34,821,661

Income tax payable (Note 20) 13,654,309 -

Accounts payable (Notes 9, 21 and 22) 243,092,336 120,247,268

Accrued expenses 16,605,906 24,507,474

Guarantee deposits received 14,723,679 13,564,570

Advances from customers 7,595 -

Unearned income 2,909,782 5,003,912

Deferred income tax liabilities (Note 20) 16,968,913 8,431,231

Withholdings (Note 9) 13,004,668 9,034,853

Others (Note 9) 31,488,049 23,497,509

374,806,723 239,108,478

TOTAL LIABILITIES 9,405,705,995 8,364,321,647

COMMITMENTS AND CONTINGENCIES (Note 22)


(Continued)

44

NON-CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF MARCH 31, 2010 AND 2009

2010 2009

SHAREHOLDERS’ EQUITY:

Capital stock (Note 17) ＼ 850,000,000 ＼ 850,000,000

Capital surplus 836,361,851 836,361,851

Capital adjustments (Note 17) (68,161,137) (68,161,137)

Accumulated other comprehensive income

(Notes 7, 8, 20 and 23) 85,122,239 64,145,995

Retained earnings (Note 17) 735,456,596 597,041,447

TOTAL SHAREHOLDERS’ EQUITY 2,438,779,549 2,279,388,156

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY ＼ 11,844,485,544 ＼ 10,643,709,803


See accompanying notes to non-consolidated financial statements.

45

NON-CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED MARCH 31, 2010 AND 2009

2010 2009

OPERATING REVENUES:

Commissions received (Notes 21 and 27) ＼ 476,169,781 ＼ 366,667,053

Gain on sales of trading securities 285,988,569 144,839,037

Gain on valuation of trading securities (Note 4) 38,751,707 59,354,014

Gain on sales of available-for-securities 19,799,214 757,281

Reversal of impairment loss on securities (Note 7) 3,200,000 22,640

Gain on valuation of securities sold 934,973 1,698,758

Gain on valuation of derivatives linked securities (Note 5) 447,872,506 122,997,524

Gain on derivatives linked securities transactions 121,312,564 151,189,280

Gain on valuation of derivatives linked securities sold (Note 5) 13,774,524 670,604,694

Gain on derivatives linked securities sold transactions 393,956,230 611,826,043

Gain on derivatives transactions (Note 24) 617,367,623 347,382,157

Interest income (Notes 4, 7, and 21) 388,768,203 377,431,035

Gain on valuation and disposal of loans 2,823,517 1,917,969

Gain on foreign currency transactions 5,627,522 6,159,971

Gain on valuation of reserve for claims of customer’s deposits (trust) 34,596,639 56,722,207

Others 11,731,605 14,740,103

2,862,675,177 2,934,309,766

OPERATING EXPENSES:

Commissions expenses (Note 21) 41,012,677 30,036,313

Loss on sales of trading securities 120,907,080 192,721,058

Loss on valuation of trading securities (Note 4) 12,959,431 24,181,535

Loss on sales of available-for-securities 2,880,805 1,330,870

Impairment loss on securities (Note 7) 8,906,241 6,610,635

Loss on valuation of securities sold 940,585 1,783,002

Loss on valuation of derivatives linked securities (Note 5) 8,545,995 344,874,542

Loss on derivatives linked securities transactions 197,879,643 625,714,819

Loss on valuation of derivatives linked securities sold (Note 5) 776,287,858 204,717,083

Loss on derivatives linked securities sold transactions 343,478,522 92,944,385

Loss on derivatives transactions (Note 24) 456,348,776 592,161,322

Interest expense 175,767,521 218,802,055

Loss on valuation and disposal of loans 7,644,427 2,580,103

Loss on foreign currency transactions 9,208,278 10,378,923

Selling and administrative expense (Notes 13, 14, 21 and 28) 444,220,118 386,300,340

Others 483,434 751,564

2,607,471,391 2,735,888,549

OPERATING INCOME 255,203,786 198,421,217

Korean won (In thousands, except per share amounts)

(Continued)

46

NON-CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED MARCH 31, 2010 AND 2009

Korean won (In thousands, except per share amounts)


2010 2009

NON-OPERATING INCOME:

Gain on disposal of property and equipment ＼ - ＼ 3,069

Rental income (Note 21) 7,857,852 6,189,284

Gain on equity method valuation (Note 8) 7,672,813 2,530,734

Gain on disposal of investment securities using the equity method (Note 8) - 255,920

Others 8,240,278 2,720,540

23,770,943 11,699,547

NON-OPERATING EXPENSES:

Loss on disposal of property and equipment 14,951 100,850

Loss on equity method valuation (Note 8) 4,977,370 3,127,928

Donations 3,833,807 3,057,443

Others 18,713,393 1,129,526

27,539,521 7,415,747

INCOME BEFORE INCOME TAX 251,435,208 202,705,017

INCOME TAX EXPENSE (Note 20) 72,574,038 53,515,794

NET INCOME ＼ 178,861,170 ＼ 149,189,223

INCOME PER SHARE (Note 18) ＼ 1,106 ＼ 913

47

NON-CONSOLIDATED STATEMENTS OF APPROPRIATIONS OF

RETAINED EARNINGS FOR THE YEARS ENDED MARCH 31, 2010 AND 2009

2010 2009

RETAINED EARNINGS BEFORE APPROPRIATIONS:

Unappropriated retained earnings carried over from prior year ＼ - ＼ -

Net income 178,861,170 149,189,223

178,861,170 149,189,223

APPROPRIATIONS:

Voluntary reserves 107,676,329 104,698,600

Legal reserves 6,471,349 4,044,602

Dividends (Note 19) 64,713,492 40,446,021

178,861,170 149,189,223

UNAPPROPRIATED RETAINED EARNINGS TO BE

CARRIED FORWARD TO SUBSEQUENT YEAR ＼ - ＼ -



48

NON-CONSOLIDATED STATEMENTS OF CHANGES IN

SHAREHOLDERS’ EQUITYFOR THE YEARS ENDED MARCH 31, 2010 AND 2009

As of April 1, 2008 ＼ 850,000,000 ＼ 836,361,851 ＼ (30,279,532) ＼ 80,899,032 ＼ 522,184,545 ＼ 2,259,165,896

Cash dividends - - - - (74,332,321) (74,332,321)

Retained earnings after appropriations 850,000,000 836,361,851 (30,279,532) 80,899,032 447,852,224 2,184,833,575

Net income - - - - 149,189,223 149,189,223

Purchase of treasury stock - - (37,881,605) - - (37,881,605)

Gain on valuation of available-for-sale

securities - - - (36,149,511) - (36,149,511)

Loss on valuation of available-for-sale

securities - - - (5,298,032) - (5,298,032)

Changes in equity arising from

application of the equity method - - - 16,356,046 - 16,356,046

Negative changes in equity arising from

application of the equity method - - - 5,648,053 - 5,648,053

Overseas operation

translation income - - - 2,690,407 - 2,690,407

As of March 31, 2009 ＼ 850,000,000 ＼ 836,361,851 ＼ (68,161,137) ＼ 64,145,995 ＼ 597,041,447 ＼ 2,279,388,156

As of April 1, 2009 ＼ 850,000,000 ＼ 836,361,851 ＼ (68,161,137) ＼ 64,145,995 ＼ 597,041,447 ＼2,279,388,156

Cash dividends - - - - (40,446,021) (40,446,021)

Retained earnings after appropriations 850,000,000 836,361,851 (68,161,137) 64,145,995 556,595,426 2,238,942,135

Net income - - - - 178,861,170 178,861,170

Gain on valuation of available-for-sale

securities - - - 57,969,633 - 57,969,633

Loss on valuation of available-for-sale

securities - - - (22,372,774) - (22,372,774)

Changes in equity arising from

application of the equity method - - - (11,195,762) - (11,195,762)

Negative changes in equity arising from

application of the equity method - - - (2,676,820) - (2,676,820)

Overseas operation translation income - - - (748,033) - (748,033)

As of March 31, 2010 ＼850,000,000 ＼836,361,851 ＼ (68,161,137) ＼ 85,122,239 ＼ 735,456,596 ＼ 2,438,779,549


Capital stockCapital

surplus

Capital

adjustments

Accumulatedother

comprehensive income

Retained

earnings Total


49

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2010 AND 2009

2010 2009

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income ＼ 178,861,170 ＼ 149,189,223

Adjustments to reconcile net income to net cash provided by

operating activities:

Gain on valuation of trading securities, net (25,792,276) (35,172,479)

Loss (gain) on sales of available-for-sale securities, net (16,918,409) 573,588

Impairment loss on securities, net 5,706,241 6,587,995

Loss on valuation of securities sold, net 5,612 84,245

Loss (gain) on valuation of derivatives linked securities, net (439,326,511) 221,877,017

Loss (gain) on valuation of derivatives linked securities sold, net 762,513,335 (465,887,611)

Loss (gain) on valuation of derivatives, net (214,346,080) 189,146,593

Provision for doubtful accounts, net 8,127,860 1,413,698

Loss (gain) on foreign currency translation, net (2,260,216) 2,810,818

Provision for severance benefits 19,360,889 24,004,312

Depreciation 19,108,778 18,886,840

Amortization 12,882,825 3,241,938

Loss on disposal of property and equipment, net 14,951 97,781

Loss (gain) on equity method valuation, net (2,695,443) 597,194

Gain on disposal of loans (2,823,517) -

Gain on valuation of reserve for claims of customer’s deposits (trust) (34,596,639) (56,722,207)

Others, net (1,542,022) (144,062)

Changes in assets and liabilities from operations:

Decrease (increase) in deposits 250,188,858 (246,491,282)

Increase in trading securities (282,962,896) (2,218,205,935)

Dividends from investment securities using the equity securities 5,727,017 1,624,638

Decrease in derivatives linked securities 885,440,269 644,053,955

Decrease in derivative assets 117,343,320 12,970,906

Decrease (increase) in loans (476,762,192) 439,726,693

Increase in receivables (33,211,400) (56,608,213)

Increase in accrued income (3,066,419) (6,218,397)

Increase in advanced payments (9,991,759) (5,853,911)

Increase in prepaid expenses (403,879) (273,301)

Decrease (increase) in refundable income tax 13,769,171 (13,769,171)

Decrease in collective fund for default loss 211,680 804,708

Decrease in deferred income tax assets - 45,084,564

Decrease (increase) in customers’ deposits (53,047,906) 323,053,181

Increase in securities sold under repurchase agreements 914,910,559 1,495,894,799


(Continued)

50

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED MARCH 31, 2010 AND 2009

2010 2009

Increase (decrease) in securities sold 11,054,679 (7,424,754)

Increase (decrease) in derivatives linked securities sold (1,101,494,254) 166,173,482

Increase (decrease) in derivatives instruments liabilities (78,502,805) 301,886

Payment of severance benefits (6,579,820) (11,336,661)

Decrease in National Pension Fund 13,367 -

Increase in individual severance insurance deposits (23,284,198) (6,899,971)

Increase in retirement pension assets (1,980,413) -

Increase (decrease) in income tax payable 13,654,309 (24,926,178)

Increase in accounts payable 104,556,416 33,641,608

Decrease in accrued expenses (7,901,568) (6,133,884)

Increase in advances from customers 7,595 -

Increase (decrease) in withholdings 3,969,815 (11,715,396)

Decrease in unearned income (2,094,130) (725,420)

Increase (decrease) in deferred income tax liabilities (565,233) 8,431,231

Others, net 15,862,516 23,532,557

Net cash provided by operating activities 521,141,247 639,296,617

CASH FLOWS FROM INVESTING ACTIVITIES:

Withdrawal of long-term financial instruments 254,378,594 -

Disposal of available-for-sale securities 421,865,770 48,128,553

Disposal of investment securities using the equity method 330,445 609,920

Disposal of privately placed bonds 9,823,517 -

Disposal of property and equipment 23,077 79,406

Decrease in guarantee deposits 10,153,007 16,385,073

Acquisition of long-term financial instruments (208,903,984) (114,515,786)

Increase in restricted deposits (3,000) -

Acquisition of available-for-sale securities (1,418,822,394) (116,885,030)

Acquisition of investment securities using the equity method (8,223,728) (92,206,820)

Acquisition of privately placed bonds (28,572,595) -

Acquisition of property and equipment (9,567,396) (51,863,571)

Increase in guarantee deposits (13,891,701) (13,229,220)

Increase in intangible assets (10,646,027) (28,633,061)

Other, net (834,501) 221,940

Net cash used in investing activities (1,002,890,916) (351,908,596)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from call money 266,000,000 -

Proceeds from bank overdrafts 9,930,318 -

Proceeds from borrowings from KSFC 329,306,603 140,104,079

Proceeds from other borrowings 1,126,380,726 1,403,194,608


(Continued)

51

2010 2009

Proceeds from debentures 199,329,900 -

Increase in guarantee deposits received 6,367,576 741,527

Payment of call money - (254,000,000)

Repayment of other borrowings (1,090,848,863) (1,405,994,608)

Payment of debentures (200,000,000) -

Decrease in guarantee deposits received (5,208,466) (1,923,014)

Acquisition of treasury stock - (37,881,605)

Payments of dividends (40,446,021) (74,332,321)

Net cash provided by (used in) financing activities 600,811,773 (230,091,334)

NET INCREASE IN CASH AND CASH EQUIVALENTS ＼ 119,062,104 ＼ 57,296,687

CASH AND CASH EQUIVALENTS, AT THE BEGINNING OF THE YEAR 153,511,496 96,214,809

CASH AND CASH EQUIVALENTS, AT THE END OF THE YEAR (Note 25) ＼ 272,573,600 ＼ 153,511,496



52

Shareholders Number of shares Percentage of ownership (%)

Hyundai Merchant Marine Co., Ltd. 39,382,676 23.2%

Treasury stock 8,215,870 4.8%

Others 122,401,454 72.0%

170,000,000 100.0%

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED MARCH 31, 2010 AND 2009

1. GENERAL

Hyundai Securities Co., Ltd. (the “Company”) was established in 1962, under the name of Kookil Securities Co., Ltd. The

Company changed its name to “Hyundai Securities Co., Ltd”on June 5, 1986. In 1975, the Company’s shares were listed on the

Korean Stock Exchange and as of March 31, 2010, all issued and outstanding shares are publicly traded. After several capital

increase, capital stock of the Company is ＼850,000 million as of March 31, 2010. The Company has 139 branch offices in

Korea, 1 overseas branch and 3 overseas offices as of March 31, 2010.

The Company's shareholders and their respective percentage of ownership as of March 31, 2010 are as follows:

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Non-Consolidated Financial Statement Presentation

The Company maintains its official accounting records in Korean won and prepares statutory financial statements in the Korean

language (Hangul) in conformity with the accounting principles generally accepted in the Republic of Korea. Certain accounting

principles applied by the Company that conform with financial accounting standards and accounting principles in the Republic

of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these financial

statements are intended for use by those who are informed about Korean accounting principles and practices. The

accompanying financial statements have been condensed, restructured and translated into English (with certain expanded

descriptions) from the Korean language financial statements. Some supplementary information included in the Korean

language financial statements, but not required for a fair presentation of the Company's financial position, results of

operations, changes in shareholders’equity or cash flows, is not presented in the accompanying financial statements.

The Company has renamed the balance sheets as of March 31, 2010 and 2009 to statements of financial position in accordance

with the amendment made to Article No. 1-2 of the Act on External Audit for Stock Companies in the current period.

The 2010 financial statements prepared for the regular shareholders’meeting were approved on May 12, 2010 by the

board of directors.

53

Revenue Recognition

The Company recognizes commissions, and trading gains and losses on the contract date. The Company, however, recognizes

commissions, and trading gains and losses in connection with over-the counter (OTC) transactions on the collection date.

The Company recognizes the interest income to the loan in proportion to the loan period, however, the accrued interest income

on loan that is uncertain to collect its principal or interest income is recognized when the cash is received and the interest

income is reversed.

Allowance for Doubtful Accounts

Regulation on Capital Market and Financial Investment Business Act (the “Act”) requires the Company to classify all

outstanding loans and accounts receivable (loans, receivables, accrued income, loans purchased, advances for customers,

dishonored loans, privately placed bonds and others) into five categories as normal, precautionary, substandard, doubtful or

estimated loss, based on borrowers’repayment capability and historical financial transaction records. The Supervisory

Regulation also requires providing the minimum rate of allowance for doubtful accounts for each category balance using the

prescribed minimum percentages of 0.5 percent, 2 percent, 20 percent, 75 percent and 100 percent, respectively. In addition,

the Company does not provide allowance for doubtful accounts for receivables from standardized transactions, call loans,

which were classified as normal loan and bonds purchased under reverse repurchase agreements in accordance with article 3-

8, clause 2 of the Act.

Investments in Securities Other Than Those Accounted for Using the Equity Method

Debt and equity securities are initially stated at the market value of consideration given for acquisition (market value of

securities acquired if market value of consideration given is not available) plus incidental costs attributable to the acquisition of

the securities and are classified into trading, available-for-sale and held-to-maturity securities depending on the purpose and

nature of acquisition. The Company presents trading securities as short-term investments, and available-for-sale securities

and held-to-maturity securities as short-term investments or long-term investment securities depending on their nature in the

statements of financial position. The moving average method is used to determine the cost of securities for the calculation of

gain (loss) on disposal of those securities.

The following is the specific valuation method applied for debt and equity securities:

1) Trading securities

Securities that are bought and held principally for the purpose of selling them in the near term with active and frequent buying

and selling, including securities which consist of a portfolio of securities with the clear objective of generating profits on short-

term differences in price, are classified as trading securities. Trading securities are recorded at their fair value and unrealized

gains or losses from trading securities are recorded as gain (loss) on valuation of trading securities included in the non-

operating income (expense).

54

2) Held-to-maturity securities

Debt securities that have fixed or determinable payments with a fixed maturity are classified as held-to-maturity securities only

if the Company has both the positive intent and ability to hold those securities to maturity.

After initial recognition, held-to-maturity securities are stated at amortized cost in the statements of financial position. When

held-to-maturity securities are measured at amortized costs, the difference between their acquisition cost and face value is

amortized using the effective interest rate method and the amortization is included in the cost and interest income.

When the possibility of not being able to collect the principal and interest of held-to-maturity securities according to the terms

of the contracts is high, the difference between the recoverable amount (the present value of expected cash flows using the

effective interest rate upon acquisition of the securities) and book value is recorded as impairment loss on held-to-maturity

securities included in operating expense and the held-to-maturity securities are stated at the recoverable amount after

impairment loss. If the value of impaired securities subsequently recovers and the recovery can be objectively related to an

event occurring after the impairment loss was recognized, the reversal of impairment loss is recorded as reversal of

impairment loss on held-to-maturity securities included in operating revenues. However, the resulting carrying amount after

the reversal of impairment loss shall not exceed the amortized cost that would have been measured, at the date of the reversal,

if no impairment loss was recognized.

3) Available-for-sale securities

Debt and equity securities that do not fall under the classifications of trading or held-to-maturity securities are categorized and

presented as available-for-sale securities included in investment assets. However, if an available-for-sale security matures or

it is certain that such security will be disposed of within one year from the date of the statements of financial position, it is

classified as a current asset.

Available-for-sale securities are recorded at fair value. Unrealized gain or loss from available-for-sale securities are presented

as gain or loss on valuation of available-for-sale securities included in accumulated other comprehensive income (loss) under

shareholders’equity. In addition, accumulated gain or loss on valuation of available-for-sale securities is reflected in either

gain or loss on disposal of available-for-sale securities or impairment loss on available-for-sale securities upon disposal or

recognition of impairment of the securities. However, available-for-sale equity securities that are not marketable and whose

fair value cannot be reliably measured are recorded at acquisition cost.

When there is objective evidence that the available-for-sale securities are impaired and the recoverable amount is lower than

the cost (amortized cost for debt securities) of the available-for-sale securities, an impairment loss is recognized as

impairment loss on available-for-sale securities in operating expense and the related unrealized gain or loss remaining in

shareholders’equity is adjusted to the impairment loss. If the value of impaired securities subsequently recovers and the

recovery can be objectively related to an event occurring after the impairment loss was recognized, the reversal of impairment

loss can be recognized up to the previously recorded impairment loss as a reversal of loss on impairment of available-for-sale

securities in operating revenues. However, if the fair value increases after the impairment loss is recognized but does not

relate to the recovery of impairment loss as described above, the increase in fair value is recorded in shareholders’equity.

55

4) Reclassification of securities

Trading securities should not be reclassified as other categories of securities. However, when those securities can no longer be

held for sale in the near-term to generate profits from short-term price differences, the trading securities can be reclassified

as available-for-sale or held-to-maturity securities. When those securities are no longer traded in an active market, such

securities are reclassified as available-for-sale securities.

When trading securities are reclassified to other categories, the fair value (latest market value) as of the date of the

reclassification becomes new acquisition cost of the security and the security’s unrealized holding gain or loss through the

date of the reclassification is recorded in current operations.

Securities Borrowed (Loaned)

The Company has loaned or borrowed securities and the lists of these securities as of March 31, 2010 are as follows

(Korean won in thousands):

Investment Securities Using the Equity Method

Investments in equity securities of companies, over which the Company exercises significant influence, are reported using the

equity method of accounting.

1) Accounting for changes in the equity of the investee

Under the equity method of accounting, the Company records changes in its proportionate equity of the net assets of the

investee depending on the nature of the underlying changes in the investee as follows: (i) “gain (loss) on equity method

valuation”in the non-operating income (expense) for net income (loss) of the investee; (ii) “increase (decrease) in retained

earnings of associates”in the retained earnings for changes in beginning retained earnings of the investee; (iii) “increase

(decrease) in equity of associates”in accumulated other comprehensive income (loss) for other changes in stockholders’

equity of the investee.

When the equity method investee’s unappropriated retained earnings carried over from prior period changes due to significant

error corrections, the Company records the changes in equity as “gain (loss) on equity method valuation”included in the non-

operating income (expense) if the impact of the changes on the Company’s non-consolidated financial statements is not

significant. If the changes results from the changes in accounting policies of the equity method investee, they are reflected in

unappropriated retained earnings carried over from prior period in accordance with SKAS on changes in accounting policy and

errors corrections. When the investee declares cash dividends, the dividends to be received are deducted directly from the

investment securities using the equity method.

Assets Depreciation Amounts Appraisal standard

Borrowed security Stock ＼ 18,673,973 Fair value

56

2) Treatment of investment difference

Difference between the acquisition cost and the Company’s proportionate equity in the fair value of net assets of the investee

upon acquisition (“investment difference”) is considered as (negative) goodwill and accounted for in accordance with

accounting standards for business combination. The goodwill portion is amortized over useful lives within 5 years on a straight

line method and the negative goodwill portion is amortized over the weighted average useful lives of depreciable non-monetary

assets of the investee are included in “gain (loss) on equity method valuation”.

When the Company’s equity interest in the investee increases due to an increase (or decrease) in contributed capital with (or

without) consideration, the changes in the Company’s proportionate equity in the investee are accounted for as investment

difference. If the Company’s equity interest decreases, the changes are accounted for as “gain (loss) on disposal of investment

securities using the equity method”. However, if the investee is the Company’s subsidiary, those changes are accounted for

included in the capital surplus (capital adjustments).

3) Difference between the fair value and book value of net asset of the investee

Upon acquisition of the investment securities using the equity method, the Company’s proportionate shares in the differences

between the fair values and book values of the identifiable assets and liabilities of the investee are amortized/reversed and

included in “gain (loss) on equity method valuation”in accordance with the investee’s methods of accounting for the assets and

liabilities.

4) Elimination of unrealized gain or loss from intercompany transactions

The Company’s proportionate share in the gain (loss) arising from transactions between the Company and the investee, which

remains in the book value of assets held as of the date of the statements of financial position, is considered unrealized gain

(loss) and adjusted to the investment securities using the equity method. If the investee is a subsidiary of the Company,

unrealized gain (loss) from sale of an asset by the Company to the investee (downstream transaction) is fully eliminated and

adjusted to the investment securities using the equity method.

5) Impairment loss on investment securities using the equity method

When there is objective evidence that the investment securities using the equity method is impaired and the recoverable

amount is lower than the carrying amount of the investment securities using the equity method, an impairment loss is

recognized as “loss on impairment of investment securities using the equity method”included in non-operating expense and

the unamortized investment difference is first reduced. When the recoverable amount is recovered after the recognition of

impairment loss, the reversal of impairment loss is recognized as income up to the previously recorded impairment loss. The

book value of the investment securities using the equity method after the reversal of the impairment loss cannot exceed the

book value calculated as if the impairment loss would not been originally recognized. The reversal of the impairment loss

recognized against the unamortized investment difference is not allowed.

57

6) Translation of financial statements of overseas investees

For overseas investees whose financial statements are prepared in foreign currencies, the equity method of accounting is

applied after assets and liabilities are translated in accordance with the accounting treatments for the translation of the

financial statements of overseas’subsidiaries for consolidated financial statements. The Company’s proportionate share of

the difference between assets net of liabilities and shareholders’equity after translation into Korean won is accounted for as

“increase (decrease) in equity of associates”included in accumulated other comprehensive income (loss).

7) Suspension of applying the equity method.

When the Company applies the equity method, the Company stops to apply the equity method in case the book value of

investment securities using the equity method becomes under “0”due to the loss of investee. In addition, the Company deducts

the loss that was not recognized on the financial statement before the current year from the paid in capital increase, including

the increase of capital surplus and capital adjustments, as the decrease of retained earnings carried from the last year or

negative changes in equity arising from application of the equity method.

Property and Equipment

Property and equipment are stated at cost (acquisition cost or manufacturing cost plus expenditures directly related to

preparing the assets ready for use). Assets acquired from investment-in-kind, by donation or free of charge in other ways are

stated at fair value. Expenditures after acquisition or completion that increase future economic benefit in excess of the most

recently assessed capability level of the asset are capitalized and other expenditures are charged to current operations as

incurred.

In accordance with the Company’s policy, borrowing costs in relation to the manufacture, purchase, construction or

development of assets are charged to current operations as incurred.

When the expected future cash flow from use or disposal of the property and equipment is lower than the carrying amount due

to obsolescence, physical damage or other causes, the carrying amount is adjusted to the recoverable amount (the higher of

net sales price or value in use) and the difference is recognized as an impairment loss. When the recoverable amount

subsequently exceeds the carrying amount of the impaired asset, the excess is recorded as a reversal of impairment loss to the

extent that the reversed asset does not exceed the carrying amount before previous impairment as adjusted by depreciation.

Depreciation method and useful lives of assets are as follows:

Assets Depreciation Useful lives

Buildings Straight-line method 40

Vehicles Straight-ling method 4

Furniture and fixtures Straight-line method 4

Other tangible assets Straight-line method 4

58

Collective Fund for Default Loss

Collective fund for default loss is a deposit at the Korea Stock Exchange, KOSDAQ and ECN, whenever stock transaction

occurred, as a percentage of the transaction amount to compensate for any default loss.

Accounting for Lease Contracts

All lease contracts that prohibit from cancelling the contract during the lease period are classified as capital lease, in case the

ownership of the lease property shall be transferred to the lessee, it has the option to purchase the lease property at a price

lower than the fair value, the lease period exceeds 75 percent of the estimated useful life of the lease property, or the present

value of the basic lease payments exceeds 90 percent of the fair value of the leased assets. All other lease contracts are

classified as an operating lease.

Assets leased and capital lease liabilities under capital lease are recorded at the smaller amounts between the present value

of future cash flows from lease payments and the fair market value of the assets. The aggregate lease payments are recorded

as a capital lease obligation, net of accrued interest as determined by the excess of lease payments over the cost of the leased

assets. Accrued interest is charged to expense over the lease terms using the effective interest rate method.

Assets Useful lives

Development cost 4

Software 4

Other intangible assets 5

Intangible Assets

Intangible assets are stated at cost, net of amortization computed using the straight-line method over the estimated economic

useful lives of related assets. Development costs are amortized over the estimated economic useful life from the date of usage

of the related products. Ordinary development and research expenses are charged to current operations.

The Company assesses the potential impairment of intangible assets when there is evidence that events or changes in

circumstances have made the recovery of an asset’s carrying value to be unlikely. The carrying value of the assets is reduced

to the estimated realizable value, and an impairment loss is recorded as a reduction in the carrying value of the related asset

and charged to current operations. However, the recovery of the impaired assets is recorded in current operations up to the

cost of the assets, net of accumulated amortization before impairment, when the estimated value of the assets exceeds the

carrying value after impairment.

The useful lives of assets are as follows:

59

Accounting for Foreign Currency Transactions and Translation

The Company maintains its accounts in Korean won. Transactions in foreign currencies are recorded in Korean won based on

the prevailing rates of exchange on the transaction date. Monetary accounts with balances denominated in foreign currencies

are recorded and reported in the accompanying financial statements at the exchange rates prevailing at the date of the

statements of financial position. The balances have been translated using the Basic Rate announced by the Seoul Money

Brokerage Services, Ltd., which was ＼1,130.80 and ＼1,377.10 to U.S. $1.00 at March 31, 2010 and 2009, respectively and the

translation losses or gains are reflected in current operations.

Valuation of Receivables and Payables at Present Value

Sales with deferred payment term, loans or other similar transactions are stated at present value if the differences between

nominal value and present value of receivables or payables incurred are significant. The present value discount is amortized

using the effective interest method, and the amortization of the present value discount or premium is recorded as interest

income or expense.

Readjustment of Receivables and Payables

Receivables and payables, whose contractual terms are modified in a debt restructuring due to mutual agreement such as

commencement of reorganization, court receivership and workout plans, are accounted for at the present value of expected

future cash flows, if the book value of the loan differs from the present value. The difference between book value and present

value is offset against the allowance for doubtful accounts, and any remaining amounts are charged to current operations as

bad debt expense. The difference between book value of a receivable and its present value is recorded as allowance for

doubtful accounts, which is presented as a deduction from the receivable. The present value discount is amortized over the

remaining maturity using the effective interest rate method, and the amortization amount of the present value discount account

is recorded as interest income. The additional impairment loss on securities of ＼8,906,241 thousand is due to readjustment of

receivables for the year ended of March 31, 2010.

Translation of Financial Statements of Overseas Affiliates Stated in Foreign Currency

For overseas affiliates whose financial statements are prepared in foreign currency, assets and liabilities are translated at the

exchange rate at the date of the statements of financial position, shareholders’equity is translated at the historical exchange

rate, and items in statement of income are recorded at the average exchange rate of the reporting period. Gain (loss) from

foreign currency translation of overseas affiliate is recorded as accumulated other comprehensive income (loss). When

subsequent gain (loss) from foreign currency translation of overseas affiliate arises, it is offset against the previously

recognized gain (loss) and charged to gain or loss on the accounting period in which such overseas affiliates are liquidated,

closed or disposed of.

60

Accrued Severance Benefits

In accordance with the Company's policy, all employees with more than one year of service are entitled to receive lump-sum

severance payments upon termination of their employment, based on their current rates of salary and length of service. The

accrual for severance benefits is computed as if all employees were to terminate at the date of the statements of financial

position and amounted to ＼93,051,352 thousand and ＼80,270,284 thousand as of March 31, 2010 and 2009, respectively. In

accordance with the National Pension Law of Korea, a portion of its severance benefits, which had been transferred in cash to

the National Pension Fund through March 1999, were presented as a deduction from accrued severance benefits.

The Company has insured a portion of its obligations for severance benefits by making deposits that will be directly paid to

employees with Korea Life Insurance Co., Ltd. and other, and records them as deposits for severance insurance deposits which

are directly deducted from accrued severance benefits. However, as of the date of statements of financial position, the

Company records the retirement deposits in excess of accrued severance benefits liabilities as an investment asset.

Since beginning of the current year, the Company provides defined contribution benefit plan to its officers and benefit plan

asset or pension asset is deducted from accrued severance benefits.

Actual payments for severance indemnities amounted to ＼6,579,820 thousand and ＼11,336,661 thousand for the years ended

March 31, 2010 and 2009, respectively.

Pension plan assets as of March 31, 2010 consist of the following (Korean won in thousands):

Description Amount

Cash and cash equivalents 528,176

Securities 1,047,836

Other assets 404,401

1,980,413

Bonds under Resale or Repurchase Agreements

Bonds purchased under resale agreements are recorded as loans and bonds sold under repurchase agreements are recorded

as borrowings when the Company purchases or sells securities under resale or repurchase agreements.

Discounts on Debentures

Discounts on debentures are amortized over the term of the debentures using the effective interest rate method. Amortization

of discount is recorded as part of interest expense.

61

Valuation of Derivatives Linked Securities

The Company valuates derivatives linked securities, such as equity linked securities sold and equity linked warrants sold, and

derivatives linked securities sold based on the market value and reflects gains or losses from transaction, valuation and early

or maturity redemption in current operations as gain (loss) on derivatives linked securities (sold) transactions.

Accounting for Derivative Instruments

Derivative instruments are classified as used for trading activities or for hedging activities according to their transaction

purposes. All derivative instruments are accounted for at fair value with the valuation gain or loss recorded as an asset or

liability. If the derivative instrument is not part of a transaction qualifying as a hedge, the adjustment to fair value is reflected in

current operations. The accounting for derivative transactions that are part of a qualified hedge based both on the purpose of

the transaction and on meeting the specified criteria for hedge accounting differs depending on whether the transaction is a fair

value hedge or a cash flow hedge. Fair value hedge accounting is applied to a derivative instrument designated as hedging the

exposure to changes in the fair value of an asset or a liability or a firm commitment (hedged item) that is attributable to a

particular risk. The gain or loss both on the hedging derivative instruments and on the hedged item attributable to the hedged

risk is reflected in current operations.

Cash flow hedge accounting is applied to a derivative instrument designated as hedging the exposure to variability in expected

future cash flows of an asset or a liability or a forecasted transaction that is attributable to a particular risk. The effective

portion of gain or loss on a derivative instrument designated as a cash flow hedge is recorded as accumulated other

comprehensive income (loss) and the ineffective portion is recorded in current operations. The effective portion of gain or loss

recorded as accumulated other comprehensive income (loss) is reclassified to current earnings in the same period during

which the hedged forecasted transaction affects earnings. If the hedged transaction results in the acquisition of an asset or the

incurrence of a liability, the gain or loss in accumulated other comprehensive income (loss) is added to or deducted from the

asset or the liability.

Trust Accounts

In accordance with the amendment of the Trust Business Law, the Company obtained trust business authorization from the

Financial Supervisory Commission and started its trust business. Accordingly, the Company separately records the trust assets

from the owned assets of the Company. The Company offers operational, managerial and disposal services to trust assets and

receives fee on trust assets recognized as operating income.

Income Tax Expense

The Company recognizes income tax expense determined by adding or deducting changes in deferred income tax assets

(liabilities) to or from total income tax and surtaxes to be paid for the current period. The deferred income tax assets or

liabilities will be charged or credited to income tax expense in the period each temporary difference reverses in the future.

62

After reclassifications Before reclassifications Difference

Available-for-sale securities:

Corporate bonds ＼ 187,786,292 ＼ 225,950,719 ＼ (38,164,427)

Loans:

Privately placed bonds 38,164,427 - 38,164,427

Allowance for doubtful loans:

Allowance for doubtful privately placed bonds (1,506,098) - (1,506,098)

Allowance for doubtful other Assets:

Allowance for doubtful privately placed bonds - (1,506,098) 1,506,098

＼ 224,444,621 ＼ 224,444,621 ＼ -

Korean won (In thousands) March 31, 2010

After reclassifications Before reclassifications Difference

Available-for-sale securities:

Corporate bonds ＼ 11,442,395 ＼ 23,263,467 ＼ (11,821,072)

Loans:

Privately placed bonds 11,821,072 - 11,821,072

Allowance for doubtful loans:

Allowance for doubtful privately placed bonds (212,673) - (212,673)

Allowance for doubtful other Assets:

Allowance for doubtful privately placed bonds - (212,673) 212,673

＼ 23,050,794 ＼ 23,050,794 ＼ -


The Company recognizes deferred tax liabilities basically for all taxable temporary differences, but recognizes deferred tax

assets for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which

the deductible temporary difference can be utilized. Also, the Company recognizes deferred tax assets for all deductible

temporary differences arising from investments in subsidiaries and associates to the extent that it is probable that the

temporary difference will be reversed in the foreseeable future and taxable profit will be available against which the temporary

difference can be utilized. In addition, current tax and deferred tax is charged or credited directly to equity if the tax relates to

items that are credited or charged directly to equity in the same or different period.

Reclassification

With the application of the Instruction of the Regulations of the Financial Investment Services and for a better comparability

with financial statements for the year ended March 31, 2010, certain accounts from prior year’s financial statement were

reclassified and the ordering of accounts was changed according to their appearance on financial statements for the year

ended March 31, 2010. Such reclassification does not affect prior year’s net income and net asset value.

63

3. RESTRICTED DEPOSITS

Restricted deposits as of March 31, 2010 and 2009 are as follows:

The subscription deposits that have to be separately deposited in Korea Securities Finance Corporation or bank until the days

before the payment date for securities in accordance with the Financial Investment Services Regulations No 4-44 cannot be

used as collateral.

The reserve for claims of customers’ deposits is deposited separately in a form of trust in KSFC to meet the demands of

investees, such as return of deposit and others, in accordance with article 74 of the Capital Market and Financial Investment

Business Act. The deposits for exchange-traded derivatives which the investors pay for FX margin trading to Korea Exchange

Bank and FDM, are recognized as deposits. The long-term financial instruments, which are pledged for the balance billing, are

limited to use. The guarantee deposits for stock borrowings from KSFC are the margin accounts of investee’s lending and

borrowing securities transactions which are deposited in KSFC. Also, the restricted deposits are deposited for opening

checking account. The others are deposited as the margin accounts for the ELS transactions with counterparties.

Collective fund for default loss is accumulated at the Korea Stock Exchange and Securities Industry Association in accordance

with Capital Market and Financial Investment Business Act as compensation for the loss caused by breach of trading contract

in security markets.

2010 2009

Deposits:

Subscription deposits ＼ - ＼ 13,500,000

Reserve for claims of customers’deposits 15,037,589 10,033,830

Reserve for claims of customers’deposits (trust) 1,194,211,651 1,365,792,938

Deposits for exchange-traded derivatives 172,587 -

Guarantee deposits for stock borrowings from KSFC 2,618,376 -

Long-term financial instruments 28,988,067 -

Restricted deposits 41,000 38,000

Others 5,383,782 4,855,942

1,246,453,052 1,394,220,710

Other assets:

Collective fund for default loss 6,534,196 6,745,876

＼ 1,252,987,248 ＼ 1,400,966,586


64

4. TRADING SECURITIES

(1) Stocks as of March 31, 2010 and 2009 are as follows:

(2) The details of bonds as of March 31, 2010 and 2009 are as follows:

2010 2009

Book value before valuation 303,911,023 256,578,363

Fair value (book value) 322,829,119 244,526,744

Gain (loss) on valuation 18,918,096 (12,051,619)


Book value before valuation Par value Book value

Government and public bonds ＼ 1,839,679,013 ＼ 1,826,612,011 ＼ 1,848,015,876

Special bonds 2,343,559,474 2,316,958,825 2,342,861,148

Corporate bonds 1,458,002,046 1,438,111,029 1,452,987,938

＼ 5,641,240,533 ＼ 5,581,681,865 ＼ 5,643,864,962


Book value before valuation Par value Book value

Government and public bonds ＼ 1,391,877,472 ＼ 1,369,672,417 ＼ 1,391,610,110

Special bonds 2,243,893,798 2,251,142,970 2,260,955,724

Corporate bonds 1,650,607,701 1,666,208,389 1,671,670,597

＼ 5,286,378,971 ＼ 5,287,023,776 ＼ 5,324,236,431


65

Fair value is calculated based on average price from Korea Investors Service Inc. (KIS) and Korea Bond Pricing & KR Co (KBP).

The fair values of bonds consist of book value, accrued interest receivables and accrued interest on bonds.

(3) Collective investment securities as of March 31, 2010 and 2009 are as follows:

Collective investment securities are appraised at NRV as of March 31, 2010 and 2009. The bonds that are included in bond style

of collective investment securities are appraised by adding the interest receivables of the bonds on the acquisition value of the

bonds. The gain and loss on valuation of collective investment securities is ＼6,108,118 thousand and ＼643,382 thousand,

respectively.

The unsold collective investment securities as of March 31, 2010 include ＼55,021,973 thousand of the corporate bonds which

are issued by the company that shows signs of insolvency, or insolvency, due to its ongoing corporate restructuring agreements

and others. These kinds of unsold collective investment securities are the recoverable amounts, which are appraised by

depreciating additionally ＼6,474,990 thousand from the standard price of ＼61,496,963 thousand, which is calculated by the

investment trust management company under the generally accepted accounting principles in the Republic of Korea, of the

corporate commercial papers and bonds issued by Seoul Guarantee Insurance Company and others. The Company classifies

the unsold collective investment securities as trading securities based on the interpretation.

2010 2009

Bond Style ＼ 64,605,234 ＼ 67,934,591

Money Market Fund 831,774 1,353,736

Stock Style 18,679,875 17,497,354

Hybrid Style 1,123,698 836,466

＼ 85,240,581 ＼ 87,622,147


66

However, the recoverable amounts of corporate bonds above could be influenced by the economic situation of the Republic of

Korea. This uncertainty is not reflected on the non-consolidated financial statements.

(4) Corporate commercial papers as of March 31, 2010 and 2009 are as follows:

(5) Interest income from trading securities amounted to ＼251,446,923 and ＼243,630,346 in 2010 and 2009, respectively.

Korea Express Co., Ltd. CP ＼ 30,000,000 ＼ 30,069,164 ＼ 69,164

Lotte Samkang Co., Ltd. CP 9,000,000 9,008,759 8,759

KDB Capital Corporation CP 10,000,000 10,107,975 107,975

IBK Capital Corporation CP 40,000,000 40,159,589 159,589

KT Capital Corporation CP 10,000,000 10,008,589 8,589

＼ 99,000,000 ＼ 99,354,076 ＼ 354,076


Acquisition cost Fair value

(Book value)

Accumulated

valuation gain

Shinsegae Co., Ltd. CP ＼ 20,000,000 ＼ 20,030,334 ＼ 30,334

GS-Caltex Corporation. CP 28,000,000 28,378,192 378,192

Hyundai Motor Co. CP 40,000,000 40,360,679 360,679

Samsung Techwin Co., Ltd. CP 20,000,000 20,381,803 381,803

Hyundai Capital Services, Inc. CP 40,000,000 40,135,940 135,940

Daewoo Gamsam Prugio-2 Co. CP 30,000,000 30,076,295 76,295

Cheonan Cheongdang First Co., Ltd. CP 5,000,000 5,006,818 6,818

Cheongjin Metro First Co., Ltd. CP 10,000,000 10,052,759 52,759

Military Mutual Aid Association CP 20,000,000 20,084,537 84,537

Korea Gas Corporation. CP 10,000,000 10,061,705 61,705

＼ 223,000,000 ＼ 224,569,062 ＼ 1,569,062


Acquisition cost Fair value

(Book value)

Accumulated

valuation gain

67

5. DERIVATIVES LINKED SECURITIES AND DERIVATIVES LINKED SECURITIES SOLD

Derivatives linked securities and derivatives linked securities sold as of March 31, 2010, are as follows:

Equity Linked Securities (“ELS”) and others (Interest rate linked securities and others) are contracts of which the interest and

maturity amount of securities are determined by the price of stock index and interest rate, respectively. Stock warrants are

contracts of which the maturity amount is determined by stock index and take option premium only without guarantee of

principal. The Company appraises these contracts at fair value at the date of the statements of financial position and reflects

valuation gain or loss in current operations.

Derivatives linked securities:

Equity linked securities ＼ 117,759,677 ＼ 544,903,596 ＼ 435,687,164 ＼ 8,543,245

Warrants 841,476 898,750 60,024 2,750

Others 19,176,352 31,301,670 12,125,318 -

Assets ＼ 137,777,505 ＼ 577,104,016 ＼ 447,872,506 ＼ 8,545,995

Derivatives linked securities sold:

Equity linked securities sold ＼ 600,903,946 ＼ 1,347,303,583 ＼ 10,211,922 ＼ 756,611,559

Warrants sold 3,823,812 4,055,979 2,755,704 2,987,871

Others 343,399,418 359,280,948 806,898 16,688,428

Liabilities ＼ 948,127,176 ＼ 1,710,640,510 ＼ 13,774,524 ＼ 776,287,858

Before valuation Appraisal valueResult of valuation

Valuation gain Valuation loss


68

6. COLLATERALIZED SECURITIES

Collateralized securities as of March 31, 2010 and 2009 are as follows:

(*) Collateral amount is the appraised amount calculated by multiplying certain rate to fair market price of stocks and bonds.

Stocks ＼ 69,248,016 ＼ 69,248,016 ＼ 67,173,106 ＼ 67,173,106 Guarantee deposits on KRX

26,689,000 26,689,000 27,738,290 27,738,290 Guarantee deposits for

lending and borrowing

securities on Korea

Securities Depository

95,937,016 95,937,016 94,911,396 94,911,396

Bonds - - 50,917,009 53,012,729 Guarantee deposits for

futures trading


Korea Securities Finance

Corporation

200,977,197 202,123,135 1,002,819 1,003,242 Margin accounts for

derivatives trading


derivatives trading


lending and borrowing

securities


trading bonds under

repurchase agreements

- - 955,956 1,003,509 Guarantee deposits

265,966,705 268,168,322 339,877,206 341,995,553

＼ 361,903,721 ＼ 364,105,338 ＼ 434,788,602 ＼ 436,906,949

Description2009

Book value Collatera amount

2010

Book value Collatera amount


69

7. AVAILABLE-FOR-SALE SECURITIES:

(1) Available-for-sale securities as of March 31, 2010 and 2009, are as follows:

Among the available-for-sale securities above, the marketable equity securities are appraised by the closing price at the date of

statements of financial position, and the collective investment securities are appraised by the sale price proposed by the fund

management company. The detachable stock rights of the others are appraised by the price calculated by using Black-Sholes

Model. The commercial bonds of others, special bonds and corporate bonds are appraised using the yield rate of fair value

provided by the external fund valuation institutions.

2010 2009

Stocks ＼ 256,921,154 ＼ 222,455,291

Investment in partnerships 62,719,650 40,600,414

Special bonds 766,986,258 -

Corporation bonds 187,786,292 11,442,395

Collective investment securities 109,986,389 26,520,190

Others 31,894,192 23,025,994

＼ 1,416,293,935 ＼ 324,044,284


70

Marketable equity securities:

Hyundai Engineering &

Construction Co., Ltd. 813,149 0.73 ＼ 39,289,832 ＼ 50,496,553 ＼ 50,496,553

Hyundai Elevator Co., Ltd. 356,209 4.99 30,527,111 18,843,456 18,843,456

Hyundai Development Company 830,000 1.10 43,990,000 27,431,500 27,431,500

Visang Inc. (Common stock) 333,924 3.41 8,431,581 4,240,835 4,240,835

Moorim P&P Co., Ltd. 291,940 0.94 3,328,116 2,379,311 2,379,311

Daewoo Securities Green Korea

Special Purpose Acquisition

Company 371,700 1.38 1,300,950 1,351,130 1,351,130

Hyundai Dream Together Special

Purpose Acquisition Company 25,000 0.65 50,000 184,250 184,250

Kumho Industrial Co., Ltd. (*) 6,805,848 1.40 24,780,093 24,780,092 24,780,092

151,697,683 129,707,127 129,707,127

Unlisted equity securities:

Korea Exchange (**) 624,190 3.12 2,807,105 74,121,314 74,121,314

Korea Securities

Finance Corporation (**) 2,152,828 3.17 10,757,876 20,938,405 20,938,405

Korea Securities Depository (**) 59,320 0.94 496,910 5,666,840 5,666,840

Korea Securities Computer

Corporation (**) 58,120 1.09 290,600 2,974,000 2,974,000

Korea Money

Brokerage Corporation (**) 10,000 0.50 50,000 278,770 278,770

Hyundai Asan Corporation 587,839 4.27 20,322,600 5,299,908 5,405,175

Hyundai Futures Corporation 396,000 8.61 2,009,700 3,770,377 1,882,774

Hyundai Logiem Co.,Ltd. 609,000 4.99 4,485,285 6,030,455 4,485,285

Hyundai Research Institute 200,000 10.00 480,685 901,931 480,685

C9 Asset Management

Corporation (***) 140,000 9.52 700,000 635,607 700,000

InvesteesBook

value

Net asset

(fair) value

Acquisition

cost

Percentage of

ownership (%)

No. of

shares

Korean won (In thousands)March 31, 2010

(2) Stocks as of March 31, 2010 and 2009 are as follows:

71

Reyon Pharmaceutical Co., Ltd. 99,000 0.81 625,000 483,358 625,000

Reyon Pharmaceutical Co., Ltd.

(Preferred stock) 297,000 2.43 2,025,000 1,450,075 2,025,000

Hanwon Square PFV Co., Ltd. 190,000 19.00 950,000 - 760,000

Pantech Co., Ltd. 12,746,528 0.77 2,428,316 2,446,182 582,796

E&B Stars Co., Ltd. 8,292 4.55 462,000 86,131 78,540

Hyundai Auction

Real Estate Fund 1st 298,791 0.99 226,484 734,428 226,484

Others 37,650,747 5,982,961 5,982,959

86,768,308 131,800,742 127,214,027

＼ 238,465,991 ＼ 261,507,869 ＼ 256,921,154

InvesteesBook

value

Net asset

(fair) value

Acquisition

cost

Percentage of

ownership (%)

No. of

shares


(*) The Kumho Industrial Co., Ltd. 234, 253 and 256 corporate bonds are reclassified to available-for-sale

securities due to the company restructuring. The impairment loss on bonds of ＼8,869,965 thousand is accounted for

considering the recoverable amount.

(**) These unlisted equity securities are carried at values published by Nice Pricing Services Inc., an independent valuation

organization, based on the professional judgment and one or more of rational valuation methods using reasonable financial

estimations, such as DCF model, Price Earnings Ratio (PER) or others.

(***) As of March 31, 2010, the disposal is restricted to sell.

The Company used recent audited (or provisional settlement of) financial statements for valuation of net asset value. The non

marketable stocks are accounted for at their acquisition costs since the information for valuation of fair value is not available

and the fair value cannot be reliably estimated with other proper method.

72

Marketable equity securities:

Hyundai Engineering &

Construction Co., Ltd. 813,149 0.73 ＼ 36,795,027 ＼ 47,975,791 ＼ 47,975,791

Moorim P&P Co., Ltd. 371,560 1.19 5,502,804 1,776,057 1,776,057

Hyundai Elevator Co., Ltd. 356,209 4.99 30,527,111 25,183,976 25,183,976

Hyundai Development Company 830,000 1.10 43,990,000 27,929,500 27,929,500

Visang Inc. (Common stock) 333,924 3.41 8,431,581 4,341,012 4,341,012

125,246,523 107,206,336 107,206,336

Unlisted equity securities:

Korea Exchange (*) 624,190 3.12 2,807,105 66,082,371 66,082,371

Korea Securities Finance

Corporation (*) 2,152,828 3.17 10,757,876 16,533,719 16,533,719

Korea Securities Depository (*) 56,496 0.94 496,910 4,729,732 4,729,732

Korea Securities Computer

Corporation (*) 58,120 1.09 290,600 1,810,438 1,810,438

Korea Money Brokerage

Corporation (*) 10,000 0.50 50,000 229,980 229,980

Hyundai Asan Corporation 587,839 4.27 21,229,535 5,552,115 5,405,175

Hyundai Futures Corporation 396,000 8.61 2,009,700 3,391,354 1,882,774

Hyundai Research Institute 200,000 10.00 480,685 556,487 480,685

C9 Asset Management

Corporation 140,000 9.52 700,000 633,946 700,000

Visang Inc. (Preferred stock) 209,000 2.09 7,106,000 2,229,167 7,106,000

InvesteesBook

value

Net asset

(fair) value

Acquisition

cost

Percentage of

ownership (%)

No. of

shares


73

Reyon Pharmaceutical Co., Ltd. 99,000 0.81 625,000 346,639 625,000

Reyon Pharmaceutical Co., Ltd.

(Preferred stock) 297,000 2.43 2,025,000 1,039,918 2,025,000

Hanwon Square PFV Co., Ltd. 190,000 19.00 950,000 - 760,000

Pantech Co., Ltd. 9,713,264 1.77 2,428,316 582,796 582,796

E&B Stars Co., Ltd. 8,292 4.55 462,000 52,562 78,540

Hyundai Auction Real Estate

Fund 1st 298,791 0.99 820,564 1,475,222 491,511

Others 35,887,921 5,780,559 5,725,234

89,127,212 111,027,005 115,248,955

＼ 214,373,735 ＼ 218,233,341 ＼ 222,455,291

InvesteesBook

value

Net asset

(fair) value

Acquisition

cost

Percentage of

ownership (%)

No. of

shares


(*) These unlisted equity securities are carried at values published by Nice Pricing Services Inc., an independent valuation

organization, based on the professional judgment and one or more of rational valuation methods using reasonable financial

estimations.

The Company adjusted acquisition cost of Moorim P&P Co., Ltd. to net asset value and the difference between the acquisition

cost and net asset value (＼1,810,028 thousand) was reflected as impairment loss on available-for-sale securities in 2009.

The Company adjusted acquisition cost of Enbastars Co., Ltd. to net asset value and the difference between the acquisition cost

and net asset value (＼383,460 thousand) was reflected as impairment loss on available-for-sale securities in 2009.

74

Book value

H&Q AP Korea 16.88 ＼ 1,148,350 ＼ 994,439 ＼ 1,148,350 ＼ 1,869,150

KTB 2007 Private Equity Fund 8.70 29,217,306 27,978,710 29,217,306 23,880,000

NPS 06-7 KDBC Corporate

Restructuring Fund 15.00 6,042,000 5,804,422 6,042,000 5,928,000

Tube Midas Venture Investment Fund 5.00 1,650,000 1,862,407 1,650,000 1,000,000

Corporate restructuring fund QCP 13 16.67 4,405,000 4,008,810 4,405,000 750,000

Asia Orchid Venture Fund 1 15.38 892,308 839,719 892,307 1,200,000

KLAUS Private Equity Fund 9.55 1,276,125 912,308 912,308 972,864

West End Corporate

Restructuring Fund 10.34 3,000,000 3,278,742 3,000,000 3,000,000

BKC-NICE NO.1 Corporate

Restructuring Fund 13.29 638,175 1,303,643 638,175 1,200,000

TSyoon 2th CRC Fund 23.25 5,000,000 4,890,405 5,000,000 -

Shibuya Sakuragaoka Property TMK 100.00 4,793,804 3,299,288 4,793,804 -

NAU IB 6th fund 40.00 4,000,000 4,000,000 4,000,000 -

IBK KTAC Private Equity Fund No. 2 - - - - 800,000

Others 1,020,400 994,839 1,020,400 400

＼ 63,083,468 ＼ 60,167,732 ＼ 62,719,650 ＼ 40,600,414

Investees20092010

Net asset

value (*)

Acquisition

cost

Percentage of

ownership (%)


(3) Investment in partnerships as of March 31, 2010 and 2009 are as follows:

(*) The Company used recent audited (or provisional settlement of) financial statements for valuation of net asset value.

Investments in partnerships are accounted for at their acquisition costs since the information for valuation of fair value is not

available and the fair value cannot be reliably estimated with other proper method.

In 2009, the Company reflected an impairment loss of ＼679,781 thousand considering the collectability of KLAUS Private Equity

Fund.

75

March 31, 2010 Korean won (In thousands)

The Korea Development

Bank09coup0300-0914-1 ＼ 50,000,000 ＼ 50,000,000 ＼ 51,396,701 ＼ 51,396,701 ＼ 1,396,701 -


Bank09coup0206-0825-2 50,000,000 50,000,000 50,983,124 50,983,124 983,124 -


Bank09coup0200-0828-1 50,000,000 50,000,000 50,913,619 50,913,619 913,619 -


Bank09coup0300-1105-1 50,000,000 50,000,000 51,331,794 51,331,794 1,331,794 -

Industrial Bank of

Korea(new)0910coups 2A-20 50,000,000 50,000,000 51,126,744 51,126,744 1,126,744 -

Small & Medium Industry

Promotion 319 50,000,000 50,000,000 50,944,216 50,944,216 944,216 -


Promotion 325 50,000,000 50,000,000 51,117,249 51,117,249 1,117,249 -


Promotion 327 50,000,000 50,000,000 51,433,917 51,433,917 1,433,917 -

Korea Housing Finance

Corporation 19 50,000,000 50,000,000 51,369,654 51,369,654 1,369,654 -

SH Corporation 73 50,000,000 50,000,000 50,920,238 50,920,238 920,238 -

SH Corporation 74 50,000,000 50,000,000 51,064,350 51,064,350 1,064,350 -

Kosaf 9 50,000,000 50,000,000 50,900,916 50,900,916 900,916 -

Kosaf 10 50,000,000 50,000,000 51,067,996 51,067,996 1,067,996 -

Korea Finance

Corporation

09coup0300-1110-1 50,000,000 50,000,000 51,388,331 51,388,331 1,388,331 -

National Agricultural

Cooperative Federation

2009-10coup2Y-C 50,000,000 50,000,000 51,027,409 51,027,409 1,027,409 -

＼ 750,000,000 ＼ 750,000,000 ＼ 766,986,258 ＼ 766,986,258 ＼ 16,986,258 -

InvesteesAccumulated

impairment loss

Accumulated

unrealized gainBook valueFair valuePar value

Acquisition

cost

(4) Special bonds as of March 31, 2010 are as follows:

The difference between the acquisition cost and fair value of special bonds of ＼16,986,258 thousand (before reflecting

deferred income tax effect) is reflected in accumulated other comprehensive income as gain on valuation of available-for-sale

securities.

76

The difference between the acquisition cost and fair value of corporate bonds of ＼2,095,892 thousand (before reflecting

deferred income tax effect) is reflected in accumulated other comprehensive income as gain on valuation of available-for-sale

securities. The Company recognized impairment loss of securities of ＼36,276 thousand of Shinsung Engineering &

Construction 91 corporate bond due to bond debt restructuring in 2010.


Pantech 24-1 ＼ 4,483,045 ＼ 4,483,045 ＼ 2,241,523 ＼ 2,241,523 ＼ - ＼ 2,241,522

SMI XVI ABS

Securitization Specialty

CO. 1-7 6,306,021 6,500,000 6,252,494 6,252,494 (53,527) -

SMI XVI ABS

Securitization Specialty

CO. 1-8 4,331,269 4,500,000 2,420,156 2,420,156 (1,911,113) -

Shinsung Engineering &

Construction 91 87,651 87,651 26,932 26,932 - 60,719

Shinhan Bank 13-09

coup 2A 49,992,500 50,000,000 50,949,320 50,949,320 956,820 -

Hana Bank 09-09 coup

24 ⓐ 49,995,000 50,000,000 51,003,022 51,003,022 1,008,022 -

SOIL Corporation 43-1 30,000,000 30,000,000 30,674,803 30,674,803 674,803 -

Easy Bio System 9CB 2,797,155 2,799,000 3,155,067 3,155,067 357,912 -

GS CALTEX 118-1 20,000,000 20,000,000 20,608,182 20,608,182 608,182 -

Woori Bank 13-10 coup

2ⓐ 12 20,000,000 20,000,000 20,454,793 20,454,793 454,793 -

＼187,992,641 ＼ 188,369,696 ＼ 187,786,292 ＼ 187,786,292 ＼ 2,095,892 ＼ 2,302,241

InvesteesAccumulated impairment

loss

Accumulated unrealizedgain (loss)

Book valueFair value Par valueAcquisition

cost

(5) Corporate bonds as of March 31, 2010 and 2009 are as follows:

77

During the year ended March 31, 2009, the Company reclassified Shinsung Engineering & Construction 91 corporate bond as

available-for-sale securities due to continuous operating loss and worsening cash flow. Also, the Company recognized

impairment loss on securities of ＼58,280 thousand considering the collectability.


Pantech 24-1 ＼ 4,483,045 ＼ 4,483,045 ＼ 2,241,523 ＼ 2,241,523 ＼ - ＼ 2,241,522

SMI XVI ABS

Securitization

Specialty CO. 1-7 6,306,021 6,500,000 5,778,384 5,778,384 (527,637) -

SMI XVI ABS

Securitization

Specialty CO. 1-8 4,331,269 4,500,000 3,358,555 3,358,555 (972,714) -

Shinsung Engineering &

Construction 91 122,213 122,213 63,933 63,933 - 58,280

＼ 15,242,548 ＼ 15,605,258 ＼ 11,442,395 ＼ 11,442,395 ＼ (1,500,351) ＼ 2,299,802

InvesteesAccumulated impairment

loss

Accumulated unrealizedgain (loss)

Book valueFair value Par valueAcquisition

cost

78

Shang-Hai real estate Fund ＼ 7,647,314 ＼ 9,444,127 ＼ 9,444,127 ＼ 1,796,813 ＼ -

GB Vietnam Private Fund 2,000,000 1,286,407 1,286,407 (713,593) -

Bond Market Stabilization Private

Fund 1 13,500,000 14,426,640 14,426,640 926,640 -

Hyundai YouFirst Real Estate

Private Trust 1 4,500,000 4,578,615 4,578,615 78,615 -

Hyundai Dream Equity Trust 1 10,000,000 11,999,500 11,999,500 1,999,500 -

Hyundai Green Equity Trust 1 5,000,000 6,042,400 6,042,400 1,042,400 -

Hyundai Smart Index alpha

Derivative Trust 1 5,000,000 6,109,400 6,109,400 1,109,400 -

Hyundai Trust Bond Trust 1 30,000,000 31,039,800 31,039,800 1,039,800 -

Hyundai Market Neutral

Derivative Trust 1 10,000,000 10,169,400 10,169,400 169,400 -

Korea Investment Private

Long Shot hybrid fund 1 10,000,000 10,689,299 10,689,299 689,299 -

Hyundai China A Share Trust 1 4,000,000 4,200,801 14,200,801 200,801 -

MBC-E&B Drama Fund 479,086 - - - 479,086

＼ 102,126,400 ＼ 109,986,389 ＼ 109,986,389 ＼ 8,339,075 ＼ 479,086


Impairment loss

Accumulated

unrealized gain (loss)Book valueFair value

Acquisition

cost


(6) Collective investment securities as of March 31, 2010 and 2009 are as follows:

79

Shang-Hai real estate Fund ＼ 7,647,314 ＼ 11,596,005 ＼ 11,596,005 ＼ 3,948,691 ＼ -

GB Vietnam Private Fund 2,000,000 1,301,065 1,301,065 (698,935) -

Bond Market Stabilization

Private Fund 1 13,500,000 13,623,120 13,623,120 123,120 -

MBC-E&B Drama Fund 479,086 - - - 479,086

＼ 23,626,400 ＼ 26,520,190 ＼ 26,520,190 ＼ 3,372,876 ＼ 479,086


Impairment loss

Accumulated

unrealized gain (loss)Book valueFair value

Acquisition

cost



The collective investment securities classified as available-for-sale are assessed by the same method used on the assessment

of those classified as trading securities. The difference between the acquisition cost and fair value of corporate bonds of

＼8,339,075 thousand (before reflecting deferred income tax effect) is reflected in accumulated other comprehensive income as

gain on valuation of available-for-sale securities.

Also, the Company recognized impairment loss of ＼479,086 thousand considering the collectivity of MBC-E&B Drama Fund.

(7) Other available-for-sale securities as of March 31, 2010 and 2009 are as follows:

2010March 31, 2010 2009

Commercial papers ＼ 23,130,000 ＼ 23,130,000 ＼ 23,130,000 ＼ - ＼ 22,800,000 ＼ (7,200,000)

Stock warrants 4,118,140 8,764,192 8,764,192 4,646,052 225,994 (1,083,006)

Total ＼ 27,248,140 ＼ 31,894,192 ＼ 31,894,192 ＼ 4,646,052 ＼ 23,025,994 ＼ (8,283,006)

DescriptionAccumulated

Unrealized gain(loss)

Book valueAccumulated

Unrealized gain(loss)

Book valueFair valueAcquisition

cost

80

(9) Changes in gain and loss on valuation of available-for-sale securities (before reflecting deferred income tax effect) for the

year ended March 31, 2010 are as follows:

(10) Interest income from available-for-sale securities amounted to ＼31,282,237 thousand and ＼2,937,437 thousand in 2010

and 2009, respectively.

Description Beginning balance Increase (decrease) Ending balance

Stocks ＼ 58,020,579 ＼ 9,375,703 ＼ 67,396,282

Investments in partnerships (1,347,355) 983,537 (363,818)

Special bonds - 16,986,258 16,986,258

Corporate bonds (1,500,351) 3,596,243 2,095,892

Collective investment securities 3,372,876 4,966,200 8,339,075

Others (5,083,006) 9,729,058 4,646,052

＼ 53,462,743 ＼ 45,636,999 ＼ 99,099,741


Description Within 1 year Over 1 year to 5 years Total

Special bonds ＼ - ＼ 766,986,258 ＼ 766,986,258

Corporate bonds 6,252,494 181,533,798 187,786,292

Commercial bonds 10,000,000 13,130,000 23,130,000

＼ 16,252,494 ＼ 961,650,056 ＼ 977,902,550


In 2009, the Company recognized impairment loss of ＼3,200,000 thousand considering the collectability of Sonjung City

Development Co., Ltd.

In 2010, the Company recognized reversal of impairment loss of ＼3,200,000 thousand considering the collectability of Sonjung

City Development Co., Ltd. due to change of construction company and others.

(8) Maturities of special bonds, corporate bonds and commercial papers as of March 31, 2010 are as follows:

81

Net asset

value

Acquisition

cost

Percentage of

ownership (%)

No. of Shares

owned

2010 Book value

Hyundai Securities America Inc. 220 100% ＼32,735,839 ＼26,289,525 ＼26,289,525 ＼30,752,055

Hyundai Securities Asia Ltd. 10,000,000 100% 8,918,826 26,734,369 26,734,369 30,906,630

Hyundai Securities Europe Ltd. 11,000,000 100% 19,130,104 17,522,697 17,522,697 20,284,306

Hyundai Wise Asset

Management Co., Ltd. 659,997 33.00% 3,827,983 4,629,876 4,629,876 4,033,010

Shibuya Sakuragaoka Property TMK(*) - - - - - 5,751,243

Osaka Kitahama 3 Undisclosed

Association 1,419,326,000 75.00% 1,419,326 2,058,534 - 2,037,312

Core-clean Tech Venture

Investment 2 Association 582,000,000 25.84% 582,000 549,163 549,163 567,036

Investment Opportunity

Limited (**) 60,000 50% 626,100 880,630 880,630 806,152

Hyundai Asset Management Co., Ltd. 6,000,000 100% 30,000,000 25,541,152 25,541,152 28,638,983

Korea Pacific No.08 Ship

Investment Co., Ltd. 2,292,971 99.57% 11,134,410 11,134,397 11,134,397 11,505,395











＼165,774,103 ＼172,831,389＼ 170,772,855 ＼185,555,070

Investees 20092010

(*) As of March 31, 2010, the Company reclassified investment securities using the equity method as investments in

partnerships of available-for-sale securities since the Company no longer have significant influence.

(**) Offshore fund established in Labuan Island, Malaysia.

8. INVESTMENT SECURITIES USING THE EQUITY METHOD

(1) Investment securities using the equity method as of March 31, 2010 and 2009 are as follows (Korean won in thousands) :

82

(2) The financial statements used in the equity method are as follows:

These securities were accounted for using the equity method of accounting based on provisional settlement of financial

statements as the audited financial statements on these companies could not be obtained at the Company’s year-end closing.

In order to verify the reliability of such unaudited financial statements, the Company has performed the following procedures

and found no significant exceptions:

a. Obtained the unaudited financial statements signed by the investee’s chief executive officer and statutory auditor

b. Identified whether the major transactions or accounting events, including those disclosed to public by the investee, which

were acknowledged by the Company, are properly reflected in the unaudited financial statements

c. Analyzed the effect of potential difference between the unaudited and audited financial statements

(3) The details of valuation of investment securities using the equity method for the years ended March 31, 2010 and 2009 are as

follows:

Investees Date of financial statements Description

Hyundai Securities America Inc. March 31, 2010 Provisional settlement of financial statements

Hyundai Securities Asia Ltd. March 31, 2010 Provisional settlement of financial statements

Hyundai Securities Europe Ltd. March 31, 2010 Provisional settlement of financial statements

Hyundai Wise Asset Management Co., Ltd. March 31, 2010 Provisional settlement of financial statements

Shibuya Sakuragaoka Property TMK March 31, 2010 Provisional settlement of financial statements

Osaka Kitahama 3 Undisclosed Association March 31, 2010 Provisional settlement of financial statements

Core-clean Tech Venture Investment 2 Association March 31, 2010 Provisional settlement of financial statements

Investment Opportunity Limited. March 31, 2010 Provisional settlement of financial statements

Hyundai Asset Management Co., Ltd. March 31, 2010 Provisional settlement of financial statements

Korea Pacific No.08 Ship Investment Co., Ltd. March 31, 2010 Provisional settlement of financial statements






83

Hyundai Securities America Inc. ＼ 30,752,055 ＼ - ＼ 1,120,707 ＼ (5,583,237) ＼ 26,289,525

Hyundai Securities Asia Ltd. 30,906,630 - (229,747) (3,942,514) 26,734,369

Hyundai Securities Europe Ltd. 20,284,306 - 471,452 (3,233,061) 17,522,697

Hyundai Wise Asset

Management Co., Ltd. 4,033,010 - 96,321 500,545 4,629,876

Shibuya Sakuragaoka

Property TMK 5,751,243 940,078 (207,949) (6,483,372) -

Osaka Kitahama 3

Undisclosed Association 2,037,312 - (1,419,326) (617,986) -


Investment 2 Association 567,036 - (17,873) - 549,163

Investment Opportunity Limited. 806,152 - 234,224 (159,746) 880,630

Hyundai Asset ManagementCo., Ltd. 28,638,983 - (3,102,475) 4,644 25,541,152


Investment Co., Ltd. 11,505,395 (330,445) 1,113,535 (1,154,088) 11,134,397


Investment Co., Ltd. 11,505,394 - 772,076 (812,551) 11,464,919


Investment Co., Ltd. 11,505,411 - 1,049,624 (1,071,649) 11,483,386


Investment Co., Ltd. 11,485,277 - 1,040,820 (1,044,263) 11,481,834


Investment Co., Ltd. 7,888,433 3,641,825 887,649 (887,030) 11,530,877


Investment Co., Ltd. 7,888,433 3,641,825 886,405 (886,633) 11,530,030

＼185,555,070 ＼ 7,893,283 ＼ 2,695,443 ＼ (25,370,941) ＼ 170,772,855

InvesteesEnding

balance

Other increase

(decrease) (*)

Gain (loss) on equity method

valuation

Acquisition/

Disposal

Beginning

balance


(*) These are composed of decrease due to dividend (＼5,727,017 thousand) from Korea Pacific No. 08 ~ 13 Ship Investment Co.,

Ltd., changes in accumulated other comprehensive income of investee of ＼375,992 thousand, transfer of investment

securities using equity method to available-for-sales securities (＼6,483,372 thousand) and changes in overseas operation

translation (＼13,536,544 thousand).

84

(*) These are composed of decrease due to dividend (＼1,624,638 thousand) from Korea Pacific No. 08 ~ 13 Ship Investment Co.,

Ltd., changes in accumulated other comprehensive income of investee of ＼22,240,921 thousand, overseas operation

translation of ＼1,042,513 thousand and disposal (＼354,000 thousand).

Hyundai Securities America Inc. ＼ 22,807,915 ＼ - ＼ (833,855) ＼ 8,777,995 ＼ 30,752,055

Hyundai Securities Asia Ltd. 22,824,809 - 499,997 7,581,824 30,906,630

Hyundai Securities Europe Ltd. 15,949,397 - (904,993) 5,239,902 20,284,306

Hyundai Wise Asset

Management Co., Ltd. 4,910,182 - 235,352 (1,112,524) 4,033,010

Shibuya Sakuragaoka

Property TMK 3,772,057 - 359,459 1,619,727 5,751,243

Osaka Kitahama 3

Undisclosed Association 1,440,288 - - 597,024 2,037,312


Investment 1 Association 354,000 - - (354,000) -


Investment 2 Association 582,000 - (14,964) - 567,036

Investment Opportunity Limited. - 626,100 (17,743) 197,795 806,152

Hyundai Asset Management Co., Ltd. - 30,000,000 (1,356,373) (4,644) 28,638,983


Investment Co., Ltd. - 11,464,855 298,550 (258,010) 11,505,395











＼ 72,640,648 ＼ 92,206,820 ＼ (597,194) ＼ 21,304,796 ＼ 185,555,070

InvesteesEnding

balance

Other increase

(decrease) (*)

Gain (loss) on equity method

valuation

Acquisition/

Disposal

Beginning

balance


85

Hyundai Securities America Inc. March 31, 2010 (*) ＼ 26,351,916 ＼ (62,391) ＼ 26,289,525

Hyundai Securities ASIA Ltd. March 31, 2010 (*) 31,142,307 (4,407,938) 26,734,369

Hyundai Securities Europe Ltd. March 31, 2010 (*) 17,630,689 (107,992) 17,522,697

InvesteesNet asset value

after adjustment

Adjustment

amount

Net asset value before

adjustment Reasons

Date of thestatement of

financial position


(*) The Company adjusted overseas subsidiaries’financial statements since there are differences in generally accepted

accounting principles as compared to Korean GAAP.

(5) In 2010, there is no difference occurred newly between the acquisition cost and the Company’s proportionate equity in the

fair value of net assets of the investee upon acquisition (“investment difference”), and all investment difference occurred

before March 31, 2009 had been amortized.

(6) Financial information of investees accounted for using the equity method as of and for the year ended March 31, 2010 is as

follows:

Investees Total assets Total liabilities Operating revenues Net income (loss)

Hyundai Securities America Inc. (*) ＼ 26,693,337 ＼ 403,812 ＼ 4,310,165 ＼ 1,232,479

Hyundai Securities Asia Ltd. (*) 27,103,415 369,046 13,016,047 1,541,305

Hyundai Securities Europe Ltd. (*) 18,277,308 754,611 3,396,498 418,972

Hyundai Wise Asset Management Co., Ltd. 16,830,592 2,800,665 4,557,825 706,845

Osaka Kitahama 3 Undisclosed Association 2,744,712 - - -


Investment 2 Association 2,162,054 37,113 - (69,163)

Investment Opportunity Limited. 1,761,260 - 531,629 468,449

Hyundai Asset Management Co., Ltd. 25,818,904 277,752 3,059,769 (3,102,475)


Investment Co., Ltd. 13,158,377 1,975,446 1,131,442 1,068,502






(4) The adjustments of investee’s financial statements due to the difference of accounting standards are as follows:

86

(*) The Company adjusted overseas subsidiaries’financial statements since there are differences in generally accepted

accounting principles as compared to Korean GAAP.

(7) There are no significant unrealized profits (losses) in 2010 and 2009.

9. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

Assets and liabilities denominated in foreign currencies as of March 31, 2010 and 2009 consist of the following


(*) Foreign currencies other than U.S. dollars are translated into U.S. dollars.

10. BROKER’S LOAN

The Company extends loans to its customers from funds borrowed from KSFC or from its own funds. The loans bear annual

interest at 7.2~9.7 percent and are due in 90 days. Customers provide collateral such as marketable securities or cash

equivalents for 140 percent or more of the loan amount.

Assets:

Cash and cash equivalents US$ 33,834,368 ＼ 38,259,903 US$ 3,578,357 ＼ 4,927,756

Deposits 27,988,767 31,649,698 27,619,069 38,034,220

Guarantee deposits 120,689 136,475 113,176 155,855

US$ 61,943,824 ＼ 70,046,076 US$ 31,310,602 ＼ 43,117,831

Liabilities:

Accounts payable US$ 3,690,422 ＼ 4,173,129 US$ 3,690,422 ＼ 5,082,080

Withholdings 2,418 2,734 - -

Other liabilities 27,388,000 30,970,350 16,972,000 23,372,141

US$ 31,080,840 ＼ 35,146,213 US$ 20,662,422 ＼ 28,454,221

Description2009

U.S. dollar (*) Korean won

2010

U.S. dollar (*) Korean won

Investees Total assets Total liabilities Operating revenues Net income (loss)




Investment Co., Ltd. 13,824,390 2,243,367 979,251 959,483


Investment Co., Ltd. 13,845,902 2,265,730 974,022 934,097


87

11. ADVANCES FOR CUSTOMERS

Advances for customers consist of advances for payment on bonds guarantee, advances for payments on loss

compensation and advances for payments for others.

Advances for payment on bonds guarantee are principally from guarantees of indebtedness of Korean companies, which issued

corporate bonds. The Company has provided payment guarantees to the debtors and upon the occurrence of the debtors’

failure to make payment to the creditors, the Company pays directly to the creditors upon maturity.

Advances for payment on loss compensation are compensation receivables occurred from customers’ loss due to employees’

misappropriation and arbitrary transactions.

The Company made advanced payments on behalf of the securities companies to which the Company is responsible for the

payments in advance according to the former law on securities transaction.

12. ALLOWANCE FOR DOUBTFUL ACCOUNTS

(1) Regulation on Capital Market and Financial Investment Business Act (the “Act”) requires the Company to classify all

outstanding loans and accounts receivable (brokers’loans, loans for debt-equity swap, accrued income, accounts receivable

from customers, loans, advances for customers, dishonored bonds and others) into five categories as normal, precautionary,

substandard, doubtful or estimated loss, based on borrowers’repayment capability and historical financial transaction

records.

(2) The details of classification of loans and accounts receivable as of March 31, 2010 are as follows (Korean won in thousands):

(*) The Company does not provide allowance for doubtful accounts for receivables of ＼62,987,952 thousand since it has not

matured at the relevant period.

Broker’s loans ＼ 799,614,461 ＼ - ＼ - ＼ - ＼ - ＼ 799,614,461

Loans 80,549,839 - - - - 80,549,839

Loans purchased 134,000,000 - 12,200,000 6,800,000 - 153,000,000

Advances for customers - - 10,099 2,961,206 13,781,743 16,753,048

Dishonored loans - - - - 6,933,050 6,933,050

Privately placed bonds 32,843,667 - 5,320,760 - - 38,164,427

Receivables (*) 49,144,207 - - 196,580 841,893 50,182,680

Accrued income 61,752,158 - - 11,691 100,285 61,864,134

＼1,157,904,332 ＼ - ＼ 17,530,859 ＼ 9,969,477 ＼ 21,656,971 ＼ 1,207,061,639

TotalLossDoubtfulSubstandardPrecautionaryNormal

88

Company Bond amounts Claim amounts Statute of limitations

Receivables (*) ＼ 841,893 ＼ 841,893

Accrued income (*) 100,285 100,285

Advances for customers Gukmin Rental Company 13,487,360 13,487,360 2009.6.16

Advances for payment

on loss compensation (*) 294,383 294,383

13,781,743 13,781,743

Dishonored loans Koryo securities Inc. 459,988 459,988 2010.3.14

Dae rung Co., Ltd. 2,539,146 2,539,146 2010.3.14

Seah Besteel Corporation 3,923,716 3,923,716 2008.9.22

Bond Park 10,200 10,200 2009.2.28

6,933,050 6,933,050

＼ 21,656,971 ＼ 21,656,971

(*) These consisted of a number of private investors.

(4) The percentage of allowance for doubtful accounts to total loans for recent 3 years is as follows (Korean won in thousands):

Total loans Allowance for doubtful accounts Percentage

2010.3.31 ＼ 1,207,061,639 ＼ 39,089,323 3.24%

2009.3.31 836,289,981 31,085,220 3.72%

2008.3.31 1,111,617,928 32,426,699 2.92%

(3) The details of bonds as determined by estimating the loss by the Company as of March 31, 2010 are as follows

(Korean won in thousands) :

89


Land ＼ 114,154,831 ＼ 105,828 ＼ - ＼ - ＼ - ＼ 114,260,659

Buildings 118,205,354 846,417 - 2,667,615 3,767,155 117,952,231

Vehicles 74,404 - 15,025 - 24,866 34,513

Furniture and equipment 22,887,720 5,786,512 11,772 - 10,272,563 18,389,897

Others 11,505,923 2,828,639 11,231 (169,712) 5,044,194 9,109,425

＼ 266,828,232 ＼ 9,567,396 ＼ 38,028 ＼ 2,497,903 ＼ 19,108,778 ＼ 259,746,725

Ending

balanceDepreciationOthersDisposalAcquisition

Beginning

balance


Land ＼ 90,169,971 ＼ 23,984,860 ＼ - ＼ - ＼ 114,154,831

Buildings 112,195,170 9,466,526 - 3,456,342 118,205,354

Vehicles 106,783 - - 32,379 74,404

Furniture and equipment 20,534,816 12,566,147 65,904 10,147,339 22,887,720

Others 11,006,391 5,846,038 95,726 5,250,780 11,505,923

＼ 234,013,131 ＼ 51,863,571 ＼ 161,630 ＼ 18,886,840 ＼266,828,232

Ending

balanceDepreciationDisposalAcquisition

Beginning

balance

13. PROPERTY AND EQUIPMENT

(1) The changes in property and equipment in 2010 and 2009 are as follows:

(2) The value of Company-owned land (90,068.98 square meters and 89,980.40 square meters as of March 31, 2010 and 2009,

respectively) is ＼142,684,090 thousand and ＼143,544,856 thousand, using the disclosed land price pursuant to the Laws on

Disclosure of Land Price and Valuation of Land as of March 31, 2010 and 2009, respectively.

(3) As of March 31, 2010, a substantial portion of the Company’s land and buildings are pledged as collateral to a maximum of

＼10,429,340 thousand and leasehold rights amount to ＼3,348,193 thousand for the deposits for rent.

(4) As of March 31, 2010, buildings of head quarter and branches, furniture are insured for ＼153,996,502 thousand with

Hyundai Marine & Fire Insurance Co., Ltd. In addition, the Company also carries a general insurance policy and liability

insurance for vehicles with Hyundai Marine & Fire Insurance Co., Ltd.

90

(5) The Company has leased vehicles as of March 31, 2010, under operating lease agreements with Hyundai Capital Services,

Inc. The payment schedule of the lease obligations is as follows (Korean won in thousands):

14. INTANGIBLE ASSETS

(1) Intangible assets as of March 31, 2010 and 2009 are as follows:

Development costs ＼ 55,162,986 ＼ 36,941,723 ＼ 18,221,263

Software 23,163,809 14,851,000 8,312,809

Others 23,463,284 3,128,438 20,334,846

＼ 101,790,079 ＼ 54,921,161 ＼ 46,868,918


Period Amount

2010.4.1 ~ 2011.3.31 ＼ 52,612

2011.4.1 ~ 2015.3.31 28,930

＼ 81,542

Acquisition cost Accumulated

amortizationBook value

Development costs ＼ 52,229,238 ＼ 30,612,164 ＼ 21,617,074

Software 20,689,529 11,426,172 9,263,357

＼ 72,918,767 ＼ 42,038,336 ＼ 30,880,431


Acquisition cost Accumulated

amortizationBook value

91

(2) The changes in intangible assets in 2010 and 2009 are as follows:

Development costs ＼ 21,617,074 ＼ 2,933,748 ＼ - ＼ 6,329,559 ＼ 18,221,263

Software 9,263,357 2,474,280 - 3,424,828 8,312,809

Others - 23,463,284 - 3,128,438 20,334,846

＼ 30,880,431 ＼ 28,871,312 ＼ - ＼ 12,882,825 ＼ 46,868,918

Ending

balanceAmortizationDecreaseIncrease

Beginning

balance


Development costs ＼ 1,676,768 £‹ 21,117,873 ＼ - ＼ 1,177,567 ＼ 21,617,074

Others 3,812,540 7,515,188 - 2,064,371 9,263,357

＼ 5,489,308 ＼ 28,633,061 ＼ - ＼ 3,241,938 ＼ 30,880,431

Ending

balanceAmortizationDecreaseIncrease

Beginning

balance


15. BORROWINGS

(1) Call money as of March 31, 2010 and 209 are as follows (Korean won in thousands):

Lender Annual interest rate (%) 2010 2009

Tong Yang Securities Inc. 2.10 ＼ 326,000,000 ＼ 60,000,000

Amount

92


Hana Bank 7.85 ＼ 9,930,318 ＼ -

Amount


Korea Securities Finance Corporation and others 0.60 ~ 4.28 ＼ 510,624,857 ＼ 181,318,254

Amount


Bank of Korea 2.17 ＼ 6,700,000 ＼ 47,200,000

Woori Investment & Securities Co., Ltd. 2.83 50,000,000 -

Ministry of Strategy and Finance 0.60 ~ 0.61 26,031,863 -

＼ 82,731,863 ＼ 47,200,000

Amount

(2) Bank overdraft from banks as of March 31, 2010 and 2009 are as follows (Korean won in thousands):

(3) Borrowings from Korea Securities Finance Corporation as of March 31, 2010 and 2009 are as follows


(4) Other borrowings as of March 31, 2010 and 2009 consist of the following:

93

16. DEBENTURES

Debentures as of March 31, 2010 and 2009 are as follows:

17. SHAREHOLDERS’EQUITY

(1) As of March 31, 2010 and 2009, details of capital stock are as follows:

(2) Treasury stock

The Company holds 8,215,870 shares of its common stock as of March 31, 2010, and intends to sell the shares in the near

future.

Publicly-offered 26th debentures 2007.3.06 2010.3.06 5.23 ＼ - ＼ 200,000,000

Publicly-offered 27th debentures 2008.1.08 2011.1.08 7.22 1,000,000 1,000,000

Publicly-offered 28th debentures 2010.2.03 2013.2.03 5.70 200,000,000 -

201,000,000 201,000,000

Less: Discount on debenture issued (650,870) (124,710)

＼ 200,349,130 ＼ 200,875,290

DescriptionKorean won (In thousands)

20092010

Annual

interest rate (%) MaturityIssuance date

2010 2009

Authorized shares 600,000,000 shares 600,000,000 shares

Par value per share ＼ 5,000 ＼ 5,000

Outstanding shares 170,000,000 shares 170,000,000 shares

Capital stock ＼ 850,000,000,000 ＼ 850,000,000,000

Korean Won

94

(*) 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. This 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.

(**) In accordance with the provisions of Article 5 of Regulation on Supervision of Electronic Financial Activities, the Company

provides reserve for loss on electronic financial transactions to make reparation for the damage in process of the electronic

transfers or operations.

Description Amount Legal basis

Legal reserve (*) ＼ 20,222,764 The Commercial Code of

the Republic of Korea, Article 458

Reserve for loss on electronic financial

transactions (**) 500,000 Regulation on Supervision of Electronic

Financial Activities, Article 5

＼ 20,722,764

18. INCOME PER SHARE

(1) Ordinary net income per share for the years ended March 31, 2010 and 2009 is calculated as follows:

2010 2009

Net income ＼ 178,861,170,143 ＼ 149,189,223,295

Weighted average number of common shares outstanding 161,784,130 163,445,808

Ordinary net income per share ＼ 1,106 ＼ 913

Korean won

(3) Restricted retained earnings

As of March 31, 2010, restricted retained earnings are as follows (Korean won in thousands):

95

(2) Weighted average number of common shares outstanding for the year ended March 31, 2010 is calculated as follows:

Weighted-average number of common shares outstanding: 59,051,207,450 shares ÷ 365 days = 161,784,130 shares

Diluted earnings per share is the same as basic earnings per share since there are no diluted securities outstanding as of

March 31, 2010 and 2009.

19. DIVIDENDS

Dividends for the years ended March 31, 2010 and 2009 are calculated as follows (Korean won):

(1) Details of dividends

(2) Dividend payout ratio

2010 2009

Dividends per share (dividend rate) ＼ 400 (8%) ＼ 250 (5%)

Number of shares outstanding 161,783,730 161,784,130

Cash dividends 64,713,492,000 40,446,021,000

2010 2009

Cash dividends ＼ 64,713,492,000 ＼ 40,446,021,000

Net income 178,861,170,143 149,189,223,295

Dividend payout ratio 36.18% 27.11%

April 1, 2009 170,000,000 365 62,050,000,000

Treasury stock (carried forward) (8,215,870) 365 (2,998,792,550)

161,784,130 59,051,207,450

Number of

shares issued

Number of days

outstanding

Weighted number

of shares

96

20. INCOME TAX EXPENSE AND DEFERRED INCOME TAXES

(1) Income tax expense for the years ended March 31, 2010 and 2009 are as follows:

Description 2010 2009

Income tax currently payable ＼ 73,139,270 ＼ -

Changes in deferred income taxes due to temporary difference (*1) (9,760,839) 52,614,143

Changes in deferred income taxes due to carry-forwarded tax loss (*2) 13,397,932 (13,397,932)

Changes in deferred income taxes due to tax credits (*3) 4,900,589 (4,900,589)

Deferred income tax directly reflected to equity (9,102,914) 19,200,172

Income tax expense 72,574,038 53,515,794

(*1) Deferred income tax assets (liabilities) due to temporary

difference, net at the end of the year (16,968,913) (26,729,750)

Deferred income tax assets (liabilities) due to temporary

difference, net at the beginning of the year (26,729,752) 25,884,393

Changes in deferred income taxes due to temporary difference 9,760,839 (52,614,143)

(*2) Deferred income tax assets due to carry-forwarded tax

loss, net at the end of the year - 13,397,932

Deferred income tax assets due to carry-forwarded tax

loss, net at the beginning of the year 13,397,932 -

Changes in deferred income taxes due to carry-

forwarded tax loss (13,297,932) 13,297,932

(*3) Deferred income tax assets due to tax credits, net at the

end of the year - 4,900,589

Deferred income tax assets due to tax credits, net at the

beginning of the year 4,900,589 -

Changes in deferred income taxes due to tax credits (4,900,589) 4,900,589


(3) Dividend yield ratio

2010 2009

Dividends per share ＼ 400 ＼ 250

Market price per share as of the

date of statements of financial position date 13,600 11,400

Dividend yield ratio 2.94% 2.19%

97


(2) Tax reconciliation items between pretax accounting income and taxable income for the years ended March 31, 2010 and 2009

are as follows:


Income before income tax ＼ 251,435,208 ＼ 202,705,017

Income tax payable applying tax rate

(2010: 24.2%, 2009: 27.5%) 60,823,120 55,713,080

Reconciliation:

Non-taxable Income (224,024) (508,661)

Non-deductible expense 909,644 1,205,578

Additional (payment of) income tax 2,724,298 -

Exclusion from deferred income tax 8,341,000 (2,894,203)

Income tax expense ＼ 72,574,038 ＼ 53,515,794

Effective income tax rate 28.86% 26.40%

(3) The table below shows the accumulated temporary differences, carry-forwarded tax loss and total amount

of deferred income tax assets (liabilities) for the year ended and as of March 31, 2010:

1) Deductible temporary difference:

Allowance for doubtful accounts ＼ 2,150,077 ＼ (893,200) ＼ 1,256,877

Commission (local subsidiary) (***) 2,080,658 3,596,039 5,676,697

Impairment loss on securities 66,658,531 5,006,281 71,664,812

Accrued severance benefits 56,046,962 8,960,115 65,007,077

Loss on valuation of collective investment securities 33,645,043 (5,100,542) 28,544,501

Securities sold 315,533 5,612 321,145

Loss on valuation of options 34,761 19,139 53,900

Loss on valuation of OTC derivatives 216,739,550 (212,320,184) 4,419,366

Loss on sales of foreign bonds 5,040,480 - 5,040,480

Loss on foreign exchanges translation 2,810,887 164,917 2,975,804

Other non-operating expenses 16,429,810 11,488,485 27,918,295

Advertising (dream point) 5,109,284 (380,972) 4,728,312


Beginning

balance (**)

Increase

(decrease)

Ending

balance

98

Loss on valuation of derivatives linked securities sold ＼ - ＼ 267,691 ＼ 267,691

Loss on valuation of derivatives linked securities 445,042,575 (439,326,511) 5,716,064

Employee welfare fund 2,950,000 650,000 3,600,000

Accrued expenses (education tax) - 1,400,000 1,400,000

Dividends (specific overseas company) (***) 11,987,221 7,821,610 19,808,831

Donations in excess of tax limit 3,894,843 (3,894,843) -

Carry-forwarded tax loss 55,363,355 (55,363,355) -

Sub-total 926,299,570 (677,899,718) 248,399,852

2) Temporary difference to be added:

Severance insurance deposits (45,306,387) (19,700,690) (65,007,077)

Gain on equity method valuation (5,353,218) 3,031,574 (2,321,644)

Accrued interest receivable (19,433,554) (6,802,418) (26,235,972)

Gain on valuation of stock (27,900,271) (18,589,043) (46,489,314)

Gain on valuation of bonds (40,412,759) (2,604,858) (43,017,617)

Gain on settlement of futures (12,323,137) 10,712,736 (1,610,401)

Collective fund for default loss (445,550) - (445,550)

Gain on sales of investment securities (196,170) - (196,170)

Stock of affiliated company (9,791,465) - (9,791,465)

Allowance for reduction entry (***) (16,982,736) - (16,982,736)

Gain on valuation of negotiable commercial papers (1,569,062) 1,214,986 (354,076)

Interest incurred during construction (508,913) 17,303 (491,610)

Gain on valuation of derivatives linked securities sold (762,311,278) 62,311,278 -

Gain on valuation of available-for-sale securities (53,462,743) (45,636,998) (99,099,741)

Capital variation of equity method (16,738,214) 14,188,032 (2,550,182)

Overseas operation translation income (1,546,741) 1,546,741 -

Sub-total (1,014,282,198) 699,688,643 (314,593,555)

Total ＼ (87,982,628) ＼ 21,788,925 ＼ (66,193,703)


Beginning

balance (**)

Increase

(decrease)

Ending

balance

99



Commission (local subsidiary) ＼ 5,676,697 ＼ -

Dividends (specific overseas company) 19,808,831 -

＼ 25,485,528 ＼ -

Unrecognized amount (37,483,790) 4,022,515

Recognized amount (***) (50,498,838) (70,216,218)

Statutory tax rate (*) 24.2% or 22.0% 24.2% or 22.0%

Deferred income tax assets (liabilities) (13,331,820) (16,968,913)

Tax credits 4,900,589 (4,900,589) -

Deferred income tax assets (liabilities), net ＼ (8,431,231) ＼ (16,968,913)


Beginning

balance (**)

Increase

(decrease)

Ending

balance

(*) The income tax rate used in computing deferred income tax assets (liabilities) is the expected margin tax rate, which is

applicable to the forecasted period when the temporary differences are reversed. However, temporary difference to be added,

which is related to equity method valuation, is supposed to be realized by dividend and the effective tax rate for calculating

deferred income tax is adjusted considering deduction rate of dividend income.

(**) Some beginning balance amounts were changed based on the final tax return. The amounts were adjusted to the beginning

balance of 2010.

(***) As of March 31, 2010, deferred income tax assets, which are related to deductible temporary differences and carry-

forwarded tax loss, are recognized within the limit of taxable profit that is certainly realizable. But the Company did not

recognize the deferred income taxes, which are related to allowance for reduction entry, gain and loss on equity method

valuation and capital variation of equity method since it is not certain that these can be realized.

(4) Deductible temporary difference, which were excluded due to uncertainty of its realization as of March 31,

2010 and 2009, are as follows:

100

(5) Temporary differences to be added, which were excluded due to uncertainty of its realization as of March

31, 2010 and 2009, are as follows:

(6) As of March 31, 2010 and 2009, deferred income tax assets (liabilities), which were added or subtracted to

shareholders’equity, are as follows:



Allowance for reduction entry ＼ 16,982,736 ＼ 16,982,736

Gain (loss) on equity method valuation 1,775,737 5,042,346

Capital variation of equity method 2,704,541 15,458,708

＼ 21,463,014 ＼ 37,483,790

Gain on valuation of available-for-sale securities ＼ 135,713,499 ＼ (29,856,970) ＼ 105,856,529

Loss on valuation of available-for-sale securities (36,613,758) 8,055,027 (28,558,731)

Capital variation of equity method 5,859,395 (110,119) 5,749,276

Negative capital variation of equity method (3,590,705) 425,571 (3,165,134)

Overseas operation translation income 5,240,299 - 5,240,299

＼ 106,608,730 ＼ (21,486,491) ＼ 85,122,239


Before reflecting

tax effect Tax effect

After reflecting

tax effect

Gain on valuation of available-for-sale securities ＼ 61,393,457 ＼ (13,506,561) ＼ 47,886,896

Loss on valuation of available-for-sale securities (7,930,714) 1,744,758 (6,185,956)

Capital variation of equity method 17,407,619 (462,581) 16,945,038

Negative capital variation of equity method (669,404) 181,089 (488,315)

Overseas operation translation income 6,328,613 (340,281) 5,988,332

＼ 76,529,571 ＼ (12,383,576) ＼ 64,145,995


Before reflecting

tax effect Tax effect

After reflecting

tax effect

101

Related party

Hyundai Securities Asia Ltd.

Hyundai Securities America Inc.

Hyundai Securities Europe Ltd.

Hyundai Asset Management Co., Ltd.

Korea Pacific No.08 Ship Investment Co., Ltd.






Hyundai Wise Asset Management Co., Ltd.

Osaka Kitahama 3 Undisclosed Association

Core-clean Tech Venture Investment 2 Association

Investment Opportunity Limited.

Description

The subsidiaries

Equity investees

(7) Income tax payable and refundable income tax before offsetting as of March 31, 2010 and 2009 is as follows:

21. RELATED PARTY TRANSACTIONS

(1) Related parties as of March 31, 2010 are as follows:


Refundable income tax before offsetting ＼ 59,484,961 ＼ 13,769,171

Income tax payable before offsetting 73,139,270 -

Refundable income tax (income tax payable) after offsetting ＼ (13,654,309) ＼ 13,769,171


102

Related party Description 2010 2009

Hyundai Securities Asia Ltd. Accounts payable ＼ 194,000 ＼ 385,000

Hyundai Securities America Inc. Accounts payable 145,000 524,531

Hyundai Securities Europe Ltd. Accounts payable 165,000 77,000

Hyundai Asset Management Co., Ltd. Bonds sold under reverse

resale agreements 1,286,461 -

Hyundai Merchant Marine Co., Ltd. Advanced payments 102,817 -

Hyundai Ubiquous &

Information Technology Co., Ltd. Advanced payments 3,890,127 363,825

〃 Bonds sold under reverse

resale agreements 255,208 3,695,817

Hyundai Research Institute Bonds sold under reverse

resale agreements 1,194,547 1,853,377

Hyundai Logiem Co., Ltd. Bonds sold under reverse

resale agreements 94,495 79,030

Hyundai Asan Corporation Advanced payments 3,103,773 -

Employees Loans 80,541,921 98,283,145

(2) Significant balances with related parties as of March 31, 2010 and 2009 are as follows:


The subsidiaries

Others

The Company

Description

103

Related party Description 2010 2009

Hyundai Securities ASIA Ltd. Commissions expense ＼ 3,819,223 ＼ 3,913,106

Hyundai Securities America Inc. Commissions expense 986,669 2,056,227

Hyundai Securities Europe Ltd. Commissions expense 1,684,750 1,545,834

Hyundai Asset Management Co., Ltd. Commissions expense 2,740 -

Training 872,418 1,116,137

Rent 654,905 508,698

Benefits for employees 5,105 458

Entertainment - 198

Selling and administrative

expense - other 19,168 13,900

Research 773,300 707,300

Rental income 994,334 900,000

Commissions expense 2,976,765 1,896,266

Rent 21,892 -


expense - other 6,148 6,600

Commissions received - other 4,796 9,316

Rental income 382,836 -

Commissions expense 49,643 110,062

Advertising 1,394,141 -


expense - other 184 5,656


Computer system

operation expense 11,900,691 7,240,466


expense - other 2,401,653 2,650,903


Advertising 4,609,690 7,613,721


expense - other 9 160

Entertainment - 1,000

Rent income 13,123 -

Commissions received

- underwriting 30,000 -

Rent 2,098 26,950

Entertainment - 116,876

Advertising 2,969,945 -

Training 10,424 239,756


expense - other 6,990 -


Rental income 797 -

Interest income 162,527 154,703

The subsidiaries

Others

The Company

(2) Significant transactions with related parties for the years ended March 31, 2010 and 2009 are as follows:


Description

Hyundai Ubiquous &

Information Technology Co., Ltd.

Hyundai Logiem Co., Ltd.

Hyundai Asan Corporation

Hyundai Investment Network Co., Ltd.

Employees

Hyundai Elevator Co., Ltd.

Hyundai Merchant Marine Co., Ltd.

Hyundai Research Institute

104

(4) The Company purchased property and equipment and intangible assets from Hyundai Ubiquous & Information Technology

Co., Ltd. amounting to ＼ 8,003,671 thousand and ＼ 16,035,057 thousand in 2010 and 2009, respectively.

(5) For the year ended March 31, 2010, the Company recognized expenses for salaries of ＼7,370 million and severance

benefits of ＼1,127 million as management compensation. Management consists of executive officers who have the authority

and responsibility in the planning, directing and controlling of the Company’s operations.

22. COMMITMENTS AND CONTINGENCIES

(1) The Company has entered into various agreements with various banks as of March 31, 2010 and the details

are as follows (Korean won in thousands):

Description Financial Institution Contract amount

Overdraft (including daily overdraft) Kookmin Bank and 6 banks ＼ 431,200,000

General loan Kookmin Bank and 1 bank ＼ 100,000,000

Short-term finance of borrowings Woori Bank ＼ 100,000,000

Securities underwriting loan KSFC ＼ 500,000,000

Working capital loan (general) KSFC ＼ 500,000,000

Working capital loan (trust) KSFC Limit of trust amount

Note trading at a discount (general) KSFC ＼ 200,000,000

Note trading at a discount (trust) KSFC Limit of subscription deposits

Bond dealer loan (general) KSFC ＼ 696,767,000

Bond dealer loan (trust) KSFC Limit of trust amount

Bond dealer loan (deposit) KSFC Limit of deposit amount

Bond dealer loan (national treasury) KSFC Limit of national treasury

Bond dealer loan (government bonds) KSFC Limit of 10% of gross deposit amount

105

(2) The Company is involved in 13 lawsuits as a defendant claiming damages of ＼255,205,443 thousand and in 4 lawsuits as a

plaintiff claiming damages of ＼118,441,911 thousand as of March 31, 2010. The Company’s management believes that the

final loss of these litigations is uncertain and the ultimate outcome of these litigations will not have a significant impact on the

financial position of the Company.

(3) The Company brokered the sale of stocks issued by Prudential Investment & Securities Co., Ltd. (“PIS”, formerly Kookmin

Investment & Securities Co., Ltd.) from Hynix Semiconductor Inc. (“HYNIX”) to Canadian Imperial Bank of Commerce (“CIBC”)

on June 4, 1997. In this regard, Hyundai Heavy Industries Co., Ltd. (“HHI”) entered into an agreement that CIBC had put options

on the above stocks based on the memorandum provided by the Company and HYNIX. Pursuant to the agreement, HHI bought

13,000,000 shares issued by PIS at the price of US$220 million on July 24, 2000, as CIBC exercised its put option. With regard to

compensation for the above trade, HHI filed a suit against the Company, HYNIX and an individual for the payment of ＼247,864

million on July 28, 2000. With regard to the above litigation, the Supreme Court ruled that the Company, jointly with HYNIX, had

to compensate ＼192,941 million to HHI on March 26, 2009. With regard to the above litigation, the Company recorded the

provisional payment of ＼99,172 million as expenses before the previous year. In addition, HHI demanded that the Company

and HYNIX cover income tax expense and other expenses of the sale and filed a separate suit against the Company and HYNIX

for ＼40,242 million on December 30, 2004. With regard to the above litigation, the Seoul District Court ruled that the

Company, jointly with HYNIX, had to compensate ＼40,242 million to HHI on October 22, 2009. With regard to the verdict of the

first trial, the Company recorded the provisional payment of ＼27,917 million as expenses. The second trial is still pending.

The ultimate resolution of this case cannot presently be estimated.

(4) The Company entered into a contract on conditional purchase agreement of ABCP with Daewoo Gamsam Prugio-2 Co.

ABCP backed by loans were issued by Daewoo Gamsam Prugio-2 Co. amounting to ＼50,000 million. The ABCP is converted

every three months (the first issuance on December 21, 2006 and the last issuance on June 18, 2009), and the Company should

purchase the remaining unsold ABCP in each issuance date on the condition that the effective credit rating of Daewoo

Engineering & Construction Co., Ltd. CP is maintained at A3+.

(5) The Company entered into a contract to reimburse certain portions of losses when Hyundai II Securitization Specialty Co.,

Ltd. and Hyundai III Securitization Specialty Co., Ltd. go into liquidation, on certain collective investment securities sold before

the previous year. With regard to the above contract, the Company recognized accounts payable of ＼20,125,315 thousand for

estimated loss as of March 31, 2010 and ＼350,494 thousand as expenses in 2010.

(6) The Company has been provided ＼19,625,698 thousand of guarantee related to provisional attachment and others by Seoul

Guarantee Insurance as of March 31, 2010.

106

23. COMPREHENSIVE INCOME STATEMENTS

Comprehensive income for the years ended March 31, 2010 and 2009 is as follows:


Net income ＼ 178,861,170 ＼ 149,189,223

Other comprehensive income (loss):

Gain on valuation of available-for-sales securities 57,969,633 (36,149,512)

Loss on valuation of available-for-sales securities (22,372,774) (5,298,032)

Capital variation of equity method (11,195,762) 16,356,046

Negative capital variation of equity method (2,676,819) 5,648,053

Overseas operation translation income (748,033) 2,690,407

Comprehensive income ＼ 199,837,415 ＼ 132,436,185


The tax effect of other comprehensive income (loss) for the years ended March 31, 2010 and 2009 is as follows:


Gain on valuation of available-for-sales securities ＼ (16,350,409) ＼ 18,369,318

Loss on valuation of available-for-sales securities 6,310,269 1,407,958

Capital variation of equity method 352,462 (417,911)

Negative capital variation of equity method 244,482 181,090

Overseas operation translation income 340,281 (340,283)

＼ (9,102,915) ＼ 19,200,172


107

Unsettled amount Gain (loss) on valuation Descriptions

Stock and stock index:

Option purchased ＼ 455,127 ＼ (165,724) For arbitrage purposes and hedging

Option sold 596,174 111,824 For arbitrage purposes and hedging

Futures purchased 93,786,612 977,395 For arbitrage purposes and hedging

Futures sold 12,027,146 (262,868) For arbitrage purposes and hedging

106,865,059 660,627

Interest rate:

Futures sold 1,922,258,000 896,003 For hedging

Currency:

Futures sold 1,449,856 (128) For hedging

＼ 2,030,572,915 ＼ 1,556,502


Unsettled amount Gain (loss) on valuation Descriptions

Stock and stock index:

Stock swap ＼ 437,625,084 ＼ 208,020,415 For derivatives linked securities sold

Option purchased 8,281,233 4,389,302 For derivatives linked securities sold

Option sold 3,409,831 (1,547,770) For arbitrage purposes

449,316,148 210,861,947

Interest rate:

Interest rate swap 982,954,526 1,475,544 For derivatives linked securities sold and hedging

Currency:

Currency forwards sold 34,498,432 2,568,104 For hedging

Others:

Option purchased 2,642,579 2,014,849 For derivatives linked securities sold

Option sold 39,920,185 (2,520,464) For derivatives linked securities sold and hedging

42,562,764 (505,615)

＼ 1,509,331,870 ＼ 214,399,980


24. DERIVATIVES

(1) Derivative contracts held by the Company as of March 31, 2010 are as follows:

(2) OTC derivative contracts held by the Company as of March 31, 2010 are as follows:

108

Korean won (In millions)

2010 2009Valuation method

The options purchased for derivatives linked securities sold are purchased for hedging derivatives linked securities sold, of

which maturity value and fair value are dependent upon stock index, interest rate and others. As of March 31, 2010, the fair

value of options sold of derivatives linked securities sold, which is opposite side of options purchased of derivatives linked

securities sold, is reflected at fair value of derivatives linked securities sold (see Note 5).

25. STATEMENTS OF CASH FLOWS

(1) Cash in the statements of cash flows consists of cash and cash equivalents in the statements of financial position.

(2) Significant transactions not involving cash flows for the years ended March 31, 2010 and 2009 are as follows:


Transfer of trading securities to available-for-sale securities ＼ 38,420,818 ＼ 94,199,707

Transfer of available-for-sale securities to privately placed bonds 4,770,760 -

Transfer of investment securities using the equity method to available-for-sale securities 4,793,804 -

Retirement of advances for customers 139,468 2,298,071

Recovery of bad debts 15,712 -

Increase in accounts payable due to purchase of intangible assets 18,225,285 -

Fluctuation of gain on valuation of available-for-sale securities 57,969,633 (36,149,512)

Fluctuation of loss on valuation of available-for-sale securities (22,372,774) 5,298,032

Fluctuation of capital variation of equity method (11,195,762) 16,356,046

Fluctuation of negative capital variation of equity method (2,676,819) 5,648,053

Fluctuation of overseas operation translation income (40,314) -


26. SECURITIES IN CUSTODY

The securities in custody as of March 31, 2010 and 2009 are as follows:

Securities in custody:

Trustor securities in custody ＼ 45,751,519 ＼ 36,082,191 Fair value

Saver securities in custody 88,690 80,041 Fair value

Beneficiary securities in custody 6,449,430 5,345,871 Standard sold price

＼ 52,289,640 ＼ 41,508,103

Account

109


Cash and deposits ＼1,051,197,371 ＼82,963,488 ＼10,199,071 ＼11,973,082 ＼37,253 ＼1,156,370,265

Securities 1,489,081,820 343,366,947 59,604,960 27,783,545 21,439,291 1,941,276,563

Call loans 70,000,000 - - - - 70,000,000

Securities purchased

under reverse

repurchase agreements 480,000,000 - - 247,278 245,175 480,492,453

Other assets 118,084,354 36,077,084 2,220,445 2,780,802 49,277 159,211,962

Total assets ＼3,208,363,545 ＼462,407,519 72,024,476 42,784,707 21,770,996 3,807,351,243

Other liabilities 21,854,382 657,781 2,233,479 2,986,647 24,466 27,756,755

Total liabilities 21,854,382 657,781 2,233,479 2,986,647 24,466 27,756,755

Trust principal 3,186,509,163 461,749,738 69,790,997 39,798,060 21,746,530 3,779,594,488

Total equity 3,186,509,163 461,749,738 69,790,997 39,798,060 21,746,530 3,779,594,488

Total liabilities and equity ＼3,208,363,545 ＼462,407,519 ＼72,024,476 ＼42,784,707 ＼21,770,996 ＼3,807,351,243

Description TotalPersonal

retirement account

Definedcontribution

retirement pension

Defined benefit retirement pension

Treasury stock trust

Specific money trust

27. TRUST ACCOUNTS:

As of March 31, 2010, financial information for trust-type is as follows:

The Company reflected the trust fees received from trust accounts of ＼2,646,850 thousand as operating

income (commissions received) in 2010.

28. SELLING & ADMINISTRATIVE EXPENSES:

Selling and administrative expenses for the years ended March 31, 2010 and 2009 are as follows:


Salaries ＼ 210,199,406 ＼ 162,824,032

Provision for severance benefits 19,360,889 24,004,312

Benefits for employees 49,526,266 52,486,783

Rent 14,733,711 14,720,434

Entertainment 5,616,119 5,317,374

Advertising 23,676,598 24,124,083

Depreciation 19,108,778 18,886,840

Amortization 12,882,825 3,241,938

Tax and dues 21,902,689 11,788,846

Others 67,212,837 68,905,698

＼ 444,220,118 ＼ 386,300,340


110

29. MAJOR INDICATORS FOR THE FINAL INTERIM PEIORD (UNAUDITED)

The major indicators of management performance for the final interim period, which are not audited, are as follows:

30. ADOPTION OF KOREAN INTERNATIONAL FINANCIAL REPORTING STANDARDS

(1) In accordance with the amendment to the Act on External Audit for Stock Companies, the Company is required to comply

with Korean financial reporting standard (K-IFRS) from 2011. The Company initiated the transition process toward K-IFRS, and

turned to with the project with the task force from January 2009. The details of K-IFRS preparation are 3 steps as follows:

A. Step 1: Evaluating the impact of K-IFRS adoption

From January 2009, the Company turned to with the project with the task force and analyzed the IFRS impact on current

accounting, financial reporting policies and system. In addition, the Company analyzed the existing accounting system for

efficient adoption of K-IFRS and development of financial infrastructure.

B. Step 2: Designing and implementing the financial infrastructure

From August 2009, the Company started the transition plans toward K-IFRS and establishing accounting system. The Company

started to improve financial infrastructure and the Company’s competency on carrying out IFRS conversion process.

C. Step 3: Preparing and stabilizing financial information by K-IFRS

During the first half of 2010, the Company plans to prepare the first reliable financial information by K-IFRS and complete the

designation of process for presenting consolidated financial statements through the designed financial infrastructure.


Operating revenues ＼ 449,036,299 ＼ 277,516,995

Operating expense 380,189,128 202,189,356

Operating income 68,847,171 75,327,639

Net income 50,057,176 66,894,257

Income per share 309 413

Korean won(In thousands, except for share amounts)

111

Accrued severance benefits

The amount of actuarial present value of

benefits for employees, incorporating

discount rate and assumptions.

The amount of benefits for employees with

more than one year of service,

presuming all employees are to retire as

of the end of the reporting date.

Consolidation scope

Exceeding 50% of shares, decision-making

capability and holding benefits and risks

are conditional on the alternatives of the

consolidation scope.

In accordance with Article 1-3 of the Act

on External Audit for Stock Companies,

over 30% of shares owned and the biggest

shareholder decision making are subject

to the alternation. Companies that have a

special purpose, of which only some

factors are satisfied, are excluded.

Classification of

financial instruments

Financial instruments classify financial

assets at fair value through profit or loss,

available-for-sale financial assets, held-

to-maturity investments, loan and

receivables.

Securities are classified by trading

securities, available-for-sale securities and

held-to-maturity securities. Deposits and

derivatives are separately categorized.

(2) The Company is in the process of designing and implementing the financial infrastructure (Step 2). After designing the new

accounting framework and financial reporting system, the Company plans to examine the system from April to May 2010. The

Company shall prepare its financial statements under K-IFRS from 2011.

(3) The expected important issues on differences between the current accounting standards and the adoption of K-IFRS.

The expected important issues on differences between the current accounting standards and the adoption of K-IFRS as of

March 31, 2010 are summarized below. Such divergence does not include every single difference that would vary with the result

of a supplementary analysis. Moreover, the detailed effects of the important differences may not figure out in business practice.

Classification K-IFRS Current Accounting Standards

112

English Translation of a Report Originally Issued in Korean

To the Representative Director of


We have reviewed the accompanying Report on the Managemant’s Assessment of IACS (the “Management’s Report) of Hyundai

Securities Co., Ltd. (the “Company”) as of March 31, 2010. The management’s Report, and the design and operation of IACS are

the responsibility of the Company’s management. Our responsibility is to review the Management’s Report and issue a review

report based on our procedures. The Company’s management stated in the accompanying Management’s Report that “based on

the assessment of the IACS as of March 31, 2010, in all material respects, in accordance with the standards of the IACS of the

Republic of Korea.”

We conducted our review in accordance with the IACS Rewiew Standards established by the korean Institute of Certified Public

Accountants. Those standards require that we plan and perform a review, objective of which is to obtain a lower level of

assurance than an audit, of the Management’s Report in all material respects. A review includes obtaining an understanding of a

Company’s IACS and making inquiries regarding the Management’s Report and, when deemed necessary, performing a limited

inspection of underlying documents and other limited procedures.

The Company’s IACS represents internal accounting policies and a system to manage and operate such policies to provide

reasonable assureance regarding the reliability of financial statements prepared, in accrdance with accounting principles

generally accepted in the Republic of Korea, for the purpose of preparing and disclosing reliable accounting information.

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 of IACS to future degree of compliance with the polcies or procedures may

deteriorate.

Based on our review, nothing has come to our attention that cause us to believe that the Management’s Report referred to above

is not fairly stated, in all material respects, in accordance with the IACS Framework established by the Korea Listed Companies

Association.

Our review is based on the Company’s IACS as of March 31, 2010, and we did not review its IACS subsequent to March 31, 2010.

This report has been prepared pursuan to Atcs on External Audit for Stock Companies in the Rpublic of Korea and may not be

appropriate for other purposes or for other users.

Independent Accountants’ Review Report

on Internal Accounting Control System (“IACS”)

May 18, 2010

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and

independent entity. Please see www.deloitte.com/kr/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member

firms.

Member of Deloitte Touche Tohmatsu

Deloitte Anjin LLC

14Fl., Hanwha Securities Bldg., 23-5 Yoido-dong,

Youngdeungpo-gu, Seoul 150-717, Korea

Tel +82 (2) 6676 1000 ㅣ Fax +82 (2) 6674 2114

www.deloitteanjin.co.kr

113

To the Board of Directors and Auditor of


May 7, 2010

I, as the Internal Accounting Control Officer (“IACO”) of Hyundai Securities Co., Ltd. (“the Company”), assessed the status of the

design and operation of the Company’s IACS for the year ended March 31, 2010.

The Company’s management including IACO is responsible for designing and operating IACS. I, as the IACO, assessed whether

the IACS has been appropriately designed and is effectively operating to prevent and detect any error or fraud which may cause

any misstatement of the financial statements, for the purpose of preparing and disclosing reliable financial statements. I, as the

IACO, applied the IACS standard for the assessment of design and operations of the IACS.

Based on the assessment of the IACS, the Company’s IACS has been appropriately designed and is operating effectively as of

March 31, 2010, in all material respects, in accordance with the IACS Framework.

Choi, Kyung Su, Chief Executive Officer

Chung, Hang Ki, Internal Accounting Control Officer

Report on the Assessment of

Internal Accounting Control System (“IACS”)

114

AUDIT

COMPLIANCE

Legal AffairsDept.

Risk ReviewDept.

RISKMANAGEMENT

RiskManagementDept.

FinancialManagementDept.

SettlementDept.

OperationsDevelopmentDept.

StrategicPlanningDept.

SystemsManagementDept.

Wrap DealingDept.

TrandingSystems Dept.

HRDevelopmentDept.

GeneralAffairs Dept.

BusinessesSystemsDept.

EconomlcsAnalysls Dept.

QuantltatlveAnalysls Dept.

ResearchSupport Team

IPO Dept.

CoporateFlnanceDept. 1

CoporateFlnanceDept. 2

InfrastructureSystems Dept.

PUBLICRELATIONS

STRATEGY &PLANNING

HUMANRESOURCES &

GENERAL AFFAIRS

MANAGEMENT

GENERAL MEETING OF SHAREHOLDERS

BOARD OF DIRECTORS

CHAIRMAN

PRESIDENT & CEO

INFORMATIONTECHNOLOGY

AUDIT COMMITTEE

NOMINATING COMMITTEE FOR NON-EMPLOYEE COMMITTEE

PERSONNEL COMMITTEE

RISK MANAGEMENT COMMITTEE

COMMITMENTS COMMITTEE

CUSTOMERSASSETS

DEALING

RESEARCHCENTER

INVESTMENTBANKING

Organization Structure

M&A Dept.EqultyAnalysls Dept.

Trust Dept.I T PlanningDept.

HumanResourcesDept.

Strategy &Planning Dept.

PublicRelationsDept.

ComplianceDept.

Auditing Dept.

115

Project FlnanceDept.

Fixed IncomeSales Dept.

Fixed IncomeDealing Dept.

EquityDerivativesDept.

StructuredProducts Dept.

Futures &Options Dept.

RISK MANAGEMENT COUNCIL

DISCIPLINARY COMMITTEE

CAPITAL MARKET INSTITUTIONAL SECURITIES RETAIL

INVESTMENT FLXED INCOME TRADING GLOBAL INSTITUTIONAL

SECURITIES

DOMESTICINSTITUTIONAL

SECURITIES

RETIREMENTPENSION

MARKETING8 DIVISIONS &

141 BRANCHESRETAIL

MANAGEMENT

Equity DealingDept.

FICC DerivativesDept.

PrincipalInvestmentDept.

Futures Sales Dept.

Global Trading Dept.

Global Support Dept.

GlobalSecurities Dept.

InstitutionalSecurities Dept. 2

FinancialProducts Dept.

Inst. SecuritiesPlanning Team

InstitutionalSeucirites Dept. 1

WM PlanningDept.

e-BusinessDept.

FinancialProductsPlanning Dept.

Retail Planning Dept.

HyundaiSecurities(America) Inc.

HyundaiSecurities(Asia) Inc.

HyundaiSecurities Tokyo

HDS ShanghaiRep. Office

HDSHochiminhRep. Office

HDS AlmatyRep. Office

HyundaiSecurities(Europe) Inc.

RP ConsultingDept. 2

RP OperationsDept.

RP ConsultingDept. 1

CustomersSatisfactionCenter

WMConsultingCenter

CustomersMarketingDept.

International Locations

LondonHYUNDAI SECURITIES

(EUROPE) Inc.

Neptune House, Triton Court

14 Finsbury Square, London, EC2A 1BR, U.K.

Phone: 44-20-7786-8601(General),

44-20-7786-8600(Dealer)

Fax: 44-20-7786-8620

Telex: 887418

VietnamHYUNDAI SECURITIES

Hochiminh Representative Office

701B, PetroVietnam Tower, 1-5 Le Duan,

District 1, Hochiminh City, Vietnam

Phone: 84-8-3910-7560

Fax: 84-8-3910-7561

KazakhstanHYUNDAI SECURITIES

Almaty Representative Office

Nurly Tau Complex , Buildding 2A, 4th Fl.

5 Al-Farabi. Av., Almaty, Kazakhstan 050059

Phone: 7-727-277-7711

Fax: 7-727-277-7712

Corporate headquarters

Hyundai Securities

#34-4, Youido-dong, Youngdeungpo-ku, Seoul, Korea, 150-735

Tel : 822-768-0114 Fax : 822-783-9746 http://www.youfirst.co.kr

Established June 1, 1962

Stock listing Korea Stock Exchange, 003450

Network 140 domestics and 7 overseas

Number of Employees

2,496 (as of March 31, 2009)

Stock Issued 170,000,000 (Common stock)

Shareholders' equity 2,439 billion won

Major shareholders Hyundai Merchant Marine 23.17%

(as of March, 2010)

Hyundai Merchant Marine 23.17%

Foreigners 11.50%

Employees Stock 3.28%

Treasury Stock 4.83%

Others 57.22%

Hong KongHYUNDAI SECURITIES (ASIA) Inc.

Suite 2301-04, Citic Tower 1 Tim Mei Avenue,

Central, Hong Kong, China

Phone: 852-2869-0559

Fax: 852-2521-5215

ShanghaiHYUNDAI SECURITIES

Shanghai Representative Office

Rm. 1405 North Stock Exchange

Mansion 528 South Pudong Rd.,

South Shanghai, China, 200120

Phone: 86-21-6881-7007~8

Fax: 86-21-6881-7778

JapanHYUNDAI SECURITIES

Tokyo Branch

7th Floor, L Ningyoucho Building, 2-7-10,

Nohonbashi, Ningyoucho

Chuo-ku, Tokyo, 103-0013, Japan

Phone: 81-3-3661-3711

Fax: 81-3-3661-9622

New YorkHYUNDAI SECURITIES (AMERICA) Inc.

1370 Avenue of the Americas, Suite 2200,

NY, NY10019, U.S.A

Phone: 1-212-265-2333

Fax:1-212-265-2676

Seoul, 51

Incheon, 4 Kangwon, 3

Choongbuk, 2 Choongnam, 6

Daejeon, 5

Kyungbuk, 8

Jeonbuk 4 Jeonbuk, 4 Daegue, 4

Kyungnam, 5 Ulsan, 10

Busan, 5

Jeonnam, 2

Kyung-gi, 22 (2 office)

Gwang-ju, 4 (1 office)

Jaeju, 1 (1 office)

Investor Relations

#34-4, Youido-dong, Youngdeungpo-ku, Seoul, Korea, 150-735

Tel : 82-2-768-0152 | Fax : 82-2-783-9746

e-mail: [email protected]

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