HYUNDAI SECURITIES ANNUAL REPORT 2009 · HYUNDAI SECURITIES ANNUAL REPORT 2009. 04 Major...
Transcript of 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.
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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
Korea Economic Daily
2007 YouFirst Award
Korea Quality Brand Grand Prize
Korea Economic Daily
Internet Marketing Grand Prize
Hangyeore
Money Today Advertisement Grand Prize
Money Today
Ranked 1st in Online Trading Service
Stockpia
Ranked 1st Securities Company in
corporate image
University News Network
2008 YouFirst Award
Customer Satisfaction Management Grand Prize
Korea Economic Daily
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
Korea Economic Daily
Grand Prize in financial products service
innovation (by Financial Supervisory Service)
Money Today
Ranked 1st in Online Trading Service
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
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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
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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.
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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.
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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.
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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
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- 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
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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
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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
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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
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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
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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.
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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
Management’s Discussion & Analysis
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%
Management’s Discussion & Analysis
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
Management’s Discussion & Analysis
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%
Management’s Discussion & Analysis
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
Management’s Discussion & Analysis
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
Management’s Discussion & Analysis
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
Management’s Discussion & Analysis
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
Management’s Discussion & Analysis
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
Management’s Discussion & Analysis
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)
Korean won (In thousands)
(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
Korean won (In thousands)
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)
See accompanying notes to non-consolidated financial statements.
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 \ - \ -
Korean won (In thousands)
See accompanying notes to non-consolidated financial statements.
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
Korean won (In thousands)
Capital stockCapital
surplus
Capital
adjustments
Accumulatedother
comprehensive income
Retained
earnings Total
See accompanying notes to non-consolidated financial statements.
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
Korean won (In thousands)
(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
Korean won (In thousands)
(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
Korean won (In thousands)
See accompanying notes to non-consolidated financial statements.
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 \ -
Korean won (In thousands) March 31, 2009
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
Korean won (In thousands)
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)
Korean won (In thousands)
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
Korean won (In thousands) March 31, 2010
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
Korean won (In thousands) March 31, 2009
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
Korean won (In thousands)
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
Korean won (In thousands) March 31, 2010
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
Korean won (In thousands) March 31, 2009
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
Korean won (In thousands)
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
15,000,000 15,176,700 75,576,161 76,122,290 Guarantee deposits for
Korea Securities Finance
Corporation
200,977,197 202,123,135 1,002,819 1,003,242 Margin accounts for
derivatives trading
19,122,049 19,413,604 101,702,216 100,784,815 Guarantee deposits for
derivatives trading
2,230,727 2,364,255 60,000,549 60,651,850 Guarantee deposits for
lending and borrowing
securities
28,636,732 29,090,628 49,722,496 49,417,118 Guarantee deposits for
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
Korean won (In thousands)
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
Korean won (In thousands)
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
Korean won (In thousands)March 31, 2010
(*) 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
Korean won (In thousands)March 31, 2009
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
Korean won (In thousands)March 31, 2009
(*) 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 (%)
Korean won (In thousands)March 31, 2009
(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 -
The Korea Development
Bank09coup0206-0825-2 50,000,000 50,000,000 50,983,124 50,983,124 983,124 -
The Korea Development
Bank09coup0200-0828-1 50,000,000 50,000,000 50,913,619 50,913,619 913,619 -
The Korea Development
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 -
Small & Medium Industry
Promotion 325 50,000,000 50,000,000 51,117,249 51,117,249 1,117,249 -
Small & Medium Industry
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.
Korean won (In thousands) March 31, 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.
Korean won (In thousands) March 31, 2009
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
InvesteesAccumulated
Impairment loss
Accumulated
unrealized gain (loss)Book valueFair value
Acquisition
cost
Korean won (In thousands) March 31, 2010
(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
InvesteesAccumulated
Impairment loss
Accumulated
unrealized gain (loss)Book valueFair value
Acquisition
cost
Korean won (In thousands)March 31, 2009
Korean won (In thousands)
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
Korean won (In thousands)
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
Korean won (In thousands)
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
Korea Pacific No.09 Ship
Investment Co., Ltd. 2,292,971 99.57% 11,464,855 11,464,919 11,464,919 11,505,394
Korea Pacific No.10 Ship
Investment Co., Ltd. 2,292,971 99.57% 11,464,855 11,483,386 11,483,386 11,505,411
Korea Pacific No.11 Ship
Investment Co., Ltd. 2,292,971 99.57% 11,464,855 11,481,834 11,481,834 11,485,277
Korea Pacific No.12 Ship
Investment Co., Ltd. 2,300,495 99.57% 11,502,475 11,530,877 11,530,877 7,888,433
Korea Pacific No.13 Ship
Investment Co., Ltd. 2,300,495 99.57% 11,502,475 11,530,030 11,530,030 7,888,433
\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
Korea Pacific No.09 Ship Investment Co., Ltd. March 31, 2010 Provisional settlement of financial statements
Korea Pacific No.10 Ship Investment Co., Ltd. March 31, 2010 Provisional settlement of financial statements
Korea Pacific No.11 Ship Investment Co., Ltd. March 31, 2010 Provisional settlement of financial statements
Korea Pacific No.12 Ship Investment Co., Ltd. March 31, 2010 Provisional settlement of financial statements
Korea Pacific No.13 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) -
Core-clean Tech Venture
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
Korea Pacific No.08 Ship
Investment Co., Ltd. 11,505,395 (330,445) 1,113,535 (1,154,088) 11,134,397
Korea Pacific No.09 Ship
Investment Co., Ltd. 11,505,394 - 772,076 (812,551) 11,464,919
Korea Pacific No.10 Ship
Investment Co., Ltd. 11,505,411 - 1,049,624 (1,071,649) 11,483,386
Korea Pacific No.11 Ship
Investment Co., Ltd. 11,485,277 - 1,040,820 (1,044,263) 11,481,834
Korea Pacific No.12 Ship
Investment Co., Ltd. 7,888,433 3,641,825 887,649 (887,030) 11,530,877
Korea Pacific No.13 Ship
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
Korean won (In thousands)March 31, 2010
(*) 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
Core-clean Tech Venture
Investment 1 Association 354,000 - - (354,000) -
Core-clean Tech Venture
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
Korea Pacific No.08 Ship
Investment Co., Ltd. - 11,464,855 298,550 (258,010) 11,505,395
Korea Pacific No.09 Ship
Investment Co., Ltd. - 11,464,855 298,550 (258,011) 11,505,394
Korea Pacific No.10 Ship
Investment Co., Ltd. - 11,464,855 225,364 (184,808) 11,505,411
Korea Pacific No.11 Ship
Investment Co., Ltd. - 11,464,855 204,096 (183,674) 11,485,277
Korea Pacific No.12 Ship
Investment Co., Ltd. - 7,860,650 204,683 (176,900) 7,888,433
Korea Pacific No.13 Ship
Investment Co., Ltd. - 7,860,650 204,683 (176,900) 7,888,433
\ 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
Korean won (In thousands)March 31, 2009
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
Korean won (In thousands)
(*) 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 - - -
Core-clean Tech Venture
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)
Korea Pacific No.08 Ship
Investment Co., Ltd. 13,158,377 1,975,446 1,131,442 1,068,502
Korea Pacific No.09 Ship
Investment Co., Ltd. 14,054,824 2,539,930 1,129,692 1,062,966
Korea Pacific No.10 Ship
Investment Co., Ltd. 13,762,277 2,228,836 1,132,626 1,066,061
Korean won (In thousands)
(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
(Korean won in thousands):
(*) 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)
Korea Pacific No.11 Ship
Investment Co., Ltd. 13,705,642 2,173,760 1,134,052 1,066,987
Korea Pacific No.12 Ship
Investment Co., Ltd. 13,824,390 2,243,367 979,251 959,483
Korea Pacific No.13 Ship
Investment Co., Ltd. 13,845,902 2,265,730 974,022 934,097
Korean won (In thousands)
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
Korean won (In thousands)March 31, 2010
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
Korean won (In thousands)March 31, 2009
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
Korean won (In thousands) March 31, 2010
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
Korean won (In thousands) March 31, 2009
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
Korean won (In thousands)March 31, 2010
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
Korean won (In thousands)March 31, 2009
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
Lender Annual interest rate (%) 2010 2009
Hana Bank 7.85 \ 9,930,318 \ -
Amount
Lender Annual interest rate (%) 2010 2009
Korea Securities Finance Corporation and others 0.60 ~ 4.28 \ 510,624,857 \ 181,318,254
Amount
Lender Annual interest rate (%) 2010 2009
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
(Korean won in thousands):
(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
Korean won (In thousands)
(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
Korean won (In thousands)
(2) Tax reconciliation items between pretax accounting income and taxable income for the years ended March 31, 2010 and 2009
are as follows:
Description 2010 2009
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
Korean won (In thousands)
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)
Korean won (In thousands)
Beginning
balance (**)
Increase
(decrease)
Ending
balance
99
Korean won (In thousands)
Description 2010 2009
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)
Korean won (In thousands)
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:
Korean won (In thousands)
Description 2010 2009
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
Korean won (In thousands)March 31, 2010
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
Korean won (In thousands)March 31, 2009
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.
Korea Pacific No.09 Ship Investment Co., Ltd.
Korea Pacific No.10 Ship Investment Co., Ltd.
Korea Pacific No.11 Ship Investment Co., Ltd.
Korea Pacific No.12 Ship Investment Co., Ltd.
Korea Pacific No.13 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:
Description 2010 2009
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
Korean won (In thousands)
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:
Korean won (In thousands)
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 -
Selling and administrative
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 -
Selling and administrative
expense - other 184 5,656
Rental income 5,398 -
Computer system
operation expense 11,900,691 7,240,466
Selling and administrative
expense - other 2,401,653 2,650,903
Rental income 8,519 -
Advertising 4,609,690 7,613,721
Selling and administrative
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
Selling and administrative
expense - other 6,990 -
Rental income 10,928 -
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:
Korean won (In thousands)
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:
Description 2010 2009
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
Korean won (In thousands)
The tax effect of other comprehensive income (loss) for the years ended March 31, 2010 and 2009 is as follows:
Description 2010 2009
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
Korean won (In thousands)
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
Korean won (In thousands)
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
Korean won (In thousands)
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:
Description 2010 2009
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) -
Korean won (In thousands)
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
Korean won (In thousands)
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:
Description 2010 2009
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
Korean won (In thousands)
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.
Description 2010 2009
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
Hyundai Securities Co., Ltd.
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
Hyundai Securities Co., Ltd.
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]