Upload
phungque
View
220
Download
2
Embed Size (px)
Citation preview
HYUNDAI SECURITIESANNUAL REPORT 2008
03 International Locations
05 Company Profile
06 Innovate in limitless change
08 Message from the CEO
10 Board of Directors
12 Vision & Strategy
14 Major Achievements in FY 2008
18 Engage in the highest challenge
20 Review of Operations
28 Drive on Your best Choice
30 Financial Highlights
31 Management’s Discussion & Analysis
46 Financial Statements
86 Organization Structure
88 Shareholders’ Information
CONTENTS
Hong KHYUNDAI SECUR
Suite 2301-04, Cit
Central, Hong Kon
Phone: 852-2869-
Fax: 852-2521-52
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
Hochiminh HYUNDAI 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
AlmatyHYUNDAI 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
International Locations
Kong ITIES (ASIA) Inc.
tic Tower 1 Tim Mei Avenue,
ng, China
-0559
215
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
TokyoHYUNDAI 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
Hyundai Securities has led the Korean stock market for the past 46 years of ceaseless changes
and renewed challenges. Faced with an industry paradigm shift in the wake of the Capital
Market and Financial Investment Services Act, Hyundai Securities set strategic goals to lead the
new change and is making visible progress in various business areas.
We provide wealth management, brokerage, and other customer-focused financial services
through 147 domestic and overseas branch offices. We are working hard to globalize, maximize,
and professionalize our operations, including investment banking (IB), principal investment (PI),
derivatives product development, and new business exploration.
Hyundai Securities will continue to improve the quality of our services to provide premium
solutions to our customers in creating sustainable wealth growth. By establishing an innovative
business system to maximize profits, we will enhance shareholder value and employee
satisfaction to become the preeminent investment bank.
The best investment bank in Korea
with the best financial solutions
CHANGEINNOVATE IN LIMITLESS
Limitless innovation in ceaseless changes Following the enforcement of
the Capital Market and Financial Investment Services Act, Hyundai Securities has transformed itself into one
of the best financial investment companies. Based on the competitiveness of our brokerage service, we have
expanded our financial channels to deliver diverse services, including retail payment in alliance with CMA
card and credit card services. We also have advanced into proprietary trading and futures businesses to
provide the best financial services. Hyundai Securities is committed to leading the changes in the financial
market with our innovative corporate culture based on the industry’s best manpower and upgraded financial
infrastructure.
▲
Dear shareholders and investors:
Fiscal year 2008 was a very eventful year for the financial market. The financial crisis that originated in the US
spread worldwide and sent Korea’s and other financial markets around the world into a recession. The real
economy contracted and securities firms’earnings were squeezed. Some securities firms that invested in real
estate or derivatives suffered extensive losses. The KOSPI opened 2008 at 1,891.45 points, but plunged almost
half points points as of end-Oct when investment banks started falling prey to a major crisis in the US. It
rebounded fortunately to 1,206.26 points at year-end thanks to aggressive countermeasures adopted by the
financial authorities, emergency measures employed by companies, and current account surplus resulting from a
positive foreign exchange effect.
Determined to grow into the best
financial investment company and
armed with the Hyundai Group’s
signature “We Can Do” spirit, the
management and employees of
Hyundai Securities will make the
utmost efforts to maximize profits
of our shareholders and clients.
Message from the CEO
08 | HYUNDAI SECURITIES
In 2008, our net operating profit declined 17.5% year-
over-year to KRW584.7bn and earnings before tax fell
21.1% year-over-year to KRW202.7bn. We fared relatively
well compared to other large securities firms, whose net
operating profit dropped 26% year-over-year and
earnings before tax 44% year-over-year on average. In
terms of earnings before tax, in particular, we moved up
two steps to the No. 4 position in fiscal year 2008. Our
relatively sound results owe to the following. First, even
amid the stock market slump, we reached the industry’s
No.2 position in terms of commission income in the
brokerage business. Second, in proprietary trading, we
performed better than peers in the bond segment by
actively coping with interest rate cuts. We appreciate the
continuous support from our shareholders and clients
during this difficult time of economic turbulence.
Now, fiscal year 2009 has begun with high hopes. The
global economy is starting to recover. The US housing
market, the epicenter of the financial crisis, is showing
signs of recovery. Aggressive fiscal and monetary policies
by EU, Japan, China, and other nations around the world
are also contributing to the global turnaround. Although
the recent steep won appreciation is burdensome, a
green light is on for the Korean economy. It is enjoying
continued current account surplus and an uptrend in
leading indicators. We believe the Korean economy
stands to benefit greatly once the global economy begins
to rebound in earnest. A rise in customer's deposit amid
low interest rates and an inflow of foreign funds are
driving the Korean bourse’s liquidity currently, and this
trend is likely to continue through year 2009.
Against this backdrop, we have set out our priority tasks
for 2009 as follows. First, we are committed to becoming
one of the top three in fiscal year 2009. In retail
brokerage and proprietary trading, where we have strong
competitiveness, we will make utmost efforts to generate
the largest profits among peers. In wealth management,
investment banking, and retirement pension, where we
lack competitiveness more or less, we will aim to make it
to the top five.
Second, all efforts shall be put into elevating the brand
value of Hyundai Securities. By continuing to deliver solid
results and through proactive engagement in investor
and public relations, we will do our utmost to get Hyundai
Securities re-rated fundamentally in the market. We
intend to meet our investors’expectations by lifting our
shares out of undervaluation.
Third, we aim to lead the market in product development
and new business exploration. We will venture into the
uncharted territory in the market, whose doors have now
been opened with the implementation of the Capital
Market and Financial Investment Services Act, by rolling
out new financial products and seeking new business
opportunities ahead of rivals. New and competitive
financial products, such as payment and settlement,
credit card cash management account, futures business,
foreign exchange margin trading, collective investment,
and hedge fund, will be developed swiftly and provided to
customers. We intend to undertake a new form of
business that can set us apart from others.
Fourth, customer satisfaction will be maximized through
improved customer services. We will improve our
customer service system in order to enhance existing
customers’loyalty and induce new customers. To that
end, we will make efforts to overhaul the entire customer
service process from a customer’s viewpoint and
continue to systemize our customer services operation.
The financial and stock markets are expected to regain
stability in 2009 in tandem with a gradual recovery in
Korean and global economies. 2009 also started out with
the Capital Market and Financial Investment Services Act
fully implemented. By actively tapping into the economic
turnaround and policy changes, we will advance into the
industry’s top position. Determined to grow into the best
financial investment company and armed with the
Hyundai Group’s signature “We Can Do”spirit, the
management and employees of Hyundai Securities will
make the utmost efforts to maximize profits of our
shareholders and clients.
I wish for happiness and good health to all the
shareholders, clients, and your families in 2009.
Thank you.
Sincerely,
Kyung-soo Choi
Chief Executive Officer
May 29, 2009
ANNUALREPORT 2008 | 09
01 02
03 04
Hyundai Securities strives for responsible, ethical, and transparent management with advanced corporate
governance by the board of directors. The board of directors consists of four inside directors and five
corporate directors who have extensive experience and expertise in finance, economy, management, and
legal affairs. They provide guidance for righteous management in the internal decision making of Hyundai
Securities and suggest strategic directions for its business operations.
The board of directors is making concerted efforts on maximizing the company's valuation and
shareholders' value through rational decision making while being mindful of the benefits and interests of
shareholders in order to achieve its vision of making Hyundai Securities "the best investment bank in Korea,
providing the best financial solutions." In addition, the board shall put its best efforts into bringing one step
closer the future of Hyundai Securities as a financial leader with advanced financial services.
Board of Directors
Providing Guidance
for Righteous Management
10 | HYUNDAI SECURITIES
01 Hyun, Jeong Eun
Director
Chairman of the board
02 Choi, Kyung Soo
Director
President and Chief Executive Officer
03 Chung, Hang ki
Director
Managing Director
Head of Strategy & Planning
Division
04 Lim, Seung Cheol
Director
Auditor
05 Park, Yo Chan
Corporate Director
06 Jeon, Jae Joong
Corporate Director
07 Ahn, Jong Bum
Corporate Director
08 Cho, Jin Wan
Corporate Director
Auditor
09 Lee, Chul Song
Corporate Director
Auditor
05
07 08 09
06
ANNUALREPORT 2008 | 11
Vision and Strategy
Emerge as a top-3 general investment bank bystrengthening business competitiveness
based on retail sales
Structure
in FY2009
Vision 2012
No.1 in retail brokerage and proprietary trading
(securities, bonds, derivatives)
Top 5 in Wealth Management, IB, Retirement Pension
Securing growth drivers with new and overseas businesses
(launching new businesses and strengthening overseas businesses)
12 | HYUNDAI SECURITIES
Management
Strategies
Management policy
Maximize profitability and productivity
Vitalize organization
Satisfy customers
Enhance brand value
Vitalize sales and improve earning power
Maximize productivity and profitability utilizing operational resources
Solidify operating competitiveness by beefing up support operations (research and risk management)
Improve productivity by streamlining management system(MIS, budget system)
Heighten profitability of brokerage by enhancing efficiency ofwholesale and retail sales and increasing online sales channels
Increase asset and secure new customers by introducing newproducts and strengthening wealth management services
Maximize return on investment by responding to market changes nimbly
Pursue IB profitability by exploring new income source
Core strategic goals
Action plan by business
ANNUALREPORT 2008 | 13
Major Achievements in FY2008
14 | HYUNDAI SECURITIES
Hyundai Securities opens office in Almaty, Kazakhstan
More than 120 prominent leaders from Korea and Kazakhstan attended Hyundai
Securities’opening ceremony for its Almaty branch office at the InterContinental Hotel
in Almaty, Kazakhstan. The opening of the Almaty branch will kick start Hyundai
Securities’PF (project financing; major real estate investments, SOC infrastructure
establishment, resource development, etc.) and PI (principal investment) operations in
Kazakhstan and enable the company to develop Kazakhstan-specific financial
instruments targeting Korean investors.
Hyundai Securities already invested in PF associated with developing a commercial or
residential complex in Kazakhstan and is currently seeking an alliance partner among
local financial institutions. Hyundai Securities, pledged that Hyundai Securities would
make best efforts to contribute to the development of the capital market in Kazakhstan
by pursuing strategic alliance with local financial institutions or by establishing joint
ventures or new companies going forward. Almaty office will serve as a hub for the CIS
(Commonwealth of Independent States) region for the company under a strategy to
secure key business points in emerging markets. Hyundai Securities set a mid/long-
term goal of expanding the number of its overseas base to 10 until 2010. With the
opening of an office in Kazakhstan, Hyundai Securities has reached seven global
financial hubs now, including New York, London, Hong Kong, Tokyo, and Shanghai.
Apr 17th, 2008
Hyundai Securities customer satisfaction center selected best
call center
Hyundai Securities customer satisfaction center was selected as the best call center in
the 2008 KSQI (Korean service quality index) evaluation of Korean industries conducted
by KMAC (Korea’s Most Admired Company).
It received high scores for being able to respond swiftly to customers’ requests via its
one-stop services based on customer satisfaction education system and knowledge
sharing system. The company’s continued efforts to enhance customer satisfaction
were valued especially high. For example, it introduced the CCO (chief customer
officer) position for the first time in the industry to oversee all customer-related
matters and actively reflected customer opinions in its management strategies.
To compile KSQI, KMAC researchers disguised as customers and evaluated 154 call
centers run by institutions in 25 industries in Korea. They were evaluated for 17
categories, such as kindness, work knowledge, accuracy of answers, speed of
responses, and extent of customer understanding. Evaluation was done 60 times on
each call center.
June 10th, 2008
ANNUALREPORT 2008 | 15
Trade overseas equities easily on HTS
Hyundai Securities is providing a new gateway for investors to trade overseas equities. Using
the “overseas equity power trading” menu created in “YouFirst ACE,” the company’s HTS
(Home Trading System), investors can trade all stocks listed on the Hong Kong Exchanges
and Clearing in real time.
YouFirst ACE gives investors access to the research materials of Guotai Junan Securities
(the top research center in Hong Kong), a strategic partner of Hyundai Securities, as well as
to frequently held overseas market information sessions for investors. Hyundai Securities
plans to develop services for other markets, such as China, Japan, the US, and Vietnam, for
which there are needs from retail investors. Hyundai Securities is currently providing
intermediary services for equities in the US, Japan, Hong Kong, and China B-share market,
through offline orders.
June 27th, 2008
Ho Chi Minh office plays lead manager for the first time
With Hyundai Securities’ Ho Chi Minh Office in Vietnam acting as a lead manager, Sajo and
BLF (Bac Lieu Fisheries Join Stock Company; a fishery company in Vietnam) forged a
strategic alliance successfully. Hyundai Securities is a financial advisory company for Sajo.
Sajo formed an equity-stake alliance with BLF by taking over bond with warrants worth
VND30bn (USD1.8mn). Accordingly, Sajo will be able to secure raw materials for marine
products stably going forward. The strategic alliance is a prime example that overseas
offices of Korean securities companies help Korean companies successfully advance into
overseas markets. The Ho Chi Minh Office will position itself as a strategic hub for the
Southeast Asian region. Building upon this experience, Hyundai Securities aims to support
Korean companies in dealing with overseas companies and thus contribute to growth of
Korean companies.
September 18th, 2008
MOU Signed with RFCA in Kazakhstan
Hyundai Securities signed an MOU with RFCA (Regional Financial Centre of Almaty) to
develop a financial center in Almaty. A state agency under the Kazakhstani president’s
office, RFCA is the largest shareholder of KASE (Kazakhstan Stock Exchange) and is in
charge of managing and supervising the Almaty Financial Center.
By signing the MOU, Hyundai Securities and RFCA will jointly develop the Almaty
Financial Center (including construction of RFCA complex in the Almaty financial
district) and undertake other projects in the region. Hyundai Securities will serve as a
financial advisor to joint businesses. Going forward, Hyundai Securities will be
aggressively engaged in PF and PI for real assets, such as key real estate, SOC
infrastructure, resource development in Kazakhstan, tapping into the RFCA’s broad-
based networks. The company expects the move can add impetus to developing
specialized financial products targeted at Korean investors. Hyundai Securities
announced plans to expand busienss areas by proactively developing new revenue
models that accompany the capital market development.
September 4th, 2008
16 | HYUNDAI SECURITIES
Hyundai Securities’ “fund fundamental index” first in industry
Hyundai Securities developed “Fund Fundamental Index,” the first of its kind in the
industry, designed to help investors compare investment funds based on basic
techniques for individual stock analysis. The index is based on the stock portfolio of
corresponding funds and Hyundai Research Center’s projections, and uses six indexes,
including sales growth, EPS growth, dividend yield, and PER.
Investors used to resort to historical yields or depend on the reputation of investment
firms or fund managers to choose investment funds. With the launch of the “Fund
Fundamental Index,” investors can now understand the status of each investment fund
more objectively and select an investment fund more suitable for their needs.
In addition, Hyundai Securities has launched the “Hyundai FRS (Fund Rating System)”
to recommend individual funds based on the indexes every month. The recommended
funds and basic analysis reports are posted on our monthly publication, Fund Universe
for You.
October 22nd, 2008
Sharing warmth in winter
Hyundai Securities President Kyung-soo Choi visited 30 elderly people living alone in
Yeongdeungpo with his employees to deliver heating oil and financial support. “We
wanted to help those elderly people who may have trouble with heating expenses in
this cold weather and economic slowdown,” said Mr. Choi, adding that Hyundai
Securities would fulfill its social responsibilities.
Hyundai Securities has been involved in voluntary activities based on the corporate
culture of social contribution and sharing. The company is involved in various social
charities, including the recent charity concert to help poor children who skip meals.
December 17th, 2008
ANNUALREPORT 2008 | 17
Hyundai Securities forms strategic alliance with Woori Bank
Hyundai Securities signed a strategic alliance with Woori Bank for co-marketing to
provide cards and services for customers of both companies. As the first product of the
partnership, they plan to launch Hyundai CMA-Woori check card.
“With the strategic collaboration with Woori Bank, we are now able to find the common
area for brokerage houses and banks and develop diverse co-marketing programs to
maximize synergy,” said the Hyundai Securities President Kyung-soo Choi. “Hyundai
Securities will introduce more products that meet our customers’ needs in an era of
the Capital Market and Financial Investment Services Act.”
February 6th, 2009
Get your funds serviced now!
Hyundai Securities launched “Choice & Care” service, a total asset care service
differentiated from previous services that focused on selling products. With Choice &
Care, the company recommends funds and provides management services (fund status
and profitability).
Choice & Care service is based on the company’s FRS (fund rating system), which
analyzes a fund’s intrinsic value, and provides objective information to investors in
choosing their investment target. Individual fund reports and comprehensive fund
investment strategies, as well as video clips that enable investors to easily get fund
information, are provided. In addition, the company helps investors to choose the best
product via online consultations.
After products are sold, Choice & Care service updates investors with recent news,
such as funds hitting a certain profit rate or falling to a dangerous situation. It also
provides a more aggressive fund management service by sending text messages or e-
mails to investors to inform of fund status. Another notable feature of Choice & Care is
that comprehensive investment reports and individual fund analysis reports are
provided, even to those who are not Hyundai Securities clients.
March 3rd, 2009
CHALLENGEENGAGE IN THE HIGHEST
Being the first, pursuing the highest Our spirit of challenge has driven
Hyundai Securities to reach the top position. We have launched many, the first-of-its-kind products and
services as follows: 1) “Best customer manager system”designed to provide professional and effective
customer services; 2) “Fund fundamental indexes”(based on basic analysis techniques of individual stocks)
to compare various individual investment funds; 3) “Hyundai FRS (Fund Rating System)”designed to
recommend individual funds based on the indexes every month; 4) “Boutique Monaco,”a financial lounge
dedicated to female customers; and 5) “Live talk”to deliver online consulting services through online
chatting. We will reinforce competitiveness of each of the business operations, drawing upon our strong
retail operations, and achieve our vision based on the spirit of challenge to become Top 3 investment bank by 2012.
▲
20 | HYUNDAI SECURITIES
Establishing a company vision
We established Vision 2012, a proclamation to emerge as a top 3 general investment bank, and laid out detailed
goals of becoming the industry’s No.1 player in retail brokerage and proprietary trading and a top 5 player in
wealth management, IB, and retirement pension. We also established five management targets, including
maximizing profitability and productivity, promoting responsible management, vitalization of organization,
realizing customer satisfaction, and enhancing brand value, in order to encourage the management and
employees to work hard to achieve the goals. We have started on developing special workforce, increasing
research competitiveness, building an integral risk management structure as well as a next-generation IT
system, exploring new products and income sources, and promoting company-wide TCR (total cost reduction).
We established our strategies in detail to improve capability of all our business units such as wealth
management, brokerage, IB, PI, derivatives, and retirement pensions.
BIG 3 Investment Bank
Establishment of next-generation financial
infrastructure to lead market
Diversifying
profit source
Reinforcing new
business and risk
management
Securing
profitability and
growth potential
ANNUALREPORT 2008 | 21
Hyundai Securities boasts unrivaled competitiveness in
retail brokerage, which is a core profit source and will
remain a cash cow for the company. We are making our
utmost efforts to become the best brokerage firm in both
online and offline markets by actively utilizing our offline
sales capacity backed by 148 branches at home and abroad
and the most talented work force as well as our top-notch
online channels based on the next-generation financial
system.
In order to reach the No.1 position in
brokerage, it is imperative to secure
competitiveness in wholesale
brokerage. We are continuously
making investments to raise the
brand value of our research center,
which plays a pivotal role in boosting
institutional and international sales.
In addition, we are continuously augmenting our sales
force in wholesale brokerage by reinforcing prime
brokerage service to institutions and expanding the
market share of our international sales and trading
department. We, thereby, aim to achieve a well-balanced
profit structure between retail and wholesale brokerage
businesses.
We will become an industry top five in wealth management
by building competitiveness in the whole process of wealth
management, i.e., developing and selling products,
maintaining adequate level of investment return, and so
on. In order to achieve the goal, we are concentrating on
linking our businesses and developing combined products
so that we can compete with various products in the larger
financial market, including bank, securities, and insurance
products, in line with the implementation of the Capital
Market and Financial Investment Services Act in 2009. We
are also making efforts to expand our financial assets
(regular savings plan funds, CMA, WRAP, retail bonds) and
client base as well as activate sales channels (i.e., hire
more proxy solicitors to attract investments, enter into
strategic alliances with other financial institutions, and
increase online-exclusive funds).
We also established an asset management company for
proprietary trading, which creates strong synergy with
each of our other business areas, such as wealth
management, retirement pension, institutional sales, and
IB. This is part our move towards becoming a general
investment bank.
Diversifying profit source
“Establish a diversified profit structure, through which profits are evenly generated regardless of
business area, by strengthening market dominance in brokerage, a core profit source, and
nurturing proprietary trading, wealth management, and IB.”
22 | HYUNDAI SECURITIES
The implementation of the Capital Market and Financial
Investment Services Act in 2009 will likely set off
unshackled competition among banks, insurance
companies, and brokerage houses in pursuit of future
growth opportunities. With a view to secure various
business opportunities and future growth engine, Hyundai
Securities has set up strategic planning department in
charge of proactively exploring new business
opportunities and providing new services such as futures
business (i.e., foreign exchange margin trading), prime
brokerage (i.e., loan transaction), and development of
products linked to cash management account (i.e., retail
payment and credit card).
In order to create synergy between brokerage and wealth
management and to expand sales competence in each
business, we divided our marketing organization into retail
sales and planning department and wealth management
planning department, and newly established customer
marketing department and wealth management
consulting center to build a sales support system
optimized for each field. To reinforce sales staff’s job
mindset and skills, we launched BEST (Branch
Enhancement and Sales Training) team and selected eight
best managers. These managers go around different
branches to disperse their know-how in financial
instruments and customer management, adding impetus
to enhancing our retail sales competence.
With a view to reinforce risk management and aptly
measure risks that inevitably accompany investment
business (i.e., investment banking, principal investment,
overseas) in a global financial crisis, Hyundai Securities
established risk assessment department and secured
independent risk assessment capability. We also upgraded
risk management system (ERMS) for a company-wide and
systematic control of risks.
We have maximized our capacity for all-around investment
banking operation. We divided our investment banking
operation into two areas -- one for customer relation
management and the other for securities underwriting --
in order to place our top operational priority on clients and
run investment banking business more efficiently. We
have also aggressively made inroads to niche markets to
help small/mid-sized companies raise capital.
In order to secure a growth driver in the highly promising
retirement pension market, we organically integrated
consulting and sales operations of our retirement pension
department. We also set up a derivatives planning
department to meet clients’demand for various fixed
income, currency and commodities derivative products
such as hedge funds, and the department is playing a
stronger role as a control tower in derivatives product
development.
Streamlining of organization to reinforce
new business and risk management
“Maximize sales competence by reorganizing investment banking businesses and reinforcing new
business and products as well as after-sales risk management in line with changing financial
environment and expanding business scope.”
ANNUALREPORT 2008 | 23
We boast competitive edges in wholesale retail and aim to
continuously strengthen competitiveness of our offline
sales channels by reinforcing sales competence and
efficiency. To this aim, we have consolidated (including
relocation) branches, diversified the size of branches,
allocated human resources efficiently, and opened
“Boutique Monaco,”a branch for only female customers.
Running counter to the overall market trend of fee
reduction, we have strived to deliver high quality customer
services and maintain our average fee rates by: 1)
designating sales personnel to customers and thereby
improving customer management; 2) providing
differentiated research information; and 3) delivering yield
management services through customer management
system. Also, we will reinforce online channel marketing
activities. To keep up with expanding online trading, we
plan to enhance our brand power and expand our
customer base by preparing for the launch of bank-linked
online transaction systems, reviewing diverse online fee
schemes, and promoting our superior online trading
system. By fortifying online channel marketing, we plan to
reinforce our sales competence in both online and offline
retail channels.
In wholesale brokerage, we have invested our core
resources in major institutional investors such as National
Pension Corporation to enhance our sales operations. To
attract large investors such as hedge funds and pension
funds, we are beefing up our research and IR activities at
home and abroad. In overseas markets, we are trading not
only stocks, but also futures by introducing the DMA
(direct market access) order system to expand our sales
competence. Also, we are hiring global sales force and
carrying out inbound sales operations, aided by overseas
branches in New York, London, Hong Kong, Tokyo, and
other global cities. Furthermore, we are offering investors
in Korea an opportunity to directly invest in global
bourses, including Hong Kong, the US, and China, through
Securing profitability and growth potential
We plan to: 1) reinforce sales competence in online and offline channels for wholesale and retail
brokerage and invite large institutional investors to expand our market share; 2) enhance our
research brand power as a major securities firm in Korea; 3) improve commercial viability of
our cash management accounts to expand assets and accounts, and thus secure profitability of
wealth management business through cross-selling; 4) strengthen underwriting business and
participate in large government projects to boost our investment banking business’growth
potential; and 5) maximize profitability of principal investment to achieve the highest
return on equities in the industry.
24 | HYUNDAI SECURITIES
our home-trading-system for overseas trading, although
the size of trading is not yet substantial. We are delivering
trading services of foreign government/public bonds, KP
bonds, and depository receipts (DR) to reinforce our
outbound sales operations for domestic investors.
We have made great efforts to reinforce our research
center both in quantitative and qualitative terms. We have
recruited top analysts for large-cap sectors and held
research conferences at home and abroad to raise our
research brand value. We also have discovered hidden
blue chip companies by increasing company visits to
reinforce competitiveness of our small cap sector
coverage. We introduced new assessment and incentive
systems for our research division to improve
organizational efficiency. Against this backdrop, we boast
top analysts in the automobile, LCD∙display, bond, small
cap sectors, which upholds our reputation as a major
securities firm in Korea.
The wealth management business has yielded tangible
results as the number of subscribers to Choice & Care
service launched in Mar hit 100,000 by offering services
not only to customers who sign up for Hyundai Securities’
funds but also to customers who sign up for other
companies’funds. Hyundai Securities will remain
committed to offering diverse product lineups and
upgraded services to lead qualitative differentiation in
wealth management. In addition, Hyundai Securities is
striving for an industry top position by boosting our brand
power and product attractiveness for the WRAP products,
which have the second largest balance in the industry.
Also, we plan to boost product attractiveness for cash
management accounts by offering the highest interest rate
in the industry and credit card functionality, increase asset
size and the number of accounts, and strengthen cross
selling. As such, we will make multi-faceted efforts to
secure profitability of wealth management business.
The investment banking business has laid the foundation
for securing growth potential by strengthening the
underwriting segment such as firm commitment
underwriting for large companies and participation as a
primary collateralized bond obligation underwriter,
strengthening competence to securitize distressed assets
held by state-owned companies, and participating in large
government-led projects such as the Green New Deal
project. Besides, we move proactively to become a global
investment banking by attracting overseas companies’
initial public offerings to list them on the Korean stock
market, establishing private equity fund for large pension
funds, and participating in major mergers and acquisitions
deals.
Our proprietary trading department has flexibly adjusted
the size of bonds and equities under management to cope
with changes in financial market indexes. It is exploring
investment opportunities in undervalued blue-chip assets
following the financial crisis and building a diverse
portfolio encompassing equities/convertible bonds,
commodities, and private equity fund as part of the efforts
to diversify its investment portfolio. In addition, we also
seek to reinforce risk management by expanding
investment in safe and liquid assets while hedging against
loss using derivatives. In doing so, we will maximize
principal investment and achieve the highest return on
equities in the industry.
ANNUALREPORT 2008 | 25
As financial products multiplied with the Capital Market
and Financial Investment Services Act taking effect, the
focus of financial companies’IT system is shifting to
“supporting comprehensive wealth management”from
“securities trading.”In addition, as financial information is
increasing rapidly due to launches of diverse financial
products and new services, it became necessary to
reassure security in online operations (i.e., preventing
hacking on financial information). Against this backdrop,
we opened the next-generation information system at the
end of March after a year’s preparation. The introduction
of new information system allows the following: ① shifting
the product-oriented individual account s system to a
customer-oriented system; ② shortening the development
time of financial products by 25% and the time needed to
apply modifications in existing products by 20%, ③
building a new system for general asset management
services such as 24-hour online service as well as
improving the speed of trading.
Hyundai Securities’IT system has garnered ample
credibility, as it allows finding and tracing those whoever
that access information on the system, as we continuously
beefed up security to protect customer information and
prevent hacking. We also aggressively pursue sales of
financial IT know-how for additional profit creation, by
participating in building IT system in other institutions
based on our excellent IT staff and infrastructure.
Establishment of next-generation financial
infrastructure to lead market
“By opening the next-generation financial system, Hyundai Securities will be able to efficiently
cope with expansion of business areas and changes in market landscape following the
implementation of the Capital Market and Financial Investment Services Act. Also, we will
continue to improve the complex financial business system to provide differentiated services to
our customers and become the top investment bank in Korea.
26 | HYUNDAI SECURITIES
Along with the next-generation information system, we
opened new operation support system that adds financial
and investment planning system in EGIS (engine of
innovation system). With this, our customers can enjoy
systematic wealth management service, as we provide not
only financial planning consulting service but also
customized investment planning service that allocates
asset and build portfolio to meet customers’investment
target and preference.
We renewed our retirement pension system, improving
convenience for the staff in charge, and strengthened
proprietary trading and educational services for
customers. In particular, online service became available,
and text messages or e-mails are sent to customers to tell
service results. Analyses of reserve management results
and 365-day risky asset monitoring service are also
provided. We realigned our website for retirement pension
(pension.yourfirst.co.kr) and provide various information
including product and investment guide, retirement plan,
education content, and customer education management
system for employees.
We established a knowledge management system to
utilize our manpower. Hyundai Securities’knowledge
management system is operated largely with business
knowledge, product knowledge, the sharing of best
practices (business skill), and suggestions, which
contributes to disseminating creative ideas as well as
fostering active communication among employees. It also
helps increase business competitiveness and business
productivity by converting the experience of business
know-how of individual employees and executives into
concrete forms of knowledge and information to share
with each other.
Hyundai Securities will continue to improve the
management system by setting MIS (management
information system) to provide key management
information and support management’s decision making.
We also support TCR (total cost reduction) activities by
building a budget system for efficient budget allocation,
execution, control, analysis, and evaluation.
ANNUALREPORT 2008 | 27
CHOICEDRIVE ON YOUR BEST
Providing the best solution for you We are exploring diverse business areas
to satisfy our customers’financial aspirations. We launched “Choice & Care Service,”a customized wealth
management service based on our analyses of funds’intrinsic value. It provides objective information to
clients to choose the best financial products and follow-up information including profitability and fund
status. We always seek to develop better services for our customers and create synergy.
▲
FINANCIAL HIGHLIGHTSAs of the year 2009, 2008 and 2007 ended March
30 | HYUNDAI SECURITIES
As of the year 2008, 2007 and 2006 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)
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)
1,804
1,689
115
67
19
163
115
7,753
6,234
1,519
7.6%
485%
139,353,423
11,299
822
250
12,850
2,241
135(5)
FY2008KRW in billions FY2007 FY2006
MANAGEMENT’S DISCUSSION & ANALYSIS
1. Major results of operations
Hyundai Securities’net profit declined 21% year-over-year to KRW149.2bn from KRW186.7bn in fiscal year 2008, mainly due
to a decrease in brokerage commission rate resulting from shrinking turnover value and drops in commissions (related to
beneficiary certificates and commissions from combined securities) amid the stock market contraction. Net operating profit
slid 19% year-over-year to KRW584.7bn, and selling general and administration cost expenses were cut 16% year-over-year
to KRW386.3bn due to a decline in performance bonuses under personnel expenses, efficient budget use, and cost-cutting
efforts. As such, the operating profit dwindled 24% year-over-year to KRW198.4bn, and earnings before tax came in at
KRW202.7bn. Hyundai Securities is gradually moving toward an advanced, diversified profit structure by decreasing the
profit contribution from brokerage business while increasing that from proprietary trading and investment banking
business.
1QFY07 2Q 3Q 4Q FY07
16 2,613
1,072
1,071
487
1QFY08 2Q 3Q 4Q FY08
7531,984
340 38
929
YoY -24%
OoO -19%
KRW in 100milOperating income
1QFY07 2Q 3Q 4Q FY07
40 2,569
1,064
1,010
534
1QFY08 2Q 3Q 4Q FY08
784 2,027
359 38
922
YoY -21%
OoO -15%
KRW in 100milPre-tax income
1QFY07 2Q 3Q 4Q FY07
4,572
886
1,298
1,285
1,103
1QFY08 2Q 3Q 4Q FY08
832 3,863
1,012
898
1,121
YoY -16%
OoO -26%
KRW in 100milSG&A
ANNUALREPORT 2008 | 31
3Q
Net Operating Income
MANAGEMENT’S DISCUSSION & ANALYSIS
Net operating profit declined 19% year-over-year to KRW584.7bn in fiscal year 2008. Net operating profit breaks down by
segment as follows: 1) brokerage were down 34% year-over-year to KRW291.1bn due to a year-over-year plunge in turnover
value; 2) wealth management was down 44% year-over-year to KRW47bn as sales of risky financial instruments including
ELS (or ELKS, equity-linked securities) and equity funds contracted due to the flight-to-quality trend amid financial crisis; 3)
IB (underwriting and advisory services) was up 5% year-over-year to KRW18bn on an increase in corporate bond issuances
amid fourth quarter 2008 stabilization of the financial market; 4) proprietary trading was up 28% year-over-year to
KRW149.3bn thanks to active bond management following interest rate cuts in third quarter 2008 and fourth quarter 2008;
and 5) interest income was down 3% year-over-year due to declines in valuation gains of reserve for claims of customer
deposits and in interest income from margin lending and other sources.
In net operating profit composition ratio, brokerage fell
13%p over the past three years to 50% due to decreased
turnover and brokerage commission rate. Profits from
wealth management deteriorated 3%p year-over-year on a
decline in fees for equity linked securities, collective
investment securities, and wealth management. Investment
banking profits inched up 1%p year-over-year thanks to a
recovery in the primary market. Profits from proprietary
trading jumped 16%p year-over-year to 26%, fueled by
aggressive bond management.FY05 FY06 FY07 FY08 1Q 2Q 4Q
NOI breakdown
Prop. Trading Others Interest IB Wealth Mgmt. Brokerage
68%
5%2%
16%
8%1%
59%
8%2%
25%
4%1%
0% -13%
62%
7%2%
10%
18%
58%
8%5%
20%
8%
70%
8%2%
1%
30%
-1%
38%
2%2%
31%
13%
47%
3%4%
25%
13%
1QFY07 2Q 3Q 4Q FY07
7,186
1,958
2,369
1,772
1,087
1QFY08 2Q 3Q 4Q FY08
1,585 5,847
1,352
860
2,050
YoY -19%
OoO -23%
KRW in bnNOI by QoQ
771 4,442
2,911
470
263
172
180
1,170
1,493
948
995
786753
KRW in 100milNOI by business
Brokerage
10070
4745
WM
63174158
IB
149-98
926518
Prop.Trading
265258263
207
Interestincome
Brokerage
WM
IB
Prop.Trading
Interestincome
FY08 1Q FY08 2Q FY08 3Q FY08 4Q FY07 FY08
32 | HYUNDAI SECURITIES
601
MANAGEMENT’S DISCUSSION & ANALYSIS
2. Operating results by division
Brokerage
1QFY07 2Q 3Q 4Q FY07
4,402
1,204
1,277
1,209
752
1QFY08 2Q 3Q 4Q FY08
752 2,910
771
601
786
YoY -34%
OoO -4%
KRW in 100milBrokerage income
KRW in trMarket share (turnover)
FY05
Market share (commissions)
8.39%
FY06
7.21%
FY07
7.47%
FY081Q
6.81%
2Q
6.43%
3Q
6.75%
4Q
6.96%
6.00%
4.00%
2.00%
12,00
8.00
4.00
-
5.25%5.12%
5.48%
4.33%
5.40%5.37%
5.64%
Avg. Daily Turnover(right)
M/S(left)
08-Jan Mar Jun Sept 08-Dec 09-Mar
Market share in terms of brokerage inched down 1.3%p year-over-year to 5.1% in fiscal year 2008 due to a decline in
turnover amid a sluggish stock market. On a monthly basis, the market share was 4.33% in September and increased rapidly
to 5.64% as of end-March thanks to brisk trading by individual investors. In terms of fees, the market share was 6.96% in
fiscal year 2008. Despite a 0.51%p drop, we still ranked high.
Brokerage profits dipped 34% year-over-year due to
deteriorated turnover amid rapid changes in the financial
market. In fiscal year 2008, daily average turnover fell
16% year-over-year to KRW7.9tr from KRW6.7tr, and
stock brokerage consequently decreased 30% year-over-
year to KRW168.9tr from KRW240.8tr.
ANNUALREPORT 2008 | 33
The proportions of online stock brokerage amount and fees for both online and offline trading increased 6%p and 7%p,
respectively, from the first quarter of 2007. The increase was attributable to the market turnaround from the second half of
2008 and the increased proportion of individual investors preferring low fees. The proportion of individual investors
increased significantly in the second half, driving up stock brokerage amount and fees from individual investors by 6%p and
3%p, respectively, against the first half of 2007.
MANAGEMENT’S DISCUSSION & ANALYSIS
FY05
On∙Off-line proportions
66%
34%
44%
56%
44%
56%
FY06
62%
38%
FY07
63%
37%
41%
59%
FY08 1Q
60%
40%
43%
57%
2Q
62%
38%
48%
52%
3Q
68%
32%
50%
50%
4Q
69%
31%
48%
52%
FY05
Proportions by investors type (turnover)
FY06 FY07 FY08 1Q 2Q 3Q 4Q
4%
5%
91%
5%
10%
85%
5%
9%
87%
6%
10%
84%
5%
12%
83%
4%
8%
88%
3%
8%
89%
Retail Domestic Inst. Overseas Inst.
On Off Comm.(on) Comm.(off)
FY05
Proportions by investor type (comm.)
FY06 FY07 FY08 1Q 2Q 3Q 4Q
4%
3%
93%
6%
5%
89%
5%
4%
90%
6%
5%
89%
5%
7%
88%
4%
4%
92%
4%
5%
91%
Retail Domestic Inst. Overseas Inst.
34 | HYUNDAI SECURITIES
MANAGEMENT’S DISCUSSION & ANALYSIS
Client Assets
KRW in trRetail
36.1
5.6
30.5
40.9
6.7
34.2
38.9
6.8
32.1
36.6
6.8
29.8
36.8
8.1
28.7
30.8
7.3
23.5
24.6
8.2
16.4
29.0
11.5
17.5
Financial products Brokerage
FY07 1Q
KRW in trInstitutions
21.5
6.4
15.1
2Q
23.1
7.2
15.9
3Q
21.9
6.9
15.0
4Q
23.0
8.9
14.1
FY08 1Q
17.8
9.8
8.0
2Q
15.4
8.7
6.7
3Q
16.7
11.5
5.2
4QFY07 1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q
17.0
11.5
5.5
Financial products Brokerage
Hyundai Securities’ brokerage asset under management consists 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, trusts, and bonds. Among retail investors’ assets, asset under
management plunged 41% year-over-year on reduced equity valuation gains amid the stock market contraction, while
financial assets soared 69% year-over-year on increased collective investment securities and cash management account
balance. On the other hand, institutional investor assets increased 29% year-over-year on the inflow of short-term liquidity
to cash management accounts, WRAP accounts, money market funds, and money market trusts.
Financial products proportions
Collectiveinvestment
33%
CMA14%
Fixedincome/RP
15%
Wrap11%
ELS20%
Trust∙SF7%
Collectiveinvestment
26%
CMA13%
Fixedincome/RP
22%Wrap16%
ELS13%
Trust∙SF10%
FY07 4Q FY08 4Q
The breakdown of financial assets shows that the proportion of collective investment securities and equity linked securities
each decreased 7%p year-over-year, while that of wrap accounts, bonds, and trusts increased 5%p year-over-year, 7%p
year-over-year, and 3%p year-over-year, respectively. With investments in high-risk financial instruments such as equity-
type collective investment securities and equity linked securities, contracting, assets in bonds and trusts perceived as
relatively safe investment targets by investors, increased.
ANNUALREPORT 2008 | 35
MANAGEMENT’S DISCUSSION & ANALYSIS
Wealth Management
FY071Q 2Q 3Q 4Q FY07
470
122
114
142
92
FY081Q 2Q 3Q 4Q FY08
45 261
100
70
47
YoY -44%
OoO -4%
KRW in 100milWM income
FY07 1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q
KRW in trFinancial products assets
11.2
3.00.41.01.5
1.1
4.0
12.8
3.00.52.70.9
1.4
4.2
13.7
2.81.71.22.5
1.0
4.3
15.7
3.1
2.31.12.2
1.7
5.3
17.9
3.5
3.0
1.12.5
2.4
5.4
16.0
3.6
2.71.12.1
1.9
4.5
19.5
3.0
4.4
1.62.3
3.4
4.9
23.0
2.9
5.1
2.5
2.9
3.7
5.9
CMA SF∙Trust RP�Fixed income
ELS Wrap Collective Investment sec.
1Q
KRW in 100milELS issuance & M/S
13%
10%
13%
9%
9%11%
10%
7%6,215
2,824
2Q
3,563
2,547
FY07 3Q
5,651
1,915
4Q
3,971
1,377
FY08 1Q
7,306
1,665
2Q
4,447
720
3Q
320278
4Q
609418
Private
Public
M/S
The equity linked securities primary market shrank as increased stock market volatility depressed the high-risk financial
instrument market and resulted in a 44% year-over-year drop in equity linked securities fees. Amid interest rate cuts, the
balance of financial assets increased 46% year-over-year on increased assets in short-term financial instruments such as
cash management accounts for institutions, money market funds, and wrap accounts.
36 | HYUNDAI SECURITIES
MANAGEMENT’S DISCUSSION & ANALYSIS
FY07 1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q
KRW in trCMA balance & accounts
168,113
241,061305,109
335,055
378,840
467,752 487,945 502,798
1.50
2.672.55 2.25
2.502.07
2.262.93
CMA blance
No. of account
FY07 1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q
KRW in trCollective investment securities balance
4.0
1.2
0.9
0.8
0.5
4.2
1.4
0.8
0.8
0.60
4.3
1.15
0.72
0.71
0.91
5.3
1.37
0.90
1.02
0.98
5.4
1.11
0.98
1.11
1.18 4.5
0.91
0.71
0.70
1.14
4.9
0.83
0.63
1.24
1.11
5.9
0.94
0.5 0.6 0.85 1.00 1.06 1.07 1.07 1.03
0.70
2.18
1.07
Others MMF Hybrid Bond Equity
FY08 1Q
KRW in 100mil
(Accumulated)
Retirement Pension
6,687
232
FY08 2Q
7,328
264
FY08 3Q
12,745
441
FY08 4Q
13,619
497
Reserve
Accounts
The balance of collective investment securities in fiscal year 2008 rose 9%Year-over-year on substantial growth in the
balance of short-term instruments, such as MMTs and MMFs, in response to lower interest rates. The balance of CMAs
increased 30%Year-over-year, driven by a large inflow of institutional funds, and the number of relevant accounts increased
50%Year-over-year on continued cross-selling efforts. Buoyed by aggressive sales efforts, retirement pension reserves
increased KRW26.5bnYear-over-year, and there are 6,932 more pension subscribers compared to last year.
ANNUALREPORT 2008 | 37
MANAGEMENT’S DISCUSSION & ANALYSIS
Investment Banking
FY071Q 2Q 3Q 4Q FY07
172
29
76
4323
FY081Q 2Q 3Q 4Q FY08
58 180
63
17
41
YoY +5%
OoO +41%
KRW in 100milInvestment Banking income
FY071Q
KRW in 100milCommissions by business
30
16
14
2Q
77
51
26
3Q
42
12
30
4Q
23
12
11
FY08 1Q
63
23
40
2Q
17
7
10
3Q
41
11
30
4Q
58
16
42
Commissions on M&A Underwriting commissions
Type FY08 1Q 2Q 3Q 4Q Total FY07 YoY
Corp.bond 700 800 1,550 7,850 10,900 7,095 54%
ABS 4,035 2,400 2,805 5,770 15,010 13,137 14%
IPO 681 - 21 16 718 369 95%
Capital increase 854 178 280 - 1,312 4,910 -73%
KRW in 100milUnderwriting
In the investment banking business, underwriting service fees surged 52% year-over-year; the size of our underwriting
business, 54% year-over-year. Underwriting fees climbed 52% year-over-year, as the underwriting of corporate bonds
jumped on increased demand for high-yield bonds amid interest rate declines. Underwriting soared 54% year-over-year, as
Hyundai Securities underwrote the Korea Credit Guarantee Fund’s primary collateralized bond obligation worth KRW1.1tr. In
fiscal year 2008, annual advisory fees stood at KRW5.7bn, as management and financial advisory fees (from HICEL, KR, etc.)
have steadily climbed since 1Q09.
38 | HYUNDAI SECURITIES
MANAGEMENT’S DISCUSSION & ANALYSIS
Proprietary trading
FY071Q 2Q 3Q 4Q FY07
1,170
435
652
149 67
FY081Q 2Q 3Q 4Q FY08
524 1,500
149 98
925
YoY +28%
OoO -23%
KRW in 100milProprietary trading income KRW in tr
As of March 31st, 2009
Type of fixed income position
Type Evaluated amount Proportions
State bonds 1.33 25%
Local Government bonds 0.08 1%
Special bonds 1.48 28%
Finance bonds 1.89 35%
Corporate bonds 0.59 11%
Total 5.37 100%
Type FY08 1Q 2Q 3Q 4Q Annual
Equities 510 352 122 337 330
Fixed income 3,218 3,391 1,453 1,617 2,420
Average Trading Volume
KRW in 100milEquities∙Fixed income volume
In fiscal year 2008, gains on proprietary trading increased 28% year-over-year to KRW150bn, as gains on bond transactions
outperformed the market, bolstered by aggressive measures and trading in the more volatile market. Hyundai Securities’
annual average equity and bond balances in the proprietary trading account stood at KRW33bn and KRW242bn, respectively,
in fiscal year 2008. Hyundai Securities plans to adjust the size of the balances depending on market conditions and to carry
out aggressive proprietary trading. Gains on trading in combined securities are reflected in various kinds of transactions,
including the trading/valuation of stocks and bonds, the trading/valuation/redemption of combined securities and combined
securities sold, the trading/settlement of futures, and over-the-count derivative trading/valuation. Hyundai Securities’ bond
holdings stand at KRW5.4tr, of which financial bonds and special bonds (bank bonds, capital bonds, etc.) account for 63%.
ANNUALREPORT 2008 | 39
MANAGEMENT’S DISCUSSION & ANALYSIS
Interest
FY071Q 2Q 3Q 4Q FY07 FY081Q 2Q 3Q 4Q FY08
KRW in 100milInterest income
FY07 1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q
KRW in tr
(Average balance)
Customers’Deposit
1.451.47
1.131.05 1.12
0.941.01
1.20
FY07 1Q 2Q 3Q 4Q FY08 1Q 2Q 3Q 4Q
KRW in 100mil
(average balance)
Call Money
5,503
6,556
6,105
3,0803,800 3,788
2,357
847
Hyundai Securities’ interest income consists of interest on margin loans, interest on loans, and gains on valuation of
reserves for claims of customer deposits. Interest on bonds, repurchase agreements (RPs), and other instruments is
classified as gains on proprietary trading. Interest income declined 3%Year-over-year in fiscal year 2008 due to decreases in
gains on the valuation of reserves for claims of customer deposits and interest on margin loans. As reserves for claims of
customer deposits (matching account of gains on valuation of reserves for claims of customer deposits) slid Year-over-year
by KRW203.2bn on average, gains on the valuation of reserves for claims of customer deposits also dropped year-over-year
by KRW9.3bn. As interest on margin loans (matching account of margin loans) fell year-over-year by KRW236.2bn, interest
gains decreased year-over-year by KRW16.6bn. With a 49% year-over-year decline in call money’s annual balance, interest
costs declined 41% year-over-year.
40 | HYUNDAI SECURITIES
1,023
215
248
264
296
265
258
264
208 995
YoY -3%
OoO -21%
Risk management
Risk management policy
- We aim 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 via efficient allocation of resources. For
this purpose, we endeavor to achieve comprehensive risk management and optimal capital allocation by: 1) establishing
company-wide risk management Risk management structure 2) setting up comprehensive risk-management Risk
management process 3) building a comprehensive risk-management system[ERMS, Enterprise risk-management system]
and 4) developing a firm-wide risk-conscious culture.
Risk management structure
1. 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 important matters that can affect the
company’s financial health; and 2) establishing and supervising asset-management directions (including total investment
limits) and risk management strategies. The committee convenes more than once a quarter. It consists of three directors,
including the CEO and one external director, as its members.
2. Risk management council
- We set up a risk management council (hereinafter referred to as “the council”), which discusses working-level agendas
(investment deliberation, 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 seven senior members, including the Chief Risk Officer
3. Subcommittees under council
- For the sake of reasonable decision-making, the council has subcommittees that provide professional advice and
deliberation on each agenda. The council is efficiently managing risks by convening a subcommittee for each operating
activity, including PI, IB products, marketable securities, over-the-counter derivatives, credit granting, and trust.
4. 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: 1) the CRO (chief risk officer), the executive responsible for
risk management affairs; 2) the risk management department (to detect, measure, and control risks); and 3) the risk
reviewing department (investment deliberation and post-investment follow-up).
- The risk management department., as a middle office, is run independent of the front office, engaged in sales activities,
and of the back office, a support unit taking care of financial and settlement issues.
Risk management process
1. Recognition of risks
Risks are classified into the following categories.: market risk, credit risk, operational risk, liquidity risk, legal risk,
reputation risk, strategic risk, and systematic risk.
ANNUALREPORT 2008 | 41
2. Risk measurement
- The risk management department sets methods of measurement for each risk type and reflects the result 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.
3. Risk control
- The risk management department regularly monitors 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 amid 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 an active approach to controlling risk aimed at keeping the company’s estimated losses
within a tolerable scope while reflecting the business strategy and risk appetite. All this is done while minimizing the
interference with various departments’in decision-making discretion.
Figure 1
- Investment limit management covers all trading products and manages the limits of investment, losses, sensitivity, VaR
(value at risk), and credit risk. Hyundai Securities manages risk through the ”Enterprise risk management system” on a
daily, monthly, and quarterly basis.
4. Risk report
- The risk management department monitors risk and limits utilization rates throughout the company and reports 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.
limit distribution plan recognition
- business strategy
- risk appetite
limit distribution plan framing
- business planning- (the 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
42 | HYUNDAI SECURITIES
Risk Categories
1. 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 also 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.
- VaR is a statistical index 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 the Financial Supervisory Service (FSS).
2. 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 126.94% at the end of fiscal year 2008. In addition, we established contingency plans to brace for
liquidity risk following a sudden shock in the market.
3. Credit risk
Credit risk refers to the risk of asset value declines associated with trading partners’defaults, bankruptcy, and credit rating
changes. We set a single name concentration ratio 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.
4. 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 carry out 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 quantify operational risks to control and mitigate
enterprise-wide operational risks.
Capital adequacy
1. Net capital ratio
-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 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 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
Assets on B/S - Debts on B/S - Subtracted items + Added items
Market risk + Credit risk + Operational risk
ANNUALREPORT 2008 | 43
2. Hyundai Securities’net capital ratio
- Hyundai Securities aims to maintain a net capital ratio of more than 300%. Our net capital ratio surged 25.54%pYoY to
641.09% as of end-Mar 2009, far above our risk-management target of over 300%, indicating that we fulfill the requirements
for financial soundness and capital adequacy. Our recent net capital adequacy ratio figures are as follows.
Others
1. Build “Enterprise Risk Management System”
- We have developed and been operating a comprehensive risk-management system, the ERMS since April 2009 in order to
respond to changes in regulatory environment: more specifically, possible structural changes and greater fluctuation
resulting from the Capital Market and Financial Investment Services Act. We seek to seize opportunities afforded by market
changes to launch new products.
- With the goal of establishing the best risk management system in the industry, we developed the system through 14-
month-long efforts to comprise market risk, credit risk, operation risk, capital adequacy, risk database in risk management.
<Figure 2> shows the key components of the system.
2. Developing a firm-wide Risk-Conscious Culture
- We have continuously conducted risk management education for all employees to create a culture of enterprise risk
management.
- To this end, Hyundai Securities holds risk management seminars for management to seek further improvement 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 in a
year to minimize risk-related losses.
Market risk
�In-house development of
process engine for OTC
derivatives
→ Verifying new products’
fair prices fast
Comprehensive risk management system: Linked to International Financial Reporting Standards'
(IFRS) projects; Establish the best risk management system in the industry
Credit risk
�Use internal credit rating
model
→ Establish credit risk
management system
Liquidity risk
�Elaborate liquidity ratio
computation
→ Strengthen liquidity
management
Operational risk
�Introduce operational risk
management
→ Efficient improvement in
internal control
Comprehensive risk
�Capital adequacy, investment limit management, emergency plan for crisis
→ Establish risk management at advanced level
FY 2008 2007 2006
Net capital (A) 1,688,707 1,544,254 933,273
Total exposure (B) 263,411 250,872 192,550
Net capital adequacy ratio (c) 641.09 615.55 484.69
(KRWmn, %) Net capital adequacy ratio trend
Figure 2
44 | HYUNDAI SECURITIES
ANNUALREPORT 2008 | 45
Seoul, Korea May 21, 2009
To the Shareholders and Board of Directors of
Hyundai Securities Co., Ltd.
Report of Independent Auditors
We have audited the accompanying non-consolidated balance sheets of Hyundai Securities Co., Ltd. (the
“Company”) as of March 31, 2009 and 2008, and the related non-consolidated statements of income,
appropriations of retained earnings, changes in shareholders' equity and cash flows for the years then ended,
expressed in Korean won. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in conformity 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 non-consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Hyundai Securities Co., Ltd. as of March 31, 2009 and 2008, and the results of
its operations, the changes in its retained earnings, the changes in its shareholders’equity and its cash flows
for the years then ended in conformity with accounting principles generally accepted in the Republic of Korea.
As discussed in Note 2 to the accompanying non-consolidated financial statements, the Company has changed
its classification of the non-consolidated statement of cash flows related with securities sold under repurchase
agreement. The non-consolidated statement of cash flows for the year ended March 31, 2008, has been
restated to reflect the change, resulting in a decrease in cash flows from operating activities of \672,288
million, an increase in cash flows from investing activities of \635,875 million and an increase in cash flows
from financing activities of \36,413 million.
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 conformity with accounting principles and practices
generally accepted in countries and jurisdictions other than the Republic of Korea. In addition, the procedures
and practices used in the Republic of Korea to audit such financial statements may differ from those generally
accepted and applied in other countries. Accordingly, this report and the accompanying financial statements
are for use by those who are informed about Korean accounting principles or auditing standards and their
application in practice.
This report is effective as of May 21, 2009, the audit report date. Certain subsequent events or circumstances, which may occur between
the audit report date and the time of reading this report, could have a material impact on the accompanying non-consolidated financial
statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above
audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
www.samil.com
LS Yongsan Tower 191 Hangangno 2-ga,
Yongsan-gu Seoul 140-702, KOREA
(Yongsan P.O. Box 266, 140-600)
(in thousands of Korean won)
2009
Non-Consolidated Balance Sheets
March 31, 2009 and 2008
2008
Assets
Cash and cash equivalents (Note 3)
Deposits (Note 3)
Trading securities (Note 4)
Available-for-sale securities (Note 6)
Equity-method investments (Note 7)
Structured securities (Note 5)
Derivative assets (Note 5)
Loans receivable, net (Note 8)
Property and equipment, net (Note 9)
Accounts receivable, net
Accrued income, net
Advanced payments
Prepaid expenses
Prepaid income tax
Guarantee deposits
Collective fund for default loss (Note 3)
Intangible assets, net (Note 10)
Deferred income tax assets
Others
Total assets
Liabilities and Shareholders' Equity
Deposits from customers (Note 12)
Short-term borrowings (Note 11)
Securities sold under repurchase agreements (Note 4)
Securities sold
Structured securities sold (Note 5)
Debentures, net (Note 13)
Derivative liabilities
Accrued severance benefits, net (Note 14)
Accounts payable
Accrued expenses
Income taxes payable
Guarantee deposits received
Unearned income
Defferred income tax liabilities
Withholdings
Others
Total liabilities
\ 153,511,496
1,594,012,743
5,880,954,384
335,652,683
185,555,070
1,023,217,774
127,512,007
738,508,783
266,828,232
79,209,405
58,378,174
27,553,201
1,984,326
13,769,171
78,538,840
6,745,876
30,880,431
-
40,897,207
\ 10,643,709,803
1,412,859,771
288,518,254
3,829,191,416
7,613,682
2,049,621,429
200,875,290
336,533,327
34,821,661
120,247,268
24,507,474
-
13,564,570
5,003,912
8,431,231
9,034,853
23,497,509
\ 8,364,321,647
\ 96,214,809
1,177,285,977
3,721,068,785
241,259,574
72,640,648
1,889,148,747
28,888,350
1,178,897,216
234,013,131
22,791,704
52,338,310
22,137,253
1,708,526
-
81,858,969
7,550,584
5,489,308
25,884,392
41,111,314
\ 8,900,287,597
1,088,784,560
405,214,175
2,333,296,617
14,954,191
2,349,335,558
200,763,431
35,490,285
29,053,981
85,111,833
30,641,100
24,910,635
14,746,057
5,729,332
-
20,750,250
2,339,696
\ 6,641,121,701
The accompanying notes are an integral part of these non-consolidated financial statements.
46 | HYUNDAI SECURITIES
(in thousands of Korean won)
Commitments and contingencies (Note 15)
Shareholders' equity
Capital stock (Note 1)
Capital surplus
Capital adjustments (Note 17)
Accumulated other comprehensive income (Notes 17 and 22)
Retained earnings (Note 16)
Total shareholders' equity
Total liabilities and shareholders' equity
The accompanying notes are an integral part of these non-consolidated financial statements.
ANNUALREPORT 2008 | 47
2009 2008
\ 850,000,000
836,361,851
(68,161,137)
64,145,995
597,041,447
2,279,388,156
10,643,709,803
\ 850,000,000
836,361,851
(30,279,532)
80,899,032
522,184,545
2,259,165,896
8,900,287,597
48 | HYUNDAI SECURITIES
(in thousands of Korean won, except per share amounts)
2009
Non-Consolidated Statements of Income
March 31, 2009 and 2008
2008
Operating revenues
Commissions received
Gain on sales of trading securities
Gain on valuation of trading securities
Gain on sales of available-for-securities
Reveral on impairment of available-for-securities
Gain on valuation of securities sold
Gain on structured securities transactions
Gain on valuation of structured securities
Gain on structured securities sold transactions
Gain on valuation of structured securities sold
Gain on derivatives transactions
Interest income
Gain on foreign currency transactions
Gain on valuation and disposal of loans
Gain on valuation of deposits segregated under regulation
Others
Operating expenses
Commissions expenses
Loss on sales of trading securities
Loss on valuation of trading securities
Loss on sales of available-for-securities
Loss on impairment of available-for-securities
Loss on valuation of securities sold
Loss on structured securities transactions
Loss on valuation of structured securities
Loss on structured securities sold transactions
Loss on valuation of structured securities sold
Loss on derivatives transactions
Interest expense
Loss on valuation and disposal of loans
Loss on foreign currency transactions
General and administrative expenses (Note 19)
Other
Operating income
Non-operating income
Gain on disposal of property and equipment
\ 366,667,053
144,839,037
59,354,014
757,282
22,640
1,698,758
151,189,280
122,997,524
611,826,043
670,604,694
347,382,157
377,431,035
6,159,971
1,917,969
56,722,207
14,740,103
2,934,309,767
30,036,313
192,721,058
24,181,535
1,330,870
6,610,635
1,783,002
625,714,819
344,874,542
92,944,385
204,717,083
592,161,322
218,802,055
2,580,103
10,378,923
386,300,340
751,564
2,735,888,549
198,421,218
3,069
\ 562,381,357
108,517,722
30,380,269
11,284,265
-
2,099,735
957,627,686
139,418,497
167,913,093
457,672,665
177,034,292
278,447,869
43,086
101,900
65,987,889
7,797,520
2,966,707,845
51,662,849
84,966,643
9,096,236
34,214
1,845,520
1,408,103
154,713,900
407,149,069
1,002,603,565
147,560,088
193,060,793
189,547,228
4,243,854
118,491
457,212,293
158,826
2,705,381,672
261,326,173
739,960
The accompanying notes are an integral part of these non-consolidated financial statements.
(in thousands of Korean won, except per share amounts)
2009 2008
Rental income
Gain on valuation of equity-method investments (Note 7)
Gain on disposal of equity-method investments
Other
Non-operating expenses
Loss on disposal of property and equipment
Loss on valuation of equity-method investments (Note 7)
Loss on disposal of equity-method investments
Donations
Other
Income before income taxes
Income tax expense (Note 20)
Net income
Earnings per share (Note 21) (In Korean won)
\ 6,189,284
2,530,734
255,920
2,720,540
11,699,547
100,850
3,127,928
-
3,057,443
1,129,527
7,415,748
202,705,017
53,515,794
149,189,223
913
\ 4,862,876
4,086,351
-
3,337,915
13,027,102
4,649,617
256,259
161,485
4,088,334
8,339,672
17,495,367
256,857,908
70,110,472
186,747,436
1,272
The accompanying notes are an integral part of these non-consolidated financial statements.
ANNUALREPORT 2008 | 49
50 | HYUNDAI SECURITIES
(in thousands of Korean won)
2009
Non-Consolidated Statements of Appropriations of Retained Earnings
Years ended March 31, 2009 and 2008
(Dates of appropriations : May 29, 2009 and May 30, 2008 for the years ended March 31, 2009 and 2008, respectively)
2008
Retained earnings before appropriations
Unappropriated retained earnings carried over from prior year
Net income
Appropriations
Voluntary reserves
Legal reserves
Reserve for loss on futures transactions
Reserve for loss on electronic financial transactions
Dividends (Note 18)
Unappropriated retained earnings
carried forward to the subsequent year
\ -
149,189,223
149,189,223
104,698,600
4,044,602
-
-
40,446,021
149,189,223
\ -
\ -
186,747,436
186,747,436
104,457,897
7,433,232
23,986
500,000
74,332,321
186,747,436
\ -
The accompanying notes are an integral part of these non-consolidated financial statements.
(in thousands of Korean won)
Non-Consolidated Statements of Changes in Shareholders' Equity
March 31, 2009 and 2008
Retained
earnings
Shareholders' equity, April 1, 2007
Cash dividends
Retain earnings after appropriations
Issuance of capital stock
Net income
Gain on valuation of available-for-
sale securities
Loss on valuation of
available-for-sale securities
Gain on valuation of
equity-method investments
Loss on valuation of
equity-method investments
Overseas operation translation credit
Shareholders' equity, March 31, 2008
Shareholders' equity, April 1, 2008
Cash dividends
Retain earnings after appropriations
Net income
Purchase of treasury stock
Gain on valuation of
available-for-sale securities
Loss on valuation of
available-for-sale securities
Accumulated comprehensive income
of equity method investees
Accumulated comprehensive expense
of equity method investees
Overseas operation translation credit
Shareholders' equity, March 31, 2009
Accumulated othercomprehensive
income and expense
Capital
adjustments
Capital
surplus
Capital
stock
\ 696,767,115
-
-
153,232,885
-
-
-
-
-
-
850,000,000
850,000,000
-
-
-
-
-
-
-
-
-
\ 850,000,000
\ 487,896,016
-
-
348,465,835
-
-
-
-
-
-
836,361,851
836,361,851
-
-
-
-
-
-
-
-
-
\ 836,361,851
\ (30,279,532)
-
-
-
-
-
-
-
-
-
(30,279,532)
(30,279,532)
-
-
-
(37,881,605)
-
-
-
-
-
\ (68,161,137)
\ (4,702,586)
-
-
-
-
80,773,692
(887,925)
481,866
3,443,678
1,790,307
80,899,032
80,899,032
-
-
-
-
(36,149,511)
(5,298,032)
16,356,046
5,648,053
2,690,407
\ 64,145,995
\ 369,071,390
(33,634,281)
335,437,109
-
186,747,436
-
-
-
-
-
522,184,545
522,184,545
(74,332,321)
447,852,224
149,189,223
-
-
-
-
-
-
\ 597,041,447
Total
\ 1,518,752,403
(33,634,281)
1,485,118,122
501,698,720
186,747,436
80,773,692
(887,925)
481,866
3,443,678
1,790,307
2,259,165,896
2,259,165,896
(74,332,321)
2,184,833,575
149,189,223
(37,881,605)
(36,149,511)
(5,298,032)
16,356,046
5,648,053
2,690,407
\ 2,279,388,156
The accompanying notes are an integral part of these non-consolidated financial statements.
ANNUALREPORT 2008 | 51
(in thousands of Korean won)
2009
Non-Consolidated Statements of Cash Flows
March 31, 2009 and 2008
2008
Cash flows from operating activities
Net income
Adjustments to reconcile net income
to net cash provided by (used in) operating activities
Gain on valuation of trading securities, net
Loss(gain) on sales of available for sale securities, net
Loss on impairment of available-for-sale securities, net
Loss(gain) on valuation of securities sold, net
Loss on valuation of structured securities, net
Gain on valuation of structured securities sold, net
Loss on valuation of derivatives
Bad debts expense, net
Provision for severance benefits
Depreciation and amortization
Loss on disposal of property and equipment, net
Loss(gain) on equity method valuation, net
Gain on valuation of deposits segregated under regulation
Others, net
Changes in operating assets and liabilities
Deposits
Trading securities
Structured securities
Account receivables
Accrued income
Advanced payments
Prepaid expenses
Prepaid income tax
Deferred income tax assets
Derivative assets
Deposits from customers
Loans receivable
Collective fund for default loss
Securities sold
Structured securities sold
Income taxes payable
Accounts payable
Accrued expenses
\ 149,189,223
(35,172,479)
573,588
6,587,995
84,245
221,877,017
(465,887,611)
189,146,593
1,413,698
24,004,312
22,128,778
97,781
597,194
(56,722,207)
2,666,757
60,584,884
(246,491,282)
(2,218,205,935)
644,053,955
(56,608,213)
(6,218,397)
(5,853,911)
(273,301)
(13,769,171)
45,084,564
12,970,906
323,053,181
439,726,693
804,708
(7,424,754)
166,173,482
(24,926,178)
33,641,609
\ (6,133,884)
\ 186,747,436
(21,284,033)
(11,250,051)
1,845,520
(691,632)
267,730,572
(310,112,577)
33,121,077
4,023,188
17,727,442
18,057,110
3,909,657
(3,830,092)
(65,987,888)
277,848
120,283,577
51,132,352
(797,929,146)
(33,153,704)
94,665,228
(14,092,206)
(11,981,633)
(164,969)
9,247,802
26,182,823
(2,879,177)
18,795,990
(636,348,707)
473,827
7,012,415
(127,403,177)
24,454,864
5,743,139
\ 6,905,543
The accompanying notes are an integral part of these non-consolidated financial statements.
52 | HYUNDAI SECURITIES
(in thousands of Korean won)
2009
Non-Consolidated Statements of Cash Flows
March 31, 2009 and 2008
2008
Withholdings
Unearned income
Derivatives liabilities
Securities sold under repurchase agreements
Payment of severance benefits
Deferred income tax liabilities
Others, net
Net cash provided by (used in) operating activities
Cash flows from investing activities
Decrease(increase) in deposits
Decrease in available-for-sale securities
Increase in available-for-sale securities
Decrease in guarantee deposits
Increase in guarantee deposits
Decrease in equity-method investments
Increase in equity-method investments
Disposal of property and equipment
Aquisition of property and equipment
Increase in intangible assets
Other, net
Net cash used in investing activities
Cash flows from financing activities
Increase in short-term borrowings
Decrease in short-term borrowings
Increase in guarantee deposits received
Decrease in guarantee deposits received
Increase in treasury stock
Issuance of capital stock
Increase in debentures
Decrease in debentures
Payments of dividends
Net cash provided by (used in) financing activities
Increase in overseas operation translation gain
Net increase(decrease) in cash and cash equivalents
Cash and cash eguivalents
Beginning of year
End of year
\ (11,715,396)
(725,420)
301,886
1,495,894,799
(18,236,632)
8,431,231
22,781,537
576,336,077
\ 636,920,961
(114,515,786)
48,128,553
(116,885,030)
16,385,073
(13,229,220)
609,920
(92,206,820)
79,406
(51,863,571)
(28,633,061)
221,940
(351,908,596)
137,304,079
(254,000,000)
741,527
(1,923,014)
(37,881,605)
-
-
-
(74,332,321)
(230,091,334)
2,375,656
57,296,687
96,214,809
\ 153,511,496
\ 10,750,409
2,090,873
(1,292,840)
843,432,697
(25,761,132)
-
2,547,098
(547,571,631)
\ (427,288,054)
74,951,537
41,987,884
(75,072,882)
20,458,548
(24,094,924)
319,200
(5,324,399)
59,488
(37,495,962)
(3,686,671)
(10,647,538)
(18,545,719)
41,214,175
(126,100,000)
1,622,000
(231,000)
-
501,698,720
953,330
(1,000,000)
(33,634,280)
384,522,945
1,179,652
(60,131,176)
156,345,985
\ 96,214,809
The accompanying notes are an integral part of these non-consolidated financial statements.
ANNUALREPORT 2008 | 53
1. The Company
Hyundai Securities Co., Ltd. (the "Company") was incorporated on June 1, 1962, under the name of Kookil Securities
Co., Ltd., pursuant to the laws of the Republic of Korea. 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, 2009,
all issued and outstanding shares are publicly traded.
In accordance with its Articles of Incorporation, the Company is authorized to issue up to 600,000,000 shares of
common stock with a par value per share of \5,000. As of March 31, 2009, 170,000,000 shares of common stock were
issued and outstanding.
In accordance with its Articles of Incorporation, the Company is authorized to issue up to \500 billion of convertible
bonds and \500 billion of debentures with stock purchase options. No convertible bonds and debentures with stock
purchase options have been issued as of March 31, 2009.
Also, in accordance with its Articles of Incorporation, the Company may grant stock purchase options to its employees
and directors up to 15% of the total issued and outstanding shares with the approval of the shareholders. No stock
purchase options have been issued as of March 31, 2009.
The Company is required to maintain a net capital ratio (“NCR”) of more than 100% pursuant to the Regulation on
Financial Investment Service (“RFIS”). NCR is the ratio of net operating capital to total risks exposed which include
market risk, counter party risk, fundamental risk and credit concentration risk.
2.Summary of Significant Accounting Policies
The significant accounting policies followed by the Company in the preparation of its non-consolidated financial
statements are summarized below.
Basis of Non-Consolidated Financial Statement Presentation
The Company maintains its accounting records in Korean won and prepares statutory non-consolidated financial
statements in 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 non-consolidated financial statements are intended for use by those
who are informed about Korean accounting principles and practices. The accompanying non-consolidated financial
statements have been condensed, restructured and translated into English from the Korean language non-
consolidated financial statements.
Certain information attached to the Korean language non-consolidated financial statements, but not required for a fair
presentation of the Company’s financial position, results of operations, or cash flows, is not presented in the
accompanying non-consolidated financial statements.
The following is a summary of significant accounting policies followed by the Company in the preparation of its
Notes to Non-Consolidated Financial StatementsMarch 31, 2009 and 2008
54 | HYUNDAI SECURITIES
financial statements. These policies have been consistently applied to all the years presented, unless otherwise
stated.
In the year ended March 31, 2009, the Company adopted the following new Statements of Korean Financial Accounting
Standards (SKFAS) issued by the Korea Accounting Standards Board:
∙SKFAS No. 8, Securities (As Revised)
∙SKFAS No. 20, Related Party Disclosures (As Revised)
∙Financial Supervisory Service’s Accounting Opinion(00140), Preparation of the Statement of Cash Flows in
Securities company
In accordance with Financial Supervisory Service's Accounting Opinion No. 00140, Preparation of Statement of Cash
Flows in Securities Company, the Company has changed its classification of the non-consolidated statement of cash
flows related with securities sold under repurchase agreement. The non-consolidated statement of cash flows for the
year ended March 31, 2008, has been restated to reflect the change, resulting in a decrease in cash flows from
operating activities of \672,288 million, an increase in cash flows from investing activities of \635,875 million and an
increase in cash flows from financing activities of \36,413 million.
Accounting Estimates
The preparation of the non-consolidated financial statements requires management to make estimates and
assumptions that affect amounts reported therein. Although these estimates are based on management’s best
knowledge of current events and actions that the Company may undertake in the future, actual results may differ from
those estimates.
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.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and in banks, and financial instruments with maturity of three months
or less at the time of purchase. These financial instruments are readily convertible into cash without significant
transaction costs and bear low risks from changes in value due to interest rate fluctuations.
Investments in securities
Costs of securities are determined using the moving-weighted average method.
Investments in equity securities or debt securities are classified into trading securities, available-for-sale securities
and held-to-maturity securities, depending on the acquisition and holding purpose. Investments in equity securities of
companies, over which the Company exercises a significant control or influence, are recorded using the equity method
of accounting.
Held-to-maturity securities are measured at amortized cost while available-for-sale and trading securities are
measured at fair value. However, non-marketable securities, classified as available-for-sale securities, are carried at
ANNUALREPORT 2008 | 55
cost when the fair values are not readily determinable.
Gains and losses related to trading securities are recognized in the income statement, while unrealized gains and
losses of available-for-sale securities are recognized under other comprehensive income and expense. Realized
gains and losses of available-for-sale securities are recognized in the income statement.
Equity method investments
Investees over which the Company can exercise significant influence should reflect any changes in equity after the
initial purchase date. Under the equity method, the Company records changes in its proportionate ownership in the
book value of the investee in current operations, as other comprehensive income and expense or as adjustments to
retained earnings, depending on the nature of the underlying change in the book value of the investee.
Structured Securities and Structured Securities Sold
Equity-linked securities are recorded as assets at the purchase price, and equity linked securities sold are recorded
as a liability at the issuance price. Gains or losses upon redemption are recorded as a gain or loss on the redemption,
and the difference with the estimated value and the book value at the balance sheet date is recorded as a gain or loss
on valuation.
Derivative Instruments
Derivative financial instruments for trading or hedging purpose are valued at estimated market price with the
resulting unrealized gains or losses recognized in the current operations, except for the effective portion of derivative
transactions entered into for the purpose of cash-flow hedges, which is recorded as an adjustment to shareholders’
equity.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts based on the aggregate estimated receivable amount of the
receivables.
The RFIS provides guidelines for calculating the allowance for doubtful accounts. These guidelines require that the
minimum level of allowances that securities firms should maintain. These guidelines require that all loans and
receivables should be classified based on a number of factors including the financial position of the debtors, the
repayment history, the Company’s past relationship and dealings with the debtors and the value of any security
interest. In accordance with these guidelines, loans and receivables have been classified as normal, precautionary,
substandard, doubtful and estimated loss.
Property and equipment
Property and equipment are stated at cost, which includes acquisition cost, production cost and other costs required
to prepare the asset for its intended use. Property and equipment are stated net of accumulated depreciation
calculated based on the straight-line method and the following estimated useful lives:
56 | HYUNDAI SECURITIES
Expenditures incurred after the acquisition or completion of assets are capitalized if they enhance the value of the
related assets over their recently appraised value or extend the useful life of the related assets. Routine maintenance
and repairs are charged to expense as incurred.
Intangible assets
Intangible assets are stated at cost, which includes acquisition cost, production cost and other costs required to
prepare the asset for its intended use. Intangible assets are stated net of accumulated amortization calculated based
on using the straight-line method and estimated useful lives of four years.
Development costs which are individually identifiable and directly related to a new technology or to new products
which carry probable future benefits are capitalized as intangible assets. Amortization of development cost begins at
the commencement of the commercial production of the related products or use of the related technology.
Securities Sold under Repurchase Agreements
Under the repurchase agreements, the Company recorded securities sold under repurchase agreements at the
amount of securities sold, and such securities are included in liabilities. Also the Company recorded the difference
between the repurchase price and the price of the securities sold as interest expense.
Meanwhile under the resale agreements, the securities purchased under resale agreements are stated at acquisition
cost and are included as assets. The Company recorded the difference between the securities resale price and
acquisition cost as interest income.
Discounts and Premium on Debentures
Discounts and premium on debentures are amortized over the term of the debentures using the effective interest rate
method. Amortization of discount or premium is recorded as part of interest expense.
Accrued Severance Benefits
Employees and directors with at least one year of service are entitled to receive a lump-sum payment upon
termination of their employment with the Company, based on their length of service and rate of pay at the time of
termination. Accrued severance benefits represent the amount which would be payable assuming all eligible
employees and directors were to terminate their employment as of the balance sheet date.
The Company has partially funded the accrued severance benefits through severance insurance deposits with an
insurance company. Deposits made by the Company are recorded as deductions from accrued severance benefits.
The excess portion of deposits over accrued severance benefits is recorded as other investments.
The Company deposits certain portion severance benefits to National Pension Service according to National Pension
Law. The deposit amount is recorded as deduction from accrued severance benefits.
Estimated useful lives (years)
Buildings
Equipment
Others
40
4
4
ANNUALREPORT 2008 | 57
Treasury Stock
Treasury stock is stated at cost. Gain on disposal of treasury stock is charged to capital surplus. Loss on disposal of
treasury stock is first offset against gain on disposal of treasury stock, if any, and the remainder is charged to capital
adjustment, a component of shareholders’equity.
Income tax and deferred income tax
Income tax expense includes the current income tax under the relevant income tax law and the changes in deferred
tax assets or liabilities. Deferred tax assets and liabilities represent temporary differences between financial
reporting and the tax bases of assets and liabilities. Deferred tax assets are recognized for temporary differences
which will decrease future taxable income or operating loss to the extent that it is probable that future taxable income
will be available against which the temporary differences can be utilized. Deferred tax effects applicable to items in
the shareholders’equity are directly reflected in the shareholders’equity.
Trust Accounts
In accordance with the Trust Business Act, trust estate should be accounted separately from the Company’s own
estate. Trust management fee for the management, administration and disposal of the trust are recognized as
operating revenue.
Translation of assets and liabilities denominated in foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the rates of
exchange in effect at the balance sheet date, and the resulting translation gains and losses are recognized in current
operations.
Currency translation for foreign operations
Assets and liabilities of a foreign branch or company subject to the equity method of accounting for investments are
translated into Korean won at the rates of exchange in effect at the balance sheet date, while their equity is translated
at the exchange rate at the time of transaction, and income statement accounts at the average rate over the period.
Resulting translation gains and losses are recorded as accumulated other comprehensive income and expense.
Corresponding gains and losses are recognized as gain or loss when the foreign branch or company is liquidated or
sold.
Earnings per Share
Earnings per share are computed based on earnings available to common shareholders, using the weighted average
number of common shares outstanding during the period.
Operating Leases
An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of
an asset. The annual minimum lease payments, less guaranteed residual value, are charged to expense on a regular
basis over the lease term.
58 | HYUNDAI SECURITIES
(1) Annual interest rate could not be determined at March 31, 2009, as the depository will pay interest based on their
operating results.
(2) As of March 31, 2009, long-term financial instruments amounting to \38,000 thousand are subject to withdrawal
restrictions to maintain checking accounts and long-term financial instruments amounting to \43,690,162
thousand are pledged as collateral for derivative instruments transactions (Note 5).
According to the Regulation on Financial Investment Services, the Company is required to deposit with the Korean
Securities Finance Corporation (“KSFC”) or other banks the amount of deposits from customers for the
customers’ claims.
Pursuant to the Financial Investment Services and Capital Markets Act, the collective fund for default loss is for
compensating losses resulting from breaching of securities trading in stock exchange.
3. Cash and Deposits
Cash and deposits as of March 31, 2009 and 2008, consist of the following:
(in thousands of Korean won)
Annual Interest Rate (%)
2009 2009 2008
Cash and cash equivalents
Cash on hand
Time deposits
Passbook accounts
Checking accounts
Passbook accounts in foreign currency
Negotiable certificate of deposits
Promissory notes
Deposits
Subscription deposits
Reserve for claims of customers' deposits
Reserve for claims of customers’deposits (trust)
Guarantee deposits for futures and
Options trading
Guarantee deposits for stock borrowings
Others(2)
Collective fund for default loss
-
4.50
0.10
-
0 - 0.25
6.45
1.90
1.00
(1)
(1)
-
-
0.10 - 7.50
(1)
\ 2,413
38,000,000
28,908,449
731,429
2,072,518
-
26,500,000
96,214,809
-
15,073,383
1,069,006,535
49,255
1,984,105
91,172,699
1,177,285,977
7,550,584
\ 1,281,051,370
\ 984
70,000,000
29,482,109
602,500
5,551,508
3,274,395
44,600,000
153,511,496
13,500,000
10,033,830
1,365,792,938
-
-
204,685,975
1,594,012,743
6,745,876
\ 1,754,270,115
ANNUALREPORT 2008 | 59
4. Trading Securities
Trading securities as of March 31, 2009 and 2008, consist of the following:
Securities in related companies as of March 31, 2009 and 2008, consist of the following:
As of March 31, 2009, \4,077,038,967 thousand (2008: \2,502,724,250 thousand) of the debt securities are secured
against securities sold under repurchase agreements.
As of March 31, 2009, the Company holds beneficiary certificates which include \56,942 million of the bonds issued by
potentially ailing companies.
The above beneficiary certificates include the bonds issued by a potentially ailing company. They are valued at the
standard price of \65,770 million, as published by the investment trust management companies. Subsequently, the
Company devalued them by \8,828 million. In this regard, the Company classified those beneficiary certificates as
trading securities in accordance with the Financial Accounting Standards of the Republic of Korea. As of March 31,
2009, the actual recoverable amounts and the redemption date or resale date of the corporate bonds may be
influenced by Korean economic conditions. The accompanying non-consolidated financial statements do not reflect
that uncertainty.
For the year ended March 31, 2009, the Company recorded \243,630 million (2008: \156,364 million) of interest
income for trading securities.
60 | HYUNDAI SECURITIES
(in thousands of Korean won)
2009
2009 2008
2008
Stocks
Government and public bonds
Corporate bonds
Beneficiary certificates
Commercial papers
Securities in foreign currencies
\ 172,556,113
2,925,484,161
299,738,531
116,594,788
202,082,285
4,612,907
\ 3,721,068,785
\ 244,526,744
4,739,819,139
584,417,292
87,622,147
224,569,062
-
\ 5,880,954,384
(in thousands of Korean won, except for the number of shares owned and percentage of ownership)
Hyundai Elevator Co.,Ltd
Hyundai Merchant Marine Co.,Ltd.
Number of
Shares Owned
-
47
Percentage of
Ownership
-
0.00
Acquisition
Cost
\ -
1,304
\ 1,304
Book
Value
\ -
1,267
\ 1,267
Book
Value
\ 28,496,720
7,380
\ 28,504,100
As of March 31, 2009, government and public bonds amounting to \261,487 million, corporate bonds amounting to
\80,508 million and stocks amounting to \1,290 million are pledged as collateral for the contractual obligations,
including derivatives contracts and securities borrowings (Notes 5, 11 and 15).
5.Structured Securities, Structured Securities Sold and Derivative Instruments
Structured securities and structured securities sold as of March 31, 2009, are as follows:
Derivatives instruments contracts outstanding as of March 31, 2009, are as follows:
ANNUALREPORT 2008 | 61
(in thousands of Korean won)
Gain on
valuation
Loss on
valuation
Equity-linked securities
Derivatives linked securities
Equity-linked securities sold
Warrant securities sold
Derivatives-linked securities sold
\ 337,496,351
7,378,191
115,813,078
87,906,345
997,660
\ 122,997,524
-
621,069,694
39,783,399
9,751,601
2009
\ 1,019,816,763
3,401,011
1,973,193,323
5,302,736
71,125,370
Fair Value
Issuing Date
\ 1,454,246,633
13,834,660
2,724,969,149
6,122,546
80,841,912
(in thousands of Korean won)
Loss on
Valuation
Purpose of
Transaction
Futures
Stock index futures
Interest futures
Listed Options
Stock index options purchased
Stock index options sold
OTC derivatives
Interest rate swap 1
Equity swap 1
Foreign exchange forward 1
OTC stock index options purchased 1
OTC derivatives purchased 2
OTC derivatives sold
Trading
"
Trading
"
Hedging
"
"
"
Trading, Hedging
Trading
\ 314,783
-
\ 314,783
\ 220,512
23,280
\ 243,792
\ 4,725,841
296,902,255
374,856
7,250,570
843,691
-
\ 310,097,213
Gain on
Valuation
\ -
12,637,920
\ 12,637,920
\ 108,894
100,137
\ 209,031
\ -
105,990,270
564,577
6,975,420
6,611,423
843,691
\ 120,985,381
Outstanding
Contract amount
\ 47,776,262
2,009,054,970
\ 885,835
570,460
\ 362,000,000
1,074,291,550
15,400,041
7,781,850
15,664,047
8,984,154
1 The Company entered into derivative contracts to hedge against fluctuation in interest rate, stock price, exchange
rate and maturity amounts of equity-linked securities sold.
Since the above transactions do not meet the conditions of hedge accounting, the Company does not apply hedge
accounting. The Company provided trading and available-for-sale securities to Korea Exchange as collateral for
derivative instruments transactions (Notes 4 and 6).
2 The OTC derivatives purchased include put options that have been purchased to hedge the risk of Donghae Pulp
Co., Ltd.’s stock price change (Note 6).
6. Available-for-sale securities
Available-for-sale securities as of March 31, 2009 and 2008, consist of the following:
As of March 31, 2009, the Company provided listed available-for-sale stocks amounting to \89,862 million to Korea
Exchange as collateral (Notes 5 and 15).
For the year ended March 31, 2009, the Company recorded \2,937 million (2008: \666 million) of interest income
from available-for-sale securities.
Investments in stocks as of March 31, 2009 and 2008, consist of the following:
62 | HYUNDAI SECURITIES
(in thousands of Korean won)
2009 2008
Stocks
Investments in partnerships
Corporate bonds
Beneficiary certificates
Others
\ 189,358,689
25,684,450
12,382,221
10,881,442
2,952,772
\ 241,259,574
\ 222,455,291
40,600,414
23,050,794
26,520,190
23,025,994
\ 335,652,683
2009 2008
(in thousands of Korean won, except for the number of shares owned and percentage of ownership)
Stocks in listed companies
Hyundai Eng. & Const. Co., Ltd.
Donghae Pulp Co.,Ltd. 2
Hyundai Elevator Co.,Ltd.
Hyundai Development Co. -
Engineering & Construction
Visang Inc.
Percentage
of Ownership
0.73
1.19
4.99
1.10
3.41
Number of
Shares Owned
813,149
371,560
356,209
830,000
333,924
Acquisition
Cost
\ 36,795,027
5,502,804
30,527,111
43,990,000
8,431,581
125,246,523
Market or
Net Asset Value
\47,975,791
1,776,057
25,183,976
27,929,500
4,341,012
107,206,336
Book
Value
\47,975,791
1,776,057
25,183,976
27,929,500
4,341,012
107,206,336
Book
Value
\ 69,930,814
-
-
-
-
69,930,814
1 The net asset values are recorded based on the most recent available unaudited financial statements.
2 During the year ended March 31, 2009, the Company recorded \1,810 million as loss on impairment of available-
for-sale securities with related to the acquisition of Donghae Pulp Co.,Ltd.’s stocks. With regard to this
transaction, the Company purchased put options to hedge the risk of Donghae Pulp Co., Ltd.’s stock price
change and recorded \4,504 million as gain on valuation of OTC derivatives.
3 During the year ended March 31, 2009, the Company recorded \383 million as loss on impairment of available-
for-sale securities, whose net asset values declined significantly and are not expected to recover.
4 The Company reclassified the investment as available-for-sale securities as Hyundai Auction Real Estate Fund 1st
stock’s establishment expiration date has lapsed.
5 Hyundai Asan Corporation is a related company.
6 These unlisted stocks are carried at values, published by Nice Pricing Services Inc., an independent valuation
organization, based on the professional judgment and rational valuation methods using reasonable financial
estimations.
2009 2008
Stocks in unlisted companies
Korea Exchange6
Korea Securities Finance Corporation6
Korea Securities Depository 6
Korea Securities Computer Corporation6
Korea Money Brokerage Corporation6
Hyundai Asan Corporation 5
Hyundai Futures Corporation
Hyundai Research Institute
C9 Asset Management Corporation1
Visang Inc(Preferred).
Reyon Pharmaceutical Co.,Ltd.
Reyon Pharmaceutical Co.,Ltd (Preferred).
Hanwon Square PFV Co.,Ltd.
Pantech & Curitel Communications, Inc.
Enbstars Co.,Ltd. 3
Hyundai Auction Real Estate Fund 1st 4
Others
Percentage
of Ownership
3.12
3.17
0.94
1.09
0.50
4.27
8.61
10.00
9.50
2.09
0.93
25.00
19.00
1.77
4.55
0.99
Number of
Shares Owned
624,190
2,152,828
56,496
58,120
10,000
587,839
396,000
200,000
140,000
209,000
9,900
297,000
190,000
9,713,264
8,292
298,791
Acquisition
Cost
\ 2,807,105
10,757,876
496,910
290,600
50,000
21,229,535
2,009,700
480,685
700,000
7,106,000
625,000
2,025,000
950,000
2,428,316
462,000
820,564
35,887,921
89,127,212
\ 214,373,735
Market or
Net Asset Value
\66,082,371
16,533,719
4,729,732
1,810,438
229,980
5,552,115
3,391,354
556,487
633,946
2,229,167
398,572
1,195,716
-
582,796
52,562
1,475,222
5,780,559
111,234,736
\ 218,441,072
Book
Value
\66,082,371
16,533,719
4,729,732
1,810,438
229,980
5,405,175
1,882,774
480,685
700,000
7,106,000
625,000
2,025,000
760,000
582,796
78,540
491,511
5,725,234
115,248,955
\ 222,455,291
Book
Value
\ 73,831,066
16,228,017
4,708,603
1,630,440
192,520
4,498,240
1,882,774
480,684
700,000
7,106,000
625,000
2,025,000
950,000
582,796
462,000
-
3,524,735
119,427,875
\189,358,689
ANNUALREPORT 2008 | 63
Investments in partnerships as of March 31, 2009 and 2008, consist of the following:
1 During the year ended March 31, 2009, the Company recorded \680 million as loss on impairment of available-
for-sale securities related to the acquisition of Donghae Pulp Co.,Ltd.’s stocks. With regard to this transaction,
the Company purchased put options to hedge the risk of Donghae Pulp Co., Ltd.’s stock price change and
recorded \2,467 million as gain on valuation of OTC derivatives.
Corporate bonds as of March 31, 2009 and 2008, consist of the following:
64 | HYUNDAI SECURITIES
2009 2008
(in thousands of Korean won, except for the percentage of ownership)
H&Q AP Korea
KTB 2007 Private Equity Fund
NPS 06-7 KDBC Corporate
Restructuring Fund
Tube Midas Venture Investment Fund
IBK KTAC Private Equity Fund No.2
Corporate restructuring fund QCP 13
Asia orchild venture Fund 1
KLAUS Private Equity Fund 1
West End Corporate Restructuring Fund
IBKC-NICE NO.1 Corporate
Restructuring Fund
Other
Percentage of
Ownership
17.00
8.80
15.00
5.00
9.10
16.70
15.38
9.56
10.34
25.00
Acquisition
Cost
\ 1,869,150
23,880,000
5,928,000
1,000,000
800,000
750,000
1,200,000
3,000,000
3,000,000
1,200,000
400
\42,627,550
Market or
Net Asset Value
\ 1,531,680
23,187,955
5,805,197
913,776
784,296
614,817
1,177,010
972,864
2,984,234
1,202,255
400
\ 39,174,484
Book
Value
\ 1,869,150
23,880,000
5,928,000
1,000,000
800,000
750,000
1,200,000
972,864
3,000,000
1,200,000
400
\40,600,414
Book
Value
\ 2,040,000
14,680,000
5,814,000
1,000,000
800,000
750,000
600,000
-
-
-
450
\25,684,450
2009 2008
(in thousands of Korean won)
Pantech & Curitel Communications, Inc.
Korea Kolmar Co.,Ltd.
GS Neo Tech Co., Ltd.
SMI XVI ABS Securitization
Specialty CO.1-9
SMI XVI ABS Securitization
Specialty CO.1-7
Par
Value
\ 4,483,045
8,500,000
100,000
550,000
6,500,000
Acquisition
Cost
\ 4,483,045
8,500,000
100,000
550,000
6,306,021
Fair
Value
\ 2,241,523
8,500,000
100,000
550,000
5,778,384
Book
Value
\ 2,241,523
8,500,000
100,000
550,000
5,778,384
Book
Value
\ 2,241,523
7,000,000
200,281
-
-
-
Less : Allowance for doubtful accounts
1 During the year ended March 31, 2009, the Company reclassified this investment as available-for-sale securities,
due to continuous operating loss and worsening cash flow. Also, the Company recorded £‹58 million as loss on
impairment of available-for-sale securities, whose net asset values declined significantly and are not expected to
recover.
Beneficiary certificates as of March 31, 2009 and 2008, consist of the following:
1 During the year ended March 31, 2009, the Company recorded \479 million as loss on impairment of available-
for-sale securities, whose net asset values declined significantly and are not expected to recover.
2009 2008
SMI XVI ABS Securitization
Specialty CO.1-8
Shinsung Engineering &
Construction 911
Baolin Shangjian Gufengongsi 1
Hyundai Card Co.,Ltd CB
Par
Value
\ 4,500,000
122,213
2,900,000
-
\ 27,655,258
Acquisition
Cost
\ 4,331,269
122,213
2,671,071
-
\ 27,063,619
Fair
Value
\ 3,358,555
63,934
2,671,071
-
\ 23,263,467
Book
Value
\ 3,358,555
63,934
2,671,071
-
23,263,467
(212,673)
\23,050,794
Book
Value
\ -
-
-
2,976,418
12,418,222
(36,001)
\12,382,221
2009 2008
(in thousands of Korean won)
Shang-Hai real estate Fund
GB Vietnam Private Fund
Bond Market Stabilization Private Fund1
MBC-E&G Drama Fund
Money Market Fund
Acquisition
Cost
\ 7,647,314
2,000,000
13,500,000
479,086
-
\ 23,626,400
Fair
Value
\ 11,596,005
1,301,065
13,623,120
-
-
\ 26,520,190
Book
Value
\ 11,596,005
1,301,065
13,623,120
-
-
\ 26,520,190
Book
Value
\ 8,370,445
1,311,443
-
1,050,524
149,030
\ 10,881,442
ANNUALREPORT 2008 | 65
Other available-for-sale securities as of March 31, 2009 and 2008, consist of the following:
1 During the year ended March 31, 2009, the Company recorded \3,200 million as loss on impairment of available-
for-sale securities, whose net asset values declined significantly and are not expected to recover.
Maturities of corporate bonds and commercial papers as of March 31, 2009 and 2008, are as follows:
Changes in unrealized gains and losses on valuation of available-for-sale securities for the years ended March 31,
2009 and 2008, are as follows:
66 | HYUNDAI SECURITIES
2009 2008
(in thousands of Korean won)
Commercial papers1
Stock warrants
Acquisition
Cost
\ 30,000,000
1,309,000
\ 31,309,000
Fair
Value
\ 22,800,000
225,994
\ 23,025,994
Book
Value
\ 22,800,000
225,994
\ 23,025,994
Book
Value
\ -
2,952,772
\ 2,952,772
2009 2008
(in thousands of Korean won)
Within 1 year
1 - 5 years
Acquisition
CostMaturity
\ 32,793,284
24,270,335
\ 57,063,619
Fair
Value
\ 25,535,005
20,528,462
\ 46,063,467
Book
Value
\ 25,535,005
20,528,462
\ 46,063,467
Book
Value
\ 3,176,699
9,241,523
\ 12,418,222
2009
(in thousands of Korean won)
Unrealized gains
Unrealized losses
Increase(Decrease) due
to valuation
\ (54,444,965)
7,930,713
Beginning
balance
\ 84,036,409
887,925
Decrease due
to disposal
\ (73,866)
(1,224,723)
Deferred
taxation
\ 18,369,318
(1,407,958)
Ending
Balance
\ 47,886,896
6,185,957
2008
(in thousands of Korean won)
Unrealized gains
Unrealized losses
Increase due
to valuation
\ 111,598,321
1,224,724
Beginning
balance
\ 3,262,717
Decrease due
to disposal
\ (186,332)
Deferred
taxation
\ (30,638,297)
(336,799)
Ending
Balance
\ 84,036,409
887,925
On July 1, 2008, the Company reclassified \93,586 of trading securities into available-for-sale securities as these are
no longer held to gain profit from due to the downturn in the domestic and international financial markets, which the
Company believes may not recover in the near term.
The current book value and fair value of securities transferred from trading securities to available for sale securities
on March 31, 2009, are as follows:
For the year ended March 31, 2009, the Company recorded \1,067 million of interest income from the above
transferred securities.
The changes in fair value related to the above transferred securities are as follows:
Also, the changes in fair value recognized as current operating expenses if the securities have not been transferred
amount to \26,995 million.
The effective interest rate and estimated cash inflow from available-for-securities transferred from trading securities
on July 1, 2008, are as follows:
(in thousands of Korean won)
Book Value & Fair Value
Stock
Corporate Bond
\ 57,454,488
9,136,939
\ 66,591,427
(in thousands of Korean won)
The changes in fair value
until the end of previous year
Stock
Corporate Bond
\ 40,446,927
(114,919)
\ 40,332,008
The changes in fair value
during the current year
\ (12,675,520)
(247,790)
\ (12,923,310)
(in thousands of Korean won)
Corporate Bond
Within 1 year
\ -
Effective
interest rate
9.54~9.99%
1 ~ 2 years
\ 8,360,300
2 ~ 5 years
\ 6,073,425
Over 5 years
\ -
ANNUALREPORT 2008 | 67
1 Offshore fund established on Labuan Island in Malaysia.
7. Equity-Method Investments
Equity-method investments as of March 31, 2009 and 2008, consist of the following:
68 | HYUNDAI SECURITIES
2009
(in thousands of Korean won, except for the number of shares owned and percentage of ownership)
Hyundai Securities America Inc.
Hyundai Securities Asia Ltd.
Hyundai Securities Europe Ltd.
Hyundai Wise Asset Management
Co., Ltd.
Shibuya Sakuragaoka
Property TMK
Osaka Kitahama 3 undisclosed
association
Core-clean tech Venture
investment 2 association
Investment Opportunity Limited 1
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.
Percentage ofOwnership
100
100
100
33
100
74
26
50
100
99.57
99.57
99.57
99.57
99.37
99.37
Number of
Shares OwnedInvestee
220
10,000,000
11,000,000
659,997
-
-
-
60,000
6,000,000
2,292,971
2,292,971
2,292,971
2,292,971
1,572,130
1,572,130
Acquisition
Cost
\ 32,735,839
8,918,826
19,130,104
3,827,983
2,969,073
1,419,326
582,000
626,100
30,000,000
11,464,855
11,464,855
11,464,855
11,464,855
7,860,650
7,860,650
\ 161,789,971
Net Asset
Value
\ 30,752,055
30,906,630
20,284,306
4,033,010
5,751,243
2,037,312
567,036
806,152
28,638,983
11,505,395
11,505,394
11,505,411
11,485,277
7,888,433
7,888,433
\ 185,555,070
Book
Value
\ 30,752,055
30,906,630
20,284,306
4,033,010
5,751,243
2,037,312
567,036
806,152
28,638,983
11,505,395
11,505,394
11,505,411
11,485,277
7,888,433
7,888,433
\185,555,070
Changes in goodwill for the years ended March 31, 2009 and 2008, are as follows:
Changes in equity-method investments for the years ended March 31, 2009 and 2008, are as follows:
2008
(in thousands of Korean won, except for the number of shares owned and percentage of ownership)
Hyundai Securities America Inc.
Hyundai Securities Asia Ltd.
Hyundai Securities Europe Ltd.
Hyundai Wise Asset Management
Co., Ltd.
Shibuya Sakuragaoka
Property TMK
Osaka Kitahama 3 undisclosed
association
Core-clean tech Venture
investment 1 association
Core-clean tech Venture
investment 2 association
Percentage ofOwnership
100
100
100
33
100
74
26
26
Number of
Shares OwnedInvestee
220
10,000,000
11,000,000
659,997
-
-
-
-
Acquisition
Cost
\ 32,735,839
8,918,826
19,130,104
3,827,983
2,969,073
1,419,326
354,000
582,000
\69,937,151
Net Asset
Value
\ 22,807,915
22,824,809
15,949,397
4,869,021
3,772,057
1,440,288
354,000
582,000
\ 72,599,487
Book
Value
\ 22,807,915
22,824,809
15,949,397
4,910,182
3,772,057
1,440,288
354,000
582,000
\ 72,640,648
2009 2008
(in thousands of Korean won)
Hyundai Wise Asset
Management Co., Ltd.
EndingBalance
\ -
Amortization
\ (41,161)
Beginning
Balance
\ 41,161
Beginning
Balance
\ 82,322
Amortization
\ (41,161)
Ending
Balance
\ 41,161
ANNUALREPORT 2008 | 69
70 | HYUNDAI SECURITIES
2009
(in thousands of Korean won)
Hyundai Securities
America Inc.1
Hyundai Securities
Asia Ltd.1,3
Hyundai Securities
Europe Ltd.1
Hyundai Wise Asset
Management Co.,Ltd.1
Shibuya Sakuragaoka
Property TMK 2
Osaka Kitahama 3
undisclosed association 2
Core-clean tech Venture
investment 1 association
Core-clean tech Venture
investment 2 association 2
Investment Opportunity
Limited2
Hyundai Asset Management
Co.,Ltd.
Korea Pacific No.08 Ship
Investment Co., Ltd.2
Korea Pacific No.09 Ship
Investment Co., Ltd.2
Korea Pacific No.10 Ship
Investment Co., Ltd.2
Korea Pacific No.11 Ship
Investment Co., Ltd.2
Korea Pacific No.12 Ship
Investment Co., Ltd.2
Korea Pacific No.13 Ship
Investment Co., Ltd.2
Gain(loss)on
Valuation
\ (833,855)
499,997
(904,993)
235,352
359,459
-
-
(14,964)
(17,743)
(1,356,373)
298,550
298,550
225,364
204,096
204,683
204,683
\ (597,194)
Acquisition
\ -
-
-
-
-
-
-
-
626,100
30,000,000
11,464,855
11,464,855
11,464,855
11,464,855
7,860,650
7,860,650
\ 92,206,820
Beginning
BalanceInvestee
\ 22,807,915
22,824,809
15,949,397
4,910,182
3,772,057
1,440,288
354,000
582,000
-
-
-
-
-
-
-
-
\ 72,640,648
Accumulated othercomprehensive
income
\ 8,777,995
7,581,824
5,239,902
(782,525)
1,619,727
597,024
-
-
197,795
(4,644)
10,739
10,738
20,135
-
7,362
7,362
\ 23,283,434
Dividend
\ -
-
-
(329,999)
-
-
-
-
-
-
(268,749)
(268,749)
(204,943)
(183,674)
(184,262)
(184,262)
\ (1,624,638)
Disposal
and Transfer
\ -
-
-
-
-
-
(354,000)
-
-
-
-
-
-
-
-
-
\(354,000)
Ending
Balance
\ 30,752,055
30,906,630
20,284,306
4,033,010
5,751,243
2,037,312
-
567,036
806,152
28,638,983
11,505,395
11,505,394
11,505,411
11,485,277
7,888,433
7,888,433
\ 185,555,070
1 As the audited reports were not available, the unaudited financial statements of subsidiaries as of and for the year
ended March 31, 2009, were used in applying the equity method of accounting.
2 The equity method of accounting is applied to the most recent audited financial statements as the balance sheet
date is not the same.
3 The Company adjusted Hyundai Securities Asia Ltd.’s financial statements since there are differences in
generally accepted accounting principles between Korea and Hong Kong.
2008
(in thousands of Korean won)
Hyundai Securities America
Inc.
Hyundai Securities Asia Ltd.
Hyundai Securities Europe
Ltd.
Hyundai Wise Asset
Management Co.,Ltd.
Hyundai Research Institute
Shibuya Sakuragaoka
Property TMK
Osaka Kitahama 3
undisclosed association
Core-clean tech Venture
investment 1 association
Core-clean tech Venture
investment 2 association
Gain(loss)on
Valuation
\ 1,431,808
1,626,709
308,394
719,440
(104,749)
(151,510)
-
-
-
\ 3,830,092
Acquisition
\ -
-
-
-
-
2,969,073
1,419,326
354,000
582,000
\ 5,324,399
Beginning
BalanceInvestee
\ 20,176,915
19,867,885
14,726,732
4,465,433
1,066,118
-
-
-
-
\ 60,303,083
Accumulated othercomprehensive
income
\ 1,199,192
1,330,215
914,271
55,308
-
954,494
20,962
-
-
\ 4,474,442
Dividend
\ -
-
-
(329,999)
-
-
-
-
-
\(329,999)
Disposal
and Transfer
\ -
-
-
-
(961,369)
-
-
-
-
\(961,369)
Ending
Balance
\ 22,807,915
22,824,809
15,949,397
4,910,182
-
3,772,057
1,440,288
354,000
582,000
\ 72,640,648
ANNUALREPORT 2008 | 71
8. Loans and other Receivables
Loans and receivables as of March 31, 2009 and 2008, by risk classification and percentages of loss applied in order to
determine the allowance for doubtful accounts are as follows:
9. Property and Equipment
Property and equipment as of March 31, 2009 and 2008, consist of the following:
Changes in property and equipment for the years ended March 31, 2009 and 2008, are as follows:
72 | HYUNDAI SECURITIES
2009 2008
(in thousands of Korean won)
Buildings
Equipment
Other
Less: Accumulated depreciation
Land
\ 146,931,317
119,060,686
37,725,348
303,717,351
(151,043,950)
152,673,401
114,154,831
\ 266,828,232
\ 137,464,791
111,898,183
34,755,181
284,118,155
(140,274,995)
143,843,160
90,169,971
\ 234,013,131
Total
(in thousands of Korean won)
Beginning balance
Acquisition
Depreciation
Disposal
Reclassification
Foreign currency translation
Ending balance
\ 234,013,131
51,863,571
(18,886,840)
(177,014)
-
15,384
\ 266,828,232
Others
\ 11,113,174
5,846,038
(5,283,159)
(101,799)
-
6,073
\ 11,580,327
Equipment
\ 20,534,816
12,566,147
(10,147,339)
(75,215)
-
9,311
\ 22,887,720
Buildings
\ 112,195,1700
9,466,526
(3,456,342)
-
-
-
\ 118,205,3540
Land
2009
\ 90,169,971
23,984,860
-
-
-
-
\ 114,154,831
2009Classification 2008 Percentages of Loss
(in millions of Korean won)
Normal
Precautionary
Substandard
Doubtful
Estimated loss
\ 801,611
118
9,853
3,597
21,110
\ 836,289
\ 1,083,941
-
150
4,215
23,312
\ 1,111,618
over 0.5%
over 2%
over 20%
over 75%
100%
As of March 31, 2009, depreciable assets are insured against fire and other casualty losses for up to approximately
\149,396,502 thousand.
As of March 31, 2009, the value of the Company’s land, as determined by the local government in Korea for property
tax assessment purposes, is \143,544,856 thousand (2008: \125,659,483 thousand).
10. Intangible Assets
Changes in intangible assets for the years ended March 31, 2009 and 2008, are as follows:
The amortization expense of intangible assets is included under general and administrative expenses.
Total
(in thousands of Korean won)
Beginning balance
Acquisition
Amortization
Ending balance
\ 5,489,308
28,633,061
(3,241,938)
\ 30,880,431
Software
\ 3,812,540
7,515,188
(2,064,371)
\ 9,263,357
Development costs
\ 1,676,768
21,117,873
(1,177,567)
\ 21,617,074
2009
Total
(in thousands of Korean won)
Beginning balance
Acquisition
Amortization
Ending balance
\ 3,543,961
3,686,671
(1,741,324)
\ 5,489,308
Software
\ 2,315,056
2,797,763
(1,300,279)
\ 3,812,540
Development costs
\ 1,228,905
888,908
(441,045)
\ 1,676,768
2008
2008
(in thousands of Korean won)
Beginning balance
Acquisition
Depreciation
Disposal
Reclassification
Foreign currency
translation
Ending balance
Equipment
\ 17,180,237
10,776,005
(9,117,693)
(22,936)
1,713,811
5,392
\ 20,534,816
Buildings
\ 91,116,525
3,820,205
(3,165,778)
(4,458,337)
24,882,555
-
\ 112,195,1700
Land
\ 86,682,583
2,208,296
-
-
1,279,092
-
\ 90,169,971
Construction in
progress
\ 14,953,489
13,701,749
-
-
(28,655,238)
-
\ -
Others
\ 7,562,603
6,989,707
(4,032,315)
(190,051)
779,780
3,450
\ 11,113,174
Total
\ 217,495,437
37,495,962
(16,315,786)
(4,671,324)
-
8,842
\ 234,013,131
ANNUALREPORT 2008 | 73
74 | HYUNDAI SECURITIES
11. Short -Term Borrowings
Short-term borrowings as of March 31, 2009 and 2008, are as follows
As of March 31, 2009, trading securities amounting to \64,605 million are pledged as collaterals for the above short-
term borrowings (Note 4).
12. Deposits from customers
Deposits from customers as of March 31, 2009 and 2008, are as follows:
13. Debentures
Debentures as of March 31, 2009 and 2008, are as follows:
1 Publicly - offered debentures.
2008
(in thousands of Korean won)
Call money
Short-term borrowings
\ 314,000,000
91,214,175
\ 405,214,175
2009
\ 60,000,000
228,518,254
\ 288,518,254
2009
2.08
1.75 - 3.09
Annual Interest Rates (%)
2008
(in thousands of Korean won)
Customers’ deposits for brokerage
Customers’ deposits for futures and options trading
Customers’ deposits for subscriptions
Customers’ deposits for savings
Customers’ deposits for Repo
Customers’ deposits for beneficiary
Other
\ 923,041,592
142,030,075
90,750
11,873,403
66,702
10,294,296
1,387,742
\ 1,088,784,560
2009
\ 1,258,853,010
119,323,010
13,186,985
10,545,891
66,698
9,061,053
1,823,124
\ 1,412,859,771
2008
(in thousands of Korean won)
26th 1
27th 1
\ 200,000,000
1,000,000
201,000,000
(236,569)
\ 200,763,431
2009Series
March 6, 2010
Jan. 8, 2011
Due date
5.23
7.22
Less : Discount
Annual Interest Rates (%) 2009
\ 200,000,000
1,000,000
201,000,000
(124,710)
\ 200,875,290
14. Accrued Severance Benefits
Changes in accrued severance benefits for the years ended March 31, 2009 and 2008, are as follows:
15. Commitments and Contingencies
The Company has entered into the following agreements with several banks as of March 31, 2009:
(1) The maximum limit is the amount of the deposits segregated per regulations.
The Company has been named as a defendant and a plaintiff in various legal actions arising from the normal course of
business. As of March 31, 2009, the aggregate amounts of claims as the plaintiff and the defendant amounted to
approximately \19,545 million in two cases and \55,184 million in nine cases, respectively, including cases
mentioned below. The ultimate result cannot be presently estimated.
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
2008
(in thousands of Korean won)
Balance at the beginning of the year
Provision for severance benefits
Actual severance payments
Less : Cumulative deposits to the
National Pension Fund
Severance insurance deposits
Balance at the end of the year
\ 55,433,502
17,727,442
(5,547,330)
67,613,614
(153,217)
(38,406,416)
\ 29,053,981
2009
\ 67,613,614
24,004,312
(11,347,642)
80,270,284
(142,236)
(45,306,387)
\ 34,821,661
Maximum Limit
(in millions of Korean won)
Bank overdraft agreements
Working capital borrowings
Short-term finance of borrowings
Short-term note trading at a discount
Margin finance borrowings
Bond dealer borrowings
General capital borrowings
\ 330,000
(1)
\ 100,000
(1)
\ 1,000,000
\ 696,767
\ 100,000
Bank
Hana Bank and other banks
Korea Securities Finance Corporation
Woori Bank
Korea Securities Finance Corporation
Korea Securities Finance Corporation
Korea Securities Finance Corporation
Woori Bank
ANNUALREPORT 2008 | 75
76 | HYUNDAI SECURITIES
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 W247,864 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 \48,770 million on December 30, 2004. This case is still
pending. The ultimate resolution of this case cannot presently be estimated.
On May 13, 1999, the Company brokered the purchase of Tong Yang Investment Bank (TYIB) of Seneca Funding I’s
US$50,000,000 Class A notes being sold by Pain Webber-US. The Company paid US$ 7.5 million in cash with the
balance of US$ 42.5 million on credit. Relative to this, the TYIB gave to Paine-Webber Korea Data Systems Co.,Ltd.
(“KDS”) bonds of US$10 million as collateral. On November 30, 2000, Paine-Webber required the Company to pay the
balance. In turn, the Company tried to collect the said balance from TYIB, which then refused to pay. Instead, the
Company paid Paine-Webber US$10 million and received the collateralized KDS bonds in the process. TYIB sued the
Company on March 17, 2003, for the losses incurred regarding the temporary seizure of the KDS bonds.
With regard to the said litigation, the Seoul Southern District Court ruled on October 7, 2004, that the Company had to
compensate \3,920 million and the Seoul High Court ruled that the Company had to compensate \2,281 million
additionally on May 2, 2007, the Company and TYIB appealed against the decision of the Seoul High Court and this case
is still pending at the Supreme Court.
The Company recorded the provisional payment of \6,201 million as expenses before the previous year. As of March
31, 2009, the ultimate result cannot presently be estimated.
Securities borrowings as of March 31, 2009, are as follows:
As of March 31,2009, trading securities are pledged as collateral for the above securities borrowings (Note 4).
With regard to the beneficiary certificate sold to customers, the Company has an agreement to reimburse certain
portions of losses from the dissolution of Hyundai Securitization Specialty Co.,Ltd. In this regard, the Company
recorded other accounts payable amounting to \19,775 million as of March 31, 2009, and recorded \707 million as
expenses for the year ended March 31, 2009.
Amounts
(in thousands of Korean won)
KT&G Corporation
Industrial Bank of Korea
KCC Corporation
Others
\ 47,563
26,441
23,595
129,397
\ 226,996
Bank
Korea Securities Depository
Korea Securities Depository
Korea Securities Depository
Korea Securities Depository
The Company leases vehicles under operating leases. Minimum lease payments schedule are as follows:
As of March 31, 2009, Seoul Guarantee Insurance Co., Ltd. has provided guarantees on the Company’s deposit
requirements to court for rulings of provisional attachment amounting to \404 million.
16. Retained Earnings
Retained earnings as of March 31, 2009 and 2008, consist of the following:
1 The Commercial Code of the Republic of Korea requires the Company to appropriate, as a legal reserve, an
amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued capital
stock. The reserve is not available for the payment of cash dividends, but may be transferred to capital stock, or
used to reduce accumulated deficit, if any with the resolution of the Company’s shareholders.
2 In accordance with Electronic Financial Transactions Act and Regulation on Supervision of Electronic Financial
Activities, the Company must have insurance or a mutual aid association and accumulate reserve to compensate
losses resulting from electronic transactions.
3 The Company appropriates a certain portion of earnings, pursuant to a shareholder resolution, as a voluntary
reserve. This reserve may be reversed and transferred to unappropriated retained earnings through a resolution
of shareholders, and may be distributed after its reversal.
2009
(in thousands of Korean won)
Within 1 year
1 - 5 years
\ 134,880
190,066
\ 324,946
2008
(in thousands of Korean won)
Appropriated
Legal reserve 1
Reserve for loss on electronic financial transactions 2
Reserve for loss on futures transactions
Voluntary reserve 3
Unappropriated
\ 8,744,930
-
48,636
326,643,543
335,437,109
186,747,436
\ 522,184,545
2009
\ 16,178,162
500,000
-
431,174,062
447,852,224
149,189,223
\ 597,041,447
ANNUALREPORT 2008 | 77
78 | HYUNDAI SECURITIES
17. Capital Adjustments and Accumulated Other Comprehensive Income and Expense
Capital adjustments, and accumulated other comprehensive income and expense as of March 31, 2009 and 2008, are
as follows:
The Company holds 8,215,870 shares of its common stock as of March 31, 2009, and intends to sell the shares in the
near future.
18. Dividends
Details of dividends declared for the years ended March 31, 2009 and 2008, are as follows:
2008
(in thousands of Korean won)
Capital adjustments
Treasury stock
Accumulated Other Comprehensive Income and expense
Translation of foreign currency financial statements
Unrealized gain on available-for-sale securities
Unrealized loss on available-for-sale securities
Accumulated comprehensive income of equity method investees
Accumulated comprehensive expense of equity method investees
\ (30,279,532)
3,297,925
84,036,409
(887,925)
588,991
(6,136,368)
\ 80,899,032
2009
\ (68,161,137)
5,988,333
47,886,896
(6,185,957)
16,945,038
(488,315)
\ 64,145,995
2008
(in Korean won)
Number of shares eligible for dividend
Dividend amount
Net income
Dividend payout ratio
Dividend ratio
Dividend yield ratio
165,182,936 shares
\ 74,332,321,200
\ 186,747,435,648
39.80%
9.00%
2.91%
2009
161,784,130 shares
\ 40,446,021,000
\ 149,189,223,295
27.11%
5.00%
2.19%
19. General and Administrative Expenses
General and administrative expenses for the years ended March 31, 2009 and 2008, are as follows:
20. Income Taxes
Income tax expense for the years ended March 31, 2009 and 2008, consists of the following:
2008
(in thousands of Korean won)
Wages and salaries
Employee fringe benefits
Severance benefits
Advertising expense
Commision expense
Depreciation
EDPS expenses
Rents
Taxes and dues
Entertainment expense
Research expense
Amortization
Training
Business consignment commission
Others
\ 243,820,754
47,727,361
17,727,442
29,232,271
17,853,046
16,315,786
15,604,003
11,731,336
11,767,036
6,587,806
1,085,305
1,741,324
4,995,274
834,576
30,188,973
\ 457,212,293
2009
\ 162,824,032
52,486,783
24,004,312
22,795,931
19,382,227
18,886,840
15,453,698
14,720,434
11,879,799
5,317,374
3,308,196
3,241,938
3,089,055
829,265
28,080,456
\ 386,300,340
2008
(in thousands of Korean won)
Current income taxes
Deferred income taxes due to temporary differences
Deferred income taxes due to tax loss carry forwards
Deferred income taxes due to tax credits
Deferred income taxes allocated directly to shareholders’ equity
Income tax expense
\ 45,522,082
54,934,557
-
-
(30,346,167)
\ 70,110,472
2009
\ -
52,614,143
(13,397,932)
(4,900,589)
19,200,172
\ 53,515,794
ANNUALREPORT 2008 | 79
80 | HYUNDAI SECURITIES
Deferred income taxes allocated directly to the shareholders’ equity are as follows:
Reconciliation of net income before tax and income tax expense:
Changes in temporary differences and deferred tax assets (liabilities) for the year ended March 31, 2009, are as
follows:
2008
(in thousands of Korean won)
Gain on valuation of available-for-sale securities
Loss on valuation of available-for-sale securities
Accumulated comprehensive income of equity method investees
Accumulated comprehensive expense of equity method investees
Overseas operation translation credit
\ (30,638,297)
336,799
-
(44,669)
-
\ (30,346,167)
2009
\ 18,369,318
1,407,958
(417,911)
181,090
(340,283)
\ 19,200,172
2008
(in thousands of Korean won)
Net income before tax
Income tax based on statutory rate
Adjustments
Tax credit
Effect of tax rate changes
Temporary difference not recognized as deferred tax assets(liabilities)
Others
Income tax expense
Effective tax rate (Income tax expense over net income before tax)
\ 256,857,908
\ 70,622,725
-
-
(1,159,195)
646,942
\ 70,110,472
27.30%
2009
\ 202,705,018
\ 55,713,080
(4,900,589)
2,540,534
415,551
(252,782)
\ 53,515,794
26.40%
Temporary differences Deferred tax assets(liabilities)
(in millions of Korean won)
Tax expense
Accrued severance benefits
Allowance for bad debts
Available-for-sale securities
Trading securities
Dividends
(specific overseas company)
Structured securities sold
EndingBalance
\ 10,741
2,150
56,671
(31,196)
11,987
(762,311)
Increase
(decrease)
\ 3,043
927
9,711
(36,135)
-
(465,742)
Beginning
Balance
\ 7,698
1,223
46,960
4,939
11,987
(296,569)
Beginning
Balance
\ 2,117
336
12,914
1,358
3,296
(81,557)
Increase
(decrease)
\ 246
184
(446)
(9,018)
(659)
(102,922)
Ending
Balance
\ 2,363
520
12,468
(7,660)
2,637
(184,479)
Temporary differences Deferred tax assets(liabilities)
(in millions of Korean won)
Accrued expenses
Majority shareholder allotment
Other extraordinary losses
Other non-operating expenses
Employee welfare fund
OTC derivatives
Structured securities
Accrued income
Commision (local subsidiary)
Equity-method investments 1
Advanced depreciation provisions 1
Others
Capital Adjustment
Accumulated comprehensive
income of equity method
investees 1
Accumulated comprehensive
expense of equity method
investees 1
Unrealized gain on available-
for-sale securities
Unrealized loss on
available-for-sale securities
Overseas operation translation
credit
Tax loss carryforwards
Total
Tax credit
Deferred tax assets(liabilities)
EndingBalance
\ 5,109
-
5,352
11,078
2,950
216,739
445,042
(19,433)
1,402
(5,353)
(16,983)
(5,543)
(71,598)
(17,408)
669
(61,393)
7,931
(1,547)
(71,748)
55,363
\ (87,983)
Increase
(decrease)
\ (3,351)
(37,362)
(99,172)
(1,800)
(850)
189,112
174,517
18,293
-
2,222
-
(10,072)
(256,659)
(16,774)
(5,467)
54,519
6,706
(1,547)
37,437
55,363
\ (163,859)
Beginning
Balance
\ 8,460
37,362
104,524
12,878
3,800
27,627
270,525
(37,726)
1,402
(7,575)
(16,983)
4,529
185,061
(634)
6,136
(115,912)
1,225
-
(109,185)
-
\ 75,876
Beginning
Balance
\ 2,327
10,274
28,744
3,542
1,045
7,598
74,395
(10,375)
385
(177)
-
1,246
57,468
(45)
-
(31,876)
337
-
(31,584)
-
25,884
-
\ 25,884
Increase
(decrease)
\ (1,203)
(10,274)
(27,567)
(1,105)
(331)
44,853
33,305
5,672
(77)
109
-
(2,581)
(71,814)
(418)
181
18,369
1,408
(340)
19,200
13,398
(39,216)
4,901
\ (34,315)
Ending
Balance
\ 1,124
-
1,177
2,437
714
52,451
107,700
(4,703)
308
(68)
-
(1,335)
(14,346)
(463)
181
(13,507)
1,745
(340)
(12,384)
13,398
(13,332)
4,901
\ (8,431)
ANNUALREPORT 2008 | 81
82 | HYUNDAI SECURITIES
1 The Company did not recognize the deferred tax assets and liabilities since it is not certain that these can be
realized.
The Company recognized deferred tax assets for all deductible temporary differences, except for the items (1)
above as of March 31, 2009, as it is probable that taxable profit and taxable temporary difference will be available
against which deductible temporary differences can be utilized.
Deferred tax assets and liabilities as of March 31, 2009 and 2008, are as follows:
The tax effect of cumulative temporary difference was calculated based on future tax rate of the fiscal year when
temporary differences are expected to reverse. The 24.2% and 22% tax rates were used for temporary difference
expected to reverse in year 2009 and thereafter, respectively. As a result, deferred tax liabilities were lower by \555
million as compared to the amount using the current tax rate of 27.5%.
21. Earnings Per Share
Basic earnings per share is computed by dividing net income attributable to common stock by the weighted average
number of common shares outstanding during the year.
Basic earnings per share for the years ended March 31, 2009 and 2008, is calculated as follows
Diluted earnings per share is the same as basic earnings per share since there are no diluted securities outstanding
as of March 31, 2009 and 2008.
2008
(in thousands of Korean won)
Deferred tax assets
Deferred tax liabilities
\ 175,795,864
149,911,471
\ 25,884,393
2009
\ 225,471,321
233,902,552
\ (8,431,231)
(in Korean won)
2009 2008
Net income attributable to common stock
Weighted average number of common stock outstanding
Basic earnings per share
\ 186,747,435,648
146,846,424
\ 1,272
\ 149,189,223,295
163,445,808
\ 913
22. Comprehensive Income
Comprehensive income for the years ended March 31, 2009 and 2008, are as follows:
23. Related Party Transactions
The Company’s subsidiaries are Hyundai Securities Asia Ltd., Hyundai Securities America Inc. and Hyundai Securities
Europe Ltd., Hyundai Asset Management Co.,Ltd., as of March 31, 2009 and 2008.
Significant transactions which occurred in the normal course of business with related companies for the years ended
March 31, 2009 and 2008, and the related account balances outstanding as March 31, 2009 and 2008, are summarized
as follows:
(in thousands of Korean won)
2009 2008
Net income
Other comprehensive income
Gain on valuation of available-for-sale securities,
net of tax of \18,369 million (2008: \30,638 million)
Loss on valuation of available-for-sale securities,
net of tax of \1,408 million (2008: \337 million)
Accumulated comprehensive income of equity method investees,
net of tax of \(418) million (2008: \45 million)
Accumulated comprehensive expense of equity method investees,
net of tax of \181 million
Translation of foreign currency financial statements,
net of tax of \(340) million
Comprehensive income
\ 186,747,436
80,773,692
(887,925)
481,866
3,443,678
1,790,307
\ 272,349,054
\ 149,189,223
(36,149,512)
(5,298,032)
16,356,046
5,648,053
2,690,407
\ 132,436,185
(in thousands of Korean won)
Subsidiaries
Equity-method companies
Other companies
\ 986,531
-
7,409,146
\ 8,395,677
\ -
-
11,480,314
\ 11,480,314
\ 7,551,620
-
18,875,809
\ 26,427,429
2009
Income Expenses Receivables Payables
\ -
596,172
1,385,247
\ 1,981,419
(in thousands of Korean won)
Subsidiaries
Equity-method companies
Other companies
\ 670,000
-
-
\ 670,000
\ -
-
-
\ -
\ 11,455,356
-
17,196,849
\ 28,652,205
2008
Income Expenses Receivables Payables
\ -
-
-
\ -
ANNUALREPORT 2008 | 83
84 | HYUNDAI SECURITIES
The Company purchased property and equipment, and intangible assets amounting to \5,617,687 thousand (2008:
\14,830,216 thousand) from other related companies during the year ended March 31, 2009.
For the year ended March 31, 2009, the Company recognized expenses for short-term benefits of \7,833 million and
severance benefits of \1,009 million as key management compensation. Key management consists of executive
officers who have the authority and responsibility in the planning, directing and controlling of the Company’s
operations.
24. Supplemental Cash Flow Information
Significant transactions not affecting cash flows for the years ended March 31, 2009 and 2008, are as follows:
25. Supplementary Information for Computation of Value Added
The accounts and amounts, included under general and administrative expenses, needed for computation of value
added for the years ended March 31, 2009 and 2008, are as follows:
(in thousands of Korean won)
2009 2008
Increase in unrealized loss on available-for-sale securities
Increase(decrease) in unrealized gain on available-for-sale securities
Decrease in accumulated comprehensive expense of equity method investees
Increase in accumulated comprehensive income of equity method investees
Reclassification of trading securities to available-for-sale securities
Reclassification of construction in-progress to property and equipment
Retirement of troubled loans and others
\ 887,925
80,773,692
3,443,678
481,866
-
28,655,238
270,793
\ 5,298,032
(36,149,512)
5,648,053
16,356,046
94,199,707
-
2,298,071
(in thousands of Korean won)
2009 2008
Wages and salaries
Severance benefits
Employee fringe benefits
Rents
Depreciation
Amortization
Taxes and dues
\ 243,820,754
17,727,442
47,727,361
11,731,336
16,315,786
1,741,324
11,767,036
\ 162,824,032
24,004,312
52,486,783
14,720,434
18,886,840
3,241,938
11,879,799
26. Securities in Custody
As of March 31, 2009 and 2008, the securities in custody which are owned by customers are as follows:
27. Approval of financial statements
The March 31, 2009 financial statements of the Company were approved by the Board of Directors on May 8, 2009.
(in millions of Korean won)
2009 2008
Trustor securities in custody
Saver securities in custody
Beneficiary securities in custody
\ 50,533,849
130,783
5,109,769
\ 55,774,401
\ 36,082,191
80,041
5,345,871
\ 41,508,103
ANNUALREPORT 2008 | 85
Organization Structure
Auditing Dept.
AUDIT
ComplianceDept.
COMPLIANCE
Legal AffairsDept.
Risk ReviewDept.Risk ReviewDept.
RISK MANAGEMENT
RiskManagementDept.
Public RelationsDept.
PUBLICRELATIONS
&TRUST
Trust Dept.
Strategy &Planning Dept.
STRATEGY &PLANNING
FinancialManagementDept.
Settlement Dept.
HumanResources Dept.
HR DevelopmentDept.
General AffairsDept.
OperationsDevelopmentDept.
StrategicPlanning
I T PlanningDept.
Cyber SystemsDept.
SystemsManagementDept.
OperationsSystems Dept.
Equity DealingDept.
Fixed IncomeDealing Dept.
Fixed IncomeDept.
PrincipalInvestmentDept.
DerivativesTrading Dept.
StructuredProducts Dept.
Futures &Options Dept.
SP PlanningTeam
InformationSystems Dept.
Next GenerationSystems Dept.
HUMANRESOURCES &
GENERAL AFFAIRS
MANAGEMENT TRADING & DERIVATIVES
PRESIDENT & CEO
CHAIRMAN
BOARD OF DIRECTORS
GENERAL MEETING OF SHAREHOLDERS
INFORMATIONTECHNOLOGY
AUDIT COMMITTEE
NOMINATING COMMITTEE FOR NON-EMPLOYEE COMMITTEE
PERSONNEL COMMITTEE
RISK MANAGEMENT COMMITTEE
COMMITMENTS COMMITTEE
TRADING &PRINCIPAL
INVESTMENTDERIVATIVES
86 | HYUNDAI SECURITIES
IPO Dept.
Real EstateFinance Dept.
CoporateFinance Dept. 1
CoporateFinance Dept. 2
GlobalSecurities Dept.
Global Business Dept.
M&A Dept.
HyundaiSecurities(Europe) Inc.
HyundaiSecurities(America) Inc.
HyundaiSecurities(Asia) Inc.
HyundaiSecurities Tokyo Branch
Equity AnalysisDept.
EconomicsAnalysis Dept.
QuantitativeAnalysis Dept.
ResearchSupport Team
InstitutionalSeucirites Dept. 1
InstitutionalSecurities Dept. 2
FinancialProducts Dept.
RP ConsultingDept.
RP ConsultingDept.
RP OperationsDept.
Inst. SecuritiesPlanning Team
CustomerMarketing Dept.
WM PlanningDept.
e-BusinessDept.
Retail PlanningDept.
HDS ShanghaiRep. Office
CustomerSatisfactionCenter
FinancialProductsPlanning Dept.
Customer AssetMangementDept.
WM ConsultingCenter
InvestmentAnalysis Dept.
HDS HochiminhRep. Office
HDS Almaty Rep.Office
RISK MANAGEMENT COUNCIL
DISCIPLINARY COMMITTEE
INVESTMENT BANKING INSTITUTIONAL SECURITIES RETAIL
IPO/M&A/REAL ESTATE
COPORATEFINANCE
GLOBAL INSTITUTIONAL SECURITIES
RESEARCHCENTER
DOMESTICINSTITUTIONAL
SECURITIES
RETIREMENTPENSION
RETAILPLANNING
8 DIVISIONS &141 BRANCHES
RETAILMANAGEMENT
ANNUALREPORT 2008 | 87
Corporate headquarters
#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
141 domestics and 7 overseas
Number of Employees
2,505 (as of March 31, 2009)
Stock Issued
170,000,000 (Common stock)
Shareholders' equity
2,279 billion won
Major shareholders
Hyundai Merchant Marine 23.17%
Shareholders’ Information
Hyundai Merchant Marine 23.17%
Foreign investors 10.13%
(as of March, 2009)
Employees Stock 3.66%
Treasury Stock 4.83%
Others 58.21%
Total 100.00%
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]