HYUNDAI SECURITIES CO. · 2004-10-25 · securities enjoyed a growing brokerage volume, ending the year with a handsome profit. Hyundai Securities also benefited from the favorable

HYUNDAI SECURITIES CO. 1

HYUNDAI SECURITIES CO.#34-4, Youido-dong, Yongdungpo-ku, Seoul, Korea, 150-735

Tel: 822-768-0114, 822-783-6511 Fax: 822-783-9746http://www.stockmarket.co.kr

Annual Report 2002

To expand its leadership in securities service to

Investment Banking Services“”

2002 ANNUAL REPORT2

To expand its leadership in securities service to

Investment banking services“”

In all or our endeavors, Hyundai is guided by one focus-delivering the best financial solutions, customized to each client’s needs, that results in a

distinctive advantage in the marketplace. We believe that we have the talent, products and resources to achieve this. Our primary management focus is

on expanding our existing business base while continuing to invest in new technology and revenue-generating lines of business. Our ultimate goal is to

become the leader in profitability, credibility, capability, and reputation, enjoying sustained profitable growth. The true driving force for this is our

corporate culture: valuing the sum of what we believe as individuals and how we work together as a team. It is the way we trust our clients, shareholders,

employees, neighbors and the public in general.

VISION


CONTENTS

2 Profile 3 Financial Highlights 4 Message from the Management6 Leader in Market Changes 14 Review of Domestic Operation 18 Review of International Operation

21 Financial Report 42 Organization Chart 43 Board of Directors44 Shareholder’s Information

2002 ANNUAL REPORT2

P r o f i l e

Welcome to Hyundai Securities. Hyundai Securities is an undisputed leader in international operations. The Company has the industry’s most respectedinternational business unit and the most extensive overseas network-five business bases located in the world’s key financial hubs.In 2000, we ushered in the era of indirect investment and individual investment by launching the Buy Korea Fund. This innovativeinvestment product was so successful that it played a significant role in helping the Korean economy overcome the worst financialcrisis in its history. We are second in sales of mutual funds and a rising star in underwriting. As a co-lead manager in the KoreaTelecom privatization project, we were responsible for 48% of total sales. We were the first to expand into China, having formed ajoint venture with a leading state-run investment bank. With a singular focus to improve services in dealing, brokerage,underwriting, and investment trust, we aim to fulfil the needs of today’s global investors.


In Millions of Korean Won In Thousands of U.S. Dollars

Financial Highlights

Operating Income Net Income Total Stockholders’ Equity(Millions of Won) (Millions of Won) (Millions of Won)

2002. 3 2001. 3 2002. 3 2001. 3

Results of OperationsOperating Revenue ￦ 1,072,721 ￦ 1,498,982 $ 808,748 $ 1,128,753Operating Expenses 924,518 1,529,100 697,012 1,151,432Operating Income 148,205 (30,118) 111,734 (22,679)Non-operating income (loss) (14,582) (321,451) (10,993) (242,057)Ordinary Income (loss) 133,623 (351,569) 100,741 (264,736)Extraordinary Income (loss) 96,283 (331) 72,590 (249)Income taxes 18,143 (105,137) 13,678 (79,170)Net Income (loss) 19,197 (246,763) 14,473 (185,815)

Financial PositionTotal Assets 3,918,132 3,502,241 2,953,960 2,637,230Total Liabilities 2,635,646 2,197,681 1,987,068 1,654,881Total Stockholders’ Equity 1,282,486 1,304,560 966,892 982,349

> > Key Financial Data for the recent 2 years

FY ‘99 FY ‘00 FY ‘01 FY ‘99 FY ‘00 FY ‘01 FY ‘99 FY ‘00 FY ‘01

456,192

30,118

148,205

305,229

246,763

19,197

1,559,1281,304,560 1,282,486

* Korean Won amounts are translated into US Dollars for the convenience of the reader at the exchange rates of ￦ 1,326.4 and ￦ 1,328 to US$ 1.00, the prevailing rates on March 31, 2002 and 2001, respectively.

2002 ANNUAL REPORT4

The year 2001 was a momentous time for the Korean economy.During the first year of the new millennium, the economy,having successful ly overcome the f inancial crisis ofunprecedented magnitude, fully established a firm foundationfor another great leap forward.

The securities industry, in particular, made noticeable progressin quality as well as in quantity. Along with the economicrecovery, stock trading volume soared, signaling that themarket index could re-enter the 1,000 area. With the opening ofan overnight stock market and a single stock options market,the market environment improved signif icantly and willcontinue to do so for the foreseeable future.

In the midst of improving business climates, many Koreansecurities enjoyed a growing brokerage volume, ending theyear with a handsome profit.

Hyundai Securities also benefited from the favorable marketenvironment, recording a ￦19.2 bil lion net income, anencouraging turnaround compared to the ￦246.8 billion loss of

Message from

President & CEO Gyu Wook Cho

The profit performance should be

credited to more than the

business climate. During the year,

we continuously strengthened

sales, streamlined the

organization, and explored many

means to bring greater efficiency

to management.

THE MANAGEMENT

“

”


the previous year. The profit performance, however, should be credited to more than the business climate.During the year, we continuously strengthened sales, streamlined the organization, and explored many means tobring greater efficiency to management.

The net income performance could have been greater had we not been burdened by a ￦207.0 billionextraordinary expense. Included in the sum is a ￦90.5 billion valuation loss from the securities that were part ofthe CBO funds we either have sold or still possess as of the end of fiscal 2001. Another such expense is the $96.3billion we have paid Hyundai Heavy Industries in accordance with the court order on the CIBC suit. Consideringthese beyond-control expenses, our fiscal 2001 performance was hardly disappointing. Moreover, as we haveappealed the court-ordered payment, many industry experts see our chances of getting back some or all of thepayment are very high.

In 2002, the Korean stock market will continue to be an arena of dynamic movements. Specifically, bank-centered holding companies will accelerate their entry into the securities industry, while existing securitiesfirms will be forced to step up their merger efforts in pursuit of market survival. In anticipation of suchchallenging developments, we plan to carry out the following measures as steps toward our long-term goal ofbecoming a world-class investment bank:

First, as a way to enhance profitability, we will be more aggressive in our sales efforts. To reach 20% in returnon assets, we will bolster our stock, futures and options, and mutual funds operations.

Second, for stronger sales ability and higher business efficiency, we will double our efforts to develop a marketstrategy that sets us apart from our peers and to strengthens our online business infrastructure.

Third, we will continue our focus on cutting costs and managing risks. In an effort to prepare for the plannedderivatives trading business, we will devote management resources to upgrading our risk management systemsto world standards.

Fourth, to upgrade our corporate image to that of a world-class institution, we will mobilize all managementresources available. With a bigger budget and increased staff, we will make efforts to participate in as manyinvestor relations events as possible. A better corporate image goes a long way in bringing rewards, including amotivated workforce.

By making all-out efforts to fully support these measures, we will bring Hyundai Securities a big step closer torealizing its goal of becoming a world-class investment bank. We look forward to your continued support as wellas sharing better business results the same time next year.

Thank you

Gyu Wook Cho President & CEO

2002 ANNUAL REPORT6

Hyundai Securities 4 8 . 3 9 %O t h e r s 5 1 . 6 1 %

P r iva t i z a t i o n

>

Sales of last goverment shares on KT privatization

Excellence in privatizing public firms

KT PrivatizationWhen the government announced its intention to sell the last of its KT shares, amounting to28.36% of total shares in 2002, response from business circles was less than encouraging. Mostindustry experts thought the project could not be completed successfully. The offeringstructure, which involved EB, were deemed too complicated; the stock market at the time wasdepressed; and large corporations, which were the prime target of sales, were toopreoccupied with keeping their investment strategy secret.

Some major securities houses, including Hyundai Securities, were chosen as joint leadmanagers. The project promised a lucrative payoff if done successfully, but it also entailed ahigh-risk condition: the joint lead managers were responsible for any shares unsold, albeit upto a certain portion. The Company took the challenge and mobilized all its sales skills andbusiness networks to fulfil its given assignment. The result was better than what experts hadexpected. The Company sold 48.39% of the shares put on sales, greatly outselling the runner-up. This performance was good enough not only for a sizable commission but also a heftybonus, as it met a condition that guaranteed an additional reward to whomever sold more thana third of the shares.

Moreover, the successful accomplishment of the Company’s role in the KT privatization projecthas brought additional benefits to the Company. First, it has vastly strengthened the Company’sposition in a lucrative industry that is certain to grow in the future. Having emerged as a shiningleader in privatization, the Company is expected by many to excel in this high fee-based

Hyundai Securities is the de facto leader in privatization. In step with the Korean government’s effort to privatize publicenterprises, the Company took full advantage of its extensive branch network and superior corporate sales ability. Inprivatizing Korea Telecom (KT), the largest privatization project in Korean history, the Company proved its sales prowess byselling the largest portion of government shares among the lead managers. This industry-leading performance has boostednot only the Company’s bottom line but also its momentum in growing into a full-fledged investment bank.


The Company will be more forthcomingin taking on other lucrative fee-based projects,

accumulating the expertise and know-how needed for becoming

a full-fledged investment bank in the process

“

”

H Y U N DAI SECURITIES CO.

business, and the government, buoyed by the KT success, is certain to push forward its bold-yet-controversialprivatization policy. Second, it has boosted the Company’s confidence in its ability and vision to grow into a world-classinvestment bank. The Company will be more forthcoming in taking on other lucrative fee-based projects, accumulatingthe expertise and know-how needed for becoming a full-fledged investment bank in the process.

KT&G ProjectIn 2001, the Korean government pared down its stake in KT&G, a tobacco and ginseng monopoly, by 20% through GDR and CB.In this privatization project, Hyundai Securities and foreign securities firms such as CSFB and UBS Warburg took part as jointlead managers. Thanks to the international powerhouses’ global reach and Hyundai’s local touch, the US$553.3 millionprivatization was carried out successfully, earning the citation of “Best Privatization Issue” in Asia from The Asset. Impressedby the sales performance of a relatively lesser-known Korean securities firm, this respected Hong Kong-based financial journalselected the Company for “The Asset Asian Awards 2002”. The coveted endorsement is based on opinions that the journalpolled from institutional investors, analysts and fund managers across the world.

KT&G is the nation’s sole manufacturer and leading distributor of tobacco products. It also distributes ginseng products.Because of its strong distribution network, industry experts see its dominant market position to continue for many yearsto come. Scheduled to fully privatized by 2002, this tobacco and ginseng monopoly is expected to improve its profitabilityin the near future.

Financial AdvisoryIn addition to privatization, the Company was active last year in financial advisory service as a way to achieve its visionof becoming an investment bank, as well as to expand its fee-based income source. In May, the Company secured afinancial advisory contract from a subsidiary of KEPCO, a state-run power monopoly. Under the contract, the Companyis to advise the subsidiary on funding and other financial matters. The subsidiary was spun off from KEPCO as part of theparent company’s privatization plan, and Hyundai Securities has been providing the subsidiary with business supportsince the spin-off stage. The contract with the subsidiary has allowed the Company to secure a position of advantage infinancial advisory, another growth sector.

2002 ANNUAL REPORT8

L o c a l i z a t i o nSuccessful Inroad to China

OverviewWith joining the World Trade Organization, China has emerged as the world’s most dynamic economy with

unlimited growth potential, including its stock market. The recent upsurge of stock price upon the opening of the

Shanghai B market to non-Chinese investors well reflects global investors’ pent-up interest in the Chinese market.

Hyundai Securities’ presence in China goes back many years. When Korea and most Asian nations were stricken

with an unprecedented financial crisis in late 1997, the Company maintained its presence in Shanghai while other

Korean securities firms pulled out in droves.

The Company’s continued presence despite management difficulties were seen as a display of strong commitment

to a country where true friendship is valued more than material contributions. The Shanghai office now prepares

for a full-fledged securities business by bolstering its market research capabilities and providing Korean investors

with daily and monthly market analyses.

Contract with CSITICIn May this year, Hyundai Securities signed, through its joint venture, an exclusive consulting contract with

CSITIC, a state-owned Chinese securities firm. Under this contract, the Company is to help the firm develop a

stock trading system. CSITIC is an investment/securities company that has the China Institute of Science as

its major shareholder. It has been anointed by the Chinese government as “Prime National Financial

Institution.” CSITIC became the Company’s strategic partner in 2000 when the two formed a joint venture

whose main business is cyber trading system development.

As non-Chinese securities firms are barred from establishing securities firms of any kind in China, the Company


Not only because it is the first of its kind in China, but also it demonstrates that the Company’s online trading knowledge

has played and will continue to play a major part in creating a new trading system for its market.

“

”

resorted to forming a cyber trading-related joint venture as the next best strategy to gain a viable foothold in the

rapidly expanding market. The joint venture firm hit a milestone in Chinese financial history in 2001 when it

completed the first-stage development of a trading system.

This development is significant not only because it is the first of its kind in China, but also because it demonstrates that

the Company’s cyber trading knowledge has played and will continue to play a major part in creating new trading

systems for the Chinese stock market. As the Chinese market is expected to be fully opened to foreigners in the near

future, the Company aims to expand its Shanghai-based foothold to 10 major cities including Beijing by 2005.

Other developmentsDuring 2001, the Company undertook many ways to enhance its relationships with its strategic partner,

CSITIC. One of them is an personnel exchange program. Two employees of CSITIC visited the Company for 75

days to observe the Company’s cyber trading system in operation and run a training system model.

The Company also sent groups of executive-level personnel to China on a three-day tour of the financial

market. A total of 209 deputy branch managers and executive officers will have participated in the tour

program by the end of this year.

Another development related to China was the opening of a website by the Company’s Shanghai office in May

2001. The new website, (http://hdsh.stockmarket.co.kr), offers the most up-to-date market information to Korean

investors interested in the Chinese stock market.


4 . 7

5 1 . 0

7 3 . 4

2002 ANNUAL REPORT10

S c r u t i n i z e dRisk-less with up-to-date services

YouFirst PlusThe Company developed YouFirst Plus in preparation for the derivatives market that was

created for individual investors in January 2002.

This program is state-of-the-art in many aspects: first, the program comes in three

different versions to better adapt to the user’s PC environment and trading habits; second,

it provides simulations based on future price fluctuation, shows real-time valuation

gain/loss, and offers a wide variety of settlement systems to better accommodate various

types of investment strategy; third, its main screen can be easily configured and designed

by the user; and fourth, it supports a personal financial management service that allows

the user to monitor and manage his/her bank, insurance and other financial accounts on

one screen.

FP DeskFP Desk is the asset management support system developed exclusively for financial

planners. Available at www.fpdesk.com, the system is more than the existing wrap

account service, which is limited to offering in-house products and securities-related

consulting. Based on an advanced personal finance management system, FP Desk has

> The growth of cyber trading has been phenomenal over the past few years in Korea. Online brokerage accounted for only 4.7% oftotal brokerage volume in January 1999, but by the end of fiscal 2001, the ratio soared as high as 73.4%. The convenience andreasonable commission rates of cyber trading can be credited for the explosive growth. Hyundai Securities has been an activepromoter of the revolutionary trading method. In addition to its own trading system, the Company has introduced “YouFirst Plus,” astate-of-the-art program designed for derivatives trading, and “FP Desk,” an advanced asset management support system.

FY’99 FY’00 FY’01

The industry’s online brokerage to total brokerage volume

(Trillion of Korea Won)


In addition to its own trading system, the Company has introduced “YouFirst Plus”,

a state-of-the-art program designed for derivatives trading, and “FP Desk”,

an advanced asset management support system.

“

”

various financial planning functions that allow financial planners to perform a more comprehensive asset

management service. Moreover, this system allows financial planners to efficiently evaluate a customer’s

financial needs that can rise throughout his/her lifetime and to accordingly set up appropriate investment

plans. The system is the first in the Korean securities industry to elevate personal asset management from

a simple game of yield rates to an art of wealth management.

OthersFour analysts of the Company were selected by a leading economic daily as “Best Analyst of the Second

Half, 2001” in five categories. Also, the Company’s research team was selected as “Best Research Team,”

and its corporate business team as “Best Corporate Business Team,” by the same daily. Another

development was the creation of a financial engineering team within the research center. The creation of

the new team was the Company’s response to the growing role of derivatives as an income source, an

explosive online trading volume of derivatives and the introduction of wrap accounts. Some of the team’s

responsibilities include development of scientific asset management models based on the portfolio theory,

assistance for development of derivatives-related systems and valuation of derivatives in preparation for

an OTC derivatives market to be opened in the near future.



Tu r n a r o u n dAsset soundness with efficient management

OverviewFiscal 2002 was a profitable year for Hyundai Securities. At the end of March 2002, the Company

recorded net income of ￦19.2 billion, an impressive turnaround compared with net loss of ￦2 4 6 . 8

billion the year before. Of course, a strong recovery of the stock market had a major impact on the

Company’s income performance, but during the year, the Company made strenuous efforts aimed at

improving profitability. Some of the efforts include reducing business expenses, downsizing the

organization and increasing sales.

The Company was stopped from turning in a better net income performance by a few factors. One is a

￦90.5 billion stock valuation loss from a write-off of such problem securities as Hynix and Hyundai

Petrochemicals, which were part of the Company’s beneficiary bond portfolio.

Another is a ￦96.3 billion extraordinary loss that occurred as a result of the first court hearing of the

suit involving Hyundai Heavy Industries. One bright side is that all or some of ￦96.3 billion

extraordinary loss could turn into a gain if and when the court judgment is overturned in the appellate

court, as most industry experts predict.

On the Hyundai Heavy Industries suit

In July 1997, the Company arranged sale of Hyundai Investment Trust Securities (HITS) stocks through

Hynix Semiconductors(Hyundai Electronics), and Canadian Imperial Bank of Commerce (CIBC). Hyundai

Heavy Industries (HHI) signed a contract with CIBC with respect to the purchase of the stocks in question.


At the end of March, 2002, the Company recorded net income of

￦19.2 billion, an impressive turnaround compared with net loss of

￦246.8 billion the year before.

“

”

As specified in the contract, in July 2000, HHI purchased 13 million HITS shares at a total price of

US$220,480,000 as a result of CIBC’s exercise of a put option. To recover the capital, HHI filed a suit

claiming compensation against Hynix Semiconductors on July 28, 2000.

The suit was heard by the court on January 25, 2002, and the judgment of the first hearing was that the

Company, together with the chip maker, should pay ￦171.8 billion in compensation. In response, the

Company appealed on February 15, 2002 and, as of the March 31, 2002, is waiting for a verdict. Following

the initial verdict, however, the Company paid ￦97.25 billion, which is 50% of the court-ordered amount, to

HHI, and recorded the paid amount as an extraordinary loss.

Other developmentsOf the Company’s total unsold beneficiary certificates valued at ￦391.1 billion as of the end of fiscal 2001,

Hynix and other troubled securities amounted to ￦181.0 billion.

A large portion of these securities already has been written off and accordingly recorded as loss. As for

the remaining portion, the Company will continue to pare it down.

Meanwhile, the CBO subordinate bonds that were included in the funds sold by the Company amounted to

￦227.5 billion as of the end of March 2002. To prepare for any loss that could arise from the CBO

subordinate bonds, the Company has provisioned a total of ￦26.1 billion, including the ￦17.1 billion

provisioned in the previous fiscal year. The Company will continue its effort to improve its balance sheet.



In the long run, the Company aims to wean itself from relying too much on brokerage commissions,

which are too closely subject to market shifts, by allocating increasing amounts of

management resources to financial product sale.

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S o u n d n e s sReview of Domestic Operations

Brokerage

Beneficiary Certificates

Underwriting

BrokerageFiscal 2001 was a dynamic year for the Korean brokerage industry. One prominent development was a drastic

change in market share: small and medium-sized securities companies in general advanced in market share, while

large firms saw theirs shrink proportionally. In steep competition against large firms, smaller firms found success by

aggressively cutting their commission rates. Another development was the emergence of discount brokers. Foreign

securities firms and Internet-based startups made strong inroads by slashing their rates. Even without the appealing

rate, these foreign firms had formidable advantages over domestic ones, as they enjoyed superior credibility as well

as name value. In addition, a number of investment trust companies expanded into securities trading, while some

healthier firms acquired or merged with struggling ones. Online trading also continued its rapid growth, exceeding

70% of total trading volume. The low commission rates of online trading, as well as a strong recovery of the stock

market, helped fuel the explosive growth.

The Company’s 2001 brokerage performance was short in quantity but long in quality. Because of the smaller

players’ aggressive sales campaigns, the Company’s overall stock turnover decreased to ￦177 trillion from ￦198.7

trillion during the course of the year, while

its market share fell to 8.84% from 9.80%.

Despite the decrease in stock turnover as

well as in market share, the Company

maintained its leading position in offline

brokerage, despite its industry’s highest

commission rate (0.237%). This fact alone

speaks volumes about the quality of its

brokerage service. Another contributing

factor is its industry’s largest branch

network.

Futures brokerage also contracted during

the year, shrinking to ￦49 trillion from

￦52 trillion in turnover. Commissions from this business decreased by a similar rate, to ￦14.5 billion from ￦15.1

billion. Options trading, however, soared seven-fold, to ￦7 trillion from ￦1 trillion, generating commission income

of ￦24.7 billion. This rise in turnover reflects institutional investors’ increasing attempts to hedge their positions


>0 . 6

1 . 0

7 . 0

(Trillion of Korean Won)

FY’99 FY’00 FY’01

Options traning volume


against falling stock prices. In addition, falling commission rates attracted the investors, as the Company slashed

its commission rates in step with the opening of the single stock options market.

A major highlight of the year in brokerage was the formation of a partnership with Hyundai Options, a first of its

kind in the Korean securities industry. The partnership allows Company customers to open accounts with Hyundai

Options through the Company’s 140-strong, nationwide branch network. Moreover, the partnership has expanded

the Company’s investment horizon beyond the options in Korea’s two stock markets to government bond futures,

U.S. dollar futures and options, CD interest rate futures and many more, thus rendering the Company more

comprehensive in asset management.

The Company plans to maintain its high-fee, high-value-added strategy, avoiding the rate war with smaller

companies. In the long run, the Company aims to wean itself from relying too much on brokerage commissions,

which are too closely subject to market shifts, by allocating an increasing amount of management resources to

financial product sale.

Beneficiary CertificatesThe fixed-income market, anticipating a steep rise in interest rates, continued declining through fiscal 2001.

Entering the new year, however, the market regained confidence on the strength of a recovering stock market.

Hyundai Securities was also affected by the fear of higher interest rates and the Hyundai Group’s liquidity crunch.

The volume of beneficiary certificates sold dropped from ￦10,260 trillion to ￦7,800 billion, along with market

share, which decreased to 4.79% from 6.79%. Despite the decrease, however, the Company maintained its

second-place position in market share. If the Company were to include Hyundai Investment Securities’ figure, as

in the case of Samsung Securities, the leader in market share, which merged with its affiliate in investment trust

business, the combined volume would exceed Samsung Securities’ volume. Along with falling volume, commission

income dropped to ￦84.1 billion from ￦130.5 billion. The shrinking commission rate was a contributing factor to

the drop in commission income.

Although the industry as a whole began to see its volume of beneficiary certificates bounce back after fiscal 2001,

the Company’s share remained uninspiring for a number of reasons. First, institutional investors withdrew their

fixed-income investments in droves, as their funds, which had been deposited a year ago as part of the

government’s market stabilization policy, reached the mandatory one-year maturity. Second, withdrawal by

institutional investors increased as a result of the poor performance of Joo Eun Investment Trust, the Company’s

main fund manager of fixed income. Joo Eun performed poorly in managing the Company’s fixed-income funds, as

its interest rate prediction proved wrong. Third, as interest rates went up, fixed-income products lost their allure.

The Company’s fiscal 2001 performance in fixed income went further in quality. The Company ranked first in selling

long-term securities savings funds, developed a fund management system to better manage trust assets and

improved asset quality by unloading low-liquidity beneficiary certificates. In addition, the Company started selling

mutual funds in June, in preparation for the open-end mutual fund market slated for March 2002.

The prospect for fixed-income business for fiscal 2002 looks bright, as a growing population of retirees is

increasingly turning to trust products as a way to hedge against low interest rates. To take full advantage of

such opportunity, the Company plans to bolster its sales infrastructure: a financial products division will be

newly establish and every branch will be outfitted with a financial products team. In addition, more incentives

will be made available to reward and encourage sales performance.

UnderwritingFiscal 2001 was an exciting year for the Company’s underwriting business. The Korean pioneer of asset-backed

securities (ABS) issues by private businesses, the Company maintained its leading position by underwriting the

most ABS issues in the year. The Company lead-managed a majority of the ABS issues by local banks during

the year. Moreover, a large portion of the ABS issues the Company underwrote was repeat business. Fully

satisfied with the Company’s expertise and know-how in the sophisticated ABS business, clients turned to the

Company whenever ABS needs arose. Kookmin Card is a case in point. Having successfully made KOSDAQ’s

largest IPO with help of Hyundai Securities in 2000, Kookmin Card issued shares a total of six times, employing a

different issue method each time, and the Company lead-managed all six issues. As a result of repeat business,

the total amount of ABS issues the Company underwrote expanded to ￦6,709.1 billion in 2001 from ￦4,992.9 in

2000, a 34% increase. The Company’s industry-leading IPO performance, however, bore the brunt from smaller

players’ all-out efforts to increase their share in this high fee-based business, and as a result ranked fourth in

market share.

The Company’s underwriting performance, however, was far impressive in quality than in quantity. For the first

time in the Korean securities industry, the Company underwrote securities issues backed by credit card

receivables as well as regular business receivables. Another industry-first record was established in

September when the Company successfully lead-managed foreign currency-denominated ABS issued by

Korean financial institutions. Through these trail-blazing achievements, the Company has secured a formidable

head start in emerging markets that have great growth potential.

17

S o u n d n e s sHyundai Securities

2002 ANNUAL REPORT18HYUNDAI Security 18

Hyundai Securities is the industry’s undisputed leader in international operations.

It has the industry’s largest international business unit and the most extensive overseas network.

“

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I n t e rch a n g eReview of International Operation

Overview

International Finance TeamHyundai Securities (America) Inc.

Hyundai Securities (Europe) Ltd.

Hyundai Securities (Hong Kong), Inc. Shanghai Office

Tokyo Branch

International OperationsHyundai Securities is the industry’s undisputed leader in international operations. It has the industry’s largest internationalbusiness unit and the most extensive overseas network. Consisting of three teams and five overseas bases, the InternationalDivision played a significant role in turning fiscal 2001 into a profitable year. The Division’s total pre-tax income amounted to￦6,160 million, of which ￦3,556 million was earned by its overseas bases. The division was able to earn a handsome profitfrom stock-related bond trading and ADR arbitrage. A strong recovery of the stock market in the second half was anothercontributing factor. A massive write-off of bad assets in 2000 and across-the-board belt-tightening efforts, including theclosure of the LA branch, also provided a basis for the profitable performance.

International Sales TeamHyundai Securities’ International SalesTeam offers stock brokerage, bond trading,and futures and options trading onconsignment services to foreign investors.In fiscal 2001, the team brokered ￦5,329.8billion worth of stocks, which accountedfor 29% of the domestic industry’s totalstock brokerage for foreign investors. Thisfigure topped the securities industry interms of stock brokerage for foreigninvestors. The Company also is a leadingforce in futures and options trading onconsignment for foreign investors, with its

market share of 20% in fiscal 2001. In the new fiscal year, the team plans to expand its operations to include foreign bonds.One major achievement was the establishment of M-Vest, an English-language home trading system exclusively designed fornon-Korean-speaking investors. A leader in international investment banking, the Company plans to promote the advancedand powerful features of the system to institutional investors through its overseas subsidiaries.

International Finance TeamHyundai Securities’ International Finance Team is active in a wide range of financial services, including helping domesticbusinesses raise funds from overseas capital markets and underwriting foreign currency-denominated financing vehiclessuch as floating-rate notes, convertible bonds, stock depository receipts and ABS. In September 2001, the InternationalFinance Team played a pivotal role in the Company’s lead-management of a $400 million foreign currency-denominated ABSissue, the first of its kind done by a Korean securities firm. This industry-first feat was soon followed by two more such issues,totaling about US$950 million. Two of the three issues involved loan receivables of a credit card company (Korea has one ofthe fastest-growing credit card industries in the world). Having successfully entered this realm, the Company expects itsnewly acquired expertise to be an important source of income.

Hyundai Securities (America) Inc. Established in 1996, Hyundai Securities (America), Inc. is predominantly involved in underwriting, dealing, and brokeringKorean stocks and bonds. This New York subsidiary also provides corporate financial services, including corporateconsultation and securities underwriting. As part of its restructuring plan, the subsidiary has closed its Los Angeles branch,and as a result has seen its profitability improve markedly. In addition to serving Korean blue-chip corporations, the subsidiary is working with leading Korean venture firms for


>Hyundai Securities 2 9 %O t h e r s 7 1 %

Market share of internationalstock brokerage


NASDAQ listing and providing a wide variety of financial services to U.S. institutional investors interested in Korean companies. Inclose cooperation with the parent company’s research center, the subsidiary holds investor meetings to offer first-rate informationon Korean markets and investment opportunities. To further strengthen its profitability, the New York subsidiary handles arbitrageinvolving ADR of Japan, Taiwan and Korea.

Hyundai Securities (Europe) Ltd. The London-based subsidiary provides European companies, as well as Europe-based Korean companies, with various financialservices including equity and fixed-income brokerage, underwriting and issuance of equity-linked products, and consultation onmergers and acquisitions. With a cleaner balance sheet, the subsidiary plans to make aggressive inroads into Eastern Europeanmarkets by strengthening its corporate finance and system trading services. The subsidiary plans to bolster its issuance businessby working closely with the parent company.

Hyundai Securities (Hong Kong), Inc. Hyundai Securities (Hong Kong), Inc., a presence in Asian finance markets since 1989, is involved primarily in equity and fixed-income brokerage, corporate banking, mergers and acquisitions, and ADR arbitrage. Bridging the Korean, Hong Kong, and regionalfinancial centers, the Hong Kong subsidiary is particularly active in underwriting and sales of overseas securities, such as CB, BW,DR, and FRN issued by Korean companies. In addition, the Hong Kong subsidiary contributes to Hong Kong’s reputation as an Asianfinancial hub by organizing investor relations seminars where Asian investors meet leading analysts of Hyundai Securities.

Shanghai OfficeOpened in 1998, the Shanghai Office of Hyundai Securities specializes in overseas initial public offerings for local blue-chipcompanies. This office also helps local enterprises to get listed on the China B share market or the Hong Kong Stock Exchange.Other primary functions include economic and market analysis and research services, including monthly and daily investmentreports, for Korean investors interested in the Chinese market, as well as advisory services on doing business in China. In March2001, the office established an IT firm to develop online trading systems. In line with China’s ongoing financial reform and marketopening, the office is pursuing the creation of a leading online trading system for China. The opening of Korea’s first securitiesfoothold in China’s hub of commerce reflects Hyundai Securities’ commitment to serving its clients on the business front. The officehas recently opened a Chinese-language stock trading website, http://hdsh.stockmarket.co.kr.

Tokyo BranchSince its inception in August 1997, the Tokyo branch has been providing Japanese institutional investors with equity and fixed-income brokerage, corporate banking and asset management services. The Tokyo subsidiary is particularly strong in bond trading.The only Korean securities company active in bond brokerage in Japan, the subsidiary has been enhancing profitability throughcontinued marketing in a country whose stock market has been depressed for some time. By acting as a bridge to link institutionalinvestors of the two countries, the branch plans to grow into a fully localized, full-fledged securities firm in Japan.

I n t e rch a n g eHyundai Securities


22 Management’s Discussion and Analysis

26 Balance Sheet

28 Statement of Income

29 Statement of Appropriations of Retained Earnings

30 Statement of Cash Flows

32 Notes to Financial Statements

41 Report fo Independent Auditors

Financia l Repor t



Management’s Dicussion and Analysis

Management’s Discussion and AnalysisBalanceSheet Statement of Income Statement of Appropriations of Retained Earnings Statement of Cash Flows Notes to Financial Statements

HYUNDAI SECURITIES CO., LTD.

OVERVIEW

In fiscal 2001, Hyundai Securities made a dramatic comeback in income performance. In contrast to operating loss of ￦30.1 billion

in the previous year, the Company posted operating gain of ￦148.2 billion, which resulted in net income of ￦19.2 billion for the

fiscal year in review. The Company’s concerted cost-cutting effort, strengthened risk management, and refocused asset

management, along with a protracted recovery of the stock market, contributed to the turn-around in income performance. In

particular, in view of a slightly decrease in stock brokerage volume and a sizable reduction in commission due to growing online

trading, the Company’s asset management proved effective.

RESULTS OF OPERATIONS

At the end of fiscal 2001, operating income totaled ￦1,072.7 billion, which represents a ￦426.3 billion decrease compared to the

previous year’s figure, while operating expenses came to ￦924.5 billion, a ￦604.6 billion reduction from the year before. As a

result of operating expenses exceeding revenue in rate of decrease, fiscal 2002’s operating gain came to ￦148.2 billion

While non-operating income changed little from the previous year, non-operating expenses dropped ￦311.1 billion to ￦51.0 billion.

In the previous year, the Company had suffered ￦38.1 billion in equity valuation method loss and ￦307.6 billion in loss on

disposition of investment securities, which included ￦294.0 billion in loss on valuation of Hyundai Investment Trust shares.

Meanwhile, others-net came to ￦114.4 billion in negative, taking a sizable portion out of net income. The others-net figure consists

of loss of ￦96.3 billion generated from the legal battle involving Hyundai Heavy Industries and ￦18.1 billion in corporate tax.

>> Brief income statement

Korean Won (In billions)

FY’ 01 FY’ 00 Year-to-year ratio

Operating income 1,072.7 1,499.0 -426.3

Operating expenses 924.5 1,529.1 -604.6

Operating gain 148.2 -30.1 178.3

Non-operating income 36.4 40.6 -4.2

Non-operating expenses 51.0 362.1 -311.1

Others-net -114.4 104.8 -219.2

Net income 19.2 -246.8 266.0

OPERATING INCOME

In fiscal 2001, operating income totaled ￦1,072.7 billion, a ￦426.3 billion decrease (28.4%) from the year before. To break down

operating income, commission income amounted to ￦553.7 billion, ￦138.6 billion (20.0%) down. As a result of operating income

exceeding commission income in rate of decrease, the ratio of commission income to operating income increased from 46.2% to

51.6% over the year. Of commission income, brokerage commissions on KSE transactions decreased 7.4% to ￦271.0 billion, while

brokerage commissions on KOSDAQ transactions dropped 28.1% to ￦170.2 billion. The difference in the two figures reflects that


Management’s Dicussion and Analysis

KOSDAQ remained sluggish throughout the year in review compared to the KSE, which managed to recover in the fourth quarter. In

addition, growing online trading led to a sharp decrease in commission rates. Brokerage commissions on beneficiary certificates

shrank ￦46.4 billion over the year to ￦84.1 billion, as the certificates sold decreased in volume along with commission rates.

Interest income amounted to ￦122.9 billion at the end of 2001, down ￦35.5 billion (22.4%) from the year before. Interest income

accounted for 11.5% of total operating income, up 0.9% points. Of interest income, interest on bonds decreased the most, shrinking

￦19.0 billion to ￦18.5 billion. Bonds at the Company decreased over the year as market interest rates fell.

Securities-related income decreased ￦171.5 billion (36.2%) over the year in review to ￦302.4 billion, which showed the largest

decrease among operating income items. As a result, securities-related income fell from 31.6% to 28.2% in proportion to total

operating income. Of securities-related income, gain on redemption of trading securities shrank the most, decreasing ￦161.1 billion to

￦79.6 billion. There was no gain on valuation of beneficiary certificates. Meanwhile, thanks to a recovering stock market, gain on

sales of stock rose ￦18.5 billion to ￦48.3 billion, while gain on valuation of stock increased ￦108.1 billion to ￦120.2 billion.

>> Operating income

Korean Won (In billions), %


Amount ratio Amount ratio Amount ratio

Commissions 553.7 51.6 692.3 46.2 -138.6 -20.0Interest 122.9 11.5 158.4 10.6 -35.5 -22.4Securities-related 302.4 28.2 473.9 31.6 -171.5 -36.2Other 93.7 8.7 174.4 11.6 -80.7 -46.3Total 1,072.7 100.0 1,499.0 100.0 -426.3 -28.4

(Note) Securities-related gain: gain on sales and valuation of stock, dividend, profit shared.



Commissions 51.6Interest income 11.5Securities-related income 28.2Other 8.7

Commissions 46.2Interest income 10.6Securities-related income 31.6Other 11.6

FY2001

FY2000




OPERATING EXPENSES

At the end of 2001, operating expenses stood at ￦924.5 billion, down 604.6 billion. By item, commission expenses decreased ￦17.7

billion to ￦36.3 billion, due mainly to a reduction in investment consulting fees. Interest expenses shrank ￦61.8 billion to ￦98.7

billion: interest expenses on call money fell the most, dropping ￦41.2 billion to ￦26.0 billion.

Securities-related loss decreased the most among the operating expense items, dropping ￦335.6 billion to ￦320.5 billion. Of

securities-related loss, the decrease of loss on redemption of trading securities was most noticeable, falling from ￦501.0 billion to

￦17.3 billion. Meanwhile, loss on sales of stock and bonds rose over the year, and loss on valuation of unsold beneficiary

certificates, which did not materialize in the previous year, amounted to ￦149.4 billion.

General and administrative (G&A) expenses decreased ￦128.5 billion to ￦395.5 billion. G&A expenses dropped 24.5% over the

year despite rising prices. Wages, advertising expenses and loss on bad debt allowance all shrank over the year, dropping 29.9%,

45.4%, and 66.2%, respectively. The decrease in G&A expenses can be attributed to the Company’s continued cost-cutting effort

and extensive self-restructuring.

>> Operating expenses

Korean Won (In billions)


Commissions 36.3 54.0 -17.7

Interest 98.7 160.5 -61.8

Securities-related 320.5 656.1 -335.6

Derivatives-related 73.5 134.5 -61.0

G&A expenses 395.5 524.0 -128.5

Total 924.5 1,529.1 -604.6

(Note) Securities-related loss: loss on sales of stock, loss on valuation of stock

ASSETS

At the end of fiscal 2001, total assets amounted to ￦3,918.1 billion, up ￦415.9 billion (11.9%) from the year before. Deposits rose

￦1,125.0 billion over the year to ￦2,314.5 billion: special deposits rose ￦486.7 billion more than the year before and stock

subscription deposits, which had not materialized in the previous year, amounted to ￦277.0 billion.

Securities dropped ￦700.6 billion to ￦776.0 billion. While stocks remained somewhat unchanged from the year before,

government bonds decreased ￦80.7 billion to ￦102.7 billion, and beneficiary certificates fell ￦475.0 billion to ￦346.0 billion,

recording the biggest drop. Tangible fixed assets & guarantees and other assets either decreased slightly or remained hardly

changed from the year before. Accordingly, deposits accounted for 59.1% of total assets, up from the year before, while securities

accounted for 19.8%, a big contrast to 42.2% for the previous year.

Mnanagement’s Dicussion and Analysis




>> Asset composition




Deposits 2,314.5 59.1 1,189.5 34.0 1,125.0 94.6

Securities 776.0 19.8 1,476.6 42.2 -700.6 -47.4

Tangible fixed asset & Guarantee 357.6 9.1 394.0 11.2 -36.4 -9.2

Others 470.0 12.0 442.1 12.6 27.9 6.3

Total assets 3,918.1 100.0 3,502.2 100.0 415.9 11.9

*Deposits: Cash and bank deposits, Deposits, Long-term depositsSecurities: Trading securities, Investment securitiesLoan loss provisions are reflected in others.

LIABILITIESAt the end of fiscal 2001, total liabilities stood at ￦2,635.6 billion, up 15% (￦437.9 billion) from the year before. Borrowings

amounted to ￦540.1 billion, which represents a 50.6% (￦552.7 billion) decrease. This decrease amount consisted of ￦283.8 billion

in call money, ￦220.0 billion in subordinate bonds (including the liquidity part) by ￦220.0 billion, and ￦25.0 billion in debentures.

The decrease can be attributed to the following factors: the volume of both beneficiary certificates unsold and financial products

under management shrank and the hefty operating income led to a sizable capital surplus.

Customers’ deposits, on the other hand, increased ￦812.2 billion to ￦1,850.3 billion, which represents a 78.2% rise from the year

before. Customers’ deposits for brokerage rose ￦376.1 billion to ￦1,313.1 billion and deposits for subscriptions, which had been

negligent the year before, recorded ￦275.3 billion, while deposits for savings increased ￦118.6 billion to ￦173.4 billion. The

increase in deposits can be attributed to a rapid recovery of the stock market in the third quarter of the year. As borrowings shrank

and deposits expanded over the previous year, the ratio of borrowings to total liabilities fell from 49.7% to 20.5%, while that of

deposits soared from 47.2% to 70.2%.

>> Liabilities




Borrowings 540.1 20.5 1,092.8 49.7 -552.7 -50.6

Customers’ Deposits 1,850.3 70.2 1,038.1 47.2 812.2 78.2

Others 245.2 9.3 66.8 3.1 178.4 267.1

Total liabilities 2,635.6 100.0 2,197.7 100.0 437.9 19.9

*Borrowings: Call money, Short-term borrowings and Debenture(including current portion)

Mnanagement’s Dicussion and Analysis




In Millions of Korean Won In Thousands of U.S.Dollars (Note 3)

See accompanying notes to financial statements

Balance sheetMarch 31, 2002 And 2001

2002. 3 2001. 3 2002.3 2001. 3

ASSETS

Current assets:Cash and bank depositsDeposits(note 4)Trading securities(notes 2, 5 and 10)Loans(note 6)ReceivablesAccrued incomeAdvance paymentsPrepaid expensesOthersLess: Allowance for credit lossTotal current assets

Investments and other assets:Investments securities (notes 2,7 and 10)Investments assets(notes 2 and 8)Advances for customersCollective fund for default loss(notes2and4)Settlement stabilization fund(note 4)Dishonored bonds and bills receivableIntangible assets(note 2)Deferred income tax debits(note 2)Less: Allowance for credit lossLess: Present value discount accountOthersTotal investments and other assets

Property and equipment (notes 2 and 9)LandBuildingsVehiclesFurniture and equipmentsConstruction in progressOthersLess: Accumulated depreciationTotal property and equipment

TOTAL ASSETS

Current liabilities:Call money (note 11)

￦513,7591,800,700

539,43826,447

127,68541,4256,956

5566

(7,702)3,049,270

236,520139,85883,5673,7683,539

18,30018,436

161,880(47,480)(20,572)

23,574621,390

70,914103,713

446170,135

3,14831,280

(132,164)247,472

￦3,918,132

￦210,000

￦133,8641,030,3621,248,562

39,79559,72354,48630,707

1,0504,061

(11,808)2,590,802

228,186183,925109,818

3,730-

22,8789,333

131,750(43,448)(36,118)25,637

635,691

70,071103,062

604163,102

1,78434,410

(97,285)275,748

￦3,502,241

￦493,800

$387,3331,357,584

406,69419,93996,26431,2315,244

4195

(5,806)2,298,907

178,317105,44263,0032,8412,668

13,79713,899

122,045(35,796)(15,510)17,773

468,479

53,46478,191

336128,268

2,37323,583

(99,641)186,574

$2,953,960

$158,323

$100,801775,875940,18229,96644,97241,02923,123

7913,058

(8,892)1,950,905

171,827138,49882,6942,808

-17,2287,028

99,209(32,717)(27,197)19,305

478,683

52,76577,607

455122,818

1,34325,911

(73,257)207,642

$2,637,230

$371,837





2002.3 2001. 3 2002.3 2001. 3


Short-term borrowings(note 11)Bonds sold under reverse resale agreementsCustomers' depositsSecurities soldAccrued income taxesAccrued dividendsAccounts payableAccrued expensesGuarantee depositsWithholding income taxesDeposits for rentSubordinated current portion of long-term debts(note 12)Unearned incomeOthers

Total current liabilities

Long-term liabilities:DebentureReserve for severance and retirement(note 2)Other long-term liabilitiesTotal long-term liabilities

TOTAL LIABILITIES

Shareholders' equity(note 13)Common stockCapital surplusRetained earnings(note 13)Capital adjustment(note 14)

Treasury stockOverseas operation translation debits(note2)Loss on valuation of investment

Total shareholders' equity

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Footnotes1. Securities in custody2. Deposits on exchanges3. Derivatives contracts4. Receivables charge-offs

50,122563

1,850,272972

37,12137,40818,72817,1073,5459,216

15,859280,000

39096,441

2,627,744

-8,031(129)

7,902

2,635,646

535,975641,366118,885(5,772)2,596

(10,564)

1,282,486

￦3,918,132

30,143,273 -

6,578 8,039

74,00066

1,038,114-

13-

11,9309,2233,338

13,28015,184

500,000145188

2,159,281

25,00013,400

-38,400

2,197,681

535,975641,366137,095

(5,772)2,913

(7,017)

1,304,560

￦3,502,241

21,889,385 1,030,364

7,711 -

37,788425

1,394,958733

27,98628,20314,11912,8972,6736,948

11,956211,098

29472,709

1,981,110

-6,055

(97)5,958

1,987,068

404,082483,53989,630(4,352)1,957

(7,964)

966,892

$2,953,960

22,725,628 -

4,959 6,061

55,72350

781,712-

10-

8,9836,9452,513

10,00011,434

376,506109143

1,625,965

18,82510,091

-28,916

1,654,881

403,595482,956103,235(4,346)2,193

(5,284)

982,349

$2,637,230

16,482,970 775,876

5,807 -

Balance sheetMarch 31, 2002 And 2001





2002. 3 2001. 3 2002.3 2001. 3


Revenue:Commissions receivedInterest incomeDividends incomeDistribution incomeGain on sales of trading securitiesGain on valuation of trading securitiesGain on derivatives transactionsOther operating income

Expense:Commissions expenseInterest expensesLoss on sales of trading securitiesLoss on valuation of trading securitiesLoss on valuation of securities soldLoss on derivatives transactionsGeneral and administrative expenses

Operating income(loss)

Non-operating income(expense)Gain(loss) on disposition of tangible assets, netRental incomeGain on disposition of investment securities, netGain(loss) on equity method valuationInvestment securities reduction lossGain(loss) on valuation of investments

on stock market stabilization fundGain(loss) on foreign currency transactions, netGain(loss) on foreign exchanges translationDonationsOthers, net

Ordinary income(loss)Extraordinary items:

Others

Net income(loss) before income taxIncome tax expense(notes 2 and 17)

Net income(loss) for the year

Ordinary income(loss) per common share(In Won and dollars)Net earnings(loss) per common share(In Won and dollars)

￦553,700122,918

1,89226,941

147,733125,860

81,20512,472

1,072,721

36,28298,705

153,045167,441

4873,544

395,451924,516

148,205

(1,770) 1,349

(10,232) 4,065

(20,339) 25,611

(932) (7)

(42) (12,285) (14,582)

133,623(96,283)(96,283)

37,34018,143

￦19,197

1,080180

￦692,271158,386

4,09740,691

311,370117,698155,40019,069

1,498,982

53,987160,536589,17366,902

-134,490524,012

1,529,100

(30,118)

(2,142) 1,221

10,115 (307,633)

(38,109) (6,928)

1,041 19,438 (3,346) 4,892

(321,451)

(351,569)(331)(331)

(351,900)(105,137)

￦(246,763)

2,3102,308

$417,44692,6711,426

20,311111,37994,88861,2229,403

808,746

27,35474,416

115,384126,237

3655,446

298,139697,012

111,734

(1,334) 1,017

(7,714) 3,065

(15,334) 19,309

(703) (5)

(32) (9,262)

(10,993)

100,741(72,590)(72,590)

28,15113,678

$14,473

0.810.14

$521,288119,267

3,08530,641

234,46688,628

117,01814,360

1,128,753

40,653120,886443,654

50,378-

101,273394,588

1,151,432

(22,679)

(1,613) 920

7,616 (231,652) (28,696) (5,217)

784 14,637 (2,520) 3,684

(242,057)

(264,736)(249)(249)

(264,985)(79,170)

$(185,815)

1.741.74

Statement of IncomeFOR THE YEARS ENDED March 31, 2002 And 2001





2002.3 2001. 3 2002.3 2001. 3


Statement of Appropriations of Retained EarningsFOR THE YEARS ENDED March 31, 2002 and 2001

Retained earnings before appropriationUnappropriated retained earnings carried

over from prior yearsLoss on equity method valuationNet income(loss)

Transfers from statutory reserves:Transfer from reserve for accidental lossTransfer from voluntary reserves

Disposition:Transfer from voluntary reserves

AppropriationLegal reserveDividends

Cash dividendsReserve for accidental loss

Unappropriated retained earnings to be carried over to subsequent year

￦ -

- 19,197 19,197

13,7198,233

21,952

-

3,74137,408

-41,149

￦ -

￦1,013

(1,157) (246,763) (246,907)

3,403-

3,403

247,750

--

4,2464,246

￦ -

$ -

- 14,473 14,473

10,3436,207

16,550

-

2,82028,203

-31,023

$ -

$763

(872) (185,815) (185,924)

2,563-

2,563

186,558

--

3,1973,197

$ -





2002.3 2001. 3 2002.3 2001. 3


Cash flows from operating activitiesNet income(loss)Add items not involving cash outflows

Bad debtsDepreciationAmortizationLoss on disposition of investment securitiesInvestment securities reduction lossLoss on valuation of investments on stockmarket stabilization fundLoss on equity method valuationLoss on disposition of tangible assetsLoss on foreign exchanges translationLoss on valuation of trading securitiesProvision for severance indemnitiesOthers

Deduct items not involving cash inflowsGain on disposition of investment securitiesGain on equity method valuationGain on disposition tangible assetsGain on valuation of investment on stock market stabilization fundGain on valuation of trading securitiesReversal of allowance for credit lossReversal of allowance for guaranteesGain on foreign exchanges translationOthers

Changes of assets and liabilities from operating activitiesDecrease(Increase) of trading securitiesDecrease(Increase) of receivablesDecrease of accrued incomeDecrease(Increase) of deferred income tax debitsncrease(Decrease) of customers' depositsIncrease(Decrease) of accrued income taxesPayment of severance benefitsOthers

Net cash provided by operating activities

Cash flows from investing activitiesCash flows provided by investing activities

Decrease of depositsDecrease of call loans

￦19,197

16,41045,722

7,03811,86920,339

--

2,1097

167,44118,61396,284

385,832

1,6364,065

33925,611

125,8603,969

--

13,436￦(174,916)

￦665,536(71,375)10,929

(30,130)812,15837,107

(12,282)18,715

1,430,6581,660,771

7,533,26229,300

￦(246,763)

48,60243,255

2,8362,550

307,6336,928

38,1092,271

-66,90213,480

114532,680

12,664-

130-

117,698-

16,29719,438

4,222￦(170,449)

￦612,79986,81532,054

(110,342)(924,225)(105,786)

(4,082)(23,821)

(436,588)(321,120)

15,224,84029,451,500

$14,473

12,37234,471

5,3068,948

15,334--

1,5905

126,23714,03372,591

290,887

1,2333,065

25619,30994,8882,992

--

10,130$(131,873)

$501,761(53,811)

8,240(22,716)612,30227,976(9,260)14,110

1,078,6021,252,089

5,679,48022,090

$(185,815)

36,59732,5722,1361,920

231,6525,217

28,6961,710

-50,37810,151

85401,114

9,537-

98-

88,628-

12,27114,6373,179

$(128,350)

$461,44565,37324,137

(83,089)(695,953)(79,658)(3,073)

(17,938)(328,756)(241,807)

11,464,48822,177,334

Statement of Cash FlowsFOR THE YEARS ENDED March 31, 2002 And 2001





2002.3 2001. 3 2002. 3 2001. 3


Decrease of broker's loansDecrease of short-term loansDisposal of investment securitiesDecrease of long-term depositsDecrease of long-term loansDecrease of guaranteesDisposal of tangible fixed assetsDecrease of advances for customersOthers

Cash flows used by investing activitiesIncrease of depositsIncrease of call loansIncrease of broker's loansIncrease of short-term loansAcquisition of investment securitiesIncrease of long-term depositsIncrease of long-term loansIncrease of guaranteesAcquisition of tangible fixed assetsIncrease of advances for customersIncrease of intangible fixed assetsOthers

Net cash used by investing activitiesCash flows from financing activities

Cash flows provided by financing activitiesProceeds from call moneyProceeds from short-term borrowingsIssuance of subordinated current portion of long-term debtsOthers

Cash flows used by financing activitiesRepayment of call moneyRepayment of short-term borrowingsRepayment of current portion of long-term debtRepayment of debenturesPayment of dividendsOthers

Net cash used by financing activities

Increase(decrease) in cash and cash equivalentsCash and bank deposits at beginning of the year

Cash and bank deposits at end of the year

152,142132,449428,141

25,23012,40820,467

78522,4185,492

8,362,094

8,303,600-

168,107132,437440,918

44￦1,592

12,40219,6215,2462,3813,814

(9,090,162)(728,068)

109,089,7645,255,899

279,870-

114,625,533

109,373,5645,279,777

500,00025,000

--

(115,178,341)(552,808)

379,895133,864

￦513,759

140,0231,904

83,0694,104

14,29926,666

807,518

-44,954,003

14,410,55329,452,800

123,9411,928

119,95125,105

￦1,49440,80590,17958,5176,216

12,545(44,344,034)

609,969

219,506,00110,563,259

500,000262

230,569,522

220,106,40110,719,259

59,746-

9,989411

(230,895,806)(326,284)

(37,435)171,299

￦133,864

114,70399,856

322,78419,0219,355

15,430592

16,9014,141

6,304,353

6,260,254-

126,73999,847

332,41733

$1,2009,350

14,7933,9551,7952,875

(6,853,258)(548,905)

82,244,9973,962,529

211,000-

86,418,526

82,458,9593,980,532

376,96018,848

--

86,835,299(416,773)

286,411100,922

$387,333

105,4391,434

62,5523,090

10,76720,080

605,661

-33,850,905

10,851,32022,178,313

93,3291,452

90,32418,905$1,12530,72767,90544,064

4,6819,446

(33,391,591)459,314

165,290,6637,954,262

376,506197

173,621,628

165,742,7728,071,732

44,989-

7,521310

(173,867,324)(245,696)

(28,189)128,990

$100,801

Statement of Cash FlowsFOR THE YEARS ENDED March 31, 2002 And 2001




Notes to Financial StatementsMARCH 31, 2002 and 2001

1. GENERAL

Hyundai Securities Co., Ltd.(the Company) was incorporated in June 1962, under the laws of the Republic of Korea,

to engage in brokerage, dealing and underwriting of securities. The shares of the Company have been listed on the

Korea Stock Exchange since 1975. The Company established foreign subsidiaries(Hyundai Securities (Europe) Ltd.)

in London in 1992, (Hyundai Securities (America) Inc.) in New York in 1996, and (Hyundai Securities (Asia) Ltd.) in

Hong Kong in 1997.

The Company is engaged in the securities business through its main office, domestic branches, 1 overseas branch

and 3 overseas subsidiaries.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of financial statements presentation

The Company maintains its books of account and prepares its financial statements in conformity with the Financial

Accounting Standards. These standards have been approved by the Minister of Finance and Economy and are

recognized as generally accepted accounting principles in the Republic of Korea.

For the convenience of the readers, the accompanying financial statements have been condensed, restructured

and translated into the English language. Certain supplemental information included in the statutory Korean

language financial statements and which is not required for a fair presentation of the Company's financial position,

results of operations or cash flows, has been omitted in the accompanying financial statements.

(b) Allowance for doubtful accounts

An allowance for doubtful accounts is provided based on the Financial Soundness of Securities Firms prescribed by

the Korean Securities and Exchange Law.

The Regulations prescribe guidelines for calculating the allowance for credit loss. These guidelines are meant to

represent the minimum level of allowances that securities firms should maintain. These guidelines require that all

debt be classified based on a number of factors including the financial position of the creditors, the repayment

history, the Company's past relationship and dealings with the creditiors, and the value of any security. In

accordance with these guidelines, debts have been classified as of March 31, 2002 as normal, special attention,

substandard, doubtful or estimated loss.

In accordance with the revised Regulations, effective April 1, 1998 the Company expanded its classification of

receivables by risk classification and changed certain percentages of loss applied in order to determine the

allowance for credit loss as follows:

Classification Percentage

Normal 0.5%

Special attention 2%

Substandard 20%

Doubtful 75%

Estimated loss 100%

(c) Trading securities

Trading securities are stated at market value using the moving average method. The difference between cost and

fair value is recognized in current operations.





(d) Investments in equity securities

(1) Investments-market value is available (except investments using equity method)

Marketable stocks are stated at the fair value, and the difference between book value and fair value is charged to

valuation gains and losses shown under capital adjustments account.

(2) Investments-market value is not available (except investments using equity method)

Investments whose market value is not available are stated at cost which is determined by the moving average

method. But if the investee's net book value declines and is not expected to recover, the acquisition cost is adjusted

to the investor's share in the worth of the investee. The difference between original acquisition cost and adjusted is

charged to current operations shown as investment securities reduction loss account.

(3) Investments using equity method

Investments in affiliated companies over which the Company exercises substantial control are stated using the equity

method.

The difference between the carrying value and the amount after adjusting for the investor's share in the investee's

net assets is presented as "gain or loss on equity method valuation" to account for the investor's share in the

earnings or losses of the investee. If the difference is derived from changes in the investee's retained earnings,

such difference is presented as the increase or decrease in the investor's beginning retained earning. If the

difference is derived from changes in the investee's capital surplus or capital adjustment, it is presented as

valuation gain (loss) on investments, shown in capital adjustment account, intercompany accounts, transactions

and unrealized profits and losses on transactions within the affiliated company are eliminated.

(4) Investment in debt securities

Investments in debt securities which the Company has the intent and ability to hold to maturity are generally carried

at cost, adjusted for the amortization of discounts or premiums. Premiums and discounts on debt securities are

amortized over the life of the debt using the effective interest method. Declined in the fair value of debt securities

which are anticipated to be permanent are recorded in current operations. Subsequent recoveries are also

recorded in current operations up to the amortized cost of the investment.

Other investments in debt securities are carried at fair value. Temporary differences between fair value and

amortized cost are accounted for in the capital adjustment account. Declines in fair value which are anticipated to

be permanent are recorded in current operations after eliminating any perviously recorded capital adjustment for

temporary changes. Subsequent recoveries or other future changes in fair value are recorded in the capital

adjustment account.

(e) Collective Fund for Default Losses

In accordance with the Korean Securities and Exchange Law, the Company made deposits with the Korean Stock

Exchange for potential losses on unsettled trading.

(f) Property and equipment

Property and equipment are stated at cost. Routine maintenance and repairs are expensed as incurred.

Expendiures which result in the enhancement of the value or extension of the useful life are treated as additions to

property and equipment. Depreciation is computed by the straight-line method over the estimated useful life of the

asset as prescribed in the Korean Corporate Income Tax Law.

(g) Intangible assets

Intangible assets are stated at cost less accumulated amortization computed on a straight line method over periods

within 20 years.




(h) Retirement and severance benefits

Under the Korean Labor Standards Law, employees and directors with more than one year of service are entitled to

receive lump-sum payment upon termination of their service to the company, based on their length of service and

rate of pay at the time of termination. A reserve which is intended to cover the Company's liability as if all of the

employees and directors retire at the same time is provided for all employees and directors. Actual severance

payments to empolyees during the year ended March 31, 2002 amounted to ￦12,224 million.

(i) Reserve for securities transactions

By the revised Korean Securities and Exchange Law(Feb. 1, 2002), the Company transferred the reserve for

accidental loss over 3 years and the transferred the reserve for the year ended Mar. 31, 2002. A total of to ￦13,719

million.

(j) Income Tax Expenses

According to the change of Financial Accounting Standards of Korea, the Company adopted the asset and liability

method of accounting for income taxes. Under this method, Income Tax Provisions have been made for deferred

income taxes based on differences between financial statement and tax bases of assets and liabilities using

currently enacted tax rates and regulations.

(k) Earnings per common share

Ordinary earnings per common share and net earnings per common share are computed by dividing ordinary

income and net income, respectively, by the weighted average number of shares outstanding during the year.

(l) Foreign currency transaction

The Company maintains its books and records in Korean Won. Foreign currency transactions are recorded in

Korean Won based on the prevailing rates of exchange at the time the transactions are completed. Assets and

liabilities denominated in foreign currencies are adjusted to reflect the Korean Won equivalents at the exchange

rates prevailing at the balance sheet date. Gains or losses arising from such adjustments of monetary items are

recognized in the current year.

(m) Translation of foreign currency financial statements of the overseas branch and subsidiaries

The overseas branch and subsidiaries maintain their books of account in the currencies of the countries where the

branch and subsidiaries are located. Therefore, in translating the foreign currency financial statements of the

overseas branch into Korean Won, assets and liabilities are translated at the exchange rates as of the balance

sheet date and income and expenses are translated at the average rates for the reporting periods.

Translation gains or losses arising from such translation of the foreign currency financial statements of the

overseas branch are recoreded as an overseas business translation debit or credit which is added to or deducted

from stockholders' equity.

3. WON AMOUNTS EXPRESSED IN U.S. DOLLARS

The financial statements are expressed in Korean Won. Solely for the convenience of the readers, these financial

statements have been expressed in U. S. dollars. The exchange rates used are ￦1,326.40 and ￦1,328.00 per U. S.

dollar, the exchange rates prevailing on March 31, 2002 and 2001 respectively. It should not be construed that the

Korean Won financial statements have been, could have been, or could in the future be, converted into U. S. dollars.






4. RESTRICTED DEPOSITS

Restricted deposits at March 31, 2002 and 2001 consist of the following:

Korean Won (In millions)

2002. 3 2001. 3

Deposits 1,523,700 1,030,000

Long-term deposits 47

Deposits for severance insurance - 183

Collective fund for default loss 3,768 3,730

Settlement stabilization fund 3,539 -

1,531,052 1,033,960

5. TRADING SECURITIES

Trading securities at March 31, 2002 and 2001 consist of the following:


2002. 3 2001. 3

Stocks 59,400 84,542

Governments and public bonds 102,709 183,454

Corporate bonds 8,471 76,560

Beneficiary certificates 346,012 821,029

Negotiable commercial papers 20,000 -

Stocks in foreign currency - 11,531

Bonds in foreign currency 909 3,594

Others 1,937 67,852

539,438 1,248,562

The Company has recognized the loss of ￦46,388 million on the beneficiary certificates including bonds issued by

Hynix Semiconductor Inc. and Hyundai Petrochemical Co., Ltd. as loss on valuation of trading securities.

6. BROKER'S LOAN

The company provides loans to its customers who purchase stocks on credit. The loans are funded by borrowings

from the Korea Securities Finance Co., Ltd. and funds generated within the Company.

The annual interest rate on the loans as of the current balance sheet date is 8%. The customer is required to

provide securities or cash equivalent to 170% of the loan amount as collateral. The stocks purchased by the

customer with the loan become the primary collateral. The stocks purchased with a loan from the Korea Securities

Finance Co., Ltd. are designated as collateral on this loan, and the stocks bought with a loan from the Company is

assigned as collateral on the Company's loan.

The Company requires each customer with credit transactions to deposit ￦1,000,000 in cash as a deposit on credit

transaction account.





7. INVESTMENT SECURITIES

(a) Investment securities at March 31, 2002 and 2001 consist of the following:


2002. 3 2001. 3

Stocks 117,636 98,491

Investments in partnerships 52,232 36,638

Corporate bonds 5,216 24,296

Securities in affiliated companies 60,952 68,761

Others 484 -

236,520 228,186

(b) Securities of affiliated companies at March 31, 2002 consist of the following:


Ownership Acquisition Net Book Carrent FYcost equity Value Valuation

Hyundai Research Institute 20% 2,000 1,155 1,155 (-)266

Hyundai Life Insurance Co., Ltd. 29.5% 34,391 - - -

Hyundai Securities (Europe) Ltd. 100% 19,130 24,152 24,152 232

Hyundai Securities (America) Inc. 100% 20,221 12,876 12,876 250

Hyundai Securities (Asia) Ltd. 100% 8,919 22,769 22,769 (-)473

84,661 60,952 60,952 (-)257

8. INVESTMENTS ASSETS

(a) Intangible assets at March 31, 2002 and 2001 consist of the following:


2002. 3 2001. 3

Long-term deposits 45 25,230

Long-term loans 29,667 40,484

Telephone subscription rights 2,502 2,526

Guarantee for rent 107,643 115,684

Surety Guarantee 1 1

139,858 183,925

(b) Long-term loans are loans to employees for buying or renting house or acquiring stocks of the Company.

9. INSURED ASSETS

The Company's buildings are insured for fire losses up to ￦103,963 million as of March 31, 2002.





10. ASSETS PLEDGED AS COLLATERAL

Trading securities and investment securities of ￦89,085 million are pledged as collateral for the Company's

borrowing from KSFC, Korea First Bank, etc.

11. SHORT-TERM BORROWINGS

Short-term borrowings at March 31, 2002 and 2001 consist of following:

Annual interest Korean Won(In millions)

rate(%) 2002. 3 2001. 3

Short-term borrowings

Bank loan 5.48 20,000 -

Borrowings from KSFC 4.30 10,122 74,000

Others 5.18 20,000 -

50,122 74,000

Call money 4.10 210,000 493,800

260,122 567,800

12. SUBORDINATED DEBENTURES

The bonds issued and outstanding at March 31, 2002 are as followings:


Outstanding Discounts onSeries Issue Date Maturity Date Interest Face Amount Debentures Book Value

17th May.25,2001 May.25,2002 11.50% 55,000 - 55,000

18th Jun.26,2001 Jun.26,2002 10.65% 50,000 - 50,000

19th Jun27,2001 Jun27,2002 10.00% 125,000 - 125,000

20th Jul. 2,2001 Jul. 2,2002 10.65% 50,000 - 50,000

280,000 - 280,000

Less : Current portion 280,000

Long-term portion -

13. SHAREHOLDERS' EQUITY

(a) Capital stock

Authorized shares Par value Outstanding shares

300,000,000 5,000 107,194,941

(b) Capital sarplus

Capital surplus is to be accounted for as a capital reserve which may be used to offset a future deficit or be

transferred to capital, but not for distribution as cash dividend.




Notes to Financial StatementsMarch 31, 2002 And 2001

(c) Retained earnings

Appropriated retained earnings at March 31, 2002, which are maintained by the Company in accordance with tax

and other relevant regulations, consist of the following:


2002. 3 2001. 3

Legal reserves 5,430 1,689

Reserve for loss on securities transactions 27,437 41,156

Voluntary reserves 86,018 94,250

118,885 137,095

Unappropriated retained earnings carried over to subsequent year - -

118,885 137,095

Under the Korean Commercial Code, at least 10 percent of the cash dividends declared at the annual shareholders'

meeting is to be appropriated as a legal reserve until the legal reserve reaches 50 percent of paid in capital. Legal

reserve may only be used to offset a future deficit or transferred to capital, but not for cash dividend.

14. CAPITAL ADJUSTMENTS

(a) Treasury stock

The Company has purchased and held 315,874 shares of treasury stocks to stabilize the market price of its stocks.

The treasury stocks are stated at cost and will be sold in the near future.

(b) Loss on valuation of investment in equity securities

In accordance with the Korean Financial Accounting Standards, the Company classified the valuation losses on

marketable equity investment securities, and the difference between the carrying value and investor's share in the

investee's net assets of investment securities by equity method, which was derived from changes in the investee's

capital surplus or capital adjustment, as capital adjustment. On sale of the investment securities, the valuation

losses shall be netted against disposal losses or gains.

15. RELATED PARTY TRANSACTIONS

(a) Significant transactions with affiliated companies for the years then ended March 31, 2002 and 2001

are as follows:


2002. 3 2001. 3

Hyundai Securities (Europe) Ltd. Commissions paid 1,161 2,528

Hyundai Securities (America) Inc. Commissions paid 1,470 1,288

Hyundai Securities (Asia) Ltd. Commissions paid 3,996 4,446

16. CONTINGENT LIABILITIES

As of March 31, 2002 the Company has been sued for compensation for loss in 56 cases. The ultimate outcome of

the cases cannot presently be determined.





17. INCOME TAX EXPENSES

The Company adopted the deferred accounting method for its income tax expenses by recognizing deferred tax

assets or liabilities arising from the temporary difference between financial accounting and tax reporting purposes.

The change was made in order to be in compliance with the revised generally accepted financial accounting

standards in the Republic of Korea.

Income taxes for years ending March 31, 2002 and 2001, comprise the following:


2002. 3 2001. 3

Current income taxes 41,845 5,341

Deferred income taxes (23,702) (110,478)

Income tax expenses 18,143 (105,137)

The following table reconciles the Company's pretax income to the taxable income:


2002. 3 2001. 3

Accounting income 37,340 (351,900)

Permanent differences 2,143 18,536

Temporary differences 96,421 350,765

Taxable income 135,904 17,401

18. DESIGNATION OF HYUNDAI LIFE INSURANCE AS NONVIABLE FINANCIAL INSTITUTION

The Financial Supervisory Commission designated Hyundai Life Insurance, in which the Company has 29.5% equity

stake, as a nonviable financial institution on January 11, 2001. As such, the Company reflected ￦32,671 million (total

investment amount of ￦34,391 million less ￦1,720 million write-off from the previous fiscal year) as an equity

method valuation loss for the year ended Mar. 31, 2001.

19. WITH REGARD TO FOREIGN CAPITAL INDUCEMENT FROM AIG

With regard to the foreign capital inducement the Company has concluded the first memorandum of

u n d e r s t a n d i ng(MOU) with AIG consortium on June 21, 2000. The second MOU was concluded between the two

parties on August 28, 2000.

However, it is anticipated that foreign capital inducement will be delayed as AIG has seceded from the consortium.

20. STATUS OF LEGAL PROCEEDINGS IN CONNECTION WITH HYUNDAI HEAVY INDUSTRIES CO., LTD.

The Company brokered the sell-off of stocks issued by Hyundai Investment Trust & Securities Co., Ltd. from Hyundai

Electronic Industries Co., Ltd. (Hynix Semiconductor Inc.) to Canadian Imperial Bank of Commerce(CIBC) on July 24,

1997. In this regard, Hyundai Heavy Industries Co., Ltd. concluded an agreement and obligation of purchase of the

aforementioned stocks with CIBC. Pursuant to the agreement, Hyundai Heavy Industries Co., Ltd. bought 13,000,000

shares issued by Hyundai Investment Trust & Securities Co., Ltd. at the price of US$220,480 thousand (￦245,791

million) on July 24, 2000, as CIBC exercised its put option. With regard to compensation for the aforementioned

trade, Hyundai Heavy Industries Co., Ltd. filed a suit against the Company.

With regard to the aforementioned litigation, the Seoul High Court gave a decision that the Company in solidarity with Hynix





Semiconductor Inc. and etc. had to compensate ￦184,862 million to Hyundai Heavy Industries Co., Ltd. on Jan. 25, 2002.

Therefore, the Company has paid ￦97,256 million on April 17, 2002 and ￦96,256 million was charged to current operation as

extraordinary loss. However, full extent of such losses and possibility of losses cannot be presently estimated.

21. PROVISIONAL SEIZURE OF MARKETABLE SECURITIES OF TONGYANG INVESTMENT BANK

With regard to the repurchase agreement regarding Seneca Class A Bond worth US$50,000,000 between Ulsan

Merchant Bank(Tongyang Investment Bank) and Paine Webber-US, which was brokered by the Company, the

Company repaid US$10,164,045 in Ulsan Merchant Bank's place, as Ulsan Merchant Bank defaulted on the

agreement and reported it in other account receivables. In this regard, the Company provisionally seized

marketable securities provided as collateral by Ulsan Merchant Bank(par value worth US$10,000,000) as of January

2001 and is going through procedures to collect the securities.

22. RESULT OF THE FOURTH ROUND OF INVESTIGATION BY THE FAIR TRADE COMMISSION WITH REGARD TOINTERNAL TRADING AMONG HYUNDAI SUBSIDIARIES

(1) Assistance in the form of non-collection of overdue interest

The Company signed a purchase contract for properties owned by Hyundai Engineering & Construction Co., Ltd. and paid

the amount of ￦11,596 million pursuant to the agreement. However, the contract was delayed on the part of Hyundai

Engineering & Construction Co., Ltd. but the Company did not collect interest equivalents accrued in line with such a

delay. With regard to this, the Fair Trade Commission imposed a total fine of ￦231 million for the non-collection of the

interest, which the company challenged in lawsuit against the commission. The case is currently pending.

(2) Assistance in the form of purchase of unlisted stocks at high price

The Fair Trade Commission notified the Company that it brokered the agreement Hyundai Heavy Industries Co., Ltd.

and CIBC in which Hyundai Heavy Industries Co., Ltd. shall repurchase stocks issued by Hyundai Investment Trust &

Securities Co., Ltd. at the price of US$221,000 thousand (￦245,600 million) after three years, and that the Company

provided a memorandum in which it would not oblige Hyundai Heavy Industries Co., Ltd. to implement the

agreement, In this regard, the Company was fined ￦5,457 million by the commission, which the company

challenged in a lawsuit against the commission. This case is also currently pending.

(3) Current status

With regard to the abovementioned fines imposed by the Fair Trade Commission, the Company applied for a

provisional injunction from the court to nullify the commission's decision on January 19, 2001. As the Company's

application was accepted by the court, it paid ￦1,790 million from the total of ￦5,688 million to the commission on

Mar 31, 2001. The payment of the remainder has been suspended pending the court's judgment on the matter.

23. MATTERS REGARDING THE STATEMENT OF CASH FLOW

Major transactions that do not entail any inflow and outflow of cash are as follws:


Loss on valuation of investment securities 3,547

Advance payments transferred to intangible assets 13,760

Present value discount transferred to allowance for credit loss 2,109

REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of Hyundai Securities Co., Ltd.

We have audited the accompanying balance sheets of Hyundai Securities Co., Ltd.(the "Company") as of March 31, 2002 and 2001, and the relatedstatements of income and appropriations of retained earnings and of cash flows for the years then ended. These financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion, as an independent auditor, on these financial statementsbased on our audits.

We conducted our audit in accordance with auditing standard generally accepted in the Republic of Korea. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. Webelieve that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above expressed in Korean Won, present fairly, in all material respects, the financial position ofHyundai Securities Co., Ltd. as of March 31, 2002 and 2001 and the results of its operations and its changes in retained earnings and its cash flows forthe years then ended in conformity with generally accepted accounting principles in the Republic of Korea.

Without qualifying our opinion, we draw attention to the following: As discussed note 5, the valuation loss(￦46,388million) on the beneficiary certificates including bonds issued by Hynix Semiconductor Inc. and

Hyundai Petrochemical Co., Ltd was charged currently. As described in note 20, the Company brokered the sell-off of stocks issued by Hyundai Investment Trust & Securities Co., Ltd. from Hyundai

Electronic Industries Co., Ltd. (Hynix Semiconductor Inc.) to Canadian Imperial Bank of Commerce(CIBC) on July 24, 1997. In this regard, HyundaiHeavy Industries Co., Ltd. concluded an agreement on the obligation of purchase of the aforementioned stocks with CIBC. Pursuant to theagreement, Hyundai Heavy lndustries Co., Ltd. bought 13,000,000 shares issued by Hyundai Investment Trust & Securities Co., Ltd. at the price ofUS$220,480 thousand (￦245,791 million) on July 24, 2000, as CIBC exercised its put option. With regard to compensation for the aforementionedtrade, Hyundai Heavy Industries Co., Ltd. filed a suit against the Company. And the Seoul High Court gave a decision that the Company in solidaritywith Hynix Semiconductor Inc. and etc. had to compensate ￦184,862 million to Hyundai Heavy Industries Co., Ltd. on Jan. 25, 2002. Therefore, theCompany has paid ￦97,256 million on April 17, 2002 and ￦95,256 million was charged to current operation as extraordinary loss. However, it isimpossible to estimate the final extent of such losses and possibility of losses.

As described in note 19, with regard to the foreign capital inducement the Company has concluded the first memorandum of understanding(MOU)with AIG consortium on June 21, 2000. The second MOU, was conclued between the two parties on August 28, 2000. However. it is anticipated thatforeign capital inducement will be delayed because AIG has seceded from the consortium.

As described in note 21, with regard to the repurchase agreement regarding Seneca Class A Bond worth US$50,000,000 between Ulsan MerchantBank(Tongyang Investment Bank) and Paine Webber-US, which was brokered by the Company, the Company repaid US$10,164,045 in UlsanMerchant Bank's place, as Ulsan Merchant Bank defaulted on the agreement and reported it in other account receivables. In this regard, theCompany provisionally seized marketable securities provided as collateral by Ulsan Merchant Bank(par value worth US$10,000,000) as of January2001 and is going through procedures to collect the securities.

For the convenience of the readers, the accompanying financial statements have been condensed, restructured and translated into the Englishlanguage. Certain supplemental information included in the statutory Korean language financial statements and which is not required for a fairpresentation of the Company's financial position, result of operations or cash flows, have been omitted in the accompanying financial statements.

The company maintains its account in Korean Won. Solely for the convenience of the readers, the Korean Won balances have been expressed inUnited States dollars in the accompanying financial statements on the basis set forth in Note 3 to financial statements.

April 26, 2002 Seoul, Korea



ORGANIZATION

Hyundai Seucurities Co.2 0 0 2

Business Management

Operating Service GroupBack-officeIT

Private Client GroupMarketingFinancial Products

Corporate & Institutional Client GroupResearchProprietary Account International BusinessDomestic InstitutionalIB

President&CEO

Auditor


BOARD OF DIRECTORS

Gyu Wook Chochairman & CEO

Wan Soon HongVice Chairman

Hee Jun SongOutside Director

Jin Kyu KimOutside Director

Cheol Soon JangDirector

Woo Bum ShinOutside Director

Dae Wha KangAuditor

Jae Joong JeonOutside Director

1.

2.

3.

4.

5.

6.

7.

8.

12

3 4 5 6 7 8


HEAD OFFICE

#34-4, Youido-dong, Yongdungpo-ku

Seoul, Korea, 150-735

Tel: 822-768-0114, 822-783-6511

Fax: 822-783-9746

ESTABLISHED

June 1, 1962

NETWORK

138 domestic and 5 overseas

NUMBER OF EMPLOYEES

2,859 (as of March 31, 2002)

STOCK ISSUED

107,194,941 (Common Stock)

TOTAL SHAREHOLDERS’ EQUITY

￦ 1,282 billion

MAJOR SHAREHOLDERS

Hyundai Merchant Marine Co., Ltd. 16.63%

Foreigners 21.54% (as of March 31, 2002)

INTERNET

http://www.stockmarket.co.kr

OVERSEAS NETWORK


Tokyo Branch

6th Floor, ASK Bldg., 3-12-2, Nihonbashi, Kayaba-cho

Chuo-ku, Tokyo 103-0025, Japan

Phone: 813-3661-3711

Fax: 813-3661-9622

Shanghai Representative Office

Rm. 1405 North Stock Exchange

Mansion 528 Pudong Rd.

South Shanghai, China, 200120

Phone: 86-21-6881-7007, 7008

Fax: 86-21-6881-7778

HYUNDAI SECURITIES (AMERICA) INC.

1370 Avenue of the Americas,

Suite 2200, NY, NY10019

Phone: 1-212-265-2881

Fax: 1-212-265-2676

HYUNDAI SECURITIES (EUROPE) LTD.

Neptune House, Triton Court

14 Finsbury Square, London, EC 2A1BR, U.K.

Phone:44-207-786-8601 (General), 44-207-786-8600 (Dealer)

Fax: 44-207-786-8620

Telex: 887148

HYUNDAI SECURITIES (ASIA) LTD.

Suite 3603, One Exchange Square

8 Connaught Place, Central, Hong Kong, China

Phone:852-2869-0559

Fax: 852-2521-5215

SHAREHOLDER’S INFORMATION

Annual Report 2002H y u n d a i S e c u r i t i e s c o .


Documents

HYUNDAI SECURITIES CO. · 2004-10-25 · securities enjoyed a growing brokerage volume, ending the year with a handsome profit. Hyundai Securities also benefited from the favorable